Everything You Need to Know About Copper Porphyries
Presented by Entrée Gold
What is a Porphyry?
Porphyry deposits are very large, polymetallic systems that typically contain copper along with other important metals. Much of today’s mineral production depends on porphyries: 60% of copper, 95% of molbdenum, and 20% of gold comes from this deposit type.
Where and How are Porphyries Formed?
Porphyries are most commonly found along the west coast of North and South America, as well as in the Southwest Pacific.
Porphyries are formed in tectonic plate convergent zones where oceanic crust has subducted beneath the continental crust, and in some cases the oceanic crust. As the plate subducts, the overlying upper mantle partially melts and the liquid magma rises to the surface. Hot fluids rise to the surface by flowing through cracks and fissures. Metals precipitate out of the solution as fluid cools and moves away from the heat source and pressure.
In porphyry mineralization, there are many economic minerals that can be found: copper, gold, molybdenum, silver, lead, zinc, tin, and tungsten. There are also associated mineral deposits that can form that depend on the host rock and the distance from the heat source. These include skarn, epithermal, and breccia type deposits.
Four Things to Know on Porphyries
- Polymetallic nature – Each porphyry is unique and holds different concentrations of minerals. Some deposits have such high concentrations of gold that they may be considered gold deposits rather than copper deposits. Others have barely any gold at all but may have plenty of molybdenum.
- Large Size, Low Grade – Porphyries typically have 100 million to 5 billion tonnes of ore with a lower grade (0.2% to >1% copper). It is the size of these deposits that allow for bulk mining and economies of scale.
- Long Mine Life – The size of porphyry systems usually mean that the life of the mine can be multi-decades long. This means that these deposits last through multiple market cycles, and are thus not as vulnerable to challenging market environments compared to other smaller mines.
- Infrastructure is Key – In order to process large amounts of ore, infrastructure can be a large part of initial capital expenditures (CAPEX). Access to power and water are key issues as large amounts of both are needed to process ore. The footprint of the mine and volume of tailings disposal can also make porphyries more challenging to permit.
Each year the Bingham Canyon Mine, located in Utah and owned by Rio Tinto and in production since 1906, produces approximately:
- 300,000 tons of copper
- 400,000 oz of gold
- 4,000,000 oz of silver
- 30,000,000 lbs of molybdenum
The value of the resources extracted to date from the Bingham Canyon Mine is greater than the Comstock Lode, Klondike, and California gold rush mining regions combined.
Visualizing China’s Dominance in Clean Energy Metals
Despite being the world’s biggest carbon emitter, China is also a key producer of most of the critical minerals for the green revolution.
Visualizing China’s Dominance in Clean Energy Metals
Renewable sources of energy are expected to replace fossil fuels over the coming decades, and this large-scale transition will have a downstream effect on the demand of raw materials. More green energy means more wind turbines, solar panels, and batteries needed, and more clean energy metals necessary to build these technologies.
This visualization, based on data from the International Energy Agency (IEA), illustrates where the extraction and processing of key metals for the green revolution take place.
It shows that despite being the world’s biggest carbon polluter, China is also the largest producer of most of the world’s critical minerals for the green revolution.
Where Clean Energy Metals are Produced
China produces 60% of all rare earth elements used as components in high technology devices, including smartphones and computers.
The country also has a 13% share of the lithium production market, which is still dominated by Australia (52%) and Chile (22%). The highly reactive element is key to producing rechargeable batteries for mobile phones, laptops, and electric vehicles.
But even more than extraction, China is the dominant economy when it comes to processing operations. The country’s share of refining is around 35% for nickel, 58% for lithium, 65% for cobalt, and 87% for rare earth elements.
Despite being the largest economy in the world, the U.S. does not appear among the largest producers of any of the metals listed. To shorten the gap, the Biden administration recently launched an executive order to review the American strategy for critical and strategic materials.
It’s also worth noting that Russia also does not appear among the top producers when it comes to clean energy metals, despite being one of the world’s leading producers of minerals like copper, iron, and palladium.
Low Regulation in the Clean Metal Supply Chain
While China leads all countries in terms of cobalt processing, the metal itself is primarily extracted in the Democratic Republic of Congo (DRC). Still, Chinese interests own 15 of the 17 industrial cobalt operations in the DRC, according to a data analysis by The New York Times and Benchmark Mineral Intelligence.
