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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
MinEx Consulting Strategic advice on mineral economics & exploration
QUESTION:
Is a declining ore grade bad news or good news ?
15

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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
MinEx Consulting Strategic advice on mineral economics & exploration
QUESTIONS ?
26
Contact details
Richard Schodde
Managing Director
MinEx Consulting
Melbourne, Australia
Email: Richard@MinExConsulting.com