The applications of copper are extensive, spanning various sectors, including transportation, renewable energy, and low-emission power generation and distribution. According to the International Energy Agency (IEA), in 2024, the global capacity for renewable energy saw an unprecedented 50 per cent increase in 2023, marking the fastest growth rate in two decades. As technological advancements continue to accelerate in renewable energy solutions and new electrification applications, coupled with urbanisation, the demand for copper is expected to remain both strong and resilient. This underscores the relatively inelastic nature of copper demand over the long term, highlighting its enduring and essential role in human society.
Total copper demand is made up of a combination of refined copper demand that includes both primary and secondary production, plus direct use of scrap. The growth in global copper demand in recent time is partly attributed to the rapid industrialisation of China and its status as a manufacturing hub, as well as extensive investment in infrastructure, renewable energy, and electrification, which include large-scale solar and wind projects and electric vehicle production. In 2023, as shown in Figure 1, global refined copper consumption grew 8.5 per cent to reach just over 28 million tonnes (Mt) however, recent weakening of global economic conditions is influencing some end-use sectors such as property construction (in China and Europe) and manufacturing (in Europe). According to the Australian Government Office of the Chief Economist, a more modest growth rate for copper consumption in the short term of 1.3 per cent in 2024 to reach 28.4 Mt is expected.
Figure 1 - Global refined copper use and forecast 2018-2030
The amount of copper required in clean energy technologies, coupled with the growing demand and scope of technologies, is increasing the demand on copper producers. For example, copper demand is heavily influenced by the growing market for electric vehicles (EVs), where each type of EV deploys considerably more copper than traditional internal combustion engine (ICE) vehicles. Copper usage across select EV types is shown in Figure 2.
Figure 2 - Copper use in electric vehicles by vehicle type (kg)
The IEA notes that EVs is the sector that is delivering the largest growth in copper demand when compared to other clean energy technology sectors and across all stated policy (STEPS), announced pledges (APS) and Net Zero Emission (NZE) scenarios, as shown in Figure 3 below.
Figure 3 - Refined copper demand outlook by sector and scenario (IEA)
Copper plays a foundational role in modern society.
Economic resilience measures, particularly in the United States, coupled with widespread infrastructure investments, are another factor likely to support global copper demand in the medium term. Projections by the Australian Government Office of the Chief Economist from 2024 indicate that global copper use could expand at an annual rate of 2.2 per cent to an estimated usage of approximately 32 Mt by 2029.
In the longer term, copper demand drivers are inextricably linked to demographic growth and economic progress, installed copper, renewable energy initiatives, electrification efforts, and government and industry commitments to net-zero emissions. Consequently, refined copper demand projections at the industry segment level include diverse complexities and potential outcomes. Considering these complexities and as noted by He (2022), scenarios to model future copper demand all point to an increase in total copper use over the long term. This position is supported by most leading analysts noting the robust demand for copper, critical in both traditional and sustainable technologies and even in scenarios where global efforts fall short of a complete net-zero transition. Forecasts by the ICA (Figure 4) presented in The Pathways to Net Zero (Pathway) indicate annual copper demand growth could reach 57 Mt in a 1.5 degree scenario by 2050, approximately double today’s levels.
Copper is critical to the energy transition.
Figure 4 - Base case refined copper demand showing the predicted rise in annual refined copper demand between 2020 and 2050 (ICA)
Amidst these robust demand settings, it is apparent that a substantial uplift in copper supply is needed. The copper industry response is multifaceted and will likely include a step-change in primary supply, including capacity from new (greenfield) or existing operations (brownfield), an increase in production output at existing assets, plus enhanced secondary supply, including recycling streams and utilisation.
Capacity increase in primary supply is a key priority for the copper industry and a focus of this research given the important role of discovery in unlocking future supply. In 2023, global mined copper output reached 22.4 Mt, an increase of 3.8 per cent on 2022 levels (Figure 5).
Figure 5 - Global copper mine production versus copper use 2022-2029
Latin America continues to dominate the primary copper segment, with Chile and Peru delivering 34.5 per cent of global mined copper production. Australia ranks as the 8th largest copper producer in the world, as shown in Figure 6. Primary copper production also features large-scale operations where notably the output of the top three copper operations — Escondida in Chile, PT Freeport Indonesia (Grasberg) in Indonesia and Collahuasi in Chile — produced over 10 per cent of global production in 2023.
Figure 6 - Global copper mine production by country, 2023
Addressing a short-term supply balance will necessitate an increase in existing and major new project development, which in turn requires navigating a complex array of risk factors before committing to project investment and development. In recent years, copper project develop- ments have focused on advancing the lowest-risk projects.
