Excerpts from a presentation by Eric Finlayson, head of exploration for Rio Tinto, at an international copper conference.
Image courtesy of Rio Tinto REVIEW magazine
This is the second part of a report which began last week in discussing the nature of copper exploration today and the benefits of greenfield exploration.
To read the first part of the report click here.
Turning now to brownfield exploration within the established copper provinces. Brownfield exploration provides the easiest opportunity for creating value through exploration. And the reasons for this are obvious – there is typically highly prospective ground around existing operations and economic thresholds are lower than in a greenfield setting.
And I’d like to use Bingham Canyon as an example, a place where folks have been mining for over a hundred years - 2.5 billion tonnes of porphyry ore have already been mined to yield almost 19 million tonnes of copper, 1.4 million tonnes of molybdenum and 36 million ounces of gold.
Yet even in this sort of environment, we can make major discoveries – in particular of buried deposits. Drilling over the last two years beneath the current open-pit has identified an annular body of molybdenum mineralisation that feeds upwards into the copper ore body. With the deepest hole still in mineralisation at more than 2km depth, we believe this may be one of the world’s most significant molybdenum discoveries of recent years.
And there may be more to come. For the first time, we have managed to image the system beneath the Bingham Canyon ore body. And we now know the ore body continues to depth and connects with other undrilled porphyry targets.
Recognition of the Bingham Canyon district as a potential cluster of porphyry deposits, only one of which is exposed at surface, with hindsight shouldn’t be much of a surprise, given the buried discoveries by our partners at Escondida in Chile, at the Freeport operations in West Papua and in the Oyu Tolgoi district of Mongolia.
What these discoveries tell us is that there is excellent potential for buried deposits around other open-pit porphyry mines. This will be a fertile avenue for copper exploration for at least another generation.
With brownfield discoveries being made at depth in the established copper provinces – and the greenfield potential of emerging countries perhaps not being fully realised – the proportion of production from underground mining is forecast by many to increase.
With underground mines typically much more expensive than open pit operations, this may result in higher average costs across the copper mining industry. This change in the cost of production may in turn support a higher long-term price.
However, innovations in mining and processing could potentially slow the move underground by converting uneconomic low-grade surface copper into viable open-pit ore.
A current example within Rio Tinto is provided by the La Granja copper project, where work by several previous companies had demonstrated that a conventional mining, milling and concentrate-shipping operation was uneconomic due to the relatively low grade of the deposit, its high development cost and the presence of deleterious elements in the ore.
The Rio Tinto pre-feasibility study instead is aimed at recovering copper and zinc metal – using the dump leaching of crushed whole ore and follow-up solvent extraction and electrowinning.
By carefully controlling the chemistry of fluid in the crushed ore, we can potentially dissolve the ore minerals, leave pyrite intact and lock deleterious elements in secondary iron oxides. The main challenge now for the La Granja project is to massively scale-up this leaching process.
And leaching technologies such as this could potentially be applied to the enormous volumes of low-grade copper underlying supergene enrichment blankets. Sparse attention has been paid to these low-grade deposits until this point in time.
All companies regardless of size have introduced cash conservation measures this year and this is an entirely prudent response to the current economic environment. So while access to funds is a current concern for just about everyone in the exploration sector, this is nothing that we haven’t been through before and won’t go through again.
Perhaps a more constructive view of current circumstances looks at the flip-side of the current situation – cheaper access to new opportunities, cheaper goods and services and easier staff retention.
The simple fact is that exploration expenditure varies significantly from year-to-year in response to global economic cycles. Market forces dictate the level of expenditure that the industry is able to justify.
The intrinsically cyclical nature of exploration expenditure means there is no normal or correct level of spending. And the expenditure peaks during economic booms are simply not sustainable.
Previous downturns in exploration spending have had no discernible impact on copper production or price. And given the range of options to accelerate discovery, I think it unlikely that this situation will change.
In summary:
. Open-pittable reserves and resources are falling in the established copper provinces.
. Deeper discoveries are appearing in these areas as we explore around surface deposits.
. Greenfield exploration in under-explored countries offers great potential for new surface discoveries. The full potential of these countries to support major production may be undermined by sovereign risk factors.
. Innovation in mining and processing technology may convert uneconomic surface copper mineralisation into viable open-pit ore.
. Future copper prices will depend on the interplay between greenfield discovery, brownfield discovery and innovation in mining and processing.
. Global copper resources will dramatically expand as either price increase or innovation allows mining of lower-grade mineralisation.
