Red Bull Some salient bits from this week's issue of "The Economist". Sheds some key light on why a discovery in a location like Arizona may go for a premium."Nearly a decade into China’s rampant commodity-buying spree the bosses of the big mining companies are starting to talk about the growing problems getting all manner of minerals out of the ground. Copper best illustrates the issues they face.There are few sizeable new deposits in copper’s heartlands in North and South America and Australia. Annual production at Escondida in Chile, the world’s biggest copper mine, peaked at around 1.5m tonnes in 2007. The only new mine that comes close is Rio Tinto’s Oyu Tolgoi in Mongolia, which will start commercial production in 2013 and may eventually produce half that amount.New copper supply is going to be increasingly dependent on smaller mines that are deeper underground and have lower ore grades. As Gayle Berry of Barclays Capital notes, these mines will also mainly be in riskier parts of the world, such as Africa’s copper belt, stretching across Zambia and Congo. The Chinese have a mine in Afghanistan. The lack of vital infrastructure such as roads, railways, power and water, and the ever-lengthening process of getting mining permits, will make the newer mines far more costly.This bodes ill for future supply. Lead times for new projects, once four to five years, have crept up to between seven and eight years. Wringing extra copper out of existing mines has its difficulties too. Miners dig in the better parts of mines first. As older mines get deeper, ore grades decline and extraction becomes more expensive. The disruption rate (the amount of promised copper that fails to materialise), about 2% five years ago, is now as high as 8%, according to Andrew Keen of HSBC. These difficulties and the buoyant price of iron ore and coal, which can be mined far more easily, have led the world’s biggest diversified miners to favour those commodities when allocating investment.Copper prices are also likely to stay high because of the lack of good substitutes. West Norwood library’s roof repairs are dragging on because of arguments over a suitable replacement for the copper, for instance. Michael Widmer of Bank of America Merrill Lynch reckons that the current price is probably high enough to spur serious efforts to find alternatives. But most of the easy substitution has already been done."Full story here:
https://www.economist.com/node/21530107