Dearth of exploration to exacerbate copper shortages
WITH a structural deficit expected in copper, there is little hope of exploration filling it any time soon due to a dearth of exploration funding, Kevin Murphy of S&P Global Commodity Insights told delegates at the 2023 PDAC conference in Toronto, Canada.
"Well over half of all exploration budgets in 2022 were going towards gold exploration. We have to go back to 2007-2008 to find a period when base metals attracted more for exploration than gold,"Murphy said. Murphy said that while copper exploration budgets grew 21% in 2022 compared with 2021, only 26% was dedicated to grassroots exploration, nearly an all-time low, while mine site exploration is near an all-time high at 38%."This is a huge trend in the industry. Since 2012, companies have depleted their pipelines, particularly in early-stage assets. If you are underinvesting in that base, you can only be investing in your mines, which is why there have practically been no discoveries over the past 15 years," Murphy said. Later in the session, Robert Friedland, the entrepreneur behind Ivanhoe Mines, Ivanhoe Electric and a host of other companies, added his voice to the dire situation for copper. "The copper shortage could derail the energy transition. We need an explosion in copper mining to produce the copper we need," he said.S&P data shows a $2.79 billion copper exploration budget for 2022 spread among 743 companies, a 41% lower budget versus 2012. Global copper reserves and resources have grown to 3.1Bt, but only 527Mt have been added since 2012, with 317Mt added to producing assets."Reserves have been added to assets which have been around for 20, 30, 40 years. We are adding a lot of copper to existing mines which keeps them going, which is great, but you can only do so much expansion at an asset," Murphy said. "The deeper you go, the higher your greenhouse gas footprint, and if you focus production on a handful of assets, there is an increased risk, such as political change or a seismic event. Concentrated exploration also means you may be focusing on assets which do not have a path forward. "Murphy said the data shows that the mining industry is not investing as much in exploration as it used to. The global exploration budget was $13.01 billion in 2022, up 16% over 2021 but 37% lower than 2012."2022 turned out to be a very interesting year: it started very strong with strong metals prices and financing activity, but the second half of the year changed quite a bit and financing dried up," he said. Last year saw a 21% increase in copper exploration spend, 88% growth in lithium and 12% growth in gold, while silver exploration budgets fell. The majors were responsible for 45% of exploration spending in 2022, with the juniors following closely behind.
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