Capital Intensity of New Copper Mines
July 2019
The new, large-scale Las Bambas, Cobre Panamá, Aktogay and Bozshakol mines have high capital intensities of more than US$6.6/lb of annual copper capacity. Las Bambas has a capital cost of US$6.6bn due to its remote location and the need to construct a new town, while Cobre Panamá’s US$5.48bn capex includes a new power plant and port facility and capacity for processing low-grade ores. Aktogay and Bozshakol also have low-grade ore, which requires greater ore volumes to be processed per tonne of copper production.

Big New Mines Require Large Capital Investments

Capital intensity measures the efficiency of investment. In the copper mining industry this is calculated as the ratio of initial capital expenditure to annual production capacity, indicating the investment required to generate one pound of copper. An analysis of new copper mining capacity commissioned since the beginning of 2015 and extending out to 2023 for committed, probable and possible projects indicates that median capital intensity is US$7.26/lb (US$16,000/t) of annual copper capacity. Capital intensity for most new projects is in the range of US$5.0–10.0/lb of copper.



The large new projects now in production or under construction (denoted by AME as committed) are proving to be expensive in capital intensity terms.

  • MMG’s 62.5%-owned Las Bambas mine started producing concentrate in late 2015 and achieved commercial production on the 1st of July 2016. Las Bambas is expected to produce 300ktpa of copper for 20 years. Initial capital expenditure of US$6.6bn equates to a capital intensity of US$10.0/lb of copper. The high capital cost reflects the remote location in Peru at 4,000m above sea level, the large scale of the mine and 51Mtpa concentrator and construction of the new town of Nueva Fuerabamba.
  • KAZ Minerals has brought on line two relatively large open-pit mines in Kazakhstan—Bozshakol and Aktogay. At full capacity, Bozshakol will process 30Mtpa of relatively low-grade ore (0.36% Cu) to produce 140ktpa of copper in concentrate. A capital cost of US$2.1bn equates to a capital intensity of US$6.80/lb. Copper cathode output from processing oxide ore at Aktogay commenced in December 2015 and copper in concentrate production from 25Mtpa of sulphide ore containing 0.33% copper began in February 2017. Aktogay is expected to produce 95ktpa of copper in concentrate and 20ktpa of copper cathode. In July 2016, Aktogay’s capital cost estimate was revised down by US$100m and by a further US$70m in the March Quarter of 2017 due to commissioning efficiencies and operating synergies with Bozshakol. At an initial capital cost of US$1.94bn, capital intensity is US$7.94/lb. The high capital intensity of these two projects is attributable in part to the low ore grades that require more ore to be processed per tonne of copper produced


The lower quartile on the capital intensity curve is occupied by projects in established mining districts or with high grades. Established mining districts have existing infrastructure, thus reducing capital costs for power generation and delivery, water supply, road and rail transport links, shipping ports, and onsite accommodation camps. High-grade deposits, however, produce more copper for a lower investment as capital-intensive items do not need to be as large.

  • The two lowest-cost projects on the capital intensity cost curve are Gunnison and Kalongwe. However, the quartile is dominated by Kamoa-Kakula and Timok. Ivanhoe and Zijin's Kamoa-Kakula project in the DRC is being developed in two stages, beginning with initial production from the 6Mtpa Kakula mine, then increasing to 12Mtpa with ore from the nearby Kansoko and Kamoa North mines, along with the construction of a smelter. However, its initial capital expenditure of US$1.24bn to produce up to 390ktpa of copper concentrate ranks it as one of the largest copper operations in development. It is able to achieve the low capital intensity because of its high grades (>6% copper). Nevsun and Freeport’s 180ktpa Timok project in Serbia is estimated to require US$574m in initial capital, which, at a copper output capacity of 180ktpa, gives an initial capital intensity of only US$1.45/lb of annual copper. This capital intensity is approximately a third of the copper mining industry's mean for new projects. As at Kamoa-Kakula, copper grades at Timok over the first three years of operation will be high, averaging more than 6%, well above the world average. In September 2018, Nevsun entered into a definitive agreement with Zijin Mining for its stake in Timok. As part of the deal Zijin will acquire all outstanding shares of Nevsun for a total value of C$1.86bn (US$1.41bn), acquiring 80% of Timok and the operating Bisha mine in Eritrea.
  • At the end of the first quartile is First Quantum’s Sentinel mine. The mine is located approximately 150km from the company’s Kansanshi mine and smelter in Zambia. Although the initial capital cost of US$2.5bn and copper capacity of 270ktpa gives a low capital intensity of US$4.2/lb, Sentinel experienced a slow ramp up since commencing production in February 2015, largely due to delays in receiving adequate and consistent power supply. Commercial production was declared in November 2016.

