Have we “unpeaked” copper?

Note to “peakers”, copper may have just been “unpeaked”. Julian Simon’s bet seems to live on, or at least it has in copper. LOL.

DJ BHP Billiton Announces Massive Copper Find In Chile

SANTIAGO (AFP)–British-Australian mining giant BHP Billiton (BBL) announced Tuesday a new copper find near its Minera Escondida mine in northern Chile, a vein estimated to yield at least one billion tons of the valuable metal. “In order to properly and rapidly evaluate identified exploration targets, decisions were recently made to aggressively expand the exploration and development drilling program” in the area, the company said in a report. The new Pampa Escondida project, as it is called, was discovered during extensive exploration of the area begun in recent years, it said. “Drilling to date suggests that Pampa Escondida contains at least one billion metric tons of porphyry style mineralization,” the report added. The BHP Billiton finding follows last Thursday’s announcement by Chilean state-run mining group Codelco, the biggest copper producer in the world, of a copper find called “Casualidad” with an estimated yield of 300 million tons. Minera Escondida is the world’s biggest copper mine, which produced a record 6.5billion dollars of copper last year.

Chile is the world’s biggest producer of copper, which is used for electrical wiring and plumbing.

Let’s take some bets with oil over the next few years. LOL.

Note to commentors: With only about 3% of the world’s land area partially explored only sensible comments please if you’re thinking of telling us how we’re running out of raw materials 🙂

Update: At todays LME price of US$8,300 per ton, that’s a lot of metal (Not bad for weekend’s work with a metal detector on your back).

41 thoughts on “Have we “unpeaked” copper?

  1. Agree JC, this “peak” stuff is piffle. Ever since the Club of Rome, and probably before that, we’ve had predictions about running out of resources. Being wrong is apparently no reason to change your view though.

    On the oil front, there are massive reserves of oil-bearing shale that haven’t been touched. They’re being developed now that the oil price makes it attractive. You could almost believe a market is operating.

  2. p.s. For what it is worth I think global oil output will peak just as US oil output peaked in the 1970s and never recovered. However I think the market will take care of managing consumption and moving us to alternatives as and when the peak arrives. In any case I suspect it will be a long platue rather than a sharp peak.

  3. Saw a report on a peak oiler site recently that reckoned we were at “peak” uranium.

    They’d probably say we were at peak thorium if we used thorium reactors.

  4. Gold has me stumped, terje.

    Asked a mining dude and he reckons there just aren’t enough “resources” to go around. Everything is “peaking” (love that word) looking for other stuff.

    He gave an example… it now costs US$635K a day to hire a platform to look for oil.

    I guess the people are going where the biggest potential margins to possible easy finds are first.

    It also takes about 5-10 years to develop a mine in most places these days with most of the time devoted to permits etc.

  5. Even if conventional oil peaks, there’s enough shale to last a pretty long time, which as DavidL says, is becoming more economic.

    It’s estimated that there is over 200 times as much shale oil than the conventional stuff…

  6. For what it is worth I think global oil output will peak just as US oil output peaked in the 1970s and never recovered

    Offshore drilling on the US continental shelf is banned in the US, terje. there are all sorts of restrictions there. No wonder they have found smaller quantities.

    Place a ban around Australia and we would have the same issue. Same with Mexico and Venezuela.

  7. Everyone is using time like it is going out of fashion! When will time peak?
    Don’t worry about copper. ‘Atlas Shrugged’ is the true history of how a resourceful copper owner stored stockpiles of copper on the ocean floor, where thieves couldn’t get to it! That’s forward planning!

  8. they will be telling us it’s peak time soon. oops we have that with peak hour.

    One Einstein who shall remain nameless recently suggested we’re reaching peak car. I guess with projected global GDP hitting $500 trillion in 100 years peak car looks like a very likely event.

    Quick I wanna short Toyota.

  9. JC,

    [It’s common practice to put a link to the article you cite in your post rather than to expect readers to search for it.]

    http://en.wikipedia.org/wiki/Escondida#The_Mine says in 2006 nearly 1 million tons of ore were being mined per day at Minera Escondida. (This was lower than previous years due to effects of strikes.) So the 1 billion ton find at Pampa Escondida would be extends that level of production less than 3 years if it’s possible to recover all of it.