Significant new copper discoveries and developments include an extension to mines in the Democratic Republic of Congo (DRC), the increase in Chilean production with the ramp-up of Quebrada Blanca and Codelco’s Chuquicamata, as well as the extension of the Chinese output, including the Qulong and Yulong operations. Many known resources remain undeveloped due to low-grade ore characteristics or challenges related to fiscal, political social and environmental uncertainty in the host country. Table 1 presents a summary of analysis of projects at May 2024 by major producing regions that have progressed to the Environmental Impact Assessment (EIA) phase. Several are experiencing delays in the permitting process that can take multiple years to gain approval.
Supply-side risk and uncertainty have been evident at significant existing copper operating regions. For example, Chile, the world’s largest copper producer, experienced a decline in copper output of 1.5 per cent in 2023 compared to 2022 due to a range of operational issues at major sites, project delays and social unrest, and Panama saw the closure of its largest operation, Cobre Panama, due to community opposition.
Copper supply will come from a range of new major projects.
According to the Australian Government, Office of the Chief Economist Australia remains a favourable jurisdiction for primary copper supply, with output poised for annual growth at rates of 6.2 per cent to 2029. Supply will come from a range of new major projects, such as Hillgrove Resources Kanmantoo copper mine, and efficiencies achieved through the consolidation of South Australian BHP assets Olympic Dam, Carrapateena and Prominent Hill, into a single operating asset, Copper South Australia. Australian mine production is projected to reach 1.16 Mt in 2028–29.
Shifting focus further upstream is the potential of copper supply from undeveloped resources and reserves, along with current and future exploration opportunities. Copper, a widely abundant metal in the Earth’s crust, is found in various locations worldwide, though it varies significantly in grade and economic viability for development. Total copper resources encompass both identified and undiscovered resources. A resource is defined as a naturally occurring concentration of solid, liquid, or gaseous materials in or on the Earth’s crust in such form and quantity that economic extraction of a commodity is currently or potentially feasible. These resources can be either identified through initial geological surveys or remain undiscovered. Conversely, reserves are specific deposits that have not only been discovered but also thoroughly evaluated and confirmed to be economically viable for mining. The International Copper Study Group (ICSG) note that increases in reserves are evident, and more identified copper is available to the world than at any other time in history.
Figure 7 - World copper reserves and mine production at 2022 (Mt)
According to the ICSG between 2000 and 2022, an estimated 396 Mt of copper was mined. In that same period, copper reserves have grown by 457 Mt to 890 Mt due to exploration activity, technological advances, and the evolving economics of mining. However, while the reserves outlook is promising, a key challenge facing the copper industry, with an appetite for large-scale deposits, is that many of the easily accessible near-surface copper deposits have already been mined, and analysis indicates that reserves are not always aligned to current major primary production locations (Figure 8). This presents a key risk to existing large-scale copper regions as operations reach new depths and face issues including grade decline, technical challenges and complexities, and other supply-side risks.
Major copper discoveries have increased in depth.
Figure 8 - Copper reserves versus years of remaining production at 2023 levels
Major copper discoveries (>3 Mt) are also less common and have increased in depth over time, as shown in Figure 9.
Figure 9 - Depth of discovery to select major deposits >3 Mt over time
The prioritisation of high-grade reserve extraction is of further concern for future copper supply. The depletion of higher-grade reserves is often replaced with larger resource volumes of lower-grade.
Hence, while the copper industry continues to observe large global quantities of copper resources, these reserves are being reported at lower cut-off grades, as shown in Figure 10.
Figure 10 - Average grade of reported copper reserve over time
CHALLENGES FOR COPPER SUPPLY
Current Investment Status of Exploration and Discovery
Investment in mineral exploration globally is currently very strong, reflecting a buoyant market setting, strong demand and acknowledgment of the impact of geopolitical sensitivities. From the 2023 S&P Global survey of 3,100 companies, investment in non-ferrous mineral exploration was at the near record high of US$12.8 billion in 2023, albeit down 3 per cent on 2022.
Copper and gold are perennially attractive targets for exploration activity, and when combined, accounted for 70 per cent of all exploration expenditure globally in 2023 (Figure 11). Notwithstanding short term variations in exploration expenditure, gold and copper are typically attractive targets for exploration activity, that when combined account for 60-70 per cent of all exploration expenditure (Figure 12).
Figure 11 - Proportion of global exploration investment by commodity, 2023 (%)
Figure 12 - Global exploration expenditure by commodity – percentage of total spend (1975 to 2022)
Investment in copper exploration made up 24 per cent of the global budget in 2023, increasing by 12 per cent on the previous year (to US$3.12 billion). This ongoing strength has been attributed to increases in major companies’ exploration budgets.
The key regional focus areas of non-ferrous exploration investment in 2023 were Latin America, Canada, and Australia, with Latin America attracting the largest share of global exploration investment.Latin America also hosts the largest copper producing assets.
