Geoffrey Ba*Research Associate ProfessorExxonMobil Fellow
Peak CopperIs it real, and should we worry?
Case for concern -‐ why peak copper hits the headlines
When do they ma*er?
Why do resource peaks occur?
Is peak copper imminent?
What would the implica?ons of peak copper be?
Outline
What’s going to happen to the price of base metals over the next 10 years?
Ehrlich vs SimonThe ba>lefield of environmental sociology in the 1980s
In 1980, economist Julian Simon made a widely publicised wager with Paul Ehrlich, author of the influen?al environmental essay “Popula?on Bomb”.
In this bet, Ehrlich backed the price of five industrially important metals – copper, chromium, nickel, ?n and tungsten – to rise over the next ten years to 1990 because of increasing popula?on pressures deple?ng resources.
Simon, holding the other side of the wager, predicted that the price of the metals would instead decline...
“... the age of electricity and of copper will be short. At the intense rate of produc?on that must come, the copper supply of the world will last hardly a score of years....Our civiliza?on based on electrical power will dwindle and die.”
Ira Joralemon, US geologist and copper mining expert, 1924
Based on reasonable extrapola?on of 2% growth in demand per year, copper might run out within 25 years
Lester Brown, 2007
Environmental analyst, founder of the Worldwatch Ins?tute
“Over the next 25 years, world consump?on of copper will exceed all of the copper mined today”
Megan Clark, 2007
(then Vice President, Technology, BHP Billiton, now Chief ExecuLve, CSIRO)
Based on 2006 figures for per capita consump?on, global demand for copper will outstrip the amount extractable from the ground by 2100
Tom Graedel, Yale University School of Forestry and Environmental Studies
Is there trouble on the horizon?
Source: USGS, 2007
Source: USGS, April 2012
0
2.5
2
1.5
1
0.5
3
4
3.5
Adjusted Price2009 $US/lb
Price
Production
India
Egypt MexicoRussia
BrazilPeru
Saudi Arabia
Poland
Turkey
ChileChina
BelgiumTaiwan
South Korea
Spain
Italy
Germany
United Arab Emirates
Japan
France
Canada
USA
Australia
GDP per Capita (2009 $US1000/person)
0 252015105 35 40 45 5030
Refin
ed Cop
per U
sage per Capita
(kg/pe
rson
)
0
20
15
10
5
Sources: ICSG, Interna?onal Monetary Fund
Who is using all this copper, and why?
India
Egypt MexicoRussia
BrazilPeru
Saudi Arabia
Poland
Turkey
ChileChina
BelgiumTaiwan
South Korea
Spain
Italy
Germany
United Arab Emirates
Japan
France
Canada
USA
Australia
GDP per Capita (2009 $US1000/person)
0 252015105 35 40 45 5030
Refin
ed Cop
per U
sage per Capita
(kg/pe
rson
)
0
20
15
10
5
Sources: ICSG, Interna?onal Monetary Fund
Who is using all this copper, and why?
2kg vs 10kg
Source: Standard CIB Global Research
Electrical/electronic
Construc?on
Transporta?on
Consumer/general
Industrial machinery
Global copper usage
2010
Global demand for copper is growing
Produc?on is increasing to cover this demand
As a mineral resource, ul?mate supplies are finite
Resource limits are a valid concern
Hubbert Peak TheoryM. King Hubbert, US geophysicist
Geisselian Truffula theoryT. S. Geissel (1971)
Resource Extrac?on
Rate
Time
Resource Extrac?on
Rate
Time
Discovery
Resource Extrac?on
Rate
Time
Expansion
Resource Extrac?on
Rate
Time
Peak
Resource Extrac?on
Rate
Time
Collapse
Resource Extrac?on
Rate
Time
Exhaus?on
Resource Extrac?on
Rate
Time
Where is the weakness?
new discoveries
technological efficiency enhancement
varia?on in consump?on rates
Assumes no
Are we really approaching (or at...) peak copper?