    This article out today says,

    But BHP warned that Escondida’s total output would drop 10-15 percent in the 2009 financial year and stay that way in subsequent years due to lower ore grades, a well-known problem that appears to be more significant than initially thought.

    “Maybe that’s a slightly bigger decline than some people would have expected,” said Peter Chilton, an analyst with Constellation Capital Management, adding that capital costs continue to be an issue.

    Minera Escondida started off with ore at 1.5% copper and now after about 25 years is down to 0.3%. The new find at Pampa Escondida is estimated at 0.6 to 1%.

    Note too, that Minera Escondida’s income nearly doubled from 2005 to 2006 due to increased price of copper, even though their production level dropped due to the strike.

    You might not want to take any of those Julian Simon type bets, someone might take you up on it. 😉

    “London Metal Exchange … three-month copper MCU3 reached a record $8,940 a tonne.”

  10. Can anyone name even one person that claimed we’d hit a daily peak output in COPPER.

    This is a new level of stupidity JC is getting into.

    WHO ARE THESE MYSTERIOUS COPPER-PEAKERS?

  11. Trinnifar:

    No need for link as it showed it was a Dow Jones bulletin.

    DJ at the start means “Dow Jones”

    I don’t know how you can spin a big find like this in a negative way. Sure enough you did. It seems that it more than replaces the downgrading of the previous mine. In any event it is a large find that increases known reserves of copper. That’s a good thing right?

    You might not want to take any of those Julian Simon type bets, someone might take you up on it

    In SDR terms sure I would. I’d look at any bet that was properly escrowed. You interested in offering odds?

    I wouldn’t make a bet in US dollar terms while Ben Bernanke is heading the Fed.

  12. Adding a link to quoted material is a courtesy to readers, to the source of the quote, and helps lend credibility to your post. Not sure why anyone would resist doing that. It’s common practice.

    I don’t know how you can spin a big find like this in a negative way.

    I was merely countering your spin with more (easily found) information. You’re lede is:

    Note to “peakers”, copper may have just been “unpeaked”. Julian Simon’s bet seems to live on, or at least it has in copper. LOL.

    That’s pure spin. One would expect you are presenting a compelling case that allows all of us to have no concern about any limitations to future copper supply. Simon’s thesis was that when demand for raw materials go up, prices rise, and entrepreneurs always find a way to produce more and make those prices come back down. He was the ultimate cornucopian.

    Then you closed with this:

    Note to commentors: With only about 3% of the world’s land area partially explored only sensible comments please if you’re thinking of telling us how we’re running out of raw materials.

    So I wrote what I still think was a perfectly sensible comment pointing out that while 1 billion tons of ore might seem like a lot it represents less than three years production from the existing mine the company runs. (And I think about 3 months production in terms of worldwide numbers.) I didn’t bother to ask where “only about 3% of the world’s land area partially explored” comes from.

    Simon rejected the idea that increasing population and increasing per capita consumption will cause us to run into resource limits. Yet he had to cherry pick data to make his case. (And he lost the bet on timber, but I think the betting thing was silly on both sides.)

  13. Simon rejected the idea that increasing population and increasing per capita consumption will cause us to run into resource limits. Yet he had to cherry pick data to make his case. (And he lost the bet on timber, but I think the betting thing was silly on both sides.)

    So he didn’t win the 1,000 buck bet?

  14. No, of course, he won the first bet, then lost the second. Neither of them proved anything of value however. He also refused a subsequent bet with Erhlick.

  15. JC – The reference to DJ meant nothing to me. A link in such instances would be helpful.

    The comment by Graeme Bird would seem to have some merit. Are the copper peakers actually just straw men?

    The point about offshore oil exploration doesn’t change things a lot. US oil output (ie output from the US landmass) did peak in the 1970s. The rest of the world might for this exercise include the offshore potential near the US. Clearly the world as a whole has not peaked however that does not mean that it won’t. And it does not mean that such a problem is due purely to regulations. I’m not worried about it but I do think global output will ultimately peak.

    As for shale oils I don’t know a lot about them however I thought the energy cost of extraction made a lot of it unviable. ie the energy consumed in extraction was more than the energy yield of the oil returned.

  16. Terje:

    So you want to start a debate on what DJ means? Just assume it means disk jockey from now on.

