COPPER
Declining copper ore grades
February 2018
The average grade of copper ore mined has declined by 1.8% per year over the past 12 years to 0.59% in 2017. The fall is due to declining grades at some of the largest, long-life mines and the development of new low-grade mines. The declining grade trend will continue because of the same two factors. BHP’s 1.1Mtpa Escondida is lifting ore throughput to maintain copper output as grade declines. First Quantum’s 320ktpa Cobre Panama starts up in 2018 mining ore with only 0.4% copper.

Mined grade trends over the past twelve years 

Data extracted from AME’s global mine database reveals that between 2005 and 2017, the average grade of copper ore mined declined from 0.74% to 0.59%. This represents a 1.8% CAGR decline. Sulphide ore extracted from open-pit mines and processed to concentrate accounts for an estimated 62% of total ore mined in 2017. The average mined grade of this ore has fallen from 0.77% in 2005 to 0.58% in 2017; a 2.4% CAGR decline. Oxide ore mined from open pits is of lower copper grade overall averaging 0.47% in 2017, little changed from 0.48% in 2005. 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 2017, AME estimates underground sulphide ore contained an average 1.09% copper and made up 9% of the total copper ore mined, compared to 1.39% copper and 12% of the total in 2005. Average underground sulphide ore grade declined at a CAGR of 2.1% over the twelve 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’s 1.1Mtpa Escondida and 200ktpa Spence mines, Freeport’s 500ktpa Cerro Verde, Anglo American’s 300ktpa Los Bronces, Codelco’s 450ktpa El Teniente and 300ktpa Chuquicamata mines, and BHP and Glencore’s 400ktpa Antamina each display declining copper grade trends in recent years.

  • Copper mines that started production from 2014 to 2016 and are mining ore with grades less than or equal to 0.6% copper, and therefore contributing to a decline in average grades, include KAZ Minerals’ 110ktpa Aktogay and 100ktpa Bozshakol mines, Antofagasta’s 80ktpa Antucoya, First Quantum’s 270ktpa Sentinel, Pan Pacific’s 150ktpa Caserones, KGHM’s 120ktpa Sierra Gorda, and Hudbay’s 120ktpa Constancia. MMG’s 400ktpa Las Bambas, which started production in late 2015, is a notable exception with a copper grade in its early years of approximately 0.9%.

Country level mined grade trends

 

AME’s global mine database permits grade trends to be broken down by country.

 

  • 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 2017 were 0.66% in Chile and 0.56% in Peru, and that the CAGR declines since 2005 are 2.6% and 3.2%, respectively. As mentioned above, the comparative global figures are 0.59% copper and a -1.8% 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 0.33% for the US, 0.35% for Canada and 0.36% for Mexico.
  • 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 2017 is estimated to be 2.85% 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 0.80% in 2017 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 in 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 1.50% copper from extensive sediment hosted deposits in southwest Poland.
  • Mined copper grades in Australia are also relatively high, averaging 1.25% in 2017. Australian mines exploit a mix of deposit styles including high-grade sediment hosted hydrothermal (e.g. Glencore’s 120ktpa Mount Isa at 2.3% copper and 50ktpa Cobar at 4.6% copper) and volcanic hosted massive sulphide (e.g. Sandfire’s 65ktpa DeGrussa at 4.5% copper) deposits, moderate to high grade iron oxide copper-gold deposits (e.g. BHP’s 180ktpa Olympic Dam at 2.2% copper, OZ Minerals’ 110ktpa Prominent Hill at 1.3% 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 0.9% 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 near-term contributor to supply will be First Quantum’s 320ktpa Cobre Panama. Ore grade is approximately 0.4% copper. The US$5.71bn development is on track for commissioning in 2018, with the ramp up continuing over 2019.
  • BHP is proceeding with its US$2.46bn Spence Growth Option in Chile that will mine hypogene ore beneath the currently mined and leached oxide and transitional Spence ores. The development includes construction of a 35Mtpa concentrator that will produce approximately 185ktpa of copper. First concentrate production is expected in the 2021 financial year and cathode production from leach/SX/EW processing will cease in around 2025. The 1,255Mt of hypogene Reserves contain 0.47% copper, which is much less than the 1.36% average grade of ore processed from 2006 to 2017. 
  • Rio Tinto, as operator of Oyu Tolgoi in Mongolia, is developing a US$5.3bn block cave mine in addition to the existing 150ktpa 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 0.59% 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, US$3.4bn on a desalination plant and associated water supply infrastructure that was commissioned in 2017 and US$0.2bn to extend the life of the Los Colorados concentrator and enable utilisation of the site’s three concentrators.