Earlier this year, the Biden administration slapped a 20-year moratorium on mining near the Boundary Waters Canoe Area in northern Minnesota, after having last year suspended the leases that the Twin Metals Minnesota copper and nickel mine relied upon for its planned operation. It also killed mine exploration and development in a copper-bearing region of Alaska. That must mean the world is awash in copper, right?
No. Quite the opposite.
According to its 2021 report (revised in March 2022) “The Role of Critical Minerals in Clean Energy Transitions” by the International Energy Agency (IEA), the world will need between 1.7 to 2.7 times as much copper in 2040 as it produces today. With global recycling rates of copper already at nearly 50%, the report also says that only 10% of those needs can be achieved via greater recycling.
Other studies say much the same. “According to a 2022 study by S&P Global, the various net-zero emission and clean energy goals across the world will double the demand for copper by 2035,” said Kathy Graul, Director, Public Affairs and Communications for Twin Metals Minnesota. “Bloomberg New Energy Finance predicts copper demand will increase by more than 50% from 2022 to 2040. A similar story is projected for nickel, cobalt and platinum group metals. While recycling is an important part of the solution, recycling alone will not meet these demands. We need to mine for these materials, and we can do so in a way that is safe for the environment and workers.”
Many news reports in the last six months have touted copper prices being low. That’s true only if your entire historical horizon goes back less than two years. Prices hit an all-time high a year ago, then fell by nearly 30% from March 2022 to October 2022, before making up much of the lost ground in the ensuing months.
That hardly tells the whole story. According to the U.S. Bureau of Labor Statistics Producer Price Index, copper and copper products prices today are up by about 400% since the turn of the century. And they’re almost certainly going higher, and likely much higher, based on the simple economics that demand is set to increase rapidly while supply is not.
“Copper is completely, 100% tied up with the whole story of green energy,” said Konstantin Christoulakis, Senior Manager Copper for a London-based metals trading firm. “You can’t get to the envisioned economy without it.”
On the demand side, new government mandates like the EPA’s recently issued new rules on automobile tailpipe emissions that nakedly push automakers toward producing more EVs will necessarily drive tremendous growth in the need for copper.
“The next few years, as the economy bounces back, that’s when we’ll see the shortfall, in 2025 to 2030,” Christoulakis said. “You have huge numbers that we’ll need. There are substitutes in some applications, but the big picture is that there’s a need for much more copper. There’s a vicious cycle starting.”
On the supply side, years of underinvestment, falling ore grades, and water use restrictions due to drought have mines struggling in Chile, which extracts a quarter of current global copper supply. Chile’s state-owned copper mining giant Codelco expects output to fall this year by 7%. Efforts to extend the lives of existing mines have also been difficult, as seen by the 25% increase in the estimate to extend the life of the Peruvian Antamina mine to 2036 from its current expiration date of 2028.
“We haven’t had a major find in the past five years,” said Craig Hutton, CEO and President of Iron Bull Mining Inc., a Canadian firm focused on copper mining development in the Koakoland Copper Basin in Namibia. “It takes 20 years to bring a new mine into operation. And with lower-grade ores, you have to build bigger infrastructure.”
Processing, too, has recently been suffering difficulties. This past February Canada’s First Quantum Minerals announced it had halted ore processing at its Cobre copper mine in Panama over disputes with that country’s government about payments. “You see it playing out in Peru and Panama, the government trying to extract more in taxes and royalties,” said Hutton.
Even without all those tribulations, it’s clear that more mines will be needed in a big hurry. Yet global regulatory approval for new mines is at its lowest level in a decade.
Industry consolidation can help, as larger companies are better-equipped to navigate difficult international regulatory and legal environments. Some industry experts think this month’s proposal from Glencore for a $23 billion takeover of Tech Resources might be the start of a trend.
New explorations will help too, such as Anglo American’s recently announced move to restart full-scale copper explorations in Gambia.
Something that could prompt even more vigorous movement on exploration and development would be to add copper to the U.S. critical minerals list, which already includes other battery-making minerals such as lithium, nickel and zinc. That effort has gained bipartisan support from U.S. Senators. The list is intended to spur increased exploration, mining, and processing of its included minerals.
But when it comes to its push for full electrification of all sectors of our economy, the Biden administration appears to want to have things both ways, almost simultaneously issuing de facto mandates for EVs and creating new regulations to block domestic copper mining. In January, Interior Secretary Deb Haaland signed the aforementioned order withdrawing over 225,000 acres in Minnesota’s Superior National Forest from consideration for leases, effectively killing any mining development and specifically shutting down Twin Metals, owned by Chile’s Antofagasta. “Currently, it can take more than a decade to bring a new mine online in the U.S., and in some cases, closer to 20 years,” Graul said. “If we are serious about addressing the climate crisis, we need to find solutions to our permitting processes, and we must welcome, not deter, investment in domestic mining. This is why the recent decision by the federal government to enact a 20-year moratorium on mining across a quarter million acres of land in northeast Minnesota was extremely disappointing given the projected increases in mineral demand. This region sits on top of one of the world’s largest deposits of critical minerals that are vital in meeting our nation’s goals to transition to a clean energy future, to create American jobs, to strengthen our national security and to bolster domestic supply chains.”
“It’s difficult to square the announcement of this significant land withdrawal with the Biden administration’s stated goals on electrification, the energy transition and supply chain security,” added Rich Nolan, President and CEO of the National Mining Association. “At a time when demand for minerals such as copper, nickel and cobalt are skyrocketing for use in electric vehicles and solar and wind infrastructure, the administration is withdrawing hundreds of thousands of acres of land that could provide U.S. manufacturers with plentiful sources of these same minerals.”
Meanwhile, also in January, the Environmental Protection Agency issued a ruling effectively killing mining in Alaska’s copper-, gold-, and molybdenum-bearing Pebble deposit, which had been in development for over two decades.
It’s bad enough that the administration is depriving Americans of the jobs and productivity domestic mining would bring. But as Christoulakis pointed out, preventing mining in the U.S. is also bad geopolitics. “The situation with Minnesota and Alaska is very unfortunate,” he said. “You want people to buy an EV, but you’re buying all the necessary minerals from China.”
One of the administration’s anti-mining moves has generated real pushback, however. Earlier this week, Congressman Pete Stauber of Minnesota introduced a resolution that would, if adopted, reverse Secretary Haaland’s withdrawal of the national forest land from leasing.
But it shouldn’t take acts of Congress for America to be willing to mine the metals it needs to meet its stated environmental goals. “We all want a healthier environment, but we need a healthy dose of realism,” Hutton said. “What’s happening in the U.S. is ludicrous–it’s not grounded in reality.”
A final fly in the ointment of our electrification future is the increasing difficulties mining companies are encountering in attracting investment. “One key thing is investment funding,” said Hutton. “PE and markets are all looking for projects that are development-ready. Unfortunately, they are also looking for 10x returns. The big Tier 1 projects [those expected to be large, long life, and low-cost] are now very rare because explorers cannot get funding.” Those difficulties in lining up investors are exacerbated by actions like the Biden administration’s reversals of projects that have been decades in the making.
The ironic part is that this all boils down to a tremendous hiccup for the green agenda. “So this is all building to a price tsunami,” Hutton added. “Copper will be very expensive, and therefore the green transition is going to be much more expensive than current modeling.”