JOHANNESBURG (miningweekly.com) – The capital intensity of mining has risen well ahead of inflation and mining project development timelines are continuing to extend, Anglo American CEO Duncan Wanblad pointed out on July 30 when he reported $2.9-billion half-year copper earnings at a 60% margin.

Accentuated by Wanblad is the ability of Anglo to provide capital efficient growth in a tightening copper market. (Also watch attached Creamer Media video.)

“We’re of the view that the formation of Anglo Teck can only be positive for the increasing of global copper supply,” said Wanblad of the merged entity that he will lead this year or early next year. (Also watch attached Creamer Media video.)

Anglo’s copper business produced 344 000 t of production in the six months to June 30 and is on track to meet full-year guidance of 700 000 t to 760 000 t.

Bringing new copper online is becoming ever more expensive. The rate of inflation for capital intensity is running at almost double the increase in consumer price index (CPI) terms, Wanblad explained during the presentation of half-year results covered by Mining Weekly.

“Capital is, therefore, now a bigger part of the project’s economics than ever before and returns need to be higher just to justify those elevated costs.

“As capital inflation continues, the economics of many growth projects are at risk without higher prices and this is why we believe the copper price has to be structurally higher.

“It’s also taking a lot longer to build and deliver these projects. Back in the 1990s, it took about seven years, from the time that an orebody was discovered to bringing it into production.

“Over the last decade or so, that has stretched out to almost 18 years and if that carries on, the cycles will take longer to move from trough to peak and we’ll see much bigger swings in price.

“This is especially true when so much of the demand for copper is coming from strategic buyers, who really aren’t all that price sensitive.

“So, in that kind of world, projects that you can deliver in the short to medium term without spending a fortune to build them, become hugely valuable,” said Wanblad.

Over the last 15 years, the mining industry’s capital expenditure estimates have tended to come in considerably worse than what was estimated at the study stage.

"So, in that world, low complexity and low capital intensity is exactly where you want to be,” Wanblad commented.

Starting from lower capital intensity protects returns and positions copper mining companies to benefit from price upside that these supply dynamics should drive.

Against that background, the integration of Collahuasi and Quebrada Blanca is seen as a promising prospect that provides capital-efficient copper growth at scale in the near term.

There is potential to add an incremental 175 000 t of copper production a year at a capital expenditure (capex) of $2-billion, or $11 000 of capex per ton of copper growth.

Moreover, the integration would still allow for further growth of both assets, which provides increased flexibility for future options, including leaching and other plant expansions.

Anglo is putting the building blocks in place to bring about this integration “and just like any other adjacency that we've bought over the last few years, it’s important that we take our time and we do this properly”.

Much of what drives the extended schedules for copper projects is the time needed for permitting, planning, and stakeholder alignment, “so we want to get that right from the outset. We continue to believe that this is by far the best way forward for both. It sits right in that sweet spot: low capital intensity, relatively low execution risk, high confidence and near-term copper growth at real scale, and I'm genuinely confident about the potential here. We can build something very special.”

LOS BRONCES AND ANDINA

Reportedly progressing from agreement to preparation is the planned integration of Los Bronces and Andina. The 120 000 t of copper production a year that it offers will be shared equally.

“Now that we're through completion, the teams are moving into the joint mine plan integration design work. We've got a governance framework in place, and we're now working towards the environmental permits, where we're aiming to have them done by 2030.

“Just like Collahuasi and Quebrada Blanca, there could be more growth to come down the line. For example, here at Los Bronces, we've kept the right to develop the underground if the markets can support it.

“The key value driver for us going forward, therefore, remains operational excellence. Now that we've built a more stable operating platform, we've got a solid place to plan and we're continuously working on systematically optimising productivity, costs, and stability.

“We're also looking further out to see how we can best manage the natural variation that occurs over the lives of mines, as well as the inevitable pressures on grades over time.”

A debottlenecking programme has been completed at the Quellaveco plant, where recoveries are up, offering stability that provides the opportunity to focus on maximising future value.

“It’s a highly profitable business, highly cash generative, and is well set to be a cornerstone of the Anglo Teck portfolio through the next decade and more, and we’ll continue to push for further options to enhance its value.

“It's clear from the first half performance that we remain very much on track to deliver our next phase of transformation, and what's more, we have every confidence that we are making the right choices in terms of realising full value from our portfolio,” Wanblad reported.

During a media call, Wanblad was asked about mining modernisation.

Mining Weekly: Minerals Council South Africa has just had a modernisation showcase, and popping up was the use of AI to uplift mines in South Africa. What’s your view on the deployment of AI to enhance safety, for example?

Wanblad: AI’s going to play a massive role in all of our lives from now on going forward, and I'm sure that mining is absolutely going to be no exception to this. There are many applications that AI may very well have in the mining industry. It's pretty much at quite a nascent stage at this point in time. But on the exploration side, the tools we're using now to accelerate drill core analysis to find areas of potential discovery that are subsurface or under covered ground, all of these have benefitted from the use of some form of AI. Then, as you quite rightly say, there must be potential applications in safety, and we, like many others, are absolutely looking at that in terms of the detailed analysis of information that's available, the optimisation of systems and processes that seek to remove people from the riskiest areas within the business. So, look, we have a lot to learn from each other within the industry. We also have a lot to learn from what's going on outside of the industry, and as you saw at that conference and that workshop, there's an enormous amount of energy going into seeing how we can apply and get the best benefits out of an AI app or AI applications within the mining industry.