VANCOUVER (miningweekly.com) – It is becoming increasingly expensive to bring new base metals operations on line, which means prices will need to be strong to justify new mines, TD Newcrest analyst Greg Barnes said in Vancouver this week.

The average capital intensity for new copper mines has more or less doubled, from between $4 000/t and $5 000/t of copper at the beginning of the decade, to north of $10 000/t on average for new projects at the moment, he said in a presentation at the Canadian Institute of Mining, Metallurgy and Petroleum conference.

Operating and capital cost inflation has been “endemic” across the industry over the past several years, Barnes commented.

“A shortage of people, shortage of equipment, shortage of tires, Steel prices rising, fuel prices rising, all of those things are pushing up metal prices and pushing up our long-term metal price assumptions as well.”

In fact, the capital intensity figure for Toronto-based Inmet Mining's Cobre Panama copper project, for which the company published new estimates last month, is even well above the $10 000/t-level.

“ You're looking at north of $15 000/t to build a very large copper mine in a difficult environment,” Barnes said.

Operating costs are also rising, as copper mines get deeper and mine lower-grade ore.

It also appears that the “easy deposits” have been found, which means that mines will need to go deeper, and more production will come from underground, Barnes suggested, citing data from diversified resources giant Rio Tinto.

The same sorts of trends are also evident for new nickel mines, where capital intensity “has gone through the roof”, he continued.

The global nickel supply will come increasingly from laterite nickel deposits, and high-pressure acid leach (H-Pal) plants to treat the ore often require much bigger investments.

“We are now looking at north of $35/lb capital intensity as we move into these very large H-Pal projects that are requiring many billions of dollars to build,” Barnes said.

“So the same trends that we see in copper, we're seeing in nickel.”

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