Miners at Resolution Copper will be excavating rocks more than 2,000 metres below the surface to get to a large copper ore deposit © FT montage; Resolution Copper
In Arizona miners can travel 1.4bn years back in time in 15 minutes. A dark, two-storey cage lift takes its passengers on a 2km journey straight down, reaching one of the world’s great copper reserves.
Resolution Copper’s Number 10 Shaft is the deepest in the US. It bottoms out at 2,116m, a distance that equates to about two and a half times the height of the 160-storey Burj Khalifa, the world’s tallest building. The atmosphere more than 2,700ft below sea level is hot and steamy as water pours from rocks that reach temperatures above 70C.
To reach this depth has cost $350m and taken six years. But in terms of the $6bn project to mine Resolution’s as yet untapped copper over the next 50 years, it is just a step along the way. Up to four further shafts and a network of tunnels will be needed before any copper is dug out from the rock strata where it has sat for hundreds of millions of years.
“Mother Nature has a way of getting even with you,” says Randy Seppala, who has overseen Shaft No 10’s descent. “The good stuff doesn’t come easy.”
Years before it might produce any copper, Resolution, controlled by Rio Tinto with a minority stake held by BHP Billiton, provides a vision of what the mining industry and the world’s quest for resources might look like in the future.
Copper, which along with other commodities has suffered a sharp price fall in recent years, is considered an indispensable metal for economic growth, given its importance in technologies used in energy and transport.
According to Andrew Taplin, Resolution’s chief executive, to generate a megawatt of wind energy — enough to power 500 homes — requires more than 3 tonnes of copper, while a Tesla uses four times as much of the metal as a traditional vehicle. Yet with the world consuming at an ever faster pace, the lengths and depths to which miners must go to meet this demand has become greater.
“The deposits are becoming more complex, the world’s requirements for copper are going to become harder and harder to supply,” said Sam Walsh, Rio’s former chief executive.
The technical complexity of the Resolution project, as well as the challenges of responding to environmental, political and social demands, means it is the type of scheme the mining industry would probably have rejected years ago. Now miners have few better options — and the world will have to get used to paying for them.
“The low hanging fruit has been picked. Clearly the development of the western world after World War Two benefited … but what next for the other 8bn people on the planet by 2050?” asks Paul Gait, an analyst at Bernstein Research. “We have run out of ‘easy’ good quality copper … there are a load of projects discovered decades ago that we are having to revisit because we have not found anything better over the intervening period.”
An hour’s drive east of Phoenix in Arizona’s “copper triangle”, Resolution is considered a prize asset because it will be capable of producing 25 per cent of annual US copper demand for 40 years.
One measure of the change that has come over the industry is the acceptance of lower grade, or a smaller proportion of metal in any body of ore. At the Resolution site, the copper content is 1.5 per cent. Today that is considered a high-grade deposit but, in the 1960s, the Magma mine that operated nearby yielded three times as much copper. Projects now take longer to reach production. Miners guessed at Resolution’s existence in the 1970s and confirmed it through drilling in the 1990s and 2000s.
By 2008, Rio was suggesting production could start in 2020: that now looks hopelessly optimistic. “It could take six or eight years,” Mr Walsh said last year. “There are enormous hurdles.”
More than the technical challenges, the political, environmental and social hurdles are perhaps what has changed most for the mining industry. Whether in the US or Mongolia, where Rio has another copper project, winning acceptance for mining development has become a drawn-out process.
At Resolution, the battle for permission to operate was made more complex because some of the land required for the project was covered by a 1955 ban on mining activity. Only in 2014 did the US Congress change the law — using a controversial amendment to a military spending bill, on the basis that copper was a strategic resource — to allow Rio to swap land parcels elsewhere for what it needs. Even with that achieved, the key permitting process to secure final approval has only recently begun. Rio expects it to take four to five years.
Opponents of the project include conservationists, farmers wary of how much water will be sucked into mining operations and Native American groups with historic claims to some of the land.
Roger Featherstone, a representative of the Arizona Mining Reform Coalition, has opposed the project at Rio’s recent annual meetings and accuses the company of behaving like an “international corporate thug” in trying to drive Resolution forward.
Other projects around the world have triggered similar opposition. Mr Gait puts the schemes into three categories. Big underground projects like Resolution have huge upfront costs; massive open pits with low copper grades are cheaper to build but have higher operating costs and are vulnerable to downturns. Other projects might score well on grade and cost — but are remote and have high political risks. Parts of Africa fit this last category.