    We don’t know the potential of US production/reserves until the Democratic party inspired laws hindering activity are removed. Before that time it would be better if you didn’t make comments about the US peaking. We have no idea. ANWR alone is a pretty big reserve.

    Bird’s comment would have merit if i was talking about oil. There have been enough fury, cuddly peakers now to fill the show boat a few times over. Peakers are now not just talking about peak oil they are talking about most raw materials- even food production. We even have one genius recently talking about peak car. Personally I think the world has reached peak bar stools. I don’t think we’re going to see as many bar stools we see now in the future.

  17. So he won the bet and now you say he didn’t prove anything. What does the word winning means to you Trinifar?

  18. The ninemsn site has a story about how someone is claiming that the arctic area contains hundreds of billions of barrels-worth of oil. Does this mean my shale-shares are now worthless?

  19. jc, see http://en.wikipedia.org/wiki/Simon-Ehrlich_wager and http://en.wikipedia.org/wiki/Julian_Lincoln_Simon for discussion of the various bets and what they might mean or not. Isn’t it clear that winning or losing a wager is not the same as doing science?

    If you bet on a horse and it wins, have you proved that it will win tomorrow, that you have the best betting strategy for all races, or simply on that day on that track on against that competition it was the fastest?

  20. Trinifar,

    Now you have me all confused. I bought Qantas stock the other day. The stock is up. Does that mean I have lost money?

    I thought if you won a bet, you won a bet, or am I being far to simplistic and un-nuanced here?

  21. JC, since you ask, you are being “simplistic and un-nuanced” as well as, I think, willingly dragging your own blog post and the discussion around it down into a deep dark pit.

    I was honestly engaging in what I thought was a thoughtful discussion. For some reason you are not interested in that. My sense of libertarianism and the thing that originally attracted me to it was the emphasis on rationality and skepticism. You seem to have a such a different view I wonder why you are posting on a libertarian blog.

    Or did you really not understand the horse race betting analogy in my previous comment. Didn’t seem obtuse to me.

  22. No Trinifar, Simon was right, Malthus was wrong. Malthus’s law is almost like an anti-law of economics. We are not going to run out of anything any time soon. We are going to have bad policies to that encourage poverty, like limiting land subdivision, adventurous wars and conflicts that limit our access to resources (Nigeria).

  23. Trinifar:

    I was being sarcastic because quite frankly your comment deserved it. Simons won the material part of the bet. If he lost the “timber bet”… well quite frankly that’s a loss that isn’t too material. There are no real qualifiers as to who won.

    My sense of libertarianism and the thing that originally attracted me to it was the emphasis on rationality and skepticism.

    mine does too especially in the example of the famous bet.

    For heavens sake commodity price have basically been the worst investment around for the past 100 years. You’re implying otherwise?

  24. JC – why do you assume that I want to debate the meaning of DJ? I was providing user feedback. Why get all narky about it?

  25. For heavens sake commodity price have basically been the worst investment around for the past 100 years. You’re implying otherwise?

    Like any investment, JC, it depends on when you buy and when you sell. Look at the graphs in this post. If you purchased a basket of commodities reflecting the CRB spot index in 1972 and sold in 1975 you’d have made a killing. Purchased in 2001 and sold in 2008 would have made far more.

    Simon said, “the cost of non-government-controlled raw materials (including grain and oil) will not rise in the long run.” The bet with Ehrlich was over the ten year interval from 1980 to 1990. Look at the first chart at the link above. The outcome would have been very different had the interval been 1998 to 2008.

    If you look at last 61 years of CBR index (or just the inflation-adjusted price of oil which has a similar pattern) the current spike is unprecedented. Compare the CBR index since 2000 with the DJIA and tell me which has been the better investment?

    So I’ll ask you yet again, what did the Simon-Ehrlich wager prove?

    [Side note regarding your claim “Sarcasm is one of my core strengths”: Sarcasm also is frequently used when a person doesn’t have a well-reasoned argument or doesn’t have a good grasp of the material being discussed.]

  26. Trinifar – Looked at your graphs but sorry it was inflation that drove the commodity prices in the 1970s. Not the other way around. Ultimately it was the central bankers not the Arabs.

    I’ll reserve final judgement on the current high oil price. However I suspect that monetary policy explains part of it. I also think increased demand (as you suggest) plays a part. Neither is the same as a peaking of output.

