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Abstract
The number of operating mines has fallen sharply for most mineral products, and the average size of mine risen, with the changes gathering momentum during the 1990s. The paper looks at trends in copper, zinc and gold, and then explores the relationship
between size and unit costs in copper mining, separately for underground and open-pit mines, in order to ascertain the existence
and importance of economies of scale. Changes in mine size have been accompanied by major technological and geographical
shifts. There is only a weak relationship between the scale of mines and overall unit costs per tonne of copper produced. The
paper discusses the data and explores some of the reasons.
# 2004 Elsevier Ltd. All rights reserved.
Keywords: Copper; Gold; Zinc; Mine size; Milling capacity; Tonnage milled; Head grades; Economies of scale; Copper-equivalent costs; Leaching;
Open-pit mines; Underground mines
Introduction
This paper was developed from a presentation at the
PDAC meeting in Toronto in March 2003 (Crowson,
2003) that looked at recent trends in global mine output and in the size of mines in order to assess the
implications for future exploration spending. This
paper, based on more detailed analysis of basic data,
concentrates on changes in the size of mines since the
mid-1970s and on the relationship between mine size
and production costs. It uses some of the data contained in the earlier paper, but has also drawn heavily
on analyses of copper mine size and costs, kindly made
available by Rio Tinto.1
The rst objective of the paper is to show how the size
of mines has changed since the mid-1970s, and especially
during the 1990s. For most, if not all, mineral products
there was a sharp decline in the number of operating
mines and a corresponding rise in mine size. The rst
section of the paper looks at copper, zinc and gold, and
16
Fig. 1.
Global mine output of copper and zinc. Source: International Lead and Zinc Study Group and World Bureau of Metal Statistics.
Table 1
Changes in copper mine output 19922002
Increases
Chile
Indonesia
Australia
Peru
China
Argentina
Kazakhstan
Other increases (17 countries)
Total increase
Net change
Decreases
000 tonnes
2558
902
494
473
217
203
178
412
5437
3948
65
23
13
12
5
5
5
10
138
100
000 tonnes
USA
Canada
Zambia
Congo
Philippines
Source: World Metal Statistics, Yearbooks and Monthly Bulletin. World Bureau of Metal Statistics.
611
171
126
112
105
15
4
3
3
3
364
1489
9
38
17
Table 2
Changes in zinc mine output 19922002
Increases
China
Peru
Australia
USA
Mexico
Kazakhstan
Morocco
Other increases (16 countries)
Total increase
Net change
Decreases
000 tonnes
707
619
454
243
163
112
101
284
2683
1648
43
38
28
15
10
7
6
17
163
100
000 tonnes
Canada
Japan
North Korea
422
88
83
26
5
5
442
1035
27
63
Source: World Metal Statistics, Yearbooks and Monthly Bulletin. World Bureau of Metal Statistics.
Fig. 2. Changes in global copper mine capacity 19942002. Source: International Wrought Copper Council. London. Survey of Capacities of
Copper Mines, Smelters, Reneries and Copper Wire Rod Plants, IWCC, (2000).
18
Fig. 3. Changes in global copper mine capacity by region 19942002. Source: International Wrought Copper Council, London. Survey of Capacities of Copper Mines, Smelters, Reneries and Copper Wire Rod Plants, IWCC (2000).
Just to round out the picture, the geographical distribution of mine capacity in both 1994 and 2002 is summarised in Fig. 4.
This shows the growing domination of global copper
production by Chile and other Latin American countries, and the reducing shares of Africa and North
America.
Changes in mine size in summary: copper, zinc
and gold
The rise in global mine capacity, especially during
the 1990s, was accompanied by a marked increase in
the average size of mines. In particular, the relatively
high growth rates of the 1990s gave scope for large new
mines to start up at, or near to their technical optimum, especially when account is taken of osetting
mine closures. Table 3, based on a variety of sources2
summarises how the size of copper, zinc and gold
mines moved relative to global output over rather different periods.
2
For copper, the data for 1976 are taken from an internal study by
Rio Tinto Economics Department (private communication), and the
data for 2000 from the International Wrought Copper Council
(IWCC) analysis annotated in (Survey of Capacities of Copper Mines,
Smelters, Reneries and Copper Wire Rod Plants above, IWCC
(2000)). The data for zinc are derived from the successive World
Directories on Lead and Zinc Mines of the International Lead and
Zinc Study Group, and especially on analyses of these by the author
for the Introduction to the 2001 Edition. For gold the data are from
the computerised database of the Raw Materials Group of Stockholm.
