RE:RE:Interesting Article from Japan Times BY JAMES FERNYHOUGH
BLOOMBERG
May 5, 2023
(selected highlights from article posted in the Japan Times via Bloomberg, author, James Fernyhough)
“There was no doubt that it was exactly the sort of project that Rio Tinto goes after — tier one, large size, long life, low operating cost. So that was the basis of their interest,” says David Paterson, who became Rio’s country director for Mongolia in 2010.
Oyu Tolgoi, which Rio forecasts will be the world’s fourth-largest copper mine when it is at full production, uses a complex method that allows access to deeper deposits called “block caving,” which involves digging under the ore body, blowing gaps underneath that allows the ore to collapse and fall down funnels to a lower level where it is collected, crushed, and sent to the surface on conveyor belts.
A cost-effective way of mining large deposits less rich than those of the past, its popularity is spreading, but the technique remains a challenge. Rio found early on that its ore collapsed all too well. Then there’s the hefty initial investment.
Rio’s Baatar is bullish. He argues disputes over “mega-mining contracts” are common, and doesn’t think Rio’s experience over Oyu Tolgoi was particularly unusual. Nor does he think political instability elsewhere will hold back copper supply.
But his optimism is not widespread.
Take not just Chile, with its revisions to fiscal policies for miners, but Peru, a country long considered crucial to the next wave of copper production, where the mining sector has been battered during lengthy social unrest. Rio in late March agreed to sell a controlling stake in its Peruvian mine La Granja to First Quantum.
“What the market never predicted was how difficult South America would become,” said Radclyffe. “The uncertainty out of both Chile and now ongoing in Peru, that’s just added an extra level of complexity that the market never expected, and that hasn’t really been resolved.”
The problem now is that the next big deposits will require possibly more risk than most executives at the helm of large miners are willing to take. Even before that, it requires a significant increase in exploration spending(this is where Casino has the edge).
Friedland, still one of the mining industry’s most committed boosters, agrees — and warns that the sheer length of time involved in bringing on new mines can rarely be shortened, even when exploration money is spent and a deposit found.
“Oyu Tolgoi is now 20 years old, and it’s just getting started,” he said. “It doesn’t matter whether the copper price is $3 a pound or $30 a pound, you can’t speed up the process materially.”
Granted, there are other options — recycling, or new methods to extract copper from lower grade ore and even mine waste. BHP, Rio and others have bet on cutting-edge technology. But in the face of rocketing demand, none will move the needle.
“If it was rolled out across every operation in the world, it could be another half a million tons added on,” said Wood Mackenzie analyst Carl Firmen — who estimates the annual supply gap will be 12 times that figure by next decade.
Other, more futuristic methods, such as use of underground robots and microbes to get more out of low-grade or hard-to-access deposits are at an even earlier stage.
Rio, of course, hopes to be among the beneficiaries whatever happens, with rising demand pushing prices higher just as copper output at Oyu Tolgoi reaches peak production. At that point, the company projects, it will be up there with the giants.
Greening the economy, expanding grids and renewable energy generation to hit global climate targets, however, requires many more Oyu Tolgois.
“Mongolia was an adventurous location. So was the Democratic Republic of Congo,” says Friedland. “But this has to be done. Absent this effort, there is absolutely no chance of an energy transition. It’s a fantasy.”