Unfortunately, the DRC’s cobalt production has been criticized due to reports of corruption and lack of regulation.
Part of the Congolese cobalt comes from artisanal mines with low regulation. Of the 255,000 Congolese artisanal miners, an estimated 40,000 are children, some as young as six years old.
The Rise of Clean Energy Metals
The necessary shift from fossil fuels to renewable energy opens up interesting questions about how geopolitics, and these supply chains, will be affected.
In the race to secure raw materials needed for the green revolution, new world powers could emerge as demand for clean energy metals grows.
For now, China has the lead.
The Periodic Table of Commodity Returns (2012-2021)
Energy fuels led the way as commodity prices surged in 2021, with only precious metals providing negative returns.
The Periodic Table of Commodity Returns (2022 Edition)
For investors, 2021 was a year in which nearly every asset class finished in the green, with commodities providing some of the best returns.
The S&P Goldman Sachs Commodity Index (GSCI) was the third best-performing asset class in 2021, returning 37.1% and beating out real estate and all major equity indices.
This graphic from U.S. Global Investors tracks individual commodity returns over the past decade, ranking them based on their individual performance each year.
Commodity Prices Surge in 2021
After a strong performance from commodities (metals especially) in the year prior, 2021 was all about energy commodities.
The top three performers for 2021 were energy fuels, with coal providing the single best annual return of any commodity over the past 10 years at 160.6%. According to U.S. Global Investors, coal was also the least volatile commodity of 2021, meaning investors had a smooth ride as the fossil fuel surged in price.
Source: U.S. Global Investors
The only commodities in the red this year were precious metals, which failed to stay positive despite rising inflation across goods and asset prices. Gold and silver had returns of -3.6% and -11.7% respectively, with platinum returning -9.6% and palladium, the worst performing commodity of 2021, at -22.2%.
Aside from the precious metals, every other commodity managed double-digit positive returns, with four commodities (crude oil, coal, aluminum, and wheat) having their best single-year performances of the past decade.
Energy Commodities Outperform as the World Reopens
The partial resumption of travel and the reopening of businesses in 2021 were both powerful catalysts that fueled the price rise of energy commodities.
After crude oil’s dip into negative prices in April 2020, black gold had a strong comeback in 2021 as it returned 55.01% while being the most volatile commodity of the year.
Natural gas prices also rose significantly (46.91%), with the UK and Europe’s natural gas prices rising even more as supply constraints came up against the winter demand surge.
Despite being the second worst performer of 2020 with the clean energy transition on the horizon, coal was 2021’s best commodity.
High electricity demand saw coal return in style, especially in China which accounts for one-third of global coal consumption.
Base Metals Beat out Precious Metals
2021 was a tale of two metals, as precious metals and base metals had opposing returns.
Copper, nickel, zinc, aluminum, and lead, all essential for the clean energy transition, kept up last year’s positive returns as the EV batteries and renewable energy technologies caught investors’ attention.
Demand for these energy metals looks set to continue in 2022, with Tesla having already signed a $1.5 billion deal for 75,000 tonnes of nickel with Talon Metals.
On the other end of the spectrum, precious metals simply sunk like a rock last year.
Investors turned to equities, real estate, and even cryptocurrencies to preserve and grow their investments, rather than the traditionally favorable gold (-3.64%) and silver (-11.72%). Platinum and palladium also lagged behind other commodities, only returning -9.64% and -22.21% respectively.
Grains Bring Steady Gains
In a year of over and underperformers, grains kept up their steady track record and notched their fifth year in a row of positive returns.
Both corn and wheat provided double-digit returns, with corn reaching eight-year highs and wheat reaching prices not seen in over nine years. Overall, these two grains followed 2021’s trend of increasing food prices, as the UN Food and Agriculture Organization’s food price index reached a 10-year high, rising by 17.8% over the course of the year.
As inflation across commodities, assets, and consumer goods surged in 2021, investors will now be keeping a sharp eye for a pullback in 2022. We’ll have to wait and see whether or not the Fed’s plans to increase rates and taper asset purchases will manage to provide price stability in commodities.
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