July 1980 - VOLUME 1 - NUMBER 6
Big Oil Opts for Copper
By James Ridgeway
A recent industry research report - Changing Patterns Of Investment in the Copper Industry-makes clear the growing importance of international oil companies in the future of the copper business.*
Over the last 10 years capital costs for copper mine development have jumped dramatically. As a result, all but the largest companies are kept out of developing new deposits.
To provide copper for the rest of this century and into the next, attention is now being focused on a few large untapped porphyry deposits in North and South America, Asia and.. Australia. These ore deposits have been fully studied, but who will spend the money to develop them, especially in this period of bargain-basement copper prices?
A growing proportion of these unexplored ore bodies have become linked to international oil companies. In the U.S., oil companies are thought to control a significant share of copper production. But adventuring in copper abroad is fairly new. Thus it is that ARCO has a position in the large undeveloped porphyry ore body of Andacollo in Chile; BP is tied into Olympic Dam, another such deposit in western Australia; Exxon has its well known investment at Disputada in Chile, and Superior Oil (an important metals producer through its interest in Falconbridge), at Quebrada Blanca, also in Chile.
In some cases, these undeveloped ore bodies may take on new luster, despite generally low copper prices, because of valuable by-products and other considerations.. Copper tailings, for example, can be made to yield useable quantities of uranium for nuclear power plants.
As the Soviet Union earmarks more of its vast natural gas stores for export to western Europe, where the fuel has become indispensable and a great source of foreign exchange for the Soviets, energy production within Russia turns increasingly to coal.
The world's largest coal mine, designed to produce 150 million tons of coal a year through open-pit methods, will soon begin full-scale operations in Kakh Soviet Republic. The mine is part of a big mining and power generation complex near Ekibastuz, some 215 miles southeast of Omsk. An even larger complex is being constructed in eastern Siberia.
Up to now coal has accounted for 25 percent of total Soviet fuel needs, with oil and gas - making up 68 percent. Hydroelectric and nuclear make up most of the balance.
Hitherto coal mining was thought to be too expensive for further expansion, but with the big new open-pit mines such as Bogatyr economies of scale come into play.
However, in addition to reducing costs, increased production of coal can't help but have the beneficial effect of taking pressure off oil and gas. Oil production is known to be under severe strain; and because of its world price, the export of gas is enticing. In this sense, both the Soviet Union and China are adopting similar policies: primarily reserving coal, for internal basic fuel production, while hotly pursuing policies that will allow a major return on sale to, western industrialized nations of gas and oil.
*Metals and Minerals Research Service, London.