Copper Production and Development
Humanity’s second copper age
The primary demand story driving mineral and metal prices is the world’s transition to the green energy economy. Electric vehicles (EVs), photovoltaic cells, wind turbines, energy infrastructure, etc. all require copper. Within this, EVs receive the most attention. In 2023, nearly one in every five cars sold was electric, and the number of EVs sold globally in the first three months of 2024 was roughly equivalent to the total number sold in 2020, according to the International Energy Agency. “An EV contains five times more copper than an internal combustion engine vehicle. Charging an EV significantly increases a home's peak electricity consumption, comparable to adding 46 refrigerators. The federal goal of converting half of US households to EVs in the next decade will require substantial increases in electricity generation and infrastructure,” said Nathan Foster, managing director Kennecott, Rio Tinto.
The green energy economy is not the only copper demand story. Artificial Intelligence (AI) took the world by storm over the past 24 months, a domino effect following the release of Chat GPT 3.5 in November 2022. Data centers provide the necessary infrastructure for storing, processing, and deploying large-scale AI models like ChatGPT. Data center power demand is predicted to grow 160% by 2030, estimated Goldman Sachs. In the US, centers will use 8% of US power by 2030, compared with 3% in 2022. Power translates into copper: “Each data center requires 27 tons (t) of copper per megawatt (MW) of power usage. The largest data center hub in the world draws 2,800 MW, translating to approximately 75,600 t of copper,” emphasized Ronald Thiessen, president and CEO at Northern Dynasty Minerals.
A supply-side story
For typical commodities, high prices result in reduced demand and new supply. Copper is not typical; the exorbitant need for the metal makes it difficult to reduce demand sufficiently, and the supply side cannot keep up. While copper’s last cycle was driven by demand from China, this cycle is primarily driven by lack of supply. Recent supply disruptions—Cobre Panama coming offline, lower than anticipated production output in Chile, and global reduction in ore grades to name a few—triggered the metal’s bull run, leading to its record highs. The metal has backed off these highs as Chinese housing market demand remains soft. Ex China demand, driven by the US, has been strong, and the future of the metal remains bullish given electrification and decarbonization trends along with supply constraints. BHP and Lundin Mining’s willingness to pay the 30% premium for the US$3 billion joint acquisition of Argentina-based Filo Mining highlighted the lack of good assets in the market.
“We must not only achieve the productivities and efficiencies we achieved in the past but do even better. To achieve this, we must innovate and rethink our approach to mining.”
Joshua Olmsted, President and COO, Freeport-McMoRan Americas
Of the world’s 20 largest copper producing mines, only two are in the Western US – Freeport-McMoRan’s 72%-owned Morenci, responsible for 2.6% of world supply, and Rio Tinto’s Bingham Canyon, responsible for 1.4% of world supply. However, global tensions have turned the spotlight back onto domestic assets. “As global competition for resources intensifies, prioritizing domestic production and reducing dependence on foreign trade will be increasingly important over the next few decades,” emphasized Foster.
In 2023, domestic mined copper output in the US declined an estimated 11% from 2022. Output reached 1.1 million t/y, a five-year low. Of the 25 mines that produce copper in the US, 17 account for 99% of mine production. The drop in mined copper output can be attributed in part to disruptions at these mines. Copper production across Freeport McMoRan’s North American assets dropped 74 million lb for the first six months of 2024, compared to the same period in 2023, due to lower ore grades and planned mill maintenance. Record-high snowfall and a conveyor belt failure affected production at the Bingham Canyon mine—commonly referred to as Kennecott— in Salt Lake City, Utah. Ramp-up at Nevada Copper’s Pumpkin Hollow mine was delayed; operations started in October 2023. The company declared bankruptcy in June 2024, halting operations entirely, taking another domestic copper supplier off the table.
2024 started on the right foot. Domestic mines produced 209,000 t in January and February, an 8.29% increase over 2023’s 193,000 t for that same period. Production at Kennecott for Q2 2024 was up 30% from the same period last year. First production from the Lower Commercial Skarn, a small underground ore body, was achieved in June 2024, marking the mine’s return to underground production after four decades and paving the way for first ore from North Rim Skarn (NRS) by Q1 2025. “In 2023, Rio Tinto invested US$498 million to begin developing the NRS ore body. Initial probable ore reserve at NRS is 3-million t at 2.39% copper, 1.77 g/t gold, 18.59 g/t silver and 0.010% molybdenum,” detailed Foster.
Freeport conducted technical and economic studies in 2023 for a potential expansion project at the Bagdad concentrator to increase copper production by 200 to 250 million lb/y, more than double current production rates. The firm is also working on projects at the Safford/Lone Star operation to increase copper production to 300 million lb/y. “Freeport-McMoRan made significant progress in 2023 and 2024 on the studies for the Baghdad 2X expansion. We are conducting final engineering to refine costs and prepare for a decision to advance the project. We began work on a new tailings facility necessary for the 2X expansion”, elaborated Joshua Olmsted, President and COO, Freeport-McMoRan Americas.
Increased copper production will not necessarily bring the states to where they need to be. Smelting and refining capacity is the bottleneck, said Thiessen: “Only two smelters operate within the country, and both are at capacity. 50% of US-produced copper concentrate is exported, primarily to Asia, where China holds 50% of global smelting capacity… The last approved US smelter project dates to 1971 and was never built.”
