Finding the copper mine of the 21st century - Sykes & Trench - Sep 2014 - Society of Economic Geologists
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The document discusses the conceptual exploration targeting for undiscovered copper reserves, emphasizing the need for innovative approaches to exploration in light of increasing mining challenges. It critiques the prevailing view that there are sufficient copper resources while positing that new discoveries can meet future demands sustainably. The authors argue for a focus on high-quality deposits and the importance of integrating technology and socio-political factors in the exploration process.
![Society of Economic Geologists Conference
The ‘best’ resources dominate the industry and change the future
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…in 1898.. Bingham Canyon… was something of a joke… only barren quartz rock flecked with a trace of copper. Nobody could make money out of so little. …the world’s most famous mining man [Chief Engineer for the Guggenheims] turned up his nose. It was ridiculed by the most respected mining journal of the day. …The shovels started… in June 1906. (Lynch, 2002)
Finding the Copper Mine of the 21st Century: Conceptual Exploration Targeting for Hypothetical Copper Reserves
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Finding the copper mine of the 21st century - Sykes & Trench - Sep 2014 - Society of Economic Geologists
- 1. FINDING THE COPPER MINE OF THE 21ST CENTURY: Conceptual exploration targeting for hypothetical copper reserves John P. Sykes & Allan Trench Centre for Exploration Targeting, Department of Mineral & Energy Economics, Curtin University School of Earth & Environment, The University of Western Australia Society of Economic Geologists Keystone, USA: October 2014
- 2. Society of Economic Geologists Conference Exploration is pointless! “…new copper resources are effectively not worth exploring for.” Slide 2 of 37 Finding the Copper Mine of the 21st Century: Conceptual Exploration Targeting for Hypothetical Copper Reserves Dobra & Dobra, 2014 Tilton, 1996 “…it is frequently cheaper to add to reserves via new technology than via exploration and discovery.” Mudd, Weng & Jowitt, 2013 “…there are abundant copper resources already identified that can meet growing global demands for some decades to come; the primary factors that govern whether a given project is developed will be social, economic, and environmental in nature.” Oct 2014
- 3. Society of Economic Geologists Conference My view is the opposite, BUT… Exploration in concert with technology and innovation can deliver new copper projects which can be developed in both an economic and sustainable manner, but only via exploration targeting high-quality copper deposits. In this case, the “copper mine of the 21st century” is a high quality, as yet, undiscovered deposit, meeting the twin goals of economic and sustainable development.* Slide 3 of 39 Finding the Copper Mine of the 21st Century: Conceptual Exploration Targeting for Hypothetical Copper Reserves NB: But we will have to change how we think about exploration and targeting, as we currently are not delivering this future. Always read the small print! Oct 2014
- 4. Society of Economic Geologists Conference SOME VIEWS ON THE FUTURE OF MINING & EXPLORATION Finding the copper mine of the 21st century Slide 4 of 39 Finding the Copper Mine of the 21st Century: Conceptual Exploration Targeting for Hypothetical Copper Reserves Oct 2014
- 5. Society of Economic Geologists Conference We’ve discovered lots of resources, so exploration is not needed? Slide 5 of 37 0 5 10 15 20 25 30 35 40 45 50 0 100 200 300 400 500 600 700 800 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Copper Reserve (Mt) Depletion (yrs) Source: Edelstein (2004-13). Finding the Copper Mine of the 21st Century: Conceptual Exploration Targeting for Hypothetical Copper Reserves Oct 2014 NB: This is known as ‘fixed stock’ theory, i.e. assuming the world has a fixed amount of homogeneous mineral ‘resources’
- 6. Society of Economic Geologists Conference But resources are not equal and we use the ‘best’ first Slide 6 of 37 Source: Crowson (2012) Weighted average percentage head grades of copper mines, 1970 onwards Finding the Copper Mine of the 21st Century: Conceptual Exploration Targeting for Hypothetical Copper Reserves Oct 2014
