Critical mineral spotlight: Copper (Part 1)

Copper is ubiquitous in, and essential to, the functioning of modern civilization. Its unique combination of material properties make it the go-to metal for anything electric: it’s malleable, predictable, and about 1000x more abundant than the most conductive metal, silver, while only being slightly less conductive. With the exception of long-distance transmission lines, which are aluminum, almost every electrical wire in today’s technological applications is made of copper.

There are an estimated 6.3 billion metric tons of copper in the Earth’s crust. It comes in many forms: not just pure or “native” copper, but a range of ores containing various amounts of copper alongside other elements. Some of these minerals are relatively easy to handle. Others contain or are colocated with deposits of deleterious elements like arsenic. The specific chemistry of each ore, which defines the percentage by weight of copper in the material, determines how the copper is extracted and processed. See Figure 1.

Rarely are these minerals found in their pure form. Most of the time they are distributed within a matrix of… well, dirt. That drops the concentration of copper per ton of mined earth, or grade, to 2% or lower. If the grade is too low or there’s too much arsenic in the spoil, it can become uneconomical to mine a deposit. These are situations where extraction is not physically impossible, just too expensive to be worth doing. The two main reasons to not pursue an asset are 1) the ore grade is so low that it costs more in processing than the final yield is worth; or 2) environmental regulations exist that would require significant investment to comply with. We’ll get a bit deeper into that in Section 3.2.

Economic restrictions make the vast majority of extant copper inaccessible today. Today, but possibly not tomorrow. The world’s demand for copper is increasing: the “copper intensity” of data centers, renewable energy, electric vehicles, and electrifying everything means that as the transition progresses, we expect an annual shortfall of almost 40 million metric tons by 2050. Combined with the fact that existing assets are drying up, the price of copper is likely to spike. And unlike lithium, bulk demand for which is tied very tightly to EV batteries and almost nothing else, copper has many more uses and an inelastic baseline demand. Alternative battery chemistries, like sodium-ion, compete with lithium for the EV market. In contrast, there is no economical alternative to copper for electrical purposes. As long as people want computers and lightbulbs, there will be demand for copper.

The following primer is presented in two parts. Part 1 is technical: we’ll introduce some chemistry, give a run-down of existing copper extraction techniques, and offer a snapshot of novel technologies being developed by incumbents and startups. In the next entry, Part 2 will dive into the realities of the mining sector, what matters to different stakeholders, and why this ancient industry is still breaking rocks the same way now as they did a hundred years ago. We’ll conclude with a current market map and takeaways that you, the investor, can apply to your next diligence in mining.

There are seven main types of geological deposits that contain copper. The most common, and most important for industry, is called a porphyry deposit. These massive ore bodies are formed when cooling magma leaves copper-rich fluids behind. The resulting deposits are low grade, but large enough to be worth a major deployment of equipment. Note that just because a deposit was formed this way does not guarantee it contains a specific type of mineral or at what concentration.

While a porphyry deposit comprises the initial, or primary, deposit of ore, geological processes can alter the types of minerals present and where they are located. For deposits close to the surface, the presence of oxygen and weathering can over time turn sulfides into oxides. In some cases, groundwater can leach copper from surrounding rock and concentrate it in a different location below the main orebody. These are called secondary deposits. Secondary deposits can be highly economical to extract, as the ore grade is often higher.

Another key aspect of a copper deposit that needs to be taken into account is the type of rock surrounding the ore. For porphyry deposits, that is typically igneous rock formed by the magma that formed the deposit. Igneous rocks like granite are characterized by their hardness and density – in other words, they’re awfully hard to break apart. In some cases, the copper is located within a sedimentary layer instead. Sedimentary rocks like sandstone and shale are typically more crumbly and thus require less energy to process. Understanding the geology of the proposed mine site will help evaluate the effort, and therefore opex, needed to recover the copper from the ground.

You will have noticed that Figure 1 indicates whether a given copper ore is a sulfide or an oxide. The delineation between sulfide- and oxide-based ores is more than academic, as the specific chemistry of the mineral determines the most economical way to process it and get the copper out. Let’s start with a quick exploration of why this matters.

In a mineral, elements are chemically bonded together. The element of interest – copper – is sharing electrons with or borrowing them from neighboring atoms. In this state it does not behave like the pure metal we know. It’s neither conductive nor malleable. To turn it into a pure metal, we need to give it more electrons in a process called reduction. When additional electrons are introduced to the mineral, the copper doesn’t have to share anymore, and it takes on the metallic form we find most useful.

