Creating a major mining district isn't easy.
First, it requires geological endowment. The right rocks to yield big ore deposits.
But that's not all. Big mining operations only happen where we have a populace that's relatively accepting of mining activity. And where infrastructure like power, water and roads are suitable to allow for large-scale development.
When it comes to copper, there's one place on Earth where these factors come together in just the right proportions: Chile. Massive porphyry deposits here lie alongside a sparse population and a well-developed industrial sector. Which is why the nation produced an astounding 32% of global copper output in 2013.
But changes are afoot for this mining powerhouse. Which may endanger its status as the world's go-to copper supplier.
The problem is energy. A sector that state officials said last week is verging on a major crisis.
Driven by falling hydropower production, and a lack of alternative generating methods.
Telling comments came from Senator Alejandro Guillier, chairman of the Senate Energy and Mining Commission. Who told Chile's national legislators that, "We are on the brink, and if urgent measures are not taken soon there will be rationing."
The country is now reportedly preparing an "emergency plan" for energy. Which should be released next month. Measures could include a greater role for the government in setting power prices nationally. As well as directives to enhance baseload power sources--with coal being mentioned as one likely source.
All observers of the copper market should be watching these developments. Mining is one of the most energy-intensive activities in the country. And could be one of the first sectors to take a hit if power rationing does become reality.
That would put a big chunk of global supply at risk. And even if existing operations can muddle through, future developments here could be crimped.
All of which would represent a major shift for the copper market. This could be the start of something big.
Here's to having the juice,
Dave Forest
Dave is Managing Geologist of the Pierce Points Daily E-Letter. More
Comments
If "rationing" is in the works for Chile (is that of energy or copper?) it may be of a constructive kind. China is hoarding copper, playing an unconstructive role in promoting the ultimate user value of this metal, and not promoting more profitable and energy efficient manufacture of raffinate and products. There will be shortages to do neither China or Chile any good. Why not a tie-in tax or agreement to link production with the ability to sustain it? It would be similar to the late carbon tax on coal in Australia but it would be used to promote upstream development and diversification of copper related industries in the countries that produce it.