- 7. Society of Economic Geologists Conference Causing development problems (particularly social & environmental) •Falling ore grades •Increasing depth •Shrinking size •Technological problems •Underground mining •Equipment shortages •Raw material shortages •Underinvestment •Energy prices •Labour shortages •Operating costs •Capital cost overruns •Project financing Oct 2014 •Infrastructure costs •Environmental legislation •Increased mine waste •Water shortages •Pollution •Complicated regulations •Labour unrest •Land use conflict •Political problems •Resource nationalism •Taxation •Exchange rates •Peace & security Slide 7 of 75 Finding the Copper Mine of the 21st Century: Conceptual Exploration Targeting for Hypothetical Copper Reserves NB: This is ‘sustainable development’ theory, i.e. it is the finite nature of the world and its environmental and social resources that matter. KEY Geological Technical Economic Environmental Socio-political
- 8. Society of Economic Geologists Conference And/or rising costs (and prices) without technology and innovation 0 2000 4000 6000 8000 10000 12000 14000 Long Term Real & Nominal Copper Prices: 1914-2013 (US$/tonne) Nominal Copper Price Real Copper Price Slide 8 of 37 Source: Sykes & Trench, 2014 Finding the Copper Mine of the 21st Century: Conceptual Exploration Targeting for Hypothetical Copper Reserves Oct 2014 NB: This is ‘opportunity cost’ theory, i.e. in a world where all scarce resources are being consumed it is the relative cost of consuming one resource compared to another that matters
- 9. Society of Economic Geologists Conference The prevailing view of the future of copper mining: Development problems •Contradicting views on resource abundance. •Assumed declining quality of resources into the future. •Increasing mine costs and/or ‘development’ problems. •Requirement for ‘above ground’ innovations. •Minimal role for exploration (just adding to inventory). Slide 9 of 39 Finding the Copper Mine of the 21st Century: Conceptual Exploration Targeting for Hypothetical Copper Reserves Oct 2014
- 10. Society of Economic Geologists Conference OR IS IT A DISCOVERY PROBLEM? Finding the copper mine of the 21st century Slide 10 of 39 Finding the Copper Mine of the 21st Century: Conceptual Exploration Targeting for Hypothetical Copper Reserves Oct 2014
- 11. Society of Economic Geologists Conference Not all ‘resources’ can be developed economically Slide 11 of 37 Chart: Cairns, Hronsky, and Schodde, 2010 “…investigate an alternative, less capital- intensive design of the Olympic Dam open-pit expansion… align with the Company’s cost control strategy in the current economic environment…” - BHP Billiton, 6th Dec 2012 Finding the Copper Mine of the 21st Century: Conceptual Exploration Targeting for Hypothetical Copper Reserves Oct 2014 Total Economically Demonstrated Copper Resources in Australia, 1975-2010
- 12. Society of Economic Geologists Conference Not all resources can be developed sustainably Slide 12 of 37 Photo: John P. Sykes “Anglo American has given notice that it is withdrawing from the Pebble copper project in Alaska.” - Anglo American, 16th Sept 2013 “Rio Tinto gifts stake in Northern Dynasty Minerals to Alaskan charities.” - Rio Tinto, 7th April 2014 Finding the Copper Mine of the 21st Century: Conceptual Exploration Targeting for Hypothetical Copper Reserves Oct 2014
- 13. Society of Economic Geologists Conference Thus we have a (reserve) ‘discovery’ problem, not a ‘development’ problem Slide 13 of 39 Finding the Copper Mine of the 21st Century: Conceptual Exploration Targeting for Hypothetical Copper Reserves Oct 2014 Source: Schodde (2012)
- 14. Society of Economic Geologists Conference REQUIRING AN EXPLORATION SOLUTION! Finding the copper mine of the 21st century Slide 14 of 39 Finding the Copper Mine of the 21st Century: Conceptual Exploration Targeting for Hypothetical Copper Reserves Oct 2014
- 15. Society of Economic Geologists Conference Resource quality will not inevitably decline into the future Slide 15 of 37 Chart: Lagos, 2010 Images: BHP Billiton & John P. Sykes Finding the Copper Mine of the 21st Century: Conceptual Exploration Targeting for Hypothetical Copper Reserves Oct 2014
- 16. Society of Economic Geologists Conference The best resources are discovered first… only where we haven’t looked! Slide 16 of 37 Chart: Hronsky & Groves, 2008 Finding the Copper Mine of the 21st Century: Conceptual Exploration Targeting for Hypothetical Copper Reserves NB: This is ‘search space’ theory, i.e. that by looking conceptually and physically where no one else has that resource base can be replenished by high quality discoveries. Oct 2014
