Ann: Ore Supply Agreement with Glencore, page-71

Bugs Joining Robots to Overcome Global Shortage of Copper
By Firat Kayakiran and Matt Craze Oct 15, 2014 10:00 AM ET
0 Comments Email Print Speed
Share

• Facebook
• Twitter
• Google+
• LinkedIn
• Email Print

Save
Photographer: Morten Andersen/Bloomberg
An worker transports rocks at the El Teniente copper mine, owned and operated by Corporacion Nacional del Cobre de Chile (Codelco), near Rancagua, Chile. Close
An worker transports rocks at the El Teniente copper mine, owned and operated by... Read More
Close
Open
Photographer: Morten Andersen/Bloomberg
An worker transports rocks at the El Teniente copper mine, owned and operated by Corporacion Nacional del Cobre de Chile (Codelco), near Rancagua, Chile.

With demand for copper set to swell, producers are turning to 21st century ideas to boost output of the metal that’s becoming a more crucial component of the expanding global economy.
Seeking to overcome a shortfall that may reach 2 million tons within four years, companies including Codelco, the world’s largest copper producer, Central Asia Metals Plc (CAML) and Nautilus Minerals Inc. (NUS) are using specialized microorganisms to extract copper from previously unusable ore, sending robots a mile below the sea to tap rich deposits and recovering the metal from decades-old dump sites in Kazakhstan.
Mines become more expensive to operate as they age. The new technologies offer a wide range of creative, and sometimes cheaper, options to produce a metal used in air conditioners, telecommunications networks, electric motors and other staples of the growing middle class in many developing countries.
“Supply is struggling to keep up with insatiable demand from the world economy,” said Nick Clarke, chief executive officer of Central Asia Metals, a London-based company that’s using a complex solvent-extraction technique to recover about 10,000 tons of copper a year in Kazakhstan from a mining waste dump that dates back to the 1930s.
The company has invested about $42 million for access to the site and to build a processing facility. It’s expected to report revenue of $74.3 million for fiscal 2014, according to analyst estimates, up 37 percent from a year earlier.
Clarke is so convinced copper prices will surge that he’s planning to expand that site and is evaluating a similar venture at a beach in Chile that may have traces of copper left behind by wastewater from nearby mines.
13.8 Million Tons

Total copper production in 2013 was 13.8 million tons. The push for new technologies and ideas comes at a time when copper producers face a global deficit of 296,433 tons in the first half of this year, according to the World Bureau of Metal Statistics. Goldman Sachs Group Inc. expects the supply gap to reach 2 million tons in 2018.
While prices for the metal are down 7.4 percent this year because of slowing growth in China, the world’s top copper consumer, the drop is not nearly as bad as seen with metals such as iron ore, which fell by more than 40 percent.
Paul Gait, an analyst at Sanford C. Bernstein Ltd., also remains confident about the future of copper production. He estimates that with increased demand, copper prices may test $10,000 a metric ton by 2020, close to its all-time high of $10,160 in February 2011. Yesterday’s price on the London Metal Exchange price reached $6,800.
“The time of easily accessible copper reserves is behind us,” Gait said in an interview. “The miners are trying every way to get to copper deposits.”
Codelco Venture

Codelco, Chile’s state-owned producer, formed a joint venture with JX Nippon Mining & Metals Co. that harnesses microorganisms called extremophiles to help extract copper from previously unusable sulphide ore.
Their Biosigma SA venture is building a so-called bioleaching facility at Codelco’s Radomiro Tomic mine in northern Chile that will boost production as regular supplies dwindle. CEO Pilar Parada said the technology has increased recovery rates from ore by as much as 50 percent in tests. Santiago-based Codelco, formally Corp. Nacional del Cobre de Chile, plans to license the technology to other mining companies, Parada said. She wouldn’t give details on costs.
Nautilus Minerals plans to extract copper and gold from sulphide deposits found near underwater hydrothermal vents. The Toronto-based company developed robots to cut ore from the bed of the Bismarck Sea off Papua New Guinea, about a mile (1.6 kilometers) down, before pumping the rock-and-water slurry to the surface for processing.
Existing Mines

Mining companies are also investing in existing mines, even though they become more expensive with time. Codelco plans to spend more than $30 billion this decade to increase output by 10 percent, Gerhard Von Borries, head of projects at company, said in an interview. Without the investment, annual production would slump by about 44 percent to 1 million tons at its century-old Chuquicamata pit, he said.
Rio Tinto Plc plans a $5.4 billion expansion to its Mongolian mine at Oyu Tolgoi, one of the world’s largest copper and gold deposits, after resolving an 18-month dispute with the government over taxes and cost overruns. The expansion will boost the London-based company’s copper output by 490,000 tons a year.
Investors are trying to buy up copper mines in anticipation of rising prices. Mining veteran Lloyd Pengilly, who runs QKR Corp., an investment fund backed by Qatar’s $100 billion sovereign wealth fund and Poland’s richest man Jan Kulczyk, has spent two years looking without success.
“Today the race is to secure as many copper deposits as possible,” said Pengilly, a former banker at JPMorgan Chase & Co. “Owners will be cashing in when the balance tips over with dwindling supply in three to four years’ time.”
To contact the reporters on this story: Firat Kayakiran in London at [email protected]; Matt Craze in Santiago at [email protected]
To contact the editors responsible for this story: Will Kennedy at [email protected] Dylan