MinEx Consulting Strategic advice on mineral economics & exploration
The key drivers behind resource growth:
an analysis o...
MinEx Consulting Strategic advice on mineral economics & exploration
Overview
1. What are the key drivers?
2. How much cop...
MinEx Consulting Strategic advice on mineral economics & exploration
Key drivers for resource growth
• Exploration success...
MinEx Consulting Strategic advice on mineral economics & exploration
Discovery: Most of the metal found is tied up in a ha...
MinEx Consulting Strategic advice on mineral economics & exploration
Until recently, we have been finding it faster than w...
MinEx Consulting Strategic advice on mineral economics & exploration
Copper reserves continue to grow
World Copper Reserve...
MinEx Consulting Strategic advice on mineral economics & exploration
Copper reserves continue to grow
World Copper Reserve...
MinEx Consulting Strategic advice on mineral economics & exploration
0
500
1000
1500
2000
2500
3000
3500
1900 1910 1920 19...
MinEx Consulting Strategic advice on mineral economics & exploration
0
500
1000
1500
2000
2500
3000
3500
1900 1910 1920 19...
MinEx Consulting Strategic advice on mineral economics & exploration
Over the last Century copper endowment has grown 25 f...
MinEx Consulting Strategic advice on mineral economics & exploration
0
500
1000
1500
2000
2500
3000
3500
1900 1910 1920 19...
MinEx Consulting Strategic advice on mineral economics & exploration
Reserve life has slowly declined over the last 60 yea...
MinEx Consulting Strategic advice on mineral economics & exploration
Ore grades mined have declined over time
Copper ore g...
MinEx Consulting Strategic advice on mineral economics & exploration
The average grade for copper discoveries has remained...
MinEx Consulting Strategic advice on mineral economics & exploration
QUESTION:
Is a declining ore grade bad news or good n...
MinEx Consulting Strategic advice on mineral economics & exploration
There is a trade-off between tonnes and grade
Rio Bla...
MinEx Consulting Strategic advice on mineral economics & exploration
There is a trade-off between tonnes and grade
Tonnes-...
MinEx Consulting Strategic advice on mineral economics & exploration
There is a trade-off between tonnes and grade
NORMALI...
MinEx Consulting Strategic advice on mineral economics & exploration
There is a trade-off between tonnes and grade
NORMALI...
MinEx Consulting Strategic advice on mineral economics & exploration
Most of the huge growth in known resources in the las...
MinEx Consulting Strategic advice on mineral economics & exploration
Over the last 100 years, the real price and cost of c...
MinEx Consulting Strategic advice on mineral economics & exploration
Over the same period, unit mining costs have dropped ...
MinEx Consulting Strategic advice on mineral economics & exploration
Key Technical Innovations
Estimated average operating...
MinEx Consulting Strategic advice on mineral economics & exploration
Economies of scale and new technology
helped drive do...
MinEx Consulting Strategic advice on mineral economics & exploration
SUMMARY
• World’s copper resource base grew by x25 ov...
MinEx Consulting Strategic advice on mineral economics & exploration
QUESTIONS ?
26
Contact details
Richard Schodde
Managi...
Upcoming SlideShare
Loading in...5
×

100 Years of Resource Growth for Copper - Impact of Costs, Grade and Technology

9,218
-1

Published on

The presentation outlines the various factors behind the 25-fold increase in the copper resource base over the last hundred years – and shows that the industry is NOT facing a “peak metal” situation. It has data on discovery rates, head grades and mining costs from 1900 to 2009.
One provocative observation is that the large decline in copper head grades over the century (from 4% to around 1%) is not necessarily bad news (or an indication that we are running out of ore). Instead it is more to do with the fact that technology and economies of scale have enabled lower grade ore to be economically mined. This allowed companies to lower their cut-off grade – thereby expanding the available resource by a factor of six. The author argues that engineers and geologists acted as equal partners in growing the resource base over the last Century.
Assuming that we continue to explore and innovate, the world will not run out of copper anytime soon.

0 Comments
4 Likes
Statistics
Notes
  • Be the first to comment

No Downloads
Views
Total Views
9,218
On Slideshare
0
From Embeds
0
Number of Embeds
4
Actions
Shares
0
Downloads
150
Comments
0
Likes
4
Embeds 0
No embeds