Table 3
Percentage change in global mine output and mine size
Copper 19762000
Zinc 19802000
Gold 19752000
Source: See Footnote 2.
Global
output
Mean
mine size
Median
mine size
+67
+45
+101
+182
+117
2
+252
+133
+131
19
Fig. 5. Size distribution of copper mines. Sources: Rio Tinto Mine Information System and International Wrought Copper Council. London.
IWCC (2000).
20
Fig. 6. Size distribution of zinc mines. Source: International Lead and Zinc Study Group. See Footnote 2.
Fig. 7.
Size distribution of gold mines. Source: Raw Materials Group. Stockholm. Sweden.
21
Fig. 8. Cumulative metal capacity by mine size in 1975. Source: Rio Tinto Mine Information System.
22
Table 5
Summary data on copper mines 19752000
1975
1980
1985
1990
1995
2000
341
688
2481
7955
261
797
2762
8018
223
814
2848
8100
225
919
3136
8814
137
959
2997
8681
101
1106
3474
10,662
41
184
1202
39
641
2435
Million t.p.a.
000tpd
000 t.p.a. cu
Million t.p.a.
000 t.p.a. cu
19
137a
175
20
29
344
22
33
449
32
53
775
Million t.p.a.
000 t.p.a. cu
000 t.p.a. cu
%
360
825
8130
5645
69.4
281
826
8361
6123
73.2
245
848
8549
6474
75.7
257
971
9589
7109
74.1
178
1144
9884
8103
82.0
140
1747
13,097
10,890
83.1
5.3
2.1
7.1
4.1
9.0
5.2
12.5
8.1
23.0
12.2
27.9
18.6
23
Fig. 9. Cumulative metal capacity by mine size. Source: Rio Tinto Mine Information System.
24
Fig. 11. Copper mines: distribution of metal capacity by mine size. Sources: Rio Tinto Mine Information System.
Total capacity
in 2000
(000 tonnes)
Change in capacity
19852000
(000 tonnes)
% share of
19852000
change
10
25
50
75
100
125
150
175
200
225
250
>250
Total
144
490
873
1238
514
1290
284
797
765
852
472
5378
13,097
157
495
437
566
167
848
808
144
404
634
451
4467
4548
3.5
10.9
9.6
12.4
3.7
18.6
17.8
3.2
8.9
13.9
9.9
98.2
100.0
25
Fig. 12. Average copper mine capacity 19752000. Source: Rio Tinto Mine Information System.
26
Fig. 13. Size distribution of copper mines in 2000 by tonnage treated. Source: Rio Tinto Mine Information System.
shown (over 50 million tonnes of ore per annum). Conversely, conventional mills are more important in the
2050 million tonne range. The largest mine in 2000,
based on ore throughput, was a leaching operation that
accounted for almost 2% of copper metal output from
over 200 million tonnes of ore. On that basis it was about
2.6 times the size of the next largest mine (with conventional milling).
The remainder of this section concentrates on mines
with conventional mills, as the data for these are more
complete. Fig. 14 shows the median annual mill
throughput for each year, with the upper and lower
quartiles, on the basis of cumulative metal capacity. It
Fig. 14. Average tonnes milled at conventional copper mines 19752000. Source: Rio Tinto Mine Information System.
27
Fig. 15. Conventional copper mines; metal capacity by mill size. Source: Rio Tinto Mine Information System.
Fig. 16. Average daily mill capacity at conventional copper mines 19752000. Source: Rio Tinto Mine Information System.
28
Fig. 17. Copper prices and cash costs. Source: Brook Hunt Associates. See Footnote 3.
stant 2002 terms at four points on each years cumulative cost curve from 1975 to 2002. The points are the
median, the lower and upper quartiles and the ninth
decile of each years cumulative production. Both costs
and prices moved cyclically around declining trends,
and the narrowing gaps between the four levels of costs
imply a attening of the cost curve over the period.
