Will a copper shortage hinder the energy transition?

Happy Thursday… Over the coming weeks we’ll be hitting your inboxes with deep dives written alongside the ClimateTech innovators working at the coal face, no pun intended, of the energy transition.

In this edition… we speak to Jorge Errázuriz , Co-founder of copper mining technology company Ceibo. We talk about the causes of stagnating copper supply, the threat that it poses to the global energy transition and the technologies that could help increase production.

💭  TL;DR 

• The energy transition is fueling skyrocketing demand for copper, an essential metal component that’s used to make renewables, batteries and grid infrastructure.

• But supply isn’t keeping up. There’s more than enough copper in the earth’s known reserves to fulfill our growing demand for the metal, but the amount available for manufacturing is limited due to rising extraction costs and decades long lead times to open new mines.

• Deficits between supply and demand are already present. Without action, a growing supply gap could last into the 2050s, hampering the speed and scale of the energy transition.

• Ceibo’s technology can help increase the capacity of existing mines by allowing mining companies to make use of reserves that were previously out of reach with traditional processes

 🗞 The Full Article

Q: Why do we care about Copper and why is it an important industry - specifically in the energy transition and decarbonisation? 

Copper is the metal of electrification. 45-50% of copper is used in "moving electrons" which includes wiring in buildings and the electrical grid. Another 12% is used in electronics, while the remaining copper is dedicated to construction, such as pipes. Copper has some very particular physical and electronic properties. It’s malleable, superconductive, and relatively cheap, which is what makes it so critical.  

But in addition to this base case for Copper, Copper is also critical to support decarbonisation technologies. For example, an EV uses ~3x more copper than internal combustion engine (ICE) vehicles. The generation of the electrons needed to charge Electric vehicles also relies on copper-intensive components like solar panels and wind turbines (3-5 Tonnes per MW). Transferring that electricity through the grid and the charging station infrastructure also involves significant copper usage. As we transition towards relying more on electricity than fossil fuels, we’ll need substantially more Copper. To give a sense of the challenge we mine around 5x as much Copper than we do Lithium, Nickel and Cobalt combined. 

Q: How much copper do we produce today, where does that take place and who is responsible? 

Annual production of Copper today is around 22 million metric tons. The top producing nation is Chile (around 27% of global production) then Peru (10%), the DRC (10%), China (8%) USA (5%) Australia (4%).  

The Copper industry is concentrated with ten of the largest companies producing around 50% of total output. This includes Copper pure players such as Chilean state owned Codelco, Freeport-McMoRan and Antofagasta. You also have large, diversified mining companies who also have a stake in Copper such as Anglo American, BHP, Rio Tinto, Vale. Often multiple of these players will share ownership of single mines.

Q: Can you explain a little about the Copper Value Chain? What happens to Copper after it is mined? 

I'm going to oversimplify but Copper deposits can be segmented by the type of ore they contain. You have Copper Oxides which are generally at the top of the deposit (20% of the world’s Copper), and once you start digging underground, you hit secondary sulfides, then primary sulfides (70% of the worlds copper reserve). This matters because the technologies to process these deposits are different:

• For Oxides we use Leaching. Leaching involves crushing the rock and building a heap, which is then irrigated with a chemical solution to dissolve the copper. The resulting solution is rich in copper ions, which are then deposited onto plates using electricity, generally this occurs on-site. 

• For Sulfides we use Concentration. Concentration involves crushing the rock into a very fine powder and then introducing chemical reactions to create a foam with a 30% concentration of copper. That concentrate is then shipped to a smelting facility, usually in Asia, and is refined into the final copper product. China possesses around 50% of the global smelting capacity, making it a significant bottleneck in the production process. After smelting, the purified copper is supplied to original equipment manufacturers (OEMs) or intermediate producers of copper wire. 

Copper mines will start by mining Oxides at the surface, the processes are easier to permit have lower capital expenditure, have lower associated emissions and reduced water consumption and waste.

At some points mines will start to mine sulfides. Concentration of sulfides involves a whole new range of permits, $Bn of dollars of additional CAPEX to build facilities and/or geopolitical challenges shipping products to other nations to be refined. This process also produced more waste which has to be stored in large tailings dams. In many mines this transition challenges the 'economic viability' of these sulphide reserves - a source of untapped Copper supply. 

So how is future demand expected to change and what will be the challenges in meeting this demand? 

Demand associated with economic development is expected to grow at around 2-3% per year as countries develop and the earth has more people. Then you add electrification and the green economy. Estimates suggest an extra 5-6Mn tonnes of Copper per year, within the next 10 years and pretty quickly will need to double its output in the next 20-40 years depending on the reports you read. This will be challenging to do because:   

1. Ore grades are declining at existing copper sites: The average ore grade, which measures copper content per ton of ore, has declined from 1.2% 20 years ago to 0.6% today. This means double the amount of ore is now required to produce the same quantity of copper. This drives higher energy consumption and waste. As we discussed, This is partly due to the transition from Oxide deposits to Sulfides. 

2. Timelines to bring new sites online and get the appropriate permits are lengthening: According to the US Geological Society in the 1950's would take 5 years to get a permit for a mine and now it is taking 17 years. This also has implications for mining companies’ investment decisions as it lengthens the time to realise returns.

If we follow the traditional path of permitting and capital investment it looks unlikely, we will have enough Copper to support decarbonisation. 

Q: How does  Ceibo’s tech help to combat some of these challenges (Supply crunch due to declining ore grades at current mines and not enough new mines)?  

Ceibo's processes allow mining companies to access reserves that are out of reach with the traditional leaching process, taking advantage of existing infrastructure.

We’re working on a chemical technology for leaching primary sulfides. Our technology can use leaching with a recovery rate of 70-75%, compared to ~20% for traditional methods. This makes extraction of copper from deeper ores economically viable while leveraging existing infrastructure that would otherwise become idle. And our technology is easy and affordable to implement. While some adjustments are necessary when transitioning to different chemical reagents, no new plants or facilities need to be constructed. We don’t need more water or electricity and importantly there is not a need for lots of new permissioning as there would be when switching to Concentration. We also reduce the waste that needs to go into tailings dams which have been associated with several disasters in recent years.

Additionally, our technology allows for on-site production of the final product, which not only presents economic benefits, but also has geopolitical implications. It can assist countries like the US, Mexico, and Canada, which possess significant copper resources, in revaluating closed mines or previously challenging projects.   

Q: What's next? What is the plan for this $30M in funding from your Series B? How are you thinking about scaling? 

The resources we’ve raised are for scaling our chemical leaching technology by completing our industrial pilot and generating substantial intellectual property. The first project is a prototype plant—our labs, under our terms. Large mining companies have shown interest in scaling our technology, so the second project is a demonstration plant built at a mining site and run with mining industry standards. We’ll also pursue commercial alliances with smaller operators so we can reach the market sooner and gather valuable data to build a strong pipeline of projects all over the world.

We're also engaging in discussions with offtakers that purchase copper. These offtakers play a significant role in the supply chain because they require a stable and consistent supply of copper to meet their own future feedstock needs. There is also growing interest in greener copper that our methods would produce.  

Q: As is tradition with the Triple Bottom a question from our last start up founder: What are the non-negotiables habits for you as a founder that have supported the success of Ceibo? 

Taking risks and fostering an environment that attracts smarter people than you and enables them to thrive.