Copper is a fairly common element
50-‐70 ppm (by weight) in the Earth’s crust
50-‐70 ppm (by weight) in the Earth’s crust
1kg of copper per 15-‐20 tonnes of rock
50-‐70 ppm (by weight) in the Earth’s crust
1kg of copper per 15-‐20 tonnes of rock
1018 kg of copper
50-‐70 ppm (by weight) in the Earth’s crust
1kg of copper per 15-‐20 tonnes of rock
1018 kg of copper
100 million of years of human use at current rates
So where’s the problem?
50-‐70 ppm (by weight) in the Earth’s crust
1kg of copper per 15-‐20 tonnes of rock
1018 kg of copper
100 million of years of human use at current rates
Obviously, we can’t mine the enLre crust -‐ so how much can we feasibly
extract?
MinEx Consulting Strategic advice on mineral economics & exploration
World Copper Reserves 1900-‐2010Mt Cu
Slide used with permission of Richard Shodde, MinEx Consul?ng
Based on current discovery rates and exis?ng geologic surveys 1.6 billion metric tons of copper exist that could poten?ally be brought into use*.
USGS 2005
*Taking the broadest possible defini?on of available copper, and assuming no energy constraints or environmental issues.
...of which 950 million tonnes considered economically recoverable
Based on current discovery rates and exis?ng geologic surveys 1.6 billion metric tons of copper exist that could poten?ally be brought into use*.
USGS 2005
*Taking the broadest possible defini?on of available copper, and assuming no energy constraints or environmental issues.
economically recoverable
MinEx Consulting Strategic advice on mineral economics & exploration
Ra?o of Global Copper Reserves/Produc?on 1900-‐2010
Years
36 years in 2010
111
91
50 years in 1900
32
60
Sources: Produc?on data USGS, Reserve data MinEx Consul?ng March 2010
Slide used with permission of Richard Shodde, MinEx Consul?ng
Remember Ehrlich?
0
24
21
18
15
12
9
6
3
27
Mean Cu
ore grade
s
1840 1860 1880 1900 1920 1940 1960 1980 2000
Year of mining
Australia
Canada
USA
World average
Sources: USGS (2009), Brook Hunt, UBS
Improved transporta?on
Froth flota?on processing
Expanding demand -‐ economies of scale
“Age of the Giant Porphries”
Airborne geophysics post WW2: New discoveries
Improved geological models
Improved work prac?ces
Low cost mining in new countries
MinEx Consulting Strategic advice on mineral economics & exploration
Key Technical Innova?ons Es?mated average opera?ng costs for copper mines in Western World: 1900-‐2010
Sources: Brook Hunt, CRU , Historical reports MinEx Consul?ng es?mates (for 1900-‐1974)
Bulk mining
Improved recoveries,
be*er smel?ng and refining
1900 1920 1940 1960 1980 2000
0
20
40
60
80
100
120
140
160
2009 $/ton
ne ore
Sources: Brook Hunt, CRU, MinEx Consul?ng [es?mates for 1900-‐1974]
MinEx Consulting Strategic advice on mineral economics & exploration
There is a trade-‐off between tonnes and gradeTonnes-‐Grade data for 48 copper deposits
Grade (%Cu-‐equiv)
Resource (million tonnes)
Source: MinEx Consul?ng March 2010
Slide used with permission of Richard Shodde, MinEx Consul?ng
Is it just a quesLon of economics?
Can we just buy our way out of resource limits?
“Anyone who believes that exponen?al growth can go on forever in a finite world is either a madman or an economist”
Kenneth Boulding, US Economist
ExternaliLes
Costs or benefits not transmi*ed through prices that are incurred by a party who did not agree to the ac?on
causing the cost or benefit.
