The current and future trends of copper underscore its critical role in the evolving global energy landscape. As nations grapple with ESG considerations, supply chain challenges and environmental impact, strategic planning and collaboration are essential to ensure a responsible and sustainable future for the copper industry. TARREN BOLTON finds out more from BDO South Africa Senior Audit Manager, DORCAS NHLAPO.
In this era of evolving energy dynamics, the significance of copper as a cost-effective and efficient conductive material used in capturing, storing and transporting new sources of energy is more pronounced than ever. This is reflected in current trends and predictions for the metal. Africa, in particular, stands at a pivotal moment, with the opportunity to assert its role as a significant player in the copper market of tomorrow.
The recent PwC Mine Report for 2023 sheds light on the pivotal role copper plays in the mining industry. According to the report, 66% of deals in the mining sector last year were centred around critical minerals, with copper dominating at 85%. This, together with a global capital market estimated at US$ 453.76 million and a projected growth rate of 5.1% by 2030, means the copper market is positioned for substantial expansion going forward.
The driving forces behind this surge in demand are diverse and the trajectory of global copper mine production further supports this trend, with an anticipated average annual growth rate of 3.2% from 2023 to 2032, and annual output rising from 22.6mnt in 2023 to 29.2mnt by 2032.
In 2022, Goldman Sachs described copper as, “the new oil,” underscoring its centrality to the low-carbon transition. However, this designation also raises concerns about the potentially divisive role copper may play in the global economy. The ESG question comes to the forefront here, as the increasing demand for copper may challenge nations to prioritise market dominance over responsible production.
S&P analysis paints a potentially troubling scenario, suggesting a looming 9.9 million-tonne shortfall in copper supply by 2035, akin to the 20th-century scramble for oil. The fear is that copper scarcity could destabilise international security, raising questions about the compromises nations may make on ESG principles in pursuit of securing their copper supply.
Nhlapo says, “In order for market dominance not to take priority over responsible production, firstly it is important to facilitate ongoing dialogues with various stakeholders – including governments, industry players, environmental organisations and local communities. Facilitating these conversations would provide a better understanding of the market standpoint and come to a consensus where responsible production practices are concerned.
“Secondly, simply implementing a transparency measure through the copper supply chain is important. This would include responsible sourcing and providing customers with information regarding environmentally- and sociallyfriendly conduct to ensure that the industry adheres to these practices.
“Thirdly, and closely linked to transparency measures, implementing certification programmes – in the sense that as copper producers, when you look at your environmental and social and governance criteria, have they met with these criteria and have they been certified? Through this process, consumers are then assured that they are dealing with reputable producers. By the same token, producers will be incentivised for ensuring that they’ve been accredited,” suggests Nhlapo.
Nhlapo adds that through this, the industry can then foster collaborations with local communities. “We know that where mining is concerned, and especially where new minerals are being discovered and explored, there are always communities that are affected – so including them in the decisionmaking process and having some kind of benefit scheme that can be used as a mechanism to communicate to those communities that it’s not only about the bottom line, and that their wellbeing (environmental, social and economic) is of equal importance.
“Strengthening regulations is also key – and this is where governments are critical role players. Industry players would then need to ensure that they adhere to the regulations,” she says.
In examining the reserves and geographical locations of copper mining, it becomes evident that major producers still heavily rely upon imports. China, for instance, imported US$52.4 billion worth of copper ore in 2021 and the US, at best, will still import 57% of its refined copper by 2035, according to S&P analysis.
The copper value chain spans the globe, with geopolitical tensions and competing regulatory regimes adding complexity to the supply chain. This fragmentation may burden supply chain operators, diverting resources from responsible production and compliance with ESG principles.
The growing environmental footprint of increased copper demand poses another challenge. The International Finance Corporation’s Net Zero Roadmap for Copper warns that without mitigation measures, greenhouse gas emissions from copper production alone could double by 2050.
“Due to the similarities that lie in the mining process and the exploration and extraction of mineral resources, greenhouse gas emissions mitigation is not unique to copper mining alone. The production of many commodities would include increased energy demand requirements for the mining process itself,” says Nhlapo.
“Since this is common across the mining industry, for industry players to try and go at this by themselves would not work. Therefore, the theme of collaborative effort comes into play – collaboration between different mining houses, different companies, different countries and international and intergovernmental institutions is required to find a more effective way of finding solutions for green greenhouse gas emission compliance.
“With this said, there have been some experts who have suggested that if we increase the transparency and reporting for direct and indirect emissions, that will give us a clear indication as to where the causes of the problems lie, which in turn would help find solutions. “In addition, reaching out to existing OEMs, technology and service providers – who are all stakeholders in the mining value chain – will assist the industry to find short-term and medium- to long-term solutions.
“The upside of copper, however, is the fact that it is reusable, reformable, and recyclable. Once we’ve explored this mineral into the future, there will be very much less mining and associated processing since the resource is recyclable. The advantage of this is that once it’s been recycled, it doesn’t lose its quality,” adds Nhlapo.
Africa’s role in the copper industry As the demand for copper intensifies globally, Africa finds itself at a crossroads. Despite being home to key copper producers like Zambia and South Africa, the continent remains on the periphery of the global copper supply and demand chain — with four of the five leading companies in the copper market (Anglo American, Antofagasta Plc, BHP, Codelco and First Quantum Minerals Ltd.) based outside of Africa.
In South Africa, investment in mining exploration has lagged since 2003 leading to a decline in output. In the case of Anglo American, this decline is reflected in an overall drop in ore grades, significantly impacting output in 2022. For Zambia, government intervention has hampered copper production, but there are hopes for a rebound in the medium-term as agreements are reached and funding is secured. It’s crucial for Africa to position itself as a key player in the copper industry, particularly in the context of the growing green energy initiative.
Known as a predominantly long-cycle commodity, copper typically takes up to three years to be incorporated into an existing mine and up to eight years to establish a new greenfield project. As such, long-term planning and investment are imperative to counteract losses from ageing mines and ensure a sustainable future for the continent.
Nhlapo reinforces, “For Africa to bridge that gap and step into the global arena, there’s a lot of research and exploration that needs to take place in terms of expanding on the locations where this futuristic mineral can be found. Currently, the DRC is quite dominant in this area – ranked first on the African continent and fourth in the world – with Zambia and South Africa ranking second and third respectively, as well as a new entry in the form of Namibia.
“What would be key, is zooming into some of the challenges that we face as an African continent, and this would include political instability, regulatory uncertainties and infrastructure limitations. Given these challenges, how can we then put our heads together and ensure that we address these issues to enable Africa to be a more significant player within the within the global arena?”
Nhlapo suggests, “One solution is investing in infrastructure. With any mining, it’s critical that you have improved transportation, logistics and energy supply – all essential to the mining and exporting of copper. When we begin to modernise these processes, it will help us to be more efficient, with the end result being lower costs, and this will provide Africa with a competitive advantage into the market.
“The African continent is at the hub of most of the critical metals resources in the world, but we’ve mostly extracted, produced and exported it to upward countries. Investing in downstream processes – for Africa to invest in developing our smelting and refining capabilities – will certainly add value to the copper supply chain. This will give us a fair chance towards creating jobs and improving the state of our collective African economies,” she concludes.
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