Appearing at the Mines and Money London conference this week, billionaire Robert Friedland told delegates that two months of violent demonstrations have made Chile a “terrible place to invest in mining, while [the Democratic Republic of] Congo is a really great place”.
Mr Friedland said the state of civil unrest – the worst violence the country has witnessed since the 17-year-long military dictatorship of Augusto Pinochet, which ended in 1990 – should prompt analysts to reconsider the discount rates given to the South American nation.
Country risk in the DRC by comparison, is “far lower than assumed”.
While the DRC is still recovering from a protracted economic and social slump following a series of conflicts which broke out in the 1990s, Mr Friedland said he is confident the region will regain its glory.
Key to that process is rising global copper demands, which could potentially be met from planned DRC developments such as Ivanhoe’s mega Kamoa-Kakula project worth around $14.7 billion.
Mr Friedland gave delegates an insight into future copper demand, predicting the rise of electric vehicles would be a huge opportunity for his company, the mining industry and investors.
“Copper demand is going to be psychedelic!” he said.
An “exponential rise in demand” will be fuelled by EV production and sales which are expected to increase from 2 million units in 2018 to 21 million units by 2030.
“The average petrol engine vehicle requires 20 kilograms of copper, a hybrid 40kg, and a plug-in EV 109kg, while the cars of the future will need as much as 163kg of the metal,” he explained.
Along with the wider uptake of EVs, a boom in consumer electronics, increased use of renewable energy sources and energy efficiency – coupled with the need for battery storage solutions – will also require significant amounts of copper.
The rise of copper will herald “the revenge of the miners”.
“Copper is rare and hard to find, but without it we don’t have a modern world,” he said.
“Lithium-ion batteries are made out of copper so when we start moving fully to electric vehicles, we’re going to need a telescope to actually see the copper price … the industrial revolution starts in 2023 and it just builds for the rest of the decade.”
In 2017, BHP Group (ASX: BHP) – which has looked closely at EV-related demand – estimated an average battery-powered EV would contain 80kg of copper split between the engine (the largest share), the battery and the wiring harness.
It forecast that by 2035, there could be 140 million EVs on the road (or 8% of the global fleet) and manufacturers could require 8.5 million tonnes a year of additional copper, or about a third extra on top of current total global copper demand.
The DRC is likely to be the main source of many of the minerals needed for EVs and batteries, with analysts calling it the “Saudi Arabia of the EV boom”, in reference to the kingdom’s role in oil markets.
Largest copper discovery
Mr Friedland has a long history of finding and developing lucrative mineral deposits.
Having helped discover two of the world’s largest mines – the Oyu Tolgoi copper-and-gold mine in Mongolia’s Gobi Desert and the Voisey’s Bay nickel deposit in Canada – he now believes he may have found a third at the untapped Kamoa-Kakula deposit.
A joint venture between Ivanhoe Mines (39.6% equity), Zijin Mining Group (39.6%), Crystal River Global Limited (0.8%) and the DRC Government (20%), Kamoa-Kakula has been independently ranked as the largest copper discovery in the history of mining on the African continent and the world’s largest high-grade copper discovery.
Located in the Central African Copperbelt, approximately 25 kilometres west of the town of Kolwezi and about 270km west of the provincial capital of Lubumbashi, the project is being co-funded to development by Ivanhoe and Zijin.
Grade is king
Initial copper concentrate production from Kamoa-Kakula – the revenue from which will be sufficient to finance a further two mines and a planned smelter – is scheduled for late 2021.
The project’s pre-feasibility study released in February outlined a life-of-mine production scenario of 119.7Mt at an average grade of 5.48% copper, producing 9.8Mt of high-grade copper concentrate containing approximately 12.4 billion pounds of copper.
One hole drilled earlier this year, called the “bonanza zone”, was found to contain copper grades as high as 18%.
“Grade is king,” Mr Friedland said at the time.
“Nothing even comes close to Kamoa-Kakula.”
In February, he told a mining conference in South Africa that Kamoa-Kakula could become the second-largest copper mine in the world, after BHP’s Escondida operation in Chile.
Pillar of the economy
Mining remains the pillar of the Congolese economy and accounts for up to 95% of its exports.
The country is intensely rich in natural resources and is one of the most well endowed mineral locations in the world.
It holds nearly half of the world’s cobalt reserves, and is among the top 10 countries worldwide for copper reserves. The DRC also hosts a significant amount of tin (cassiterite) which is the most traded metal on the London Stock Exchange.
Yet for all its mineral wealth, the average citizen’s income is less than $1 a day making it also one of the world’s poorest nations.
ASX copper explorers in the DRC
Among the ASX mining companies operating in the country is MMG Australia (ASX: MMG), however the company is expected to delist from the exchange next week due to low trading volumes.
In the junior space, the explorers hunting for copper in the region include Cape Lambert Resources (ASX: CFE), Fe (ASX: FEL), Hipo Resources (ASX: HIP), Nzuri Copper (ASX: NCZ), Tiger Resources (ASX: TGS) and Red Mountain Mining (ASX: RMX).
Civil unrest in Chile
Grade may be king in the DRC but back in Chile – the world’s largest copper producer – the grade of the bellwether metal has fallen from over 1.25% in 1999 to less than 0.75% today.
At Escondida, grades are expected to decline 15% until 2022.
The lower grades – teamed with domestic water and power issues – have impacted mining output and highlight the need for grassroots exploration for new copper deposits or expansions to existing projects to reverse the cycle.
Adding to the local industry’s woes is the continued state of civil unrest on the back of protests against high living costs, low wages and pensions, a lack of education rights, a poor public health system and social inequality.
At least 20 people have been killed and many others injured and arrested since the first protests broke out last month, with ongoing tensions believed to be the worst to hit the country in decades.
While the protests are yet to have any significant effect on Chile’s mining industry, speculation on potential work stoppages and ensuing supply disruptions caused the price of copper to surge to a one-month high in October.