Copper prices, capital costs driving project decisions, Freeport says: LME Week | Hotter Commodities
The price of copper and capital costs will be central to Freeport-McMoRan’s decision on the timing of an expansion at its Bagdad copper operation in the US state of Arizona, the president of the US producer told Fastmarkets
Speaking during the annual London Metal Exchange week in London, Kathleen Quirk said that the company was in no rush to advance the project, which would double concentrator capacity. Bagdad produced 165 million lb (around 75,000 tonnes) of copper in 2022.
“We’re nearing completion of the feasibility work on Bagdad, and that will form the basis for us to make a decision whether to do that project now or sometime in the future,” she said in an interview.
“It’s price dependent, and to be honest, today’s copper price around $3.50 per pound doesn’t support the project due to capital costs,” she added.
According to Quirk, if copper prices were around $5 per lb, the project would likely get a green light, even if its capital costs remained high.
“But with the copper price where it is today, capital costs where they are, and worker availability very tight, we’re not going to rush out to do [the expansion],” she added.
Quirk said that Chinese demand for copper has been growing despite a swathe of negative data, including the recent Caixin China General Manufacturing PMI, which declined to 50.6 in September 2023 from August’s six-month high of 51.0.
There had been some softness in certain market segments in the US, she noted, but areas like building wire for data centers were reporting growth.
“So, we got brighter spots that are offsetting the weak manufacturing data,” she said.
In parallel, Freeport is advancing plans for expanded tailings infrastructure projects to support Bagdad’s long-range strategy. The timing of future development will be dependent on market conditions, labor and supply chain considerations, plus other economic factors, the company has previously said.
In the interim, Freeport is using new technology to enhance the recovery of materials from its existing leach operations.
Around half of the company’s leach stockpiles are located at Morenci, an open-pit copper mine in Arizona. Around 16% of the total is located at Freeport’s sites in South America, with the remainder at its other operations in the US, Quirk said.
The work to date has put the company on track to unlock 200 million lb (roughly 90,700 tonnes) of copper per year from its stockpiles by the end of 2023, with the potential to increase this by a further 600 million lb to 800 million lb, she added.
“We were 60% of the way there at the end of the second quarter, and we’ll make more progress in the third quarter. The leaching works very well economically, and we’re working hard to get to our target by year-end,” she said.
Leaching is a process that removes material from a mine and places it directly into a stockpile. These stockpiles are then irrigated with a leach comprising a sulfuric acid solution, which breaks down the material and leaches the copper mineral to allow the copper to dissolve and be collected.
Morenci is acting as something of a proving ground for the technology at the company, with the goal of eventually scaling it further.
“What’s so exciting about the leaching technology is that in this world where capital costs are so high and the availability of the workforce is so much of a challenge, it is something that we can do to create value without having to write big checks for capital projects or try to find workers that aren’t available,” she told Fastmarkets.
“The technology has got a lot of value at any time, but this is particularly so in today’s market, where we need more capital,” she added.
The move to recover copper from leach stockpiles is being replicated by other mining companies, including Rio Tinto and Codelco. It comes with a supply gap in copper because of the dearth of new projects and expectations for future strong demand for the metal due to its use in the electromobility commodities that are central to the energy transition.
“Right now, we are seeing some pluses and minuses that are impacting decisions on projects – the short-term is unpredictable. But in our mind, it’s not the next three months, or even the next 18 months – it’s the long term, because our business is so long term,” Quirk said.
“We’ve got to prepare, but we don’t see anything in the market today that suggests that we’re not going to have a big deficit in the future that all of us need to work and try to solve. The market today just makes the issue of long-term supply constraints even harder to solve,” she added.