The way we carry out the reduction depends on whether the copper atoms are sharing electrons with oxygen or with sulfur. Oxide minerals are generally amenable to dissolution in strong acid, so a process called hydrometallurgy is employed. Sulfides don’t dissolve as readily, so they are generally processed thermochemically via pyrometallurgy, commonly called “smelting.” The kit, energy inputs, and waste outputs for these two types of extraction are wildly different, and whether a given orebody is economical to develop depends heavily on what kind of downstream process is needed once the ore is out of the ground.

Both processes start with crushing the rocks into fine pieces. Once the ore has been pulverized, though, the paths diverge. See Figure 2.

Oxide ores can be piled up in a heap (and yes, that’s the technical term) and bathed in sulfuric acid. As the acid seeps through the rock, it leaches the copper into solution that trickles out the bottom of the heap. This solution is collected and purified, and electrons are introduced directly in a process called electrowinning. The copper in solution takes these electrons and precipitates into solid copper sheets called cathodes. Cathode copper is 99.99% pure and the starting material for most industrial uses. See Figure 3.

Sulfide ores must be concentrated before smelting to avoid wasting energy heating useless rock. Once concentrated, it is smelted into a form of copper called blister that is about 98% pure. The blister is then dissolved in acid and treated in a manner similar to electrowinning to take it from blister to cathode quality. Note that the smelting process is best practiced on higher grade ores. The lower the ore grade, the more upstream processing and concentration are needed, making it less economical to smelt. As ore grades have declined over time, making hydrometallurgy work for sulfide ores has become of greater concern. See Section 4 for more about that.

Of the fifteen minerals shown in Figure 1, the most important by far is chalcopyrite. Despite its low copper content, it is the most commonly found copper ore, and it appears in large deposits that are well suited to mining at scale. Chalcopyrite deposits contribute approximately 50% of the world’s copper production today. Calcocite, a secondary ore, is a richer and more economical source of copper, but significant deposits are rarer. Both are sulfides. The other ores of primary importance to the industry are the oxides malachite and azurite. These are often found closer to the surface and have distinctive bright colors when present in high concentration: green and blue, respectively.

A critically important fact is that ores almost never occur alone. A given deposit will typically have some mix of copper-containing minerals in it, the specifics of which are entirely dependent on local geology. As such, every mine site is unique. The importance of this will become vividly apparent in Section 4.

Last but not least, copper recycling is a very important piece of the supply chain that accounts for about 30% of all copper production over the last decade. As many uses of copper require it to be pure – think wires and pipes – a complex chemical separation is not necessary for a large fraction of copper waste. It is simply stripped from its insulation or coating, melted down, and re-formed into ingots. Other sources of copper scrap, like circuit boards, are more complicated to handle and do require chemical separation. Even so, recycled copper saves over 80% of greenhouse gas emissions compared to primary copper production.

Consider two bowls of marbles. One set of marbles is red and the other is blue. The system is highly ordered: no effort is needed to select only red or only blue, because the two types of marbles are already separated, like with like. Now pour both bowls into a bucket and stir them around. Once the marbles are mixed up, it takes energy to separate them back out again. The more colors of marble are in the bucket, the more energy is required to organize them into homogenous groups again. Additionally, the fewer of one color marble there is, the more time and energy it will take to find them within the bulk. This is the fundamental problem with chemical separations, whether that’s removal of carbon dioxide molecules from the atmosphere or extracting copper atoms from piles of rock. Entropy’s a pain.

This problem is only getting worse in the world of copper mining. As richer ores are depleted over time, the grade of what’s left in the ground gets lower and lower. As such, the amount of energy needed to extract pure copper from the ground is steadily increasing. More dirt has to be shifted, more rocks have to be broken, and the ore has to undergo more concentration before it’s ready to be smelted or leached. All these steps cost money and time (which is just money in different units). Since the amount of copper – and therefore potential revenue – in a mine site is finite, higher separation costs cut directly into profitability. There’s no way to compensate by increasing production.