No notes for slide

100 Years of Resource Growth for Copper - Impact of Costs, Grade and Technology

  1. 1. MinEx Consulting Strategic advice on mineral economics & exploration The key drivers behind resource growth: an analysis of the copper industry over the last 100 years Richard Schodde Managing Director, MinEx Consulting 2010 MEMS Conference Mineral and Metal Markets over the Long Term Joint Program with the SME annual meeting in Phoenix, March 3 2010
  2. 2. MinEx Consulting Strategic advice on mineral economics & exploration Overview 1. What are the key drivers? 2. How much copper has been found and mined 3. Trends in declining ore grade – is it good news or bad? 4. Untangling the effects of discovery, technology, costs and prices 2
  3. 3. MinEx Consulting Strategic advice on mineral economics & exploration Key drivers for resource growth • Exploration success – Trends in copper discovery rates over last century – Growth in world reserves & resources • Changes in costs – Impact on what we define “economic” ore – R&D and Engineers can grow the resource • Changes in prices – Higher prices will expand the pool of economic projects 3
  4. 4. MinEx Consulting Strategic advice on mineral economics & exploration Discovery: Most of the metal found is tied up in a handful of deposits Amount of copper found in deposits >0.1 Mt Cu in the World: 1900-2009 4 0 30 60 90 120 150 180 1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 2000 2010 Other & Unspecified Individual Deposits > 1 Mt Cu Note: Chart include minor adjustment for deposits missing from the database Source: MinEx Consulting Feb 2010 Mt Cu Estimate Most of the copper found came from a handful of giant deposits Chuquicamata El Teniente Andina Olympic Dam Escondida Grasberg Lubin
  5. 5. MinEx Consulting Strategic advice on mineral economics & exploration Until recently, we have been finding it faster than we mine it Amount of copper mined vs copper found in deposits >0.1 Mt Cu in the World: 1900-2009 5 0 30 60 90 120 150 180 1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 2000 2010 Discoveries Production Note: Chart include minor adjustment for deposits missing from the database Source: MinEx Consulting Feb 2010 Estimate CAUTION: Not all discoveries turn into mines, and not all resources get recovered Mt Cu
  6. 6. MinEx Consulting Strategic advice on mineral economics & exploration Copper reserves continue to grow World Copper Reserves: 1900-2010 0 200 400 600 800 1000 1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 2000 2010 Various Authors Tilton & Lagos (2007) Govett & Govett (1976) Brook Hunt (2007) USGS USGS "Reserve Base" 6 Mt Cu Sources: Various
  7. 7. MinEx Consulting Strategic advice on mineral economics & exploration Copper reserves continue to grow World Copper Reserves: 1900-2010 0 200 400 600 800 1000 1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 2000 2010 Various Authors Tilton & Lagos (2007) Govett & Govett (1976) Brook Hunt (2007) USGS USGS "Reserve Base" ESTIMATED RESERVES 7 Mt Cu Sources: Various MinEx Consulting March 2010 550 mt in 2010 25 mt in 1900
  8. 8. MinEx Consulting Strategic advice on mineral economics & exploration 0 500 1000 1500 2000 2500 3000 3500 1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 2000 2010 Est Cumulative Mine Losses Cumulative Production 8 Mt Cu Sources: Production data from USGS MinEx Consulting March 2010 577 Note: Assumes 20mt in cumulative historic production pre-1900 Mining recovers 85% of copper contained in ore 686 Over the last Century copper endowment has grown 25 fold World Pre-mined Copper Reserves: 1900-2010
  9. 9. MinEx Consulting Strategic advice on mineral economics & exploration 0 500 1000 1500 2000 2500 3000 3500 1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 2000 2010 Estimated Reserves Est Cumulative Mine Losses Cumulative Production 9 Mt Cu Sources: Production data from USGS MinEx Consulting March 2010 1236 mt in 2010 52 mt in 1900 577 Note: Assumes 20mt in cumulative historic production pre-1900 Mining recovers 85% of copper contained in ore 686 Over the last Century copper endowment has grown 25 fold World Pre-mined Copper Reserves: 1900-2010
  10. 10. MinEx Consulting Strategic advice on mineral economics & exploration Over the last Century copper endowment has grown 25 fold World Pre-mined Copper Reserves: 1900-2010 0 500 1000 1500 2000 2500 3000 3500 1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 2000 2010 USGS "Reserve Base" Estimated Reserves Est Cumulative Mine Losses Cumulative Production 10 Mt Cu Sources: Production data from USGS MinEx Consulting March 2010 1236 mt in 2010 52 mt in 1900 577 Note: Assumes 20mt in cumulative historic production pre-1900 Mining recovers 85% of copper contained in ore 686 1670 No data pre 1977
