The Metals Economics Group’s (MEG) recent “Strategies for Copper Reserves Replacement: The Costs of Finding and Acquiring Copper” study concludes that
between 2001 and 2010, the top 23 global copper producers (those that mined at least 145,000 metric tonnes of copper in 2010) replaced nearly 290 per cent
of the copper they produced. Almost all of these companies have added enough reserves to keep ahead of production, maintaining strong pipelines of projects
to ensure stable or increased copper production.
The major copper producers increased their aggregate annual production by 26 per cent over the past 10 years to 11 million metric tonnes in 2010 – 68 per
cent of world mine production. As of year end 2010, these companies also held sufficient reserves for 34 years of production at the 2010 rate. However,
increasing production has exacerbated their need to add reserves, and most major producers forecast further production increases in the coming years. Based
on 2010 production, the major producers each need to replace an average of almost 480,000 metric tonnes of copper in reserves each year; and if their
near-term growth plans bear fruit, this could increase to almost 650,000 metric tonnes annually by 2016.
Globally, 62 significant copper discoveries (defined as a deposit containing at least 500,000 metric tonnes of copper) have been reported so far in the
1999-2010 period, containing 229.1 million metric tonnes of copper in reserves, resources and past production. The Americas account for the greatest share
of copper in these discoveries, which is not surprising given that the Americas have been the primary focus of discovery-oriented exploration spending.
Although the copper found in the 62 discoveries is slightly more than the industry has produced over the past decade, the economic viability of these
deposits relies to a large extent on location, politics, capital and operating costs, and market conditions, which inevitably reduce the amount of
resources that will reach production. Considering that just six per cent of copper in these discoveries has been upgraded to reserves so far, that many of
the larger discoveries are low grade, and that almost half the copper in the discoveries is located in areas of medium or high political risk, the amount
of copper available for production in the near term is likely far less than has been found.
Only 10 of the 23 major producers have made significant copper discoveries since 1999; of the 62 discoveries made, 24 can be attributed to these 10
companies, accounting for 41 per cent of the 229.1 million metric tonnes total in situ value found. Given that just six per cent of copper in the 62
discoveries has so far been converted to reserves, it is clear that we know the majors have added almost all of their exploration-derived reserves at
existing mines and older projects, but very little of it through new discoveries.
MEG’s Copper Reserves Replacement Strategies study addresses key growth strategy issues facing the copper mining industry and compares the relative costs
per pound of discovering or acquiring copper in the ground. In addition to an industry-wide review of the copper pipeline, acquisition activity, copper
exploration spending and major discovery successes, the study also provides a variety of metrics for measuring and comparing the relative costs of various
growth strategies for the 23 largest copper miners and the industry as a whole.
For more information on how to obtain “Copper Reserves Replacement Strategies,” please visit www.metalseconomics.com, email firstname.lastname@example.org or call 902.429.2880.
Note: At the time of writing, no qualifying copper discoveries were reported in 2010; however, due to the time required to assess a large deposit, there
may be qualifying discoveries attributable to 2010 in the future. Discoveries are not defined solely by grassroots exploration, but require additional
late-stage spending to further expand and define a deposit beyond its initial resource estimate. To account for this, MEG defines discovery-oriented copper
exploration as 100 per cent of grassroots spending plus 75 per cent of late-stage spending, which we feel best reflects the cost of finding and
subsequently defining a major new discovery.