finding the copper mine of tomorrow - sykes et al - dec 2013 - curtin university / university of...
TRANSCRIPT
Finding the copper mine of tomorrow:
AN ECONOMIST, A SCIENTIST
AND A GEOLOGIST DISCUSS
RESOURCE DEPLETION
John P. Sykes12*
Daniel Packey2
Allan Trench12
1 Centre for Exploration Targeting, University of Western Australia
2 Department of Mineral & Energy Economics,
Curtin Graduate School of Business
Contents
• The future of copper mining = bigger, badder, more problems!
• The economist and the “opportunity cost” paradigm
• The scientist and the “fixed stock” paradigm
• The “limits” to the “fixed stock” paradigm
• From “fixed stock” to “sustainable development” paradigm
• The exploration geologist’s view:
– The need for systemic exploration for “sustainable reserves”
– The need for forward planning with uncertainty
22 April 2014
Centre for Exploration Targeting: Science Day
Slide 2 of 20
The future of copper mining = bigger,
badder, more problems!
• Lower grades
• Higher capital
• More complex mineralisation
• Uncertain external environment - Anonymous CET Adjunct!
22 April 2014
Centre for Exploration Targeting: Science Day
Copper costs
up, grades
down: - Metals Economics Group
(23 July 2013
Mongolia takes battering
over Rio Tinto’s Oyu
Tolgoi mine - Minweb (19 August 2013
Anglo American
pulls out of Pebble
copper project - Minweb (16 September 2013
Slide 3 of 20
The economist and the “opportunity
cost” paradigm
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Centre for Exploration Targeting: Science Day
Source: Jacks (2013)
Slide 4 of 20
Economists assume inevitable decline
battling with innovation
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Centre for Exploration Targeting: Science Day
Source: Jacks (2013)
No need for exploration?
Slide 5 of 20
The scientist and the “fixed stock”
paradigm
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0
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2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Copper Reserve (Mt) Depletion (yrs)
Slide 6 of 20
The “limits” to the “fixed stock”
paradigm
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Centre for Exploration Targeting: Science Day
Source: Jacks (2013)
Slide 7 of 20
From “fixed stock” to “sustainable
development” paradigm
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Centre for Exploration Targeting: Science Day
Weighted average percentage head grades of copper
mines, 1970 onwards
Source: Crowson (2012)
Slide 8 of 20
The copper industry has a long term
‘development’ problem
“…the primary factors that govern whether a given
project is developed will be social, economic, and
environmental in nature.” - Mudd, Weng, & Jowitt, 2013
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Centre for Exploration Targeting: Science Day
Image from the
movie “Avatar”
courtesy of blu-
raystats.com No need for exploration?
Slide 9 of 20
The exploration geologist’s view: less
resource…
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Centre for Exploration Targeting: Science Day
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
Slide 10 of 20
A (reserve) ‘discovery’ problem, not a
‘development’ problem
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Chart: Schodde, 2012
Slide 11 of 20
But we’ve always known this!
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Centre for Exploration Targeting: Science Day
“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 12 of 20
What’s different nowadays?
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Centre for Exploration Targeting: Science Day
Sustainability:
“Development that meets the needs of the
present without compromising the
ability of future generations to meet
their own needs.”
- Brundtland Commission, 1987
“Social” “Equitable”
“Viable”
Sustainable
“Bearable”
Based on: Eggert (2013)
Slide 13 of 20
What makes a sustainable mine project?
2D McKelvey Reserve Box
3D ‘Sustainable
Development” Reserve Cube
Source: Otto & Cordes (2000)
RESOURCES
RESERVES
GEOLOGICAL CERTAINTY
EC
ON
OO
MIC
FE
AS
IBIL
ITY
RESOURCES
RESERVES
GEOLOGICAL CERTAINTY
EC
ON
OO
MIC
FE
AS
IBIL
ITY
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Centre for Exploration Targeting: Science Day
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The exploration geologist’s view: less
resource, but quality decline not certain
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Chart: Hronsky & Groves, 2010
Slide 15 of 20
Personal perspective on forecasting
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Centre for Exploration Targeting: Science Day
"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 16 of 20
Personal perspective on the future
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Centre for Exploration Targeting: Science Day
“My interest is in the future because I am going to spend the rest of my life there”
- Charles F. Kettering (American engineer, inventor of the electric starter, 1876-1958)
Slide 17 of 20
The future is not unknown, just
uncertain
22 April 2014
Centre for Exploration Targeting: Science Day
Images: Wikipedia
Thomas Bayes (1701-1761)
- An Essay towards solving a Problem in
the Doctrine of Chances
Thomas Chowder Chamberlin (1843-1928)
- The method of multiple working
hypotheses
Slide 18 of 20
Conclusions and further research • Copper prices at real price highs: China and the supply lag
– Is this a long or short term problem?
• The economist and the “opportunity cost” paradigm:
– Relative depletion, declining quality, temporary development problem
• The scientist and the “fixed stock” / “sustainable development” paradigm:
– Relative abundance, declining quality, long term development problem
• The exploration geologist’s view:
– Relative depletion, but can have improving quality, discovery problem
– Need systemic exploration for ‘sustainable reserves’ – HOW!?!
– Need to target ‘reserves’ needed in the future, not now – HOW!?!
22 April 2014
Centre for Exploration Targeting: Science Day
Slide 19 of 20
Further reading
• A version of this article appears in this months Centre
for Exploration Targeting Newsletter, available to
Corporate Members through the website:
www.cet.edu.au
• There is also a poster and extended abstract outside!
• And follow my CET webpage:
http://www.cet.edu.au/about-us/a-z-student-
profiles/john-sykes
22 April 2014
Centre for Exploration Targeting: Science Day
Slide 20 of 20