Both hydro- and pyrometallurgical copper extraction processes produce waste. In the case of hydrometallurgy, that’s a massive pile of acid-tainted rock. In pyrometallurgy you get slag, lead, emissions of carbon and sulfur dioxide, and in some cases, plumes of airborne arsenic. In the United States there are regulations surrounding what you’re allowed to do with waste materials, how you’re required to treat them to make them more environmentally benign, and even what you’re allowed to produce in the first place. Arsenic in particular is not a popular waste stream. Because of these regulations, highly polluting legacy facilities have faced fines. The current political environment has shifted somewhat in favor of lower regulations at the federal level; however, good luck getting local permitting approval for a new smelter anywhere in America. Consequently, the vast majority of copper smelters today are in China – although that industry has its own problems, too.

This is obvious, but worth spelling out. A mine, like any extractive resource, has a finite amount of revenue locked up inside it. They’re also utterly massive. Once equipment is set up at the site, it typically costs an unacceptable amount of new capex to change processes. We’re not talking about lean-six-sigma manufacturing tweaks or slightly more fuel-efficient trucks, mind you. Switching to a wholly novel way of doing physical or chemical separations requires entirely new infrastructure and expensive specialty equipment at large scale. For most mine sites, the NPV of that investment just doesn’t pencil out. We’ll get into more details of this phenomenon in Part 2. For now it will suffice to say that mine operators are effectively allergic to big hardware changes at their sites.

Many startup companies have been founded to take advantage of the opportunity the looming copper shortage presents. When prices rise, any means to wring more copper from the earth will be worth pursuing. At the high level, there are two main routes to increasing copper production: either get more copper out of existing assets, or find and unlock entirely new assets. As discussed in Section 3.2, the American copper mining industry is heavily limited by environmental regulations. To increase onshore production, then, new processes must be cleaner (or at least not dirtier) than legacy ones, as well as more effective.

The most common target for improvement is hydrometallurgy. Heap leaching is cleaner than smelting, and much cheaper, but the process is very slow and only recovers about 70% of the copper in the heap. There are three primary routes to improving the process: chemical, biological, or both. The purely chemical route involves adjusting, changing, or augmenting the fluid used to irrigate the heaps (see Figure 3, above). The biological route introduces specialized microbes into the irrigation fluid. These microbes accelerate and increase dissolution of the copper-containing minerals. The type of microbe determines which kind of ores it will “eat” – bioleaching for oxide ores has been known for a while, but as sulfide ores decline in grade and become less economical to smelt, miners have turned to microbes to enable heap leaching of these minerals as well. The details of these processes, while scientifically fascinating, are beyond the scope of this introductory article. The key takeaway is that improving heap leaching is a relatively low-hanging fruit that offers a high rate of return without the need for massive infrastructure investment.

Means to unlock new assets can take many forms. On the purely physical side, there have been advances in exploration, precision or surgical mining to reduce the need for open pits, and even new ways to pulverize rocks. A combination of novel technologies could hypothetically allow for a miner to locate and extract small deposits that would not be economical to establish a full-scale traditional operation around.

The other category of approach focuses on entirely new chemical routes to process dirty ore. In these cases, it is vital to remove the problematic elements (like arsenic or uranium) in such a way that the waste is neither airborne nor soluble in water. By ensuring that the harmful wastes can be safely collected and appropriately sequestered, these innovations have the potential to make economical billions of dollars of untapped copper assets in the United States. However, they require high capex, and as such are best suited for brand new facilities that would not require retiring existing equipment. Since it takes years to find, evaluate, and open a new mine, the deployment timeline for these technologies is on the order of years.

This timeline raises a critical note for any investor looking to put capital into a new copper extraction startup. As mentioned in Section 2, every mine site is unique. Therefore, any new technology must prove itself with a pilot at every individual mine site it wishes to sell to – and these pilots take at minimum a full year to complete. This is especially true of heap leaching. A heap is a heterogeneous mishmash of minerals that sits around exposed to the weather all year long. The temperature and moisture conditions within the heap change by season. If a startup comes to you claiming they can go from the lab to being deployed at n mines within six months, you should see a very orange flag. The leadership team should be prepared to survive a never-ending series of yearlong pilots. If the company does not have a plan to execute several pilots in parallel, that’s a huge risk.

This has been a highly abbreviated primer meant to get you started thinking about the basic science and economics of copper extraction. It is not intended to teach you detailed technicalities or biochemical mechanisms, or even provide a current market map. We will get into the company landscape piece in Part 2. In the meantime, consider whether adding copper to your investment portfolio is right for you.

Opinions expressed here belong solely to us and do not reflect the views of any past or current employers. No AI was used in the research or writing of this article. Republished with permission.