  11. 11. MinEx Consulting Strategic advice on mineral economics & exploration 0 500 1000 1500 2000 2500 3000 3500 1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 2000 2010 USGS "Reserve Base" Estimated Reserves Est Cumulative Mine Losses Cumulative Production Cumulative Discoveries (MinEx data) 11 Mt Cu Sources: Production data from USGS MinEx Consulting March 2010 1236 mt in 2010 52 mt in 1900 577 3145 686 1670 No data pre 1977 GAP? MinEx data includes Inferred Resources and assigns the current known resource back to the original discovery date – and so is larger Note: Assumes 20mt in cumulative historic production pre-1900 Mining recovers 85% of copper contained in ore Over the last Century copper endowment has grown 25 fold World Pre-mined Copper Reserves: 1900-2010
  12. 12. MinEx Consulting Strategic advice on mineral economics & exploration Reserve life has slowly declined over the last 60 years Ratio of Reserves/Production - World: 1900-2010 0 20 40 60 80 100 1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 2000 2010 12 Years Sources: Production data from USGS Reserve data MinEx Consulting March 2010 36 years in 2010 111 Note: Chart based on “Estimated Reserves” Peaks in 1921 and 1932 due to sudden drop in production 91 50 years in 1900 32 60 Assuming continued discoveries, the world isn’t going to run out of copper soon
  13. 13. MinEx Consulting Strategic advice on mineral economics & exploration Ore grades mined have declined over time Copper ore grade for World and selected countries: 1900-2008 0% 1% 2% 3% 4% 5% 6% 1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 2000 2010 World USA Canada Australia 13 Sources: USGS, Mudd (2009) Brook Hunt, UBS 6.86% 1.07% in 2010 4.0% in 1900 Note: Rise in ore grade in Australia from 1972 onwards is due to startup of the high-grade Olympic Dam mine Copper Grade (%) Estimate
  14. 14. MinEx Consulting Strategic advice on mineral economics & exploration The average grade for copper discoveries has remained relatively constant. This is dragging down the average ore grade mined Copper ore grade discovered and mined in the World: 1900-2008 0% 1% 2% 3% 4% 5% 6% 1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 2000 2010 Mined Grade Discovery Grade 14 Copper Grade (%) Sources: USGS, Mudd (2009) Brook Hunt, UBS WARNING: The definition of what is economic ore has changed over time. The estimated discovery grade is based on the latest available resource figures – which is much larger (but often lower grade) than that originally reported at the time of discovery The ore grade mined is converging on the average discovered grade Estimate
  15. 15. MinEx Consulting Strategic advice on mineral economics & exploration QUESTION: Is a declining ore grade bad news or good news ? 15
  16. 16. MinEx Consulting Strategic advice on mineral economics & exploration There is a trade-off between tonnes and grade Rio Blanco copper deposit 0% 2% 4% 6% 8% 10% 1 10 100 1000 10000 16 Grade (%Cu-equiv) Resource (million tonnes) Source: MinEx Consulting March 2010 1100 mt @ 0.58% Cu = 6.38 mt Cu 65 mt @ 1.26% Cu = 0.82 mt Cu Lowering the cut-off grade grows the resource = MORE METAL … lower grades could signify “good” news as …
  17. 17. MinEx Consulting Strategic advice on mineral economics & exploration There is a trade-off between tonnes and grade Tonnes-Grade data for 48 copper deposits 0% 2% 4% 6% 8% 10% 1 10 100 1000 10000 17 Grade (%Cu-equiv) Resource (million tonnes) Source: MinEx Consulting March 2010
  18. 18. MinEx Consulting Strategic advice on mineral economics & exploration There is a trade-off between tonnes and grade NORMALISED Tonnes-Grade data for 48 copper deposits 0 1 2 3 4 5 0.01 0.1 1 18 Change in Grade (over Base Case) Change in Resource size (over Base Case) Source: MinEx Consulting March 2010 On average, by adjusting the cut-off grade, it is possible to double or triple the head grade of the ore body, but at the expense of shrinking the ore tonnes by a factor of 10 Base Case defined as the maximum reported resource size for a given deposit
  19. 19. MinEx Consulting Strategic advice on mineral economics & exploration There is a trade-off between tonnes and grade NORMALISED Tonnes-Grade data for 48 copper deposits 0 1 2 3 4 5 0.01 0.1 1 19 Change in Grade (over Base Case) Change in Resource size (over Base Case) Source: MinEx Consulting March 2010 On average, by adjusting the cut-off grade, it is possible to double or triple the head grade of the ore body, but at the expense of shrinking the ore tonnes by a factor of 10 Base Case defined as the maximum reported resource size for a given deposit 1.0 2.3 3.5 Curve of “Best-Fit”