In a series of papers, John Tilton has emphasised the
contributions made to falling costs by the growing share
of SX-EW operations in total mine output, and by the
application of advanced technology across the board.4
The rising importance of leaching operations has been
highlighted above. So too has the changing geographical
distribution of global copper output. To the extent that
production has risen in low-cost regions and fallen in
high-cost regions there would have been a decline in the
industrys observed costs. The contribution of economies
of scale is separate from these technological and locational eects on costs.
The main impact of rising mine scale in mines with
conventional milling circuits is likely to be on mining
and milling costs. These are much more closely related
to mill throughput than smelting and rening charges,
which are often market-determined. This section concentrates on the relationship between mine size, as
measured by ore throughput, and mining and milling
costs per tonne of ore milled. Ore grades vary widely
between individual mines so that there is unlikely to be
any close relationship between mining and milling costs
per tonne of copper and metal output The subsequent
sections examine how the costs of copper produced
vary with mine scale.
4
Tilton and Landsberg (1999). Tilton (2003) also summarises a
list of references between 1999 and 2003.
29
Table 7
The relative importance of underground and open-pit copper mines
Underground mines
1975
1980
1985
1990
1995
2000
Open-pit mines
% Share of U/ground
Number
of mines
Tonnage milled
(mn tonnes)
Number
of mines
Tonnage milled
( mn tonnes)
Number
of mines
Tonnage milled
250
174
155
153
88
59
211.4
223.8
239.7
282.0
175.4
161.5
126
88
67
74
50
44
508.3
574.1
571.8
633.2
756.4
920.8
66.5
66.4
69.8
67.4
63.8
57.3
29.4
28.0
29.5
30.8
18.8
14.9
and open-pit mines in 1975 against their ore throughput. The logarithmic scales of both axes in Fig. 18
illustrate the relationships more clearly than arithmetic
scales. The costs have been adjusted to constant 2000
terms to ease comparisons between years. The deator
used here, and throughout the paper, is the United
States Implicit GDP Price Deator. Alternative measures of ination are much narrower in scope and do
not fully reect changes in purchasing power, even of
individuals. Most of the points for underground mines
are higher than those for open-pit mines at given levels
of output. The regression lines further demonstrate
that economies of scale have been more important for
open-pit than for underground mines.
This tendency for costs to decline with mine size in
both categories supports the existence of economies of
scale, whilst the wide scatter emphasises that scale
alone is by no means the only determinant of relative
costs. Comparison of the data for 2000, shown in
Fig. 19, with those of 1975 given in Fig. 18 suggests
Fig. 18. Mining and milling costs at copper mines 1975 in 2000 terms. Source: Rio Tinto Mine Information System. Note: Thirteen underground
mines, whose costs per tonne milled exceeded US$ 100/tonne in 2000 terms are omitted from the gure, but are included in the regression line.
30
Fig. 19. Mining and milling costs at copper mines 2000. Source: Rio Tinto Mine Information System.
and that unit costs fell for other reasons such as productivity improvements, broadly dened. Therefore, we
need to specify an equation that makes full use of all
the relevant data, and that allows for a changing
relationship between the two variables over time. The
chosen equation is of the form:
log Y a b log X2000 c log X1990 d log X1975 e
where Y is the costs per tonne milled, X2000 is the
tonnes milled in 2000, but zero otherwise. X1990 is
the tonnes milled in 1990, but zero otherwise. X1975 is the
tonnes milled in 1975, but zero otherwise. a, b, c, and d
are constants, e is the error
The results are summarised separately for underground and open-pit mines in the next sections.
Underground mines
Between 1975 and 1990, the successive cumulative
cost curves (plotting mining and milling costs per tonne
milled in constant 2000 terms, against cumulative
tonnes milled) generally moved downwards to the
right. The trend was uneven, however, to the extent
that 1980s cost curve was above that of 1975 for much
of its length. The drop in production from underground mines during the 1990s led to cost curves moving upwards to the left, as displayed in Fig. 20.
This method of presentation does not do proper justice to the changes over the period. Those are better
illustrated by the scatter diagram of Fig. 21, which
compares the scatters for 1975, 1990, and 2000, all in
constant 2000 terms. A relationship between mine size
and unit costs exists, but is fairly weak in each year
shown. There is a variety of dierent methods of
31
Fig. 20. Cumulative mining and milling costs at underground copper mines. Source: Rio Tinto Mine Information System.
underground mining, each suited to particular congurations of the host ore deposit. Each method incurs
typical patterns of expenditure that are not brought
out in these broad comparisons.