According to analysis by Schodde, over the last decade, US$196 billion has been spent globally on exploration, generating US$135 billion in value. This gives a value-to-cost ratio of 0.69. Australia performed better than this, generating a value-to-cost ratio of 1.19 and capturing 22 per cent of the value created by the global exploration industry.
Exploration is undertaken by a range of company types. Companies are generally defined and categorised depending on their assets and operations. They range from junior exploration companies that are typically early-stage companies searching for a resource and funded through capital raising as they have no operating asset, and generally exhibit a low market capitalisation. Mid-cap or mid-tier companies usually have at least one operating (cash-generating) asset and a modest market capitalisation. Major companies are generally multinational and have multiple assets generating cashflow and significant market capitalisation. It should be noted that there is no consensus on exact market capitalisation for each level and that mid-tier producers can also be referred to as ‘junior’ miners. However, all companies undertake exploration toward a discovery outcome, but with varying focus areas, agility, consistency and funding.
Globally, junior explorers accounted for 40 per cent of exploration expenditure in 2024, US$5.36 billion (down 4.5 per cent on 2022). Junior explorers rely heavily on capital raising to finance exploration programs and experienced weaker financing conditions in 2023. However, the impact of this challenging funding environment varied depending on the focus of the exploration programs. Metals like copper which are the key to the green energy transition, have generally continued to gain steady or expanded funding.
Mid-tier companies often focus on exploration to support extensions to their existing assets and new assets, but their budgets may be more susceptible to the profit from the operating asset/s than those of major companies.
Major companies are typically able to fund their own exploration programs internally and may seek partnerships with the more agile junior sector. These larger companies showed an increased exploration expenditure to US$6.02 billion in 2023 (a 1.2 per cent rise on 2022) with an increase in global copper exploration. The increase in copper exploration activity mainly came from the major miners (BHP Group, Vale, Barrick, and Rio Tinto).
Other research by Schodde showed that junior companies performed much better than the major companies (with value-to-cost ratios of 1.69 vs 0.74, respectively). This was perceived to be partially due to the major companies’ focus on brownfield or near-mine exploration, which, while extending the life of an existing operation, rarely results in significant new stand-alone discoveries.
The focus of global expenditure on greenfield exploration, or exploration in new areas or search spaces, declined to US$2.99 billion in 2023, while budgets for brownfield exploration, or near mine exploration, and feasibility work increased to US$4.89 billion (38 per cent of the global budget).
According to S&P Global, greenfield exploration for non-ferrous minerals is at an all-time low compared to investment in brownfield exploration. In 2004, greenfield exploration was around 50 per cent of global investment, dropping to around a third in 2014, and last year, it was just 23.4 per cent of all expenditure. The decline has been slower in Australia, from 40 per cent of exploration spend to an average of 33 per cent for the last ten years and 31 per cent in 2023 (Figure 13).
Figure 13 - Exploration expenditure in Australia 2003-2023
Globally, greenfield exploration is at an all time low.
Discovery Targets and Tiers
Exploration is generally focused on the discovery of significant quality deposits. The primary type of target is known as Tier 1 deposits, typically, these are large, have a long mine life and can be mined at low cost. The criteria is not standard across the industry. For example, according to Barrick, a Tier 1 copper asset is one with a reserve potential of greater than 5 Mt of contained copper and a cash costs per pound over the mine life that are in the lower half of the industry cost curve.
Tier 2 deposits are known as significant deposits – but not quite as large, long life, or profitable as Tier 1 deposits. These deposits present alternate economic, investment and risk criteria to Tier 1 deposits. Through additional delineation or changes in costs and/or risk, some Tier 2 deposits may become Tier 1 deposits. Prominent Hill and Northparkes are considered examples of Tier 2 deposits.
Tier 1 and 2 discoveries have the potential to be wealth creators or ‘company making’ deposits for those who discover them.
Tier 3 deposits are small or marginal deposits that typically only get developed during the top of the business cycle or if they are satellite operations to an existing mine. The Hillside Project is currently considered an example of a Tier 3 deposit.
Around 50 deposits are found globally each year (this is half the discovery rate prior to 2005). Over the last decade, 19 Tier 1 deposits have been found globally, and five of these were in Australia. According to Schodde (2023), 12-15 significant discoveries are made each year in Australia (down from 15-25 discoveries per year in previous decades). From 2012-21, Australia accounted for 18 per cent of all discoveries by number.
Over the last decade, 63 per cent of all discoveries globally (and 73 per cent of all discoveries in Australia) have been found by junior companies focused on two commodities of interest – gold and base metals. Less than 12 per cent of all discoveries are Tier 1 or 2 deposits, which are low-cost, high-return projects. This means more discoveries of Tier 3 or unclassified deposits, which are smaller, more marginal deposits and generally can only be developed at the top of a business cycle.