  20. 20. MinEx Consulting Strategic advice on mineral economics & exploration Most of the huge growth in known resources in the last 70 years can be attributed to a reduction in cut-off grades Change in pre-mined resources for 12 giant porphyry deposits: 1929-2008 0 100 200 300 400 2008 Adjusted 2008 1929 20 Mined to-date 136 mt Cu Remaining Resource 242 mt Cu Total 378 mt Cu (61,000 mt @ 0.62% Cu) Total 60 mt Cu (3880 mt @ 1.55% Cu) Pre-Mined Resource at higher cut-off grade Mined to-date 10mt Cu Remaining Reserve Total 47 mt Cu (3068 mt @ 1.55% Cu) Including “speculative” resources increases this to 67 mt Cu 37mt Cu Mt Cu Top 12 Porphyry Mines in 1929 Chuquicamata Braden (El Teniente) Morenci Utah (Bingham Canyon) Ray Chino Miami Nevada (Ely/Robinson) Inspiration Andes (Potrerillos) New Cornelia Copper Queen In 1929 these 12 mines accounted for 55% of the world’s Cu reserves. In 2008 they still accounted for 10% of world resources Reduction in pre-mined resource from using higher cut-off grade Sources: Parsons (1933) MinEx Consulting
  21. 21. MinEx Consulting Strategic advice on mineral economics & exploration Over the last 100 years, the real price and cost of copper has halved Copper price and (estimated) average operating costs for Western World: 1900-2009 $0 $1 $2 $3 $4 $5 $6 $7 1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 2000 2010 Operating Cost Copper Price 21 2009 $/lb Cu Sources: USGS, Brook Hunt, CRU MinEx Consulting estimates (for 1900-1974) Includes, transportation, smelting & refining and marketing costs QUESTION: Is price an input or an output ? Estimate … Prices are set by supply & demand
  22. 22. MinEx Consulting Strategic advice on mineral economics & exploration Over the same period, unit mining costs have dropped four-fold Estimated average operating costs for copper mines in Western World: 1900-2009 $0 $20 $40 $60 $80 $100 $120 $140 $160 1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 2000 2010 22 2009 $/tonne ore Sources: Brook Hunt, CRU , Historical reports MinEx Consulting estimates (for 1900-1974) Includes, transportation, smelting & refining and marketing costs The lower cost per tonne has more than offset the lower grades mined - leading to lower unit price per lb of copper produced Estimate Key Challenge – In the future will costs continue to fall faster than the grade ?
  23. 23. MinEx Consulting Strategic advice on mineral economics & exploration Key Technical Innovations Estimated average operating costs for copper mines in Western World: 1900-2009 $0 $20 $40 $60 $80 $100 $120 $140 $160 1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 2000 2010 23 2009 $/tonne ore Sources: Brook Hunt, CRU , Historical reports MinEx Consulting estimates (for 1900-1974) Includes, transportation, smelting & refining and marketing costs Better Smelting & Refining … which opened up the “Age of the Giant Porphyries” Airborne geophysics post-WW2 led to raft of new discoveries Expanding demand led to economies of scale Development of a good geological model for Porphyries SXEW Computer controls , modelling and scheduling Low cost mines in new countries Better work practicesImproved recoveries 65% to 85% Bulk mining at Bingham Canyon & Chuquicamata … Froth Flotation Improved transportation
  24. 24. MinEx Consulting Strategic advice on mineral economics & exploration Economies of scale and new technology helped drive down costs Cash operating costs for selected open pit mines in USA and Chile $0 $20 $40 $60 $80 $100 $120 0 1 10 100 1905 1915 1929 1996 2007 24 1905 Trend line 1915 1929 1996 & 2007 2009 $/tonne ore Mining Rate (mtpa ore) Operating costs include transportation, smelting & refining charges # Bingham Canyon, Ray, Chino, Morenci, Robinson, Toprerillos, Chuquicamata and El Teniente Source: MinEx Consulting March 2010 Cost savings from economies of scale 1 to 50 mtpa = 30% Cost savings from new technology 1905->2007 = 70% $80/t $60/t $18/t
  25. 25. MinEx Consulting Strategic advice on mineral economics & exploration SUMMARY • World’s copper resource base grew by x25 over last 100 years • Much of this was through discovery • Technical innovations enabled giant “disseminated” Porphyries to be mined, and then later Cu-oxide deposits • Costs reduced through economies of scale and new technologies • As costs went down, so too did cut-off grades … thereby further growing the resource • Prices are a output – not an input. They are driven by supply & demand 25 Hard to untangle the partnership between geologists & engineers … say 50: 50 30% 70% Halving the ore grade increased ore tonnes by x6 and metal by x3
  26. 26. MinEx Consulting Strategic advice on mineral economics & exploration QUESTIONS ? 26 Contact details Richard Schodde Managing Director MinEx Consulting Melbourne, Australia Email: Richard@MinExConsulting.com
  1. A particular slide catching your eye?

    Clipping is a handy way to collect important slides you want to go back to later.

×