Declining Copper Ore Grades
The average grade of copper ore mined has declined by 1.7% per year over the past ten years to 0.60% in 2016. The fall is due to declining grades at some of the world’s largest, long-life mines and the development of new low-grade mines. The declining grade trend will continue for these same two reasons. BHP Billiton’s 1.1Mtpa Escondida is dealing with declining grade by lifting throughput and First Quantum’s 320ktpa Cobre Panama starts up in 2018 mining ore with only 0.4% copper.
Data extracted from AME’s global mine database reveals that between 2006 and 2016, the average grade of copper ore mined declined from 0.72% to 0.60%. This represents a 1.7% CAGR decline. Sulphide ore extracted from open-pit mines and processed to concentrate accounts for an estimated 62% of total ore mined in 2016. The average mined grade of this ore has fallen from 0.76% in 2006 to 0.58% in 2016; a 2.7% CAGR decline.
Oxide ore mined from open pits is of lower copper grade overall averaging 0.50% in 2016, up from 0.47% in 2006. The average grade of this ore type increased during 2007 to 2009 as large higher-grade mines in Chile and the Democratic Republic of Congo (DRC) ramped up output. Grades of sulphide ore mined from underground are substantially higher than open-pit copper ores, but make up a small proportion of total ore mined.
In 2016, AME estimates underground sulphide ore contained an average 1.10% copper and made up 10% of the total copper ore mined, compared to 1.33% copper and 12% of the total in 2006. Average underground sulphide ore grade declined at a CAGR of 2.0% over the ten years.
Mined Grade Trends over the Past Ten Years
The declining grade trends are due to declining copper grades at some of the world’s largest copper mines and the development in recent years of low-grade deposits.
- BHP Billiton’s 1.1Mtpa Escondida mine, Freeport’s 500ktpa Cerro Verde, Anglo American’s 400ktpa Los Bronces, Codelco’s 450ktpa El Teniente and 300ktpa Chuquicamata mines, and BHP Billiton and Glencore’s 400ktpa Antamina each display declining copper grade trends over the past ten years.
- Copper mines that started production in 2014 and 2015 and are mining ore with grades less than or equal to 0.6% copper, and therefore contributing to a decline in average grades, include First Quantum’s 270ktpa Sentinel, Chinalco’s 230ktpa Toromocho, Pan Pacific’s 150ktpa Caserones, KGHM’s 120ktpa Sierra Gorda, Hudbay’s 120ktpa Constancia and Imperial‘s 40ktpa Red Chris.
- The top two producing countries are Chile and Peru in South America. Copper grades for both countries are close to the global average but are declining faster than the industry overall. AME estimates average grades of ore mined in 2016 were 0.65% in Chile and 0.55% in Peru, and that the CAGR declines since 2006 are 3.0% and 2.9%, respectively. As mentioned above, the comparative global figures are 0.60% copper and a -1.7% CAGR.
- Mines in the United States, Canada and Mexico extract lower grade ore than the industry average, due to the relatively low copper content of North American porphyry deposits. Estimated 2016 average grades of ore mined are 0.36% for the US, 0.39% for Canada and 0.37% for Mexico.
Country Level Mined Grade Trends
- The mines in the DRC and Zambia exploit African Copperbelt sediment hosted deposits that are characterised by higher grade ores. Average grade in the DRC in 2016 is estimated to be 2.8% copper. The DRC is not included on the accompanying chart because the grades are so much higher. Zambia’s average copper grade per tonne of ore mined dropped from 1.26% in 2014 to 0.84% in 2016 largely due to the ramping up of First Quantum’s large, low-grade Sentinel open-pit mine that at full capacity will produce 270ktpa of copper in concentrate from 55Mtpa of ore grading approximately 0.55% copper during its first ten years.
- Poland’s mine production of 430ktpa of copper is also high grade. KGHM’s Rudna, Lubin and Polkowice-Sieroszowice underground mines extract ore averaging 1.52% copper from extensive sediment hosted deposits in southwest Poland.
- Mined copper grades in Australia are also relatively high, averaging 1.0% in 2016. Australian mines exploit a mix of deposit styles including high-grade sediment hosted hydrothermal (e.g. Glencore’s 140ktpa Mount Isa at 2.6% copper and 50ktpa Cobar at 4.6% copper) and volcanic hosted massive sulphide (e.g. Sandfire’s 65ktpa DeGrussa at 4.6% copper) deposits, moderate to high grade iron oxide copper gold deposits (e.g. BHP Billiton’s 180ktpa Olympic Dam at 2.0% copper, OZ Minerals’ 120ktpa Prominent Hill at 1.4% copper and Glencore’s 65ktpa Ernest Henry at 1.1% copper), and low to moderate grade porphyry deposits (e.g. China Molybdenum’s 50ktpa Northparkes at 1.0% copper).
Forecast Grade Trends
The declining grade trend for mined copper ore is expected to continue because of declining grades at many of the large, long-life copper mines and the continued development of lower grade deposits. There is also expected to be a turnaround in the declining proportion of ore from underground mining due to large block cave mines currently in development, such as Grasberg, Chuquicamata and Oyu Tolgoi.
- Among new large-scale mine developments that are low grade, the biggest contributor to supply will be First Quantum’s 320ktpa Cobre Panama. Ore grade is approximately 0.4% copper. KAZ Minerals has two new low-grade mines in Kazakhstan. The Aktogay concentrator is currently being commissioned, after the 15ktpa SX/EW plant began production in 2015. At full output, Aktogay will produce 105ktpa of copper from ore containing 0.35% copper. KAZ achieved commercial production at Bozshakol in October 2016, so 2017 will be the mine’s first year at full production. Bozshakol is to produce 100ktpa of copper in concentrate from reserves averaging 0.38% copper.
- Rio Tinto, as operator of Oyu Tolgoi in Mongolia, is developing a US$5.3bn block cave mine in addition to the existing 200ktpa open-pit mine that will lift output to 550ktpa of copper. Since commencing production in 2013, ore from the Oyu Tolgoi open pit has contained approximately 0.6% Cu, while the underground reserve contains 1.66% copper. First underground production is expected in 2020, with full output from 2027.
Declining ore grades result in higher unit costs of production as more material is mined and processed to produce the same amount of payable metal. Capital costs also increase as long-life operations make capital investments to increase throughput and sustain copper production as mined ore grade is declining. Escondida spent US$4.3bn on a 55Mtpa concentrator that was completed in 2015 and is spending US$3.4bn on a desalination plant to be commissioned in 2017 to secure a reliable supply of processing water.