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Using Scenarios to Investigate the Long-term Future of Copper Mining and Guide Exploration Targeting Strategies

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Author J P Sykes and A Trench

Description

The common-held view of the future of copper mining is one of declining
quality of mineral resources and increasingly limited long-term development
options. This decline, in turn, is viewed as inevitably leading to increasing
economic, socio-political and environmental costs. As a result, new technologies
and innovations will be required to mitigate cost escalation. The future is
therefore typically summarised as a battle of a ‘below-ground’ declining quality
asset base pushing costs upward versus ‘above-ground’ technology and innovation
driving costs downward. The role that high quality new mineral discoveries could
play in mitigating industry cost pressures is typically understated, if
considered at all. New high quality discoveries can be mined at lower cost than
existing assets and potentially if discovered in the right locations within a
more amenable contemporary environmental and socio-political setting. Such
deposits, once discovered, would improve the overall quality of the industry
asset base, as well as benefitting their owners substantially through higher
margins. However, to target new high quality deposits explorers need some
understanding of the nature of high quality copper mines in the long-term
future. Conventional scientific and economic techniques for analysing the future
of copper supply, generally by studying the project pipeline, ignore as yet
undiscovered resources and also struggle to fully incorporate the multiple
internal and external factors that could impact upon copper mining practices in
the future.
Scenario analysis is specifically designed to consider multiple
factors interacting in the future, and is thus more creative than simply looking
at the visible project pipeline. The use of scenarios is therefore potentially
capable of providing insight into aspects of the future of copper mining about
which little is currently known or that remains considerably uncertain. In this
study, the Oxford University Scenarios methodology was employed to analyse
different plausible futures for copper mining and the consequent implications
for exploration targeting strategies. The scenario analysis highlights two key
dimensions or axes that serve to map out potential industry futures: firstly the
technical and economic optimisation of the existing industry; and secondly the
generation of new prospects or ‘search space’ for the copper industry. These two
axes in turn frame four different scenarios for the future of the copper mining
industry. These copper mining scenarios are then compared to the 20 largest
existing copper mines and projects, and their owners, to determine if any
represent an appropriately robust exploration targeting proxy: none do. The
paper therefore concludes that efforts by industry are required to generate mine
concepts that would be viable across all scenarios, and thus act also as
exploration targeting proxies. In the interim, companies will have to seek to
build portfolios that create an overall robust asset base, out of individually
less robust assets. Failure to do this implies that consequential, irreversible
strategic decisions lie ahead for the copper mining industry, which may be a
threat to both incumbents and the very industry itself. This situation makes
strategic exploration targeting in the copper industry very difficult.


CITATION:
Sykes, J P and Trench, A, 2016. Using scenarios to investigate
the long-term future of copper mining and guide exploration targeting
strategies, in Proceedings International Mine Management Conference, pp 265-290
(The Australasian Institute of Mining and Metallurgy:
Melbourne).