Copper Reserves, Depletion and Substitution

Since copper has a great conductivity of electricity, it is utilized in various applications, from smartphones to the submarine pipes that drive the internet, making it inevitably more and more precious and rare.

Beyond the quantity of copper utilized for current uses, a larger amount will be needed to make the transition to net-zero emissions. Whether a more or less nuclear, carbon storage, turbine, or solar power route is taken throughout the energy transition determines how much additional copper is needed.

A quantity of extra copper equal to two to ten years of present global copper production by year will be needed to develop a low-carbon energy economy that can meet the world’s electrical demand in 2050.

Nevertheless, despite this growth, the overall demand for copper will continue to be mostly dictated by a growing world economy and wealth. Even without the power transition, it is predicted that the total demand for copper in 2050 will be roughly three times larger than it was in 2000, and it will be 3.3 times greater with the power transition.

The demand pressure that copper manufacturers will soon experience in the upcoming years will almost certainly lead to market instability, which will make copper more expensive and rarer.

The issue is that ore is becoming depleted in the current copper reserves worldwide while the amount of money being invested in developing new mines is much lower than what is required.

As a result, the global copper sector is currently experiencing a fundamental supply shortage that is projected to worsen due to rising economic challenges, resource nationalism, and inflationary cost prices.

The cut-off grades have been reaching their least possible amounts. So only exploration remains a viable alternative since decreasing cut-off grades can no longer be relied upon to develop reserves.

A considerably more amount of copper is required to be discovered if the mining sector is to escape a bottleneck on the path of a green economy ahead.

This is while only 16 out of the 224 significant copper deposits reported in the last 30 years have been identified within the past ten years, as per the S&P Global Market Intelligence analysis.

Even worse than that, a copper mine must be developed for at least seven to ten years after it is discovered.

Therefore, further exploration would not satisfy the imminent soaring demand. As it gets more advantageous to recycle copper, it is more probable that recycling will rise.

Moreover, numerous copper end users would substitute aluminum or other metals for the red metal or look for methods to reduce their copper demand. Join us as we explore copper reserves, depletion, and substitution in further detail.

Copper reserves and depletion

We are all aware of the electric vehicle (EV) revolution and how copper is necessary for digitalization, sustainable sources, power distribution, as well as plumbing and wiring sectors. The usage of copper is so pervasive that it serves as a leading indicator of the health of the world economy. Not by accident is the red metal known as “Dr. Copper.”

Supply issues, or more especially, the anticipated imbalance between supply and demand, have been getting more and more complex.

The earth’s crust contains a massive amount of copper overall. Suppose you are wondering where copper reserves are found on earth. In that case, it is interesting to know that it is present in the top 3 km of the continental crust of this planet at a concentration of fifty ppm, having roughly 60,000 trillion tons of copper. In reality, it is only feasible to economically extract a very tiny proportion of this sum, especially when a mineral resource’s eventual extraction potential is challenging to forecast.

This is dependent on a chunk of variables, which are represented in the mining expenditures, which are in turn influenced by the need for energy and materials as well as the expenses associated with mitigating the consequences for the environment, the climate, and society.

Although copper price must at least compensates for the cost of production, it is impossible to forecast what market price consumers would be willing to pay. A minimal copper concentration of around 0.4 and 0.8% is currently used in the majority of copper mining operations.

In comparison to the typical crustal availability of copper, these concentrations are 80–160 times greater. It may be possible to obtain poorer-grade copper from deeper mines as copper extracting and processing technology advances.

Up to the latter part of the 19th century, ore grades of copper extraction ranged between 10 and 20%. Then at the beginning of the twentieth century, it dropped to 2–3%. The extraction of copper ore grades has decreased to under 1% since 1950 or thereabouts.

The eventual exhaustion of high ore grades is a feature of all mineral reserves. The effort required to extract a resource in regard to energy usage, water consumption, waste creation, and environmental damage may cause a shortage problem rather than the quantity of it deep within the earth as a whole.

You may have gotten the hint by now that there are two methods for the mining sector to expand copper global reserves: either it must discover substantial new explorations for mine expansion, or it must decrease existing cut-off grades to add new reserves.

However, exploration is quite difficult considering that the majority of the large, high-grade deposits in the globe have already been discovered.

Depletion of reserves wasn’t even a concern prior to 2005. With the advent of numerous new copper mines beginning in the 1980s, both the overall reserve grade as well as the cut-off grade began to rise. Nevertheless, by the 1990s, the development of new, massive copper mines had significantly slowed down, whereas the copper depletion rate of the already-existing, aged mine base had started to pick up speed.

Goehring & Rozencwajg projected in 2005 that mine supplies would be inadequate to meet the structural imbalance of copper supply and demand while copper prices would have to stay high. But why can’t the major copper miners just use their current reserves to satisfy the rising demand?

If you take into account the ore grades listed above, you can conclude that they actually have been. The primary method copper corporations use to increase reserves has been to reduce their cut-off grades rather than recruiting exploration groups around the globe to dig through the rocks in search of a new enormous copper discovery.

This is accomplished in a rather easy manner. The “cut-off grade,” or the minimum grade required to make a volume of rock economically viable to remove at a particular price, serves as the foundation for a mine design. Anything lower than this grade remains underground. The industry can “lower the cut-off grade” while still making money when the red metal is soaring high in price.

