Gruffudd Roberts, CRU, UK, explores the challenges copper miners must navigate to bring on new supply in order to meet the world’s increasing demand.
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rowing demand for copper – partly from the electric vehicle and renewable sectors – will lead to a significant supply gap appearing in the copper market from the mid-2020s onwards. CRU estimates that the world will need to add 5.5 million tpy of copper mine supply by the end of the decade. With copper prices at approximately US$9000/t, far exceeding the US$6000/t level which has historically supported both project approvals and merger and acquisition (M&A) deal activity, there has been a renewed spotlight on project development. It can take approximately 15 years to develop a new copper mine from exploration through to production, and this process is often beset by risks that can stall or even permanently block a project. Environmental, social, and governance (ESG) issues will be at the forefront when investment decisions are made.
Risks from political instability and social opposition in top copper mining countries Chile and Peru produced 5.7 million t and 2.1 million t of mined copper, respectively, in 2020, 38% of the global total. They are also home to 33% (on a production basis) of the world’s undeveloped projects with >100 000 tpy of copper producing capacity. However, over the past couple of years, both
countries have seen numerous scenes of civil unrest and social opposition to mining that have severely affected the industry and could reduce the viability of certain projects. Chile’s economic and political stability was challenged by the social and political upheaval that started in October 2019 and led to a referendum on constitutional reform. The vote, carried out in October 2020, was overwhelmingly in favour of rewriting the country’s constitution, a process that is expected to culminate with a referendum on the final proposal in August 2021. It is uncertain what changes a new constitution will bring to the mining industry, but water rights, regulation of mining concessions, taxation and mining royalties, as well as labour rights and environmental protection, are all areas where changes are possible. Peru’s mining industry has remained markedly resilient amidst the political instability the country has endured for years. However, the ousting of former President Martín Vizcarra, in November 2020, and the large protests that followed, have led to concerns among miners. Also of concern are the instances of social conflict between miners and communities, as has been the case repeatedly in recent years, most notably at MMG’s Las Bambas mine, which faced close to 100 days of community roadblocks and disrupted shipments last year. Protests against Southern Copper’s Tia Maria project in 2019 were also very disruptive and, as a
global mining review // May/June 2021
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