Major copper producers replace 210% of production

By Robert Anders | 17 July 2017

The following analysis is extracted from S&P Global Market Intelligence's Copper Reserves Replacement Strategies.

The Copper Reserves Replacement Strategies shows that, in aggregate, the world's top copper producers replaced more than twice the copper they produced over the last 10 years.

The report series examines growth strategies in the copper mining industry by compiling information on all aspects of the mined supply of copper. The study's different sections provide parameters for measuring the relative costs of various growth strategies for individual copper-producing companies and the industry as a whole.

The "Analysis of major copper-producer metrics" section compares the statistics of the 20 major copper producers profiled in the study. This analysis also includes a table summarizing the metrics of the 17 companies with the most complete and comparable information.

At the end of 2016, this group of 17 companies held a total of 398.2 million tonnes of copper in reserves, sufficient for 31 years of production at current rates after allowing 10% for recovery losses. They accomplished this while increasing their aggregate production by 31%, from 8.9 Mt in 2007 to 11.7 Mt in 2016. These 17 companies replaced 210% of their total production from 2007 through 2016, adding 227.7 Mt of reserves while producing 98.5 Mt of copper.

More than 87%, or $74.99 billion, of the group's total reserves-replacement expenditures went toward acquisitions, accounting for 31% of the group's reserves growth, and 13%, or $11.09 billion, went to exploration, accounting for 69% of reserves growth.

Grupo Mexico-controlled Southern Copper Corp. had the lowest cost of reserves replacement in the group at US$0.01/lb. Replacing 10.8 Mt of reserves, or one and one-half times its total production, it had no acquisitions — acquired copper is typically more expensive — and spent only US$230 million on copper exploration over the past 10 years. By contrast, Rio Tinto, which has always maintained a strong and diverse exploration program, spent US$1.72 billion on copper exploration during the period to add 10.8 Mt of exploration-derived reserves at a cost of more than US$0.07/lb.

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Switzerland-based Glencore Plc had the largest reserves growth of all the companies in the study, adding 41.9 Mt of copper to reserves — five times its production over the period — through a skillful mixture of acquisitions (45%), notably through its 2012 takeover of Xstrata, and exploration (55%). It accomplished this while rising to become the world's third-largest copper producer, behind state-owned Codelco and Freeport-McMoRan Inc., and while holding back almost 400,000 tonnes per year of production from its African operations, as it aims to lower costs as part of a strategy to stem what it sees as unnecessary oversupply by the major producers.

For subscribers only - Detailed datasets for all 20 profiled companies can be found in their respective profile spreadsheets, available through our Research Library on the S&P Global Market Intelligence's Metals and Mining service. In addition, we will produce separate reports comparing the strategies of the best-performing companies in most of the metrics categories, such as production, acquisitions, exploration, discoveries and copper grades.

Copyright © 2017 by S&P Global Market Intelligence, a division of S&P Global Inc. All rights reserved. No content may be reproduced or distributed without the prior written permission of S&P Global Market Intelligence or its affiliates. The content is provided on an “as is” basis.

Major copper producers replace 210% of production

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