The Rise and Rise of Australian Copper Mining in 2021

The Australian Copper mining industry has been historically characterised by large poly metalliferous open-cut operations with Au head grade producing Cu concentrate product as a secondary production process and dedicated underground Cu mining. Newmont’s Boddington Gold project is one example of an open cut project with an annual gold production over 700 Koz and 35kt of copper. The majority of copper produced in Australia is from underground mining operations, the largest of those being BHP’s Olympic Dam with an annual production of 172kt Cu. Whilst the Gold Miners benchmark against a C1 production Cost per Oz, the Copper producers have less transparency which appears largely a result of gold producers producing more copper than the copper producers. Therefore terms such as CUEQ (Copper Equivalent Grade) are often used to measure copper by comparison with an equivalent measure of Gold. Glencore is Australia’s second-largest copper producer with underground operations in Mt Isa, Ernst Henry and Cobar in NSW. Oz Minerals, Glencore and Newcrest complete the “Tier One” producers with the remaining projects run by junior and mid-tier mining houses.

In 2020 the International Copper Association predicted a downturn in the demand for copper. This was largely due to concerns about Covid 19 and its impact on economies globally. In Australia, whilst copper production declined slightly, revenue from copper sales increased from $10.1 to $10.4 billion. In 2020 copper price averaged US$6060t. With growing consumption and a modest recovery in the world economy, this was forecast to lift to US$6570t by 2022. Continued strong demand into 2021 however saw copper achieve a record high of US$9900t in June 2021 and over US$11000 t by October 2021. Copper mining in Australia is being described as “at the beginning of a Super Cycle” driven by:

  • Uptake of EV ownership globally
  • Zero and low net emission target commitments by corporations and governments
  • Clean energy technology production
  • Demand from electrification predicted to increase by 600% by 2030
  • By 2050 global copper demand is forecast to double from 25 to over 50Mtpa

In its early 2021 published report on copper, Goldman Sachs stated that “the 2020’s are expected to be the strongest phase of volume growth in copper demand in history” and that “copper will exceed US$15000t by 2025. This estimate although seemingly “bullish” only six months ago now may appear conservative. Even the ICA may now have reason to adjust its conservative forecast and commentary given the real-time market evidence. In the last 12 months, stocks in ASX listed copper producers have increased by an average of over 180% and interest from the investment community has rallied excitement among the explorers and project proponents alike. High volume projects such as Rex Minerals “Hillside” project in S.A suddenly look more viable as do mothballed operations such as *Nifty, Golden Grove in W.A and Mt Lyal in Tasmania.

Benchmarking Australian copper projects is less straightforward due to the measures referred to by Poly metalliferous producers, however, a fair comparison can be made based on %Cu grade, production (Cu concentrate), the life of asset and JORC resource.

Table 1: Copper producers in Australia

Company Project %

Cu

Type Resource Life of mine Ore Production

P/A

Cu /Pa
Oz Minerals Carrapateena 1% u/g 950Mt 2045 5Mtpa 55Kt
Oz Minerals Prom-Hill .9% o/c 150Mt 2030 5.4Mt 55Kt
BHP Olympic Dam 1.2% u/g 2.95Bt TBA 17Mt 172Kt
Sandfire De-Grussa <=3.9% u/g N/A 2023? 1.5Mt 19Kt
Newmont Boddington N/A o/c N/A 2032 N/A 35Kt
Newcrest Telfer .4% o/c N/A 2025 N/A 18Kt
Newcrest Cadia area .3% u/g 2.6Bt N/A N/A N/A

Table one shows a sample of current copper producers in Australia with production results for 2020. With the exception of the high grade but short-lived Sandfire De-Grussa project at 3.9%, grade averages around .6% which is in line with global grade averages. A 1% Cu grade is considered high.

Whilst underground mines are the most prevalent producers at present, several large-scale exploration projects are under development and with increasing prices will prove economical.

Table 2: Australian copper projects under development

Company Project % Cu Type Resource Life of mine Ore Production Cu/Pa
Oz Minerals West Musgrave .35% o/c 253Mt 2050 12Mtpa 42Kt
Rio Tinto Winu Copper .45% o/c 503Mt n/a n/a n/a
Rex Minerals Hillside .62 o/c 82Mt 13 yr 6Mtpa 35Kt
Caravel Minerals W.A .3 o/c 662mt n/a 8Mtpa 24Kt

 

Four of the largest Greenfields copper projects currently under development are open-cut mines. Typified by high volume at relatively low grade these projects are predominantly sulphatic ores and will require process infrastructure including crushing and grinding mills as well as floatation circuits/tanks to produce copper concentrate. The Majority of Australian projects are sulphatic ores. If indeed we have entered a “super-cycle” no doubt, there will be those that “make things happen” “those that watch things happen” and those that “wonder what happened”. The electrification of logistics equipment and personal transport globally is at the beginning of an unprecedented journey. So, has the ship sailed on copper? Is it still in the dock being loaded? Or are the shipyards busy building supertankers?… I am just a “rock kicker” I will leave those predictions to far wiser folk …

*Since making this prediction in June 2021 all three of these projects are in the process of re-commissioning Reference: Office of Chief Economist 2021 March Quarterly Report: Goldman Sachs “Copper Report 2021”: International Copper Association: ASX Top Copper producers 2020: Newmont /Oz Minerals/Newcrest/BHP/Sandfire/Rex Minerals/ Investor presentations/ Annual reports 2021: Financial review 2021/Mining News/ Mining Monthly/ Dept of Industry resources/ SA,W.A CME/ On line Articles – journals/publications

 

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