In some projects, the risks and rewards no longer balance. Since 2013, Rio and Anglo American have both walked away from another big US project: Pebble, an Alaskan copper resource where concerns over a spawning ground for salmon are likely to hold up development. Rio has also abandoned any attempt to rehabilitate Bougainville, a copper mine in Papua New Guinea that was at the centre of a secessionist conflict in the 1980s.
Ultimately, if the supply of copper is insufficient to meet demand the response will be price rises, which provide the incentive miners need to reassess the risks of some projects but drive up the cost of buying and using copper.
The price of the metal more than halved from a high in 2011 of $10,000 per tonne to a seven-year low in January, before rebounding 20 per cent over the past few weeks to $5,450.
Mr Taplin, meanwhile, says his job is to get Resolution through the approvals. “By the time we come back and ask [Rio and BHP] for the money [to build] there needs to be a high degree of confidence in the solution to the scheme,” he says.
Resolution is a long way off. Until then, the other synonyms that the name conjures up — doggedness, obstinacy, perseverance — are those that investors will increasingly have to attach to this and many other mining projects.
Battle for land
Much of the land around the town of Superior is part of the Tonto National Forest. Rio Tinto has had to ask for control of more than 10 sq km of this National Forest land, including a campground area called Oak Flat where mining was previously prohibited.
In return the company has acquired more than 22 sq km of land elsewhere in Arizona that it will give in exchange to the US government. The land swap agreement took six years to go through the US Congress.
At the same time there are 11 different Native American tribes and communities that use the area around the Resolution site and must be consulted over the mine plans, a process that will take years.
“We don’t know what the costs are until we understand the full range of alternatives and mitigation measures that will be required,” the company says.
Under the terms of the act that confirmed Rio’s land exchange deal, one cultural landmark, the mountain ridge of Apache Leap, is protected.
Controversy persists, however, over Oak Flat’s use as a cultural site. Apache groups say it will be lost as an important religious area. Access will be blocked and the site changed irrevocably say critics.
As Rio mines, subsidence caused by excavation deep underground is expected to form a crater 2.4km across and 300m deep.
The copper
To describe the size of the copper deposit at Resolution miners point to a mountain across the valley. The “ore body”, they say, is a small underground mountain: about 600m high and covering an area about 2km by 1.5km.
“There are probably three or four companies in the world that have the capability to develop a project like this,” says Andrew Taplin, chief executive of the Rio Tinto-BHP Billiton joint venture.
Resolution is also relatively high-grade: its copper content is better than many other sites. But that is still only about 1.5 per cent copper. Rio assumes the mine will produce around 400,000 tonnes of the metal annually but to do so it will mine that much ore every four days.
Lower grade deposits can be economic. Rio and BHP are partners at Escondida, the world’s largest copper mine in Chile, where the resource grade is 0.6 per cent. But this is an open-pit mine where it is easier to gain economies of scale with huge trucks: not an option underground.
Environmental impact
How the mine manages the waste from processing the ore is an issue that will be extensively discussed. Resolution’s plan is to store 1.5bn tonnes of so-called tailings, spread over 18 sq km, behind what will eventually be a 175m high dam on National Forest land.
Local residents have complained in the past about dust and the visual intrusion from mine dumps in the area. But Resolution says these have been cleaned up over a decade at a cost of $30m.
The tailings are not hazardous or toxic, says the company, which insists that the small trace elements, such as lead and arsenic that are found in the waste, will be safely stored.
Tailings storage has come under scrutiny since a dam collapse in Brazil in November 2015 killed 19 people, devastated villages and contaminated rivers. A report into the disaster found that part of the dam had been built over material that then liquefied and deformed under pressure.
Technical challenges
Resolution’s copper is between 1,500m and 2,100m below ground. Rio has sunk one shaft to the appropriate depth but expects to need at least four more. Then miners have to create a system of tunnels under the ore.
At that stage the copper-bearing rock is mined from below: it caves in as it is being worked on and is funnelled downwards. It is then collected and hauled out of the mine for processing.
Water enters the existing shaft at 2,273 litres a minute so the company has to try to control that via a pumping operation. It also has to create a massive ventilation system to keep the air in the mine breathable and at a comfortable temperature.
The rock at this level reaches temperatures of about 70C.
Under the proposal mined ore would travel underground, using a tunnel from an earlier mine, to a concentrator plant.
The resulting slurry of copper concentrate will be piped a further 35km to another plant to be filtered and loaded on to rail cars for shipment to customers.
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