Peak Copper

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


1kg of copper per 15-‐20 tonnes of rock



1018 kg of copper



1018 kg of copper

100 million of years of human use at current rates

So where’s the problem?



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


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


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


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]


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


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





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



Construc?on

Transporta?on

Consumer/general


Global copper usage

2010


There is no use for which copper is UNIQUELY required


Construc?on

Transporta?on

Consumer/general


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

mailto:[email protected]

mailto:[email protected]

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Peak Copper