- 17. Society of Economic Geologists Conference The ‘best’ resources dominate the industry and change the future Slide 17 of 37 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Share of Global Cu Mine production United Kingdom Chile USA Other 0.0 2000.0 4000.0 6000.0 8000.0 10000.0 12000.0 14000.0 Global Cu Mine Production (Kt) United Kingdom Chile USA Other Decline of UK mining, rise of Americas Resurrection of Chilean industry Decline of UK mining, rise of Americas Resurrection of Chilean industry Data: Crowson, 2012 …in 1898.. Bingham Canyon… was something of a joke… only barren quartz rock flecked with a trace of copper. Nobody could make money out of so little. …the world’s most famous mining man [Chief Engineer for the Guggenheims] turned up his nose. It was ridiculed by the most respected mining journal of the day. …The shovels started… in June 1906. (Lynch, 2002) Finding the Copper Mine of the 21st Century: Conceptual Exploration Targeting for Hypothetical Copper Reserves Oct 2014
- 18. Society of Economic Geologists Conference …but what ‘best’ (size & quality) actually means is a complex issue Slide 18 of 37 0.0 2.0 4.0 6.0 8.0 10.0 12.0 14.0 Cu ore grade (%) Cornwall (UK) Average UK Average Michigan (USA) Average USA Average Western World Average World Average Change from high grade underground mining in UK to low grade open pits in USA Data estimated from: Crowson, 2012 Further low grade copper mining innovations 20th century copper mining technology, innovation & discovery package Dynamite Steam power The corporation Mechanisation Major public infrastructure Flotation Improved smelting & refining Airborne geophysics Porphyry geological model Better work practices SXEW Computation Low cost drilling Globalisation Sources: Schodde, 2010; Lynch, 2002 & various personal communications to the author Finding the Copper Mine of the 21st Century: Conceptual Exploration Targeting for Hypothetical Copper Reserves Forward contracts Free trade New geographies Oct 2014
- 19. Society of Economic Geologists Conference A potential alternative view of the future of copper mining •Resource scarcity due to poor economics & sustainability issues: a discovery problem. •Exploration in new ‘search space’ has the potential to increase overall resource quality into the future. •More high quality discoveries will help mitigate rising costs and sustainable development problems. •Working in concert with ‘above ground’ technology and innovation to deal with uncertainties relating to economic, environmental and societal factors – ‘quality’. Slide 19 of 39 Finding the Copper Mine of the 21st Century: Conceptual Exploration Targeting for Hypothetical Copper Reserves Oct 2014
- 20. Society of Economic Geologists Conference SETTING A CONCEPTUAL EXPLORATION CHALLENGE Finding the copper mine of the 21st century Slide 20 of 39 Finding the Copper Mine of the 21st Century: Conceptual Exploration Targeting for Hypothetical Copper Reserves Oct 2014
- 21. Society of Economic Geologists Conference Explorationists need to be able to predict ‘presence’ and ‘quality’ McCuaig et al., 2010 LOW BROAD REGIONAL PREDICTION HIGH PROSPECT SCALE SCALE RELATIVE EFFECTIVENESS DETECTION Camp scale decision COST FLEXIBILITY Alteration halos High definition geophysics Drilling Geochemistry ? Slide 21 of 39 Finding the Copper Mine of the 21st Century: Conceptual Exploration Targeting for Hypothetical Copper Reserves Oct 2014 We should now be able to detect quality earlier here? But can we predict quality here?
- 22. Society of Economic Geologists Conference INCORPORATING ECONOMIC POTENTIAL Finding the copper mine of the 21st century Slide 22 of 39 Finding the Copper Mine of the 21st Century: Conceptual Exploration Targeting for Hypothetical Copper Reserves Oct 2014
- 23. Society of Economic Geologists Conference Exploration should consider economics (reserves) from the beginning Based on: CRIRSCO (2013); Sykes & Trench 2014 RESOURCES RESERVES GEOLOGICAL CERTAINTY ECONOOMIC FEASIBILITY ‘McKelvey” Reserve Theoretical Reserve RESOURCES GEOLOGICAL CERTAINTY ECONOOMIC FEASIBILITY RESERVES RESERVES Slide 23 of 23 Finding the Copper Mine of the 21st Century: Conceptual Exploration Targeting for Hypothetical Copper Reserves Oct 2014
- 24. Society of Economic Geologists Conference As value creation occurs at the early stages of projects, not later VALUE Front End Loading Finding the Copper Mine of the 21st Century: Conceptual Exploration Targeting for Hypothetical Copper Reserves Source: Bell (2014) Slide 24 of 33 Oct 2014
- 25. Society of Economic Geologists Conference But we’ve always known this! “Now a miner, before he begins to mine the veins must consider seven things, namely:- the situation, the conditions, the water, the roads, the climate, the right of ownership and the neighbours.” - Agricola, 1556 Image: Wikipedia Slide 25 of 23 Finding the Copper Mine of the 21st Century: Conceptual Exploration Targeting for Hypothetical Copper Reserves Oct 2014 So what is different nowadays?