In essence, it transforms waste rock that was formerly priced as trash into ore that can be mined. Having said that, reducing the cut-off eventually incurs too many expenditures to the point that regardless of the extent of increases in prices, mining becomes unprofitable.

Instances of such expenses include the fact that the grades are actually pretty low, even at a higher price; the metallurgy process becomes more challenging in lower grades; and the necessity of turning the rock that was previously waste into reserves involves managing several additional costs, including rewarding a government official or paying expensive taxes.

As a result of the asymmetry in the grade-tonnage plot, it becomes impossible to add significant reserves after reaching a particular cut-off grade, which is often close to the mean resource grade. Considering that a modern porphyry’s mean resource grade is presumably in the level of 0.3–0.4%, the industry has roughly already passed the stage where it can add reserves by decreasing the cut-off grades.

In the countries with the largest copper reserves, including Chile’s Escondida, which is the world’s largest copper mine, there is solid evidence for the fact that reducing the cut-off grade has affected the amount and quality of the reserves.

Unfortunately, even at prices exceeding $10,000 per tonne, reserves would not increase indefinitely, especially at porphyry deposits. The unfortunate reality is that we have been rapidly reaching the cut-off grades’ lower ranges, which means we are reaching the moment at which reserves cannot be increased at all. To put it another way, we are getting closer to peak copper.

Keep in mind that when the production output stops increasing, it is considered to have reached its peak for copper or any other resources. There won’t be anything left to mine someday if reserves don’t grow. There must be a peak in production before it starts to drop.

This alone is an alarming fact. It implies that the copper mining industry has reached its limit in terms of further decreasing cut-off grades, which makes it impossible to add significant reserves. This is particularly true considering that porphyry deposits are usually low grade, ranging from 0.3 to 0.4%.

Therefore, this decade will undergo a slowdown in the increase of the copper mining supply. There will be a sharp decrease in the number of major discoveries that come online, while the current mine depletion issues will worsen.

Additionally, the issues will be exacerbated by the analysts’ and investors’ inadequate understanding of the geological limits around copper porphyry deposits, which account for 80 percent of our copper supply.

Therefore, Goehring & Rozencwajg predicted that copper prices would rise far further than anyone could anticipate as a result of a shrinking supply of copper from mines and an already high level of demand.

The latest copper bull market witnessed prices increase seven times, from $0.60 to $4.62 per pound, between 2001 and 2011. The fundamentals are significantly more bullish now, and before this bull market ends, we wouldn’t be shocked to see copper prices increase by at least seven times once more.

Copper substitution

when it comes to raising output and copper reserves worldwide to keep up with the spike in demand brought on by both electrification and carbon reduction.

A decade ago, during the record-breaking run in copper prices, wire, and pipe producers frantically looked for less expensive alternatives, which caused a permanent decline in demand. Prices are now again on the rise, making substitutes more appealing than ever.

Undoubtedly, the power of money as an incentive is immense. It’s likely that prices will reach record levels once more in the latter half of this decade. Under any circumstance, this market will become tighter, and this can be revealed through pricing. Therefore, there will be an emphasis on innovation as well as copper aluminum substitution, recycling, and more effective use of copper.

With recycling becoming more profitable, recycling rates will probably rise. Some copper consumers may also try to reduce their need for copper by substituting it with aluminum or even other metals.

Aluminum, which costs less and weighs just one-third as much as copper, could be a good alternative for such consumers of copper. Due to its lower conductivity than copper (only 60%), aluminum often needs additional insulation since bigger wires are needed to transmit the very same amount of electricity.

Therefore, aluminum’s relatively low conductivity can be a disadvantage in a number of real-world uses, especially in the cases of substitution for copper wire.

Conductivity is crucial because lighter wires with similar conductivity can be utilized to create lighter motors and other lighter electronic systems, allowing vehicles to travel farther.

Everything that uses electricity, including the electronic devices in a car, power generation, its transmission to homes through grids, and battery charging, may be made more efficient.

However, it can take the place of copper in some situations, including those involving tubing and overhead power lines, when weight is a critical factor.

Be that as it may, a safety concern and a lessened conductivity problem usually appear whenever you try to use aluminum instead of copper.

Since aluminum cannot be used in place of copper in plenty of other applications, such as electric motors, experts do not believe that aluminum replacement, even at considerably higher copper prices, will be a permanent solution to the copper supply shortfall.

Due to its special characteristics in terms of conductivity and recyclability, copper won’t be replaced very often.

So there comes the day when the world would witness how a lack of investment in new copper mines would be conducive to a long-lasting depletion of copper required for the power transition.

Still, it appears that an impending copper shortage will force a quickly electrifying global economy to consider a number of potential solutions in order to meet its demands for the red metal.

Yet, there are consciences that none of these options will be able to satisfy global demand on their own, though when combined, they may be able to bring the gap down to a reasonable level.

Summary

On the path of a green economy ahead, when there are not many new copper explorations at hand, and the current cut-off grades of copper reserves have been reaching their least possible amounts, copper depletion is ever more imminent. With such a supply shortage and the soaring demand for copper as the result of the electrification and decolonization processes of the global economy, it is urgent to take a closer look at some probable options on the table to balance the gap, among which copper substitution with aluminum is the most prominent one.

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