The largest project in the second quartile is Hudbay’s Rosemont. Hudbay is envisioning a large-scale, low-grade open-pit mine and concentrator for Rosemont, which at capacity will produce 140ktpa of copper in concentrate. The low grades at Rosemont mean that approximately 35% of the US$1.92bn capex will be spent on the processing plant. Construction of Rosemont is expected to commence in 2019, with production beginning in 2022.

Besides the aforementioned Las Bambas, the third quartile is dominated by Anglo American and Mitsubishi’s Quellaveco. The development of an open-pit mine and 47Mtpa concentrating operation producing 300ktpa of copper in the first ten years at Quellaveco was approved in July 2018 and is expected to begin production in 2022. Capital expenditure for Quellaveco is high at US$5.1bn. Early site works, which have contributed to the high cost, include a 7.6km diversion tunnel for the Asana River, an access road from Moquegua and water storage dams to provide construction water.

There are two major projects in the fourth quartile, Cobre Panamá and Udokan. First Quantum will begin production from its 90%-owned, 350ktpa copper in concentrate, Cobre Panamá mine in 2019. With an estimated capex of US$6.30bn and capital intensity of US$8.16/lb of copper, Cobre Panamá is high on the capital intensity copper mine curve. Initial investment includes a coal-fired power plant (US$632m) and a port facility (US$383m). Cobre Panamá will mine and process relatively low-grade ore averaging  0.38% copper. The original capex estimate of US$6.42bn (US$9.1/lb Cu) was lifted in 2017 and 2018 to US$6.3bn as the rectification of certain components of the power station, additional spare equipment purchases and other improvements rose.


Good Value in Major Expansions

Major expansions of existing copper mines can be achieved at lower capital intensity than new mine developments. This is not surprising given that much of the required infrastructure is in place. The weighted average capital intensity of the Aktogay, Buenavista, Cerro Verde, Chuquicamata, Oyu Tolgoi, Spence, Salobo and Toquepala expansions, listed in the table below, is US$3.0/lb of additional copper capacity, compared to the US$6.2/lb for base-case new copper mines. The total capital investments, which range between US$1.1bn and US$5.6bn, are substantial in absolute terms.

  • The expansion of Aktogay from 105ktpa to 170ktpa was approved in December 2017. The US$1.2bn expansion project at Aktogay involves building a second concentrator doubling sulphide ore processing capacity to 50Mtpa. Output from the new concentrator is expected to commence in the second half of 2021 with it primarily ramping up during 2022.
  • The US$3.5bn expansion of Buenavista was completed in 2016 and was in full operation in 2017. The expansion added 300ktpa of copper capacity via both concentrators and SX/EW. Since the expansion completion, Southern Copper has announced an additional expansion for the Mexican operation. The new expansion will add 20ktpa of copper capacity and 80kt of zinc capacity at a capital cost of US$413m. It is expected to be operational by 2020.
  • Cerro Verde’s expansion from 250ktpa to 500ktpa commenced in 2013 and was completed in 2015 at a cost of US$4.6bn. Full plant capacity was reached in the March Quarter of 2016.
  • The US$4.0bn Chuquicamata underground development will replace the century-old open pit. Underground production will commence in 2019. The underground block cave, initially expected to be over four levels, will now be three. Codelco cited improved materials handling systems and investment savings for the redesign. Codelco expects the transition from open pit to underground to extend the mine life by 50 years. The announcement comes after the government approved US$1bn to support expansion plans.
  • The US$4.6bn Oyu Tolgoi expansion involves development of an underground block cave mine to exploit the Hugo Dummett North orebodies until around 2040. The expansion was approved and construction commenced in 2016. Forecast copper output from Oyu Tolgoi over 2025-2030, including the contribution from the open pit, is 600ktpa, compared to the 200ktpa in recent years.
  • BHP’s US$2.2bn Spence expansion, or Spence Growth Option (SGO), is the subject of a feasibility study by BHP Billiton for open-pit mining of the hypogene ore below the supergene reserve. Spence produces 180–200ktpa of copper cathode by leach-SX/EW processing. The SGO would involve construction of a 35Mtpa concentrator to produce approximately 200ktpa of copper, possibly from 2021. An estimated capital cost of US$2.46bn excludes development of a required desalination plant.
  • Vale approved capital expenditure of US$1.1bn for the Salobo III expansion project in Brazil in October 2018. The project includes a third concentrator and will use Salobo’s existing infrastructure. Production from the Salobo III is expected to average 50ktpa of copper in concentrate in the first five years, 42ktpa in the first ten years and 33ktpa during the entire life of mine. The expansion would shorten the mine life from 2067 to 2052. The start of Salobo III is scheduled for the first half of 2022 with a 15-month ramp-up.
  • Southern Copper’s 100ktpa expansion of its Toquepala copper operation is expected to start production in December Quarter of 2018. The expansion will increase copper production from the mine by 100ktpa to 258ktpa. By the end of the September Quarter of 2018, US$1,192m of the planned US$1,255m capital expenditure to expand copper production had been spent and the project was 98% complete.