- 26. Society of Economic Geologists Conference INCORPORATING SUSTAINABLE DEVELOPMENT Finding the copper mine of the 21st century Slide 26 of 39 Finding the Copper Mine of the 21st Century: Conceptual Exploration Targeting for Hypothetical Copper Reserves Oct 2014
- 27. Society of Economic Geologists Conference Sustainable development as ‘accessibility’ & social licence Finding the Copper Mine of the 21st Century: Conceptual Exploration Targeting for Hypothetical Copper Reserves Slide 27 of 39 The Tatshenshini-Alsek Park in British Columbia, also home to the Windy Craggy, one of the largest undeveloped VMS copper deposits in the world Image: BC Parks Oct 2014 Rebel forces outside the Bougainville copper mine in 1996, which has since civil war in 1989 miners have been unable to access. Image: Ben Bohane, The Australian
- 28. Society of Economic Geologists Conference Conceptually a ‘reserve’ should consider geology, economics & accessibility McKelvey Reserve Accessible Reserve Finding the Copper Mine of the 21st Century: Conceptual Exploration Targeting for Hypothetical Copper Reserves Slide 28 of 39 RESOURCES RESERVES GEOLOGICAL CERTAINTY ECONOOMIC FEASIBILITY RESOURCES ACCESSIBLE RESERVE GEOLOGICAL CERTAINTY ECONOOMIC FEASIBILITY Oct 2014
- 29. Society of Economic Geologists Conference DISCOVERED ECONOMIC but INACCESSIBLE UNDISCOVERED INACCESSIBLE but ECONOMIC DISCOVERED ACCESSIBLE but UNECONOMIC UNDISCOVERED UNECONOMIC but ACCESSIBLE GEOLOGICAL CERTAINTY ECONOMIC FEASIBILITY DISCOVERED ACCESSIBLE and ECONOMIC (Behind) DISCOVERED but INACCESSIBLE UNECONOMIC UNDISCOVERED INACCESSIBLE and UNECONOMIC UNDISCOVERED but ACCESSIBLE ECONOMIC Thus exploration needs to focus on undiscovered, accessible reserves Slide 29 of 23 Finding the Copper Mine of the 21st Century: Conceptual Exploration Targeting for Hypothetical Copper Reserves Source: Sykes & Trench (2014) Oct 2014
- 30. Society of Economic Geologists Conference But what will an ‘accessible reserve’ look like in 20 years time? Source: Schodde (2014) What will copper mines (accessible reserves) look like in 2035? Slide 30 of 23 Finding the Copper Mine of the 21st Century: Conceptual Exploration Targeting for Hypothetical Copper Reserves Oct 2014
- 31. Society of Economic Geologists Conference Forecasting is not possible in highly uncertain environments "Scythia has an abundance of soothsayers who foretell the future. They are judged by results and the losers are loaded on to oxcarts which are set on fire.“ -Herodotus, 440BC (NB: This is a paraphrasing by a former colleague at CRU – John Tomlinson) Slide 31 of 75 Finding the Copper Mine of the 21st Century: Conceptual Exploration Targeting for Hypothetical Copper Reserves Oct 2014
- 32. Society of Economic Geologists Conference UNDERSTANDING AN UNCERTAIN FUTURE Finding the copper mine of the 21st century Slide 32 of 39 Finding the Copper Mine of the 21st Century: Conceptual Exploration Targeting for Hypothetical Copper Reserves Oct 2014
- 33. Society of Economic Geologists Conference Taking a “multiple working hypothesis” approach to the future instead Thomas Chowder Chamberlin (1843-1928) “The method of the working hypothesis” Under the working hypothesis, the facts are sought for the purpose of ultimate induction…” “…a controlling idea” “…the method… has its defects … the ease with which the hypothesis becomes a controlling idea. To guard against this, the method of the multiple working hypotheses is urged.” “The method of the multiple working hypotheses” “The effort is to bring into view every rational explanation of new phenomena, and to develop every tenable hypothesis respecting their cause and history.” Image: Wikipedia Slide 33 of 75 Finding the Copper Mine of the 21st Century: Conceptual Exploration Targeting for Hypothetical Copper Reserves Oct 2014
