How does your company’s reserves replacement strategy compare to your competitors?

How do the current costs of adding copper reserves through exploration compare to the costs of acquisition?

PRODUCTION, EXPLORATION, AND ACQUISITION—SUPPLY-SIDE ANALYSIS OF COPPER RESERVES REPLACEMENT

Metals Economics Group’s new edition of Strategies for Copper Reserves Replacement, published in May 2008, addresses key growth-strategy issues for the copper mining industry and compares the relative costs per pound of discovering or acquiring copper in the ground.

The information presented in the five main sections of the study—Copper Production Pipeline, Acquisitions Activity, Exploration Spending, Major Discoveries, and Company Profiles—provides parameters for measuring the relative costs of various growth strategies for major copper producers and the industry as a whole.

Subscribers to Strategies for Copper Reserves Replacement receive a print copy as well as access to an online electronic version of the complete study. In addition, most of the study's supporting data is provided online in a series of Excel databases for each of the main sections mentioned above and for each of the profiled copper producers—allowing subscribers to tailor the data and conduct further analysis.

The study addresses key issues for growth strategies, including

  • How your company’s reserves replacement strategy and your success as an explorer/acquirer compares to your competitors
  • The industry's average costs of adding reserves through exploration and acquisition
  • The companies most effectively adding reserves by exploring and/or by acquiring, and how
  • The growth successes and failures of your competitors
  • How successful greenfields exploration has been in recent years
  • To what extent major-junior relationships have been successful in adding value for the majors
  • Are enough new large copper discoveries being made to satisfy expected demand?
  • The effect of rising operating costs on the major producers’ growth strategies
  • The effect of rising capital costs on the copper pipeline
SECTIONS OF THE STUDY

Executive Summary
The Executive Summary provides an overview of the metrics used to compare the relative success of replacing copper reserves, and examines how the profiled copper producers as a group are positioned relative to global copper production, acquisition activity, exploration spending, and discoveries. As well, it provides a general discussion of recent strategic activities regarding copper production and reserves replacement.

Analysis: A Ten-Year Perspective
Includes metrics tables and graphs that compare the performance of the profiled companies relative to global industry performance with respect to exploration, discovery, and acquisition, and discusses the impact these are having on reserves positions.

Metrics tables of the major copper producers (from 1997 to 2006) include

  • Reserves changes and costs
  • Production changes
  • Reserves acquisitions and costs
  • Reserves development through exploration and costs
  • Discoveries and costs
  • Cash costs

Some topics covered

  • Annual copper reserves replacement and costs by major copper producers
  • Comparison of acquisitions versus exploration costs
  • Copper resources in new discoveries relative to production
  • Comparison of market capitalization of major copper producers
  • Cost of finding copper in new discoveries

Copper Production Pipeline, 1997-2012
Details the major new mines and expansions of existing mines brought onstream over the past ten years, and looks at the major producing companies’ most advanced and promising projects for future production. It traces the production changes year-by-year for each of the profiled companies, and analyzes the overall trends of mined copper supply. In addition, this section examines and analyzes changing copper grades in reserves and resources of producing mines as well as the initial capital costs of significant copper mines that began production between 1997 and 2007, including the changing costs per metric tonne of initial copper capacity over this period. This section ends with a look at the location of copper resources in the development pipeline and the relative risk associated with these locations.

Copper Acquisitions, 1997-2007
Lists the major purchases and divestitures of both the profiled companies and the industry as a whole, including the relative costs per unit of copper acquired in reserves. To the extent possible, it compares the reserves acquired at the time of the purchase with reserves reported three years later, to help analyze the return on the deal. This section also compares the relative costs of acquiring copper in projects at various stages of development, and includes a comparison of company vs. project acquisitions.

Copper Exploration Spending, 1997-2007
Provides companies’ exploration allocations for copper, from 1997 to 2007. A database of the budgets as well as total spending for the largest spenders are included. The study examines in more detail the companies with the top budgets for copper over this period. In addition, it compares year-by-year allocations of the top companies to total annual budgets, and shows the allocation trends during this period. It also compares brownfields vs grassroots and majors vs junior spending.

Discoveries, 1995-2007
Provides a comprehensive review of the major copper deposits discovered between 1995 and 2007, including gold-copper deposits. The study also provides a list of discoveries considered but not included, so that subscribers can tailor the analysis to meet their own criteria. The analysis of the major discoveries includes an examination of the size distribution and location of discoveries made since 1995, and a comparison of copper discoveries with the copper production of major producers.

Company Profiles
A detailed look at how the largest copper producers are replacing or augmenting their reserves. Profiles of the largest copper-producing companies, accounting for more than two-thirds of world copper production, cover available activity from 1997 to 2006. The profiles detail each company’s

  • Reserves replacement
  • Production
  • Acquisitions and divestitures
  • Exploration budgets
  • Discoveries
  • Copper production pipeline

Reserves Replacement Metrics Table (1997-2006)
These tables include

  • Average costs of reserves replacement
  • Production changes
  • Total costs of reserves acquisitions and copper equivalent in acquired reserves/resources
  • Reserves development through exploration, with costs of copper in exploration-derived reserves
  • Major discoveries during the period, including average grassroots exploration costs of copper per discovery

Major Copper Producers Profiled (information as available)
  • Anglo American
  • Antofagasta
  • Barrick Gold
  • BHP Billiton
  • Codelco
  • First Quantum
  • Freeport-McMoRan (Phelps Dodge profiled separately)
  • Glencore
  • Jiangxi Copper
  • Kazakhmys
  • KGHM Polska
  • NICICO
  • Norilsk
  • Ok Tedi
  • Phelps Dodge
  • Rio Tinto
  • Southern Copper
  • Teck Cominco
  • Vale (CVRD)
  • Xstrata

 

June 2008
 
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