Copper miners face higher costs from increasing risk of rainfall disruptions

Copper miners will need to pay up in the short term to mitigate the increasing threat of rainfall disruption over the next decades or face far greater long-term costs, experts say.

Up to 25% of the world's copper projects could be threatened by heavy rains by 2050, according to an Aug. 20 report from consultancy Verisk Maplecroft. This can mean lost productivity, heightened health and safety risks, and compromised relations with local stakeholders that could threaten miners' social license to operate, the firm said.

"Some 19% of the world's copper projects fall within the two highest risk categories of our baseline Extreme Precipitation Index, which measures the frequency and intensity of heavy rains in the current climate," Maplecroft said in the report. "However, that number could rise to 25% by mid-century, according to our data covering an intermediate emissions scenario."

Jimena Blanco of Verisk Maplecroft. Source: Jimena Blanco.

"High-risk projects require a blend of engineering, operational and environmental strategies to enhance resilience, especially in extreme precipitation-prone areas," Jimena Blanco, Maplecroft's senior research director and chief analyst who co-authored the report, said in an email interview. "While this approach may raise early-stage costs, neglecting it could lead to far greater expenses during disruptive events."

"Over the past decade, severe rainfall has caused forced suspensions of operations in copper mines across Chile, Peru and Australia, resulting in billions of dollars in losses," S&P Global Commodity Insights senior copper analyst Ruilin Wang said in an email interview.

"Other extreme weather conditions include droughts, water scarcity and heatwaves. The worst Peruvian and Chilean drought in more than half a century has forced mines to make full use of desalinated seawater in the mining sector, raising production costs substantially," Wang said.

Tier 1 problems

Canada and Australia, which are seen as key to the future supply of sustainably produced, US Inflation Reduction Act-compliant critical minerals, account for just under half of the 718 copper projects benchmarked in Maplecroft's analysis, which focuses on "advanced exploration" stage or further.

The two countries are among the top four in global copper exploration spending, which has steadily risen since 2020, and their percentage share has increased over that time, according to S&P Global Market Intelligence data.

The number of Canadian copper sites facing high or very high risks from extreme precipitation is set to more than double, from 16 projects currently to 42 by 2050, under Maplecroft's intermediate emissions scenario. Meanwhile, in Australia, which hosts the second-highest number of potential sites, the number will rise from 27 sites currently to 28 in 2050, leaving 17% of the country's copper projects at risk.

While Mexico and the Democratic Republic of Congo host comparatively fewer potential mines in Maplecroft's analysis — 17 and 11, respectively — their share of assets exposed to extreme precipitation is expected to rise significantly by 2050.

Investment decision impacts

Hydropower shortages have been constraining copper mining output in the DRC and Zambia; worker strikes, community issues and difficulties in obtaining permits are also challenges for mining operations and new project development, Wang said.

Despite all this, "major copper producers need not shift geographic focus, but must adjust plans to mitigate these risks," Blanco said.

Weather risks and management are among several key considerations during conversations with miners when considering new investments, according to Nick Harridge, national metals and mining lead for KPMG Australia.

"We certainly get asked to do specific analysis on regions for miners around the potential weather impacts and how is that trend changing under certain scenarios of global warming," Harridge told Commodity Insights.

"When you've had a big weather event that goes through Queensland and it fills up some open pits or disrupts rail or port access, then it becomes a lot more topical," Harridge said.

Mitigation strategies

Though the geography of each project determines the most effective strategies, Blanco said key considerations for miners include improving water management such as surface drainage, retention ponds and pumping systems, along with employing slope stabilization and erosion control, and adjusting pit designs in open pit mines.

"Geospatial data and scenario modeling are [also] essential for all critical minerals and downstream industries to anticipate and mitigate material risks, ensuring operational resilience and the stability of future commodity supply chains," Blanco said.

Newmont Corp. has been working with the US National Center for Atmospheric Research to forecast changes in rainfall and temperature and develop "climate narratives" for each of its operations, according to a company spokesperson. The company's 2023 acquisition of Newcrest Mining Ltd. was seen as a move to add more copper to its portfolio.

"We are currently working to incorporate this information into our operational water balances to evaluate potential impacts with our current or future infrastructure and developing climate adaptation and resiliency plans to support mitigation," the Newmont spokesperson said in an email interview.