- 34. Society of Economic Geologists Conference From “multiple working hypotheses” to “multiple hypothetical reserves” GEOLOGICAL CERTAINTY ECONOMIC FEASIBILITY “CONCEPTUAL RESERVE” MULTIPLE “HYPOTHETICAL RESERVES” MULTIPLE “HYPOTHETICAL RESERVES” MULTIPLE “HYPOTHETICAL RESERVES” “HYPOTHETICAL RESERVE” DISCOVERED UNDISCOVERED Source: Sykes & Trench (2014) Slide 34 of 75 Finding the Copper Mine of the 21st Century: Conceptual Exploration Targeting for Hypothetical Copper Reserves Oct 2014
- 35. Society of Economic Geologists Conference IN SUMMARY Finding the copper mine of the 21st century Slide 35 of 39 Finding the Copper Mine of the 21st Century: Conceptual Exploration Targeting for Hypothetical Copper Reserves Oct 2014
- 36. Society of Economic Geologists Conference The copper mine of the 21st century •Prevailing view of the future of copper mining: –Some assumptions of resource abundance. –Broad assumption of declining quality of resources into the future. –Increasing mine costs and/or ‘sustainable development’ problems. –Requirement for ‘above ground’ innovations. –Minimal role for exploration (just adding to inventory). •A potential alternative view of the future of copper mining: –A discovery problem: resource scarcity due to poor economics & sustainability issues. –An exploration solution: Exploration in new ‘search space’ has the potential to increase overall resource quality into the future. –More high quality discoveries will help mitigate rising costs and sustainable development problems. –But working in concert with ‘above ground’ technology and innovation to deal with uncertainties relating to economic, environmental and societal factors – ‘quality’. Slide 36 of 39 Finding the Copper Mine of the 21st Century: Conceptual Exploration Targeting for Hypothetical Copper Reserves Oct 2014
- 37. Society of Economic Geologists Conference The 21st century conceptual exploration challenge: targeting ‘quality’ Slide 37 of 37 CRISCO (2013) Compliant “Resource” Geological “Theoretical Reserve” Geological Economic “Accessible Resource” Accessible Geological CONSIDERING ECONOMIC POTENTIAL INCORPORATING SUSTAINABLE DEVELOPMENT Economic Geological “Accessible Reserve” “Multiple Hypothetical Reserves” CONSIDERS UNCERTAINTY Source: Sykes & Trench (2014) Finding the Copper Mine of the 21st Century: Conceptual Exploration Targeting for Hypothetical Copper Reserves Oct 2014
- 38. THANK YOU Acknowledgements CET colleagues: Dan Packey, Cam McCuaig, Jon Hronsky, John Vann, Sandy Bell, Richard Schodde, Pietro Guj & many others. Funding: Curtin International Postgraduate Research Scholarship (CIPRS) SEG paper editors & reviewers: Karen Duttweiler Kelley, Howard Golden, Don Schissel & John Clifford Source authors: Simon Jowitt, Gavin Mudd, John Tilton, Rod Eggert, Philip Crowson & many others. Contact information: John P. Sykes: [email protected] Allan Trench: [email protected] For more information: Centre for Exploration Targeting: www.cet.edu.au Or visit us at Booth 11
- 39. Society of Economic Geologists Conference Further reading •Sykes, J.P., & Trench, A., 2014. Finding the copper mine of the 21st century: Conceptual exploration targeting for hypothetical reserves. Society of Economic Geologists Conference. Colorado, USA. September. •Sykes, J.P., & Trench, A., 2014. Resources versus Reserves: Towards a systems-based understanding of exploration and mine project development and the role of the mining geologist. AusIMM Ninth International Mining Geology Conference. Adelaide, Australia. August. •McCuaig T.C., Vann, J., & Sykes, J.P., 2014. Mines versus Mineralisation: Deposit Quality, Mineral Exploration Strategy and the Role of ‘Boundary Spanners’. AusIMM Ninth International Mining Geology Conference. Adelaide, Australia. August. •Trench, A., Packey, D., & Sykes, J.P., 2014. Non-technical risks and their impact on mining. AusIMM Monograph 30 on Mineral Resource & Ore Reserve Estimation. Chapter 7: Risk in Resource and Reserve Estimation. Slide 39 of 75 Finding the Copper Mine of the 21st Century: Conceptual Exploration Targeting for Hypothetical Copper Reserves Oct 2014