Bloomberg: Copper Mine Flashes Warning of ‘Huge Crisis’ for World Supply

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The transition to clean energy depends on copper, but a vast Mongolian mining project offers a glimpse of the metal’s troubled future.

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Oyu Tolgoi, in southern Mongolia just north of the Chinese border, is key to Rio’s efforts to move beyond its dependence on iron ore and expand in copper, the metal that underpins the clean energy transition. It’s also a vast deposit whose corporate, political and technical vicissitudes offer a glimpse of the red metal’s troubled future.

As demand for copper surges, supply is increasingly likely to come from mines like this one on the arid steppe: expensive, technically complex, outside traditional copper jurisdictions and operating under the eye of governments jealously guarding their natural resources.

“There’s a huge crisis,” says Doug Kirwin, one of the earliest geologists to work at the deposit that became Oyu Tolgoi, or Turquoise Hill, named after the area’s rocks, stained by oxidized copper.

“There’s no way we can supply the amount of copper in the next 10 years to drive the energy transition and carbon zero. It’s not going to happen,” adds Kirwin, now an independent consulting geologist. “There’s just not enough copper deposits being found or developed.”

Analysts at Wood Mackenzie estimate a greener world will be short about six million tons of copper by next decade, meaning 12 new Oyu Tolgois need to come online within that period.

But they aren’t — there are simply not enough new mines, much less enough large ones. The result is a gap: BloombergNEF estimates appetite for refined copper will grow by 53% by 2040, but mine supply will climb only 16%.

The world’s largest miners aren’t standing idly by. After more than a decade of repenting for the excess that followed the China-led boom in demand in the 2000s, deals are back, with green metals in buyers’ sights. The looming green metal shortfall has encouraged Glencore Plc’s move on Teck Resources Ltd, long a coveted copper target, and top gold miner Newmont Corp’s record bid for Australian peer Newcrest Mining Ltd, a deal that will add bullion but also copper to its production profile. BHP Group Ltd has just completed the acquisition of copper producer Oz Minerals, its largest deal in over a decade.

None of these, even if successful, will alter the overall global balance.

The problem now is that the next big deposits will require possibly more risk than most executives at the helm of large miners are willing to take. Even before that, it requires a significant increase in exploration spending.

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Greening the economy, expanding grids and renewable energy generation to hit global climate targets, however, requires many more Oyu Tolgois.

“Mongolia was an adventurous location. So was the Democratic Republic of Congo,” says Friedland. “But this has to be done. Absent this effort, there is absolutely no chance of an energy transition. It’s a fantasy.”

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