The definition of mineral deposit tiers is further compli- cated by the fact that they have traditionally been based on orebody size and quality. Today, geopolitics, project stakeholders and communities, environmental considerations, resource availability, labour, and infrastructure all play a role in how ore deposits may be defined. An important consideration is that a quality ore body may not be easily permitted or mined.
Other Challenges
Jurisdiction and Policy Impacts
In 2022, Chile, the Democratic Republic of Congo, and Peru were the top three copper-producing companies. However, China, Chile and Japan were the top three countries in the processing of copper. The source of copper itself and the ability to process it have some important implications for the world copper markets as countries and companies seek these resources to support their green energy transition plans.
Most jurisdictions have prioritised the discovery and development of minerals to support energy transition through legislation and regulatory frameworks. These include the US Inflation Reduction Act 2022, the EU Critical Raw Materials Act 2022, and Japan’s Economic Security Promotion Act 2022, as well as the release of government critical minerals strategies (or similar) in most key jurisdictions.
In addition, resource-rich countries are assessing their legal frameworks for mining. Countries like Indonesia, Namibia and Zimbabwe have developed restrictions on the export of unprocessed mineral ore; Chile has released a new National Mining Policy 2050 framework and reforms to copper mining royalties; while others, such as Canada and Australia, have developed tax incentives for exploration. Geopolitical sensitivities and issues with supply are driving international cooperations on critical minerals to secure reliable mineral supplies through bilateral trade agreements.
Consumers are increasingly interested in the supply of minerals from clean, responsible, and ethically sound sources. Exploration plays a key role in discovering deposits that align with relevant and evolving ESG standards and expectations. Increasingly, data regarding ore provenance and its traceability is collected, stored and shared.
Consumers are increasingly interested in the supply of minerals from clean, responsible, and ethically sound sources.
These factors will impact the market dynamics, focus and location of sought-after commodities and even the type of deposit for individual commodities. These factors could also result in a shift in focus to alternative sources of copper, such as recycled copper or copper sourced from novel sources, including off-Earth and deep sea.
Time to Discovery and Cost Impacts
Globally, average discovery costs are increasing, and discovery is becoming less frequent. The rate of discovery for all economic deposits has halved in the last decade, and the average cost of discovery is now four times higher than 20 years ago at around US$220 million.
The increase in the cost of discovery is due to several factors, including changes in the exploration search space. Previously, most economically viable, non- ferrous mineral deposits were easily detected in the near-surface environment. The exploration search space is now deeper and more complex in remote locations or difficult jurisdictions. Deposits are often deeper, under post-mineralisation cover, which has the compounding effect of making the exploration process longer and more costly.
Following Schodde’s (2023) analysis of 360 junior exploration companies listed on the ASX, junior company costs are now more than AU$1 million per year in administrative and fixed costs and AU$3.5 million in exploration and development. With cash reserves tightening, new sources of cash or new models for exploration partnerships are needed, as are persistence and resilience to progress exploration to discovery.
Discovery Success Rates
Discovery performance has decreased in recent years when considering the relationship between exploration expenditure and numbers of discovery worldwide (Figure 14). This is reportedly due to several factors, including the increasing maturity of the near-surface environment, where most of the exploration has focused, and the segment of the industry with available capital to undertake exploration.
Figure 14 - Exploration expenditure and number of discoveries worldwide 1975-2022
While discovery performance has decreased, exploration costs, time to discovery, and time from discovery to production have all increased.
Recent global analysis shows that, on average, the lead time was almost 18 years for mines to start in 2020-23. Compared to previous assessments, the mine construction period is now shorter (approximately 2.3 years); however, exploration, permitting and financing are taking longer. Of these 18 years, exploration and discovery take approximately 12.3 years. The discovery phase for a major copper-gold project has been identified as having the longest duration.
The other key implication is the focus by major companies on brownfield exploration resulting in fewer discoveries in new areas being made. The focus of company effort and exploration investment in brownfield areas compared to greenfield has several reasons and impacts.
Brownfield exploration is less speculative than greenfield exploration, and the focus of major companies exploring for copper in known geological environments. Brownfield exploration aims to extend current operating mines in known mineral systems or find a new deposit type in those environments. This focus on brownfield exploration is likely due to the opportunity to effectively develop and extend known resources at speed to meet the world’s metal requirements for a green energy transition. There are some challenges with this approach, including the limited brownfield environments, as there is arguably limited space within these brownfield environments to find new significant (Tier 1 or 2) deposits and many of the known but undeveloped copper deposits are considered complex and have environment and/or community-related issues that need to be resolved prior to potential development.
One further challenge for discovery is that explorers embrace low-risk strategies in cyclical downturns. Activity focus shifts to exploration of brownfield in areas around existing deposits and mature mineral districts. The overall impact of this may lower the chance of making world-class discoveries despite rising exploration expenditure.
