The world needs more copper but there are major hurdles to overcome to bring new supply online, mining executives lamented at CERAWeek by S&P Global.
With increasing need for electrification, datacenters, and other advancing technology, copper producers are more convinced than ever that the demand is there, executives said on a March 10 panel at the conference. However, bringing on new developments has proven challenging, particularly in the US, the executives said.
The sector has struggled to attract capital and greenfield exploration for new copper projects remains an area of underinvestment, said Shaun Usmar, CEO of Vale Base Metals Ltd., a subsidiary of Vale SA. The industry is hoping that it can tap into technology to improve its efficiency and increase investor appeal, executives said on the panel.
"Look, our industry has not covered itself in glory in terms of generating good shareholder returns over time," Usmar said. "You keep hearing these numbers, like, 'You need as much copper from 2018 to 2050 as we've had since the start of humanity that's been mined in that period,' but the trends are moving in the opposite direction. The generalist investors have not focused on this sector for a long time and the specialist funds have increasingly been reducing [exposure to mining companies]."
Due to significant copper requirements, the clean energy transition could be disrupted by "looming shortages of copper concentrate and ongoing underinvestment into new sources of copper," Nick Trickett, a senior metals and mining analyst with the Investing in Energy team at S&P Global Commodity Insights, wrote in a March 4 report.
Trickett said the problem is not investors, but that Western mining companies have focused on consolidation instead of exploration and will likely need to see higher prices to make investments in new projects.
"While it is clear that there will be a large deficit of supply without adequate investment, there is little reason to believe that there is a financing gap," Trickett wrote. "The issue is a lack of risk appetite — not a lack of capital."
In the US, copper ore grades tend to be lower than in other mining hotspot jurisdictions, said Kathleen Quirk, president and CEO of Freeport-McMoRan Inc. While artificial intelligence is increasing electricity demand and, therefore, the need for copper, AI, automation and other technologies may also be able to help miners overcome some of the disadvantages to mining in the US, Quirk said.
"We're hoping as an industry to take a page from the energy companies who brought about major technology change, major innovation with the advent of shale [gas] production," Quirk said. "We can learn a lot from oil and gas companies and energy companies to bring technology to a sector that really needs to reinvent itself in some way."
The challenge facing the sector, Usmar said, is figuring out the technological solutions that can actually offer miners what they need to improve their efficiency.
"You've got to separate the signal from the noise. Everybody seems to have generative AI solutions and I think if you chase the shiny objects, you're going to lose in that process," Usmar said. "There has to be a solid business case for each of these things."
Quirk is also hoping for some help from the US government, which recently ordered a national security probe into potential new tariffs on copper imports. During the panel, the executive called on the US to add copper to the list of critical minerals to make it eligible for production tax credits. Quirk also said that "everyone is looking forward to the streamlining of permitting" in the US and elsewhere.
"It's just about cutting down on red tape and the duplication of effort," Quirk said.
However, while there is "pretty strong bipartisan interest" in building out critical mineral supply chains, and potential for permitting reform, other challenges remain for the industry, said Ernest Moniz, founder and CEO of the EFI Foundation think tank and the former US Secretary of Energy under the Obama administration.
"It won't change the fact that to develop a new mine is not a one-year affair," Moniz said on the sidelines of the conference. "Even with streamlined permitting, it's closer to decadal than annual."