Kalgoorlie mining opera?onsCourtesy Newmont Australia Ltd
Societal tolerance for ever-‐larger mines is finite
Copper -‐ as with all mineral resources -‐ incurs a significant
ecological footprint
35,000-‐45,000 litres of water used
3-‐6 tonnes of CO2 emi*ed
15-‐30 GJ of energy
Per tonne of metal
Source: Haque and Norgate, 2010 [CSIRO Minerals Down Under Flagship]
Total Na?onal Energy Use
11%
Electricity
32%
6%
Fuels
Energy use in copper mining and producLon, Chile
Source: Chilean Copper Commission, 2009
Chile entering a complex water shortage, demand copper miners to reduce consump7onPublished Date: 14-‐04-‐2009 Source: Reuters Source Date: 07-‐04-‐2009
SANTIAGO -‐ Chile's government on Monday called on mining companies to further curb their water usage amid a shortage of the resource in the country's arid, mine-‐rich north.Miners opera?ng in Chile, the world's No.1 copper producer, have in recent years reduced their consump?on of water, a key ingredient in copper produc?on. They currently consume 11.5 cubic meters to produce a tonne of copper, down from 15 cubic meters in 2000.
"We are entering a complex water shortage phase in Chile. Water consump?on to produce a tonne of copper is s?ll high and we have to ask for more efficient usage," Public Works Minister Sergio Bitar said as the government signed a water-‐efficiency pact with mining companies.
Chile suffered one of its worst droughts in memory last year which hammered the agriculture and hydro-‐electric sectors and prompted miners to look at alterna?ves, such as desalina?on plants, to ensure supplies.
The government is concerned by a delay in the arrival of rains this year.
Francisco Costabal, president of the Mining Council that represents Chile's biggest copper mining enterprises, said the sector had cut consump?on with projects to reuse water and measures to avoid evapora?on by covering reservoirs. "We will con?nue our efforts to reduce water consump?on per tonne", he said.
ReporLng by Monica Vargas, wriLng by Patricia Velez. EdiLng by Simon Gardner and Jim Marshall
Western Australia State of the Environment Report, 2007
Energy Use by Sector, Western Australia
Western Australia State of the Environment Report, 2007
Energy Use by Sector, Western Australia
Western Australia State of the Environment Report, 2007
Energy Use by Sector, Western Australia
Electricity prices in Australia projected to rise by 37% over the next 3 years already...
“The last major diver?ble surface resources close to the Perth – Bunbury axis have now been developed.”
Economic RegulaLon Authority of Western Australia, 2004
Australian Government Bureau of Rural Sciences, 2007
Groundwater extrac?on doubled in Australia between 1985 and 1997
50% of Perth’s fresh water comes from groundwater
“The bet doesn’t mean anything. Julian Simon is like the guy who jumps off the Empire State Building and says how great things are going so far as he passes the 10th floor.”
Paul Ehrlich, 1990
If we do exhaust copper reserves, will there be severe consequences?
Increased expenditure......ul?mate societal bankruptcy
Source: Standard CIB Global Research
Electrical/electronic
Construc?on
Transporta?on
Consumer/general
Industrial machinery
Global copper usage
2010
Source: Standard CIB Global Research
There is no use for which copper is UNIQUELY required
Electrical/electronic
Construc?on
Transporta?on
Consumer/general
Industrial machinery
Global copper usage
2010
Conclusions
Yes, there are real limits on the amount of copper we can reasonably expect to extract from the Earth...but we do not
seem to be imminently close to them at present
The ul?mate limits on copper extrac?on are probably externali?es rather than the copper mineral resource base
itself
Principally, this means resource chains to more sensi?ve commodi?es -‐ water, petroleum, energy...
...and societal tolerance of mining ac?vity
Although highly desirable, copper is not crucial to societal func?on -‐ there are feasible, if less a*rac?ve, alterna?ves to all
its core func?ons
Even if we run out of croissants, we’ll s?ll have bu*ered toast
wordpress.rockysubjects.com
A Rosy View from the Pa?sserie: Copper resource peaks and why they keep failing to materialise
wordpress.rockysubjects.com
A Rosy View from the Pa?sserie: Copper resource peaks and why they keep failing to materialise
...and by the way, there’s no such thing as Geisselian Truffula theory
Ba9 Peak Copper, April 2013
For further comment on this and other resource-‐related ques?ons, contact the author at geoff.ba*@uwa.edu.au