The two operational smelters are Rio Tinto’s Kennecott and Freeport-McMoRan’s Miami. However, Grupo Mexico-owned Asarco has plans to restart operations at its Hayden complex in Arizona and at the Amarillo refinery in Texas. Currently, concentrates from the miner’s Mission and Ray mines are sold to China and Japan. Óscar González Rocha, president and CEO at Asarco, said: “Once the smelter reopens, we will produce a more finished product, the anode, which will be sent to the Amarillo refinery in Texas to manufacture wire rods. This wire rod will be sold primarily on the East Coast of the US.”
Unfortunately, goals of decarbonization and reducing dependence on China are at odds. Nearly US$85 billion in new smelting and refining capability is needed to displace Chinese supply, according to Wood Mackenzie’s Horizon’s report. China, accounting for 75% of global smelter capacity growth since 2000, overbuilt smelter capacity making it nearly impossible for the rest of the world to compete with their treatment and refining charges (TC/RCs). “Protectionist measures to secure raw materials for geopolitical reasons ignore the complexities and current efficiencies of copper market supply chains,” the report stated.
“To meet climate change goals, we need to produce as much copper in the next 50 years as we did in the entire existence of modern civilization.”
Tim Smith, President and CEO, U.S. Gold Mining
Copper Development
Gunnison Copper Corp, formerly Excelsior Mining, owner of the past producing Johnson Camp mine, received approval for its amended Mined Land Reclamation Plan in October, the final permit needed to restart production. First copper is anticipated in H1 2025. The deposit presents a unique opportunity, said Stephen Twyerould, president and CEO: “Our goal is to restart mining, creating two separate piles: a sulfide-rich pile for Nuton’s technologies and an oxide-dominant pile for standard heap leaching. All material will go through our processing plant to produce copper.”
In March 2024, Arizona Sonoran acquired the 523-acre MainSpring property immediately adjacent to its Cactus project. Comparing the February 2024 PFS with August’s PEA shows that factoring in the MainSpring property, daily throughput for the mine increases 40%, while capital costs increase only 20%. George Ogilvie, president and CEO of Arizona Sonoran, explained: “Acquiring the MainSpring property changed the scope of the Parks/Salyer deposit to an open pit and therefore lowers mining costs, with the ability to access more tons. 94% of the approximately 900 million t of mineralized material now comes from open pit mining, which is less capital-intensive and has a lower execution risk than underground mining with sub-level caving as was previously planned.”
Despite the government’s outward commitment to the green energy transition, however, many fear its lack of clear direction when it comes to bringing new supply online. “Despite quotas on EV sales, the government lacks a clear policy for the clean energy transition. It fails to support mining permitting and infrastructure,” emphasized Paul Harbidge, president and CEO of Faraday Copper.
In S&P Global’s analysis of 239 copper deposits discovered between 1990 and 2023, the US and Canada combined account for only 10% of discovered copper. The lack of governmental support and ongoing litigation at Pebble and Resolution—respectively ranked fourth and seventh globally in terms of copper volume— will only the hinder the country’s ambitions. However, these projects reached important milestones in 2024.
At Resolution Copper, the Rio Tinto- BHP joint venture, the Ninth Circuit Court of Appeals denied Apache Stronghold’s request to further hear their case to stop the land exchange between Resolution Copper and the federal government. In 2024 the firm signed a Good Neighbor Agreement with surrounding towns, counties and groups. “Over the last decade, we have worked closely with local communities to co-design what this mine will look like. The project has evolved significantly due to the input from communities and Native American tribes, ensuring we can coexist with nature, riparian areas and ancestral sites,” said Vicky Peacey, president and general manager.
In 2023, the Environmental Protection Agency (EPA) issued a final determination under Section 404(c) of the Clean Water Act, effectively vetoing any project in the Bristol Bay watershed. In 2024, Northern Dynasty Minerals, the State of Alaska and local native corporations filed lawsuits challenging the EPA's decision, alleging overreach and lack of scientific basis. “Legal proceedings are ongoing and Northern Dynasty expects a hearing in Alaska’s federal court in 2025. This appeal could clear a path for permitting, overturning both the veto and previous denial based on what the company describes as unsupported claims,” said Thiessen.
To account for the EPA process and streamline production timelines, Hudbay is using a two phased approach for their Copper World project explained Javier Del Rio, senior vice president, US business unit: “Phase one is a standalone operation, requiring only state and local permits, with a 20-year mine life. During this phase, Copper World is expected to produce an average of 85,000 t/y of copper. Phase two aims to expand operations onto federal land, which would require federal permits, and could extend the mine life beyond 20 years.”
The narrative may shift, as the government becomes cognizant of the dire need to increase production. “Typically, a company like World Copper would focus on exploration and development to expand a deposit. However, given the current deficit and our asset's potential to quickly impact supply, we decided to move straight into production. The US Government is actively supporting us in this endeavor, and we are working closely with them to ensure it happens,” said Gordon Neal, the firm’s president and CEO.
Demand for copper is estimated to grow 75% to 56 million t/y by 2050 primarily due to the energy transition. The world’s current production profile is 26 million t/y, of which 5 million t/y is recyclable. Now is the time for the government to realize the critical nature of advancing copper projects to meet demand. If it does not, the country will face the devastation, loss of biodiversity and human lives, that will accompany the climate crisis.
Article header image courtesy of Rio Tinto Kennecott