The regression lines shown in Fig. 21 imply that there
was virtually no change in economies of scale between
1975 and 1990, but that they became more important
during the 1990s. By 2000, a doubling of mine throughput resulted in a 13% reduction in unit costs. The
equation underlying the regression lines, which is in the
logarithmic form set out above, is summarised in
Table 8. Scale is a statistically signicant inuence on
costs, but by no means their only determinant.
Open-pit mines
The relative increase in production from open-pit
mines is reected in the changes in cumulative cost
curves over the 19752000 period. There was a persistent shift downwards and to the right, as illustrated in
Fig. 22.
This gure demonstrates the growth in open-pit production of the 1990s, when a number of large mines
was constructed to meet the burgeoning demand for
copper metal. Many were based on ore deposits that
had been discovered, and even delineated, many years
earlier, but whose development had been delayed,
either by market conditions, or because of political
Fig. 21. Mining and milling costs at underground copper mines in 2000 terms. Source: Rio Tinto Mine Information System.
32
Table 8
Regression equation for underground mine size and costs
Coecient
Standard error
t Statistic
Observations
R2
F
Constant a
(intercept)
Constant b Constant c
(2000)
(1990)
Constant d
(1975)
2.0522
0.046
44.48
462
0.245
49.43
0.2071
0.0175
11.86
0.1581
0.0188
8.405
0.1599
0.0169
9.43
Fig. 22. Cumulative mining and milling costs at open-pit copper mines. Source: Rio Tinto Mine Information System.
Fig. 23. Mining and milling costs at open-pit copper mines in 2000 terms. Source: Rio Tinto Mine Information System.
Coecient
Standard error
t Statistic
Observations
R2
F
33
Constant a
(intercept)
Constant b
(2000)
Constant c
(1990)
Constant d
(1975)
2.1188
0.080
26.40
244
0.514
84.57
0.320
0.021
14.92
0.291
0.024
12.21
0.265
0.025
10.4
34
Fig. 24. Cash costs and copper-equivalent production 1975 in 2000 terms. Source: Rio Tinto Mine Information System.
Fig. 25. Cash costs and copper-equivalent production 1990 in 2000 terms. Source: Rio Tinto Mine Information System.
35
Fig. 26. Cash costs and copper-equivalent production 2000. Source: Rio Tinto Mine Information System.
Table 10
Regression equation for mine size and copper-equivalent costs
Coecient
Standard error
t Statistic
Observations
R2
F
Constant a
(intercept)
Constant b Constant c
(2000)
(1990)
Constant d
(1975)
0.1180
0.0098
12.09
814
0.428
201.96
0.182
0.0082
22.26
0.0177
0.0093
1.9
0.0682
0.086
7.88
Fig. 27. Copper mine size and head grades. Source: Rio Tinto Mine Information System.
36
Table 11
Regression equation relating mine size and head grades
Coecient
Standard error
t Statistic
Observations
R2
F
Concluding comments
Constant e
(intercept)
Constant f Constant g
(ore grade) (Dummy
2000)
Constant h
(Dummy
1990)
3.0546
0.040
76.154
665
0.41
156.25
1.0258
0.059
17.38
0.352
0.053
6.62
0.855
0.07
12.22
References
Crowson, Phillip, 2003. Does size matter? Implications for exploration. In: Presentation to the Annual Conference of the Prospectors and Developers Association of Canada. Toronto. March
11th.
Survey of Capacities of Copper Mines, Smelters, Reneries and Copper Wire Rod Plants. Successive editions. International Wrought
Copper Council, London, 2000.
Tilton, J.E., 2003. Creating wealth and competitiveness in mining. In
Mining Engineering, September 2003. Society for Mining, Metallurgy, and Exploration Inc.
Tilton, J.E., Landsberg, H.H., 1999. Innovation, productivity
growth, and the survival of the US copper industry. In: Simpson,
R.D. (Ed.), Productivity in Natural Resource Industries:
Improvement through Innovation, Resources for the Future,
Washington, DC, pp. 109139.