COMMENTARY — Copper cost trends lower

Average cash operating costs for Western World copper mines have fallen during the past three years, to US54 cents per lb. in 1992 from US54.5 cents in 1991 and US58.8 cents in 1990.

Much of this fall is attributable to lower operating costs at major producers such as PT Freeport’s Ertsberg-Grasberg in Indonesia, where output has nearly doubled to more than 300,000 tonnes per year. Also contributing to lower operating costs were such U.S. mines as Chino where production is now entirely by solvent extraction-electrowinning (SX-EW), Bingham Canyon where output increased by nearly one-third, and Morenci where unit costs were cut by about 15%.

The world’s lowest-cost copper mine in each of the three years was Ertsberg-Grasberg operation. Major gold credits there (641,000 oz. in 1992) pulled copper costs down to US21.3 cents in 1992 from US27.3 cents in 1991. Without gold credits, copper cash costs at Ertsberg-Grasberg would have been US42.6 cents in 1992 and US47.6 cents in 1991.

Next came such SX-EW producers as Mantos Blancos, Chino and Tyrone with cash costs in 1992 ranging from US27 cents to US29 cents, then ZCCM’s Nchanga division at US34.1 cents and OK Tedi at US35 cents.

High-cost mines in 1992 were Kidd Creek at US69.7 cents, Highland Valley at US70.1 cents, Inco’s Ontario division at US85.7 cents (pro-rate with nickel) and most of the Canadian polymetallic producers.

Among the world’s major copper regions, the lowest-cost producer in 1992 was Zambia, with estimated cash operating costs of US42.7 cents, followed by Chile at US50 cents.

Average industry costs will continue to fall as SX-EW copper production rises, to as much as 35% of total Western world output, during the next 10-15 years. This major expansion in SX-EW capacity around the world will shift the industry cost-curve to the right, creating profits for the lower-cost SX-EW producers and widening the cost gap between SX-EW and conventional concentrate producers.

Furthermore, bacterial leaching now makes possible SX-EW production from secondary sulphide ores. North American SX-EW output, expected to decline after the mid-1990s because of depletion of oxide ores, should nevertheless continue to grow into the next century as secondary, and possibly even primary, sulphides become economically amenable to leaching. — From “Copper 1993,” a publication of AME Mineral Economics of Australia.