  27. Terje is right Trinifar. You need to dig deeper. A closer examination of the data reveals that money base growth has a causitive correlation with prices, whereas commodity prices and inflation don’t have a correlation except where there is cointegrated high money base growth.

    The nations that felt the oil shock the worst were ones with the highest rates of monetary growth…not a big surprise really.

  28. Trinnfar:

    oil in 1860 was US550 a barrel in 2008. It was pretty rare commodity. Thanks to Rockefeller that changed.

    And what Mark and Terje said.

    the outcome would have been very different had the interval been 1998 to 2008.

    Simons was a smart dude. He wouldn’t have made the bet then.

  29. Trinnifar
    Your CRB chart tells may story.

    the annual rate of compound growth of the CRB if we use the trendline on your chart has been 1.9%. If we use actual prices it’s around 2.8%.

    The rate of growth for Dow for the same period has been (175 to 11,600) 7.5%. If we add in dividends it’s even higher possibly around 8.5% as I am assume 1% annual div. per year. So, yes commodities are a rotten long term investment over the long term.

  30. JC, do you mean that in 1880, in 2008 prices, oil was 550 USD per barrel? So it is roughly fives times cheaper now and it was eight times cheaper before the Iraq War and 30 times cheaper during the tech boom?

  31. Terje, The issue of commodity prices and inflation is a fair one, but I think the jury is still out. I wish I had the time to look at it more. As for the current oil price rise, monetary policy can’t be ignored, in this or any other area.

    On the demand side, from a 2007 US government report led by the former Chair & CEO of ExxonMobile:

    “It’s a hard truth that the global supply of oil and natural gas from the conventional sources relied upon historically is unlikely to meet projected 50 to 60 percent growth in demand over the next 25 years,” says the report.

    http://www.npchardtruthsreport.org/

  32. That’s right. Growing demand is not the same as peaking. We won’t know if we’ve peaked until after the fact, and after agreeing what the term means. The term used in the report cited above, again an effort led by the former Chair and CEO ExxonMobile and others experts hand-picked by the Bush administration (meaning it’s the opposite of a group of “alarmists”), is production plateau, and the last few years of data indicate a plateau (very small rise in total production).

    The global in-place oil endowment is very large, but the recoverable resource and the rate at which it can be produced are subject to considerable uncertainty. Forecasted oil production rates vary widely: some rely heavily on OPEC to meet rising demand; others on contributions from unconventional oil and alternative liquids; a third set of forecasts project a production plateau or peak.

    Forecasts for declining production are based on various above- and below-ground factors, including: declines in volumes discovered; conventional oil production peaks and subsequent declines in countries such as the United States and the United Kingdom; and anticipated oil production plateaus in countries such as Russia and China.

    What I do think is widely accepted is that yearly global production of light sweet crude has been declining for a long time and lower grades of oil are supplementing, all the way down to tar sands. That increases costs. Also not controversial is that the volume of new discoveries has been decreasing since about 1964. In the world of coal anthracite is a declining resource. When we talk of the vast coal reserves we mean the lower grades.

    It makes obvious sense that the extractive industries go after the high-grade resources first whether it’s oil, coal, copper, or even water. And the technology to find and extract resources is highly developed.

    As the world grows more affluent and demand continues to rise for goods of all kinds, the extractive businesses respond but nearly always having to do more with less. So costs increase and prices rise. Since these industries require a good deal of energy, as energy costs rises they are directly impacted, a positive feedback loop. That portion of price inflation is quite different than the part that’s due to central bankers.

  33. What I do think is widely accepted is that yearly global production of light sweet crude has been declining for a long time and lower grades of oil are supplementing, all the way down to tar sands.

    You can’t make those observations with the little information we know, Trinifar. I have mentioned this to you a few times and it doesn’t seem to sink in.

    Additionally it’s laughable to be placing a linear fit to new discoveries as they may well come in statistical clusters.

    Having superficially surveyed 3% of the earth my confidence level that we are exhausting supplies is less that 1%.

  34. “Having superficially surveyed 3% of the earth my confidence level that we are exhausting supplies is less that 1%.”

    Which just goes to show that you are congenitally deficient when it comes to understanding what peak oil is about.

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