This headline is the latest message from Ronald W. Thiessen, President and CEO of Northern Dynasty Minerals. He notes that “even in the midst of the worst global recession since the 1930s, demand for metals hasn’t slowed all that much. Take copper. Worldwide demand for the red metal has grown by an average of 4% annually since the beginning of the 20th century – from just 500,000 t in 1900 to ~18 Mt today.
“While growth in global consumption of copper and other metals will take a breather this year, the long-term demand trend remains intact. In fact, the current economic slowdown may actually exacerbate a growing gap between future metal supply and demand.
“The reason is pretty straightforward. While the developed and developing countries of the world continue to demand greater quantities of metal each year to build and modernise their economies, the identification and development of new mineral resources simply isn’t keeping pace. The western or developed regions of the world operate primarily on the availability and use of energy, a crucial driver for the developing economies of the world. Energy in the form of electricity is a key factor in maintaining or improving our economies, and the production of energy in the form of electricity, and its transportation and usage is fundamentally based on the use of mineral resources; from carbon based energy (oil, gas, coal) to transmission or consumption of electricity which uses copper, aluminum, and other metals and minerals. Even production of green energy in the form of solar panels (silicon metal), and wind turbines (steel towers) uses substantial minerals in the production phase, and more again in the transmission and consumption phase.”
He then turned his focus on the availability of the mineral resources noting that “base and precious metal deposits are rare and finite. The truth is most of the accessible orebodies on the planet have already been developed. As recently as the 1980s, 100% of mineral deposits brought into production had a surface expression – that is, they were close to surface and easy for geologists to find. That figure dropped to 60% in the 1990s and to less than 20% this decade. Not only are the vast majority of new deposits entirely covered. They’re also much deeper, more remote and therefore more difficult to find and more expensive to exploit.
“Even when an orebody is discovered, permitting and building a new mine is risky, expensive and time-consuming. Mine developers confront a range of challenges wherever they operate around the world; Political and regulatory instability, Lack of infrastructure, Uncertain land tenure, Security risks, Labour shortages and Environmental and political activism. These are all risks the global mining industry accepts and has become expert at managing. But it takes time and costs a lot of money, often billions of dollars and 10 years (or more), to advance a mineral prospect to an operating mine.
“One of the ways metal producers have sought to maintain or enhance production while minimising risk is by focusing on ‘brownfield’ expansions of existing mines rather than ‘greenfield’ development of new resources. In the case of gold producers, some 90% of new reserves identified between 1997 and 2007 were the product of brownfield expansions or upgrades of previously discovered deposits. Not surprisingly, world gold production has been falling steadily since 2001.
“The same dynamic has affected copper producers – so much so that 75% of the largest copper mines on the planet have no further expansion potential. They can exploit the resource in fewer years but there is no room for growth in the total resource, and many will be depleted by 2015. On average, we are now exhausting the equivalent of one of the world’s largest copper deposits each year. One analyst suggests global copper demand will outstrip known supply by 6 Mt by 2016 – the equivalent of 10 or more projects the size of Northern Dynasty’s Pebble project.
“There’s at least one more factor contributing to the dearth of new mineral deposits coming on line, and this one is related to the global recession itself. Over the past five years, investment in grassroots mineral exploration had been at or near record levels. But all that changed dramatically when commodity prices and equity markets plunged late last year. Mine operators responded by curtailing exploration activities and focusing on profitable operations, while exploration companies went into survival mode – conserving cash, idling crews and hoping to ride out the financial storm. These are reasonable and prudent business responses to an immediate economic crisis. But in the long run, they will only serve to exacerbate the shortage of new mineral resources being developed to replace rapidly depleting reserves.
“The net effect of all these factors should ultimately be a positive one for resources companies (and their shareholders) that own significant late-stage mineral prospects in copper, gold and a range of other metals. Unfortunately, they may also lead to a shortage of raw materials and escalating commodity prices just as countries around the world seek to recover from the current economic crisis.”
