Summary: Among the world's top 10 copper mines by production capacity, Chile and Peru each have three. The No. 1 is Chile's Escondida, which produced 1.27 million tonnes of copper metal in 2016.
Introduction: According to USGS statistics, global proven copper reserves are about 720 million tonnes of copper metal, mainly in South America and North America, accounting for about 62%. Chile and Peru are the world's top two copper-producing countries. Among the world's top 10 copper mines by production capacity, Chile and Peru each have three, with Escondida in Chile ranking first, producing 1.27 million tonnes of copper metal in 2016.
Copper is one of the earliest metals used by humans. As early as prehistoric times, people began mining open-pit copper mines and used the copper obtained to make weapons, tools and other vessels. The use of copper had a profound impact on the progress of early human civilization. In modern times, copper is widely used in electrical, light industry, machinery manufacturing, construction, defense and other fields. Among non-ferrous metal materials consumed in China, it is second only to aluminum.
According to USGS statistics, global proven copper reserves are about 720 million tonnes of metal, mainly distributed in South and North America, accounting for about 62%. Chile and Peru are the world's top two copper producers. Among the world's top ten copper mines by capacity, Chile and Peru each account for three, with Chile's Escondida ranking first with production of 1.27 million tonnes of copper metal in 2016.
I. Escondida: The World's No. 1 Copper Producer
The Escondida mine, located in the Atacama Desert in northern Chile, began mining in 1990 and ranks first in annual output among copper mines worldwide. In 2007, it produced 1.5 million tonnes of copper worth more than US$10 billion, accounting for nearly one-tenth of global copper production. Escondida employs more than 6,000 workers.
At the beginning of 2012, through infill drilling, Escondida's reserves increased by 25%. Primary sulfide ore reserves were 4.97 billion tonnes at 0.71% copper grade; heap-leachable sulfide ore was 1.98 billion tonnes at 0.47% copper; and oxide ore was 118 million tonnes at 0.94% copper. Total copper reserves were 45.7 million tonnes. Corresponding resources were: primary sulfide ore 13.54 billion tonnes at 0.57% copper; mixed ore 183 million tonnes at 0.81% copper; and oxide ore 213 million tonnes at 0.63% copper. Total copper resources were 80 million tonnes, up 17% from previous estimates.
As of 2016, Escondida had mined, leached and floated more than 2 billion tonnes of ore, producing more than 20 million tonnes of copper. By production volume, Escondida is the world's largest copper mine.
According to a report by the International Copper Study Group, in 2017 the world's top 20 producing copper mines produced a total of 9 million tonnes of copper concentrate, with Escondida ranking first.
II. Kamoa-Kakula: The Most Promising
The Kamoa copper mine is the largest undeveloped copper deposit discovered on the African continent and the second largest in the world, with resources/reserves exceeding 40 million tonnes—equivalent to 40% of China's total copper resources—and an average grade of nearly 3%.
Kamoa-Kakula is a joint venture between Ivanhoe and Zijin Mining. At a cutoff grade of 1.4%, the Kamoa-Kakula project has indicated mineral resources of approximately 1 billion tonnes at 3.02% copper, plus inferred resources of 191 million tonnes at 2.37% copper. At a cutoff grade of 3%, Kakula's indicated resources have increased by 75% to 116 million tonnes at an average grade of 6.09% copper, plus inferred resources of 12 million tonnes at 4.45% copper. Kakula is already large enough, with an average grade as high as 6%, and can produce 6 million tonnes of copper ore per year for a mine life of nearly 20 years.
Under a two-phase development plan with total annual mining of 12 million tonnes, Kakula will be developed first to form a 6 million tonne-per-year capacity, requiring an investment of US$1.2 billion.
At an 8% discount rate, a 33% internal rate of return and a 44-year production life, the two 6 million tonne-per-year mines could generate a net present value of US$7.2 billion.
Ivanhoe says half of the 400-square-kilometer Kamoa-Kakula project area has not yet been verified, but geologists have identified at least nine priority targets for drilling this year. Clearly, Kamoa-Kakula still has further development potential.
III. Oyu Tolgoi: The Most Frustrated
The Oyu Tolgoi copper belt is located 500 kilometers from Ulaanbaatar, the capital of Mongolia, 1.3 kilometers beneath the Gobi Desert. Annual production is expected to reach a staggering 500,000 tonnes by 2027, and reserves could support 100 years of mining. The project has a profound impact on all of Mongolia: Mongolia's GDP is only about US$11 billion, while this project alone is expected to account for 30% of total economic output.
Currently, the Mongolian government holds 34% of the project, and the remaining 66% is held by Turquoise Hill (NYSE: TRQ, formerly Ivanhoe Mining), a Canadian listed company whose largest shareholder is the global mining giant Rio Tinto Group.
The investment required for a world-class mine is also world-class. Rio Tinto Group has already spent US$7.8 billion and will invest at least another US$5 billion. The project's electricity consumption accounts for 25% of Mongolia's total electricity generation.
However, Mongolia is not a calm place for Rio Tinto, because such a large world-class project inevitably involves many political factors.
Under the project agreement, Rio Tinto's shareholders and creditors bear all project costs first, while the Mongolian government only needs to use the cash flow from its share of equity to pay 34% of construction costs after the project becomes profitable. In addition, the Mongolian government will receive billions of dollars in annual project royalty income. But since 2007, Mongolia has elected seven different prime ministers. The unstable political environment has exposed Rio Tinto to great risk and brought uncertainty to the future of the Oyu Tolgoi copper mine.
The development of Oyu Tolgoi could completely improve the lives of the Mongolian people, but this still requires a stable, open and cooperative Mongolian government to achieve.