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Finding the copper mine of the 21st century - Sykes & Trench - Sep 2014 - Society of Economic Geologists
Citation preview
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
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
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
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
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’
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
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
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
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
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
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
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
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)
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
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
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
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%
Sh
are
of
Glo
ba
l C
u M
ine
pro
du
cti
on
United Kingdom Chile USA Other
0.0
2000.0
4000.0
6000.0
8000.0
10000.0
12000.0
14000.0
Glo
ba
l C
u M
ine
Pro
du
cti
on
(K
t)
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
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
gra
de
(%
)
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
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
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
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
RE
LA
TIV
E
EF
FE
CT
IVE
NE
SS
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?
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
Society of Economic Geologists Conference
Exploration should consider economics
(reserves) from the beginning
Based on: CRIRSCO (2013); Sykes & Trench 2014
RESOURCES
RESERVES
GEOLOGICAL CERTAINTY E
CO
NO
OM
IC F
EA
SIB
ILIT
Y
‘McKelvey” Reserve Theoretical Reserve
RESOURCES
GEOLOGICAL CERTAINTY
EC
ON
OO
MIC
FE
AS
IBIL
ITY
RESERVE
S RESERVES
Slide 23 of 23
Finding the Copper Mine of the 21st Century: Conceptual Exploration Targeting for Hypothetical Copper Reserves
Oct 2014
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
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?
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
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
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 E
CO
NO
OM
IC F
EA
SIB
ILIT
Y
RESOURCES
ACCESSIBLE
RESERVE
GEOLOGICAL CERTAINTY
EC
ON
OO
MIC
FE
AS
IBIL
ITY
Oct 2014
Society of Economic Geologists Conference
DISCOVERED
ECONOMIC but
INACCESSIBLE
UNDISCOVERED
INACCESSIBLE but
ECONOMIC
DISCOVERED ACCESSIBLE
but UNECONOMIC
UNDISCOVERED
UNECONOMIC but
ACCESSIBLE
GEOLOGICAL CERTAINTY
EC
ON
OM
IC F
EA
SIB
ILIT
Y
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
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
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
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
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
Society of Economic Geologists Conference
From “multiple working hypotheses” to
“multiple hypothetical reserves”
GEOLOGICAL CERTAINTY
EC
ON
OM
IC F
EA
SIB
ILIT
Y
“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
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
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
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
Ec
on
om
ic
“Accessible Resource”
Ac
ce
ss
ible
Geological
CONSIDERING
ECONOMIC
POTENTIAL
INCORPORATING
SUSTAINABLE
DEVELOPMENT
Ec
on
om
ic
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
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
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