Real copper prices reached a cyclical peak in 1974 (figure 11) and began a long downhill slide that bottomed in 2002, initially driven by diminished world demand in the epoch of oil shocks and “stagflation” and later by over-supply. US mines were also plagued by high labor costs and low productivity, strikes, declining grades and major capital investments required to meet new air quality standards. In addition, several US companies (e.g. Anaconda and Kennecott) were crippled by the nationalization of their higher-grade, more profitable, foreign assets. Oil companies had purchased many copper producers (AMOCO: Cyprus, Arco: Anaconda, SOHIO: Kennecott, Pennzoil: Duval) in the early 80s and seemed unwilling, or incapable, of turning them around. All of this led the magazine Business Week to proclaim “The Death of Mining” in 1984.

Figure 11. Graphical history of copper mining in SW N America.

The reaction to the crisis varied amongst the producers. Phelps Dodge, which had no significant foreign assets, was probably the most aggressive and took a bold stance in a 1983 strike, ultimately resulting in the decertification of the unions at its Arizona mines, a complete restructuring of the labor force and its attendant costs. And, while not the first company to implement SX-EW, it did so on a much larger scale than its competitors. By 2002, nearly 55% of US production was from SX-EW (figure 12, 13). These, and additional cost-cutting and efficiency efforts, allowed US producers to drive their production costs down in concert with the long-term secular decline in real prices, staying afloat during the busts and reaping the rewards of the occasional booms. All of this was in spite of the inexorable decline in mine head grades.

Figure 12. Crisis and resurrection of US copper mining.

Figure 13. Percentage of US copper production from leaching vs milling operations, 1967-2018.

Note that there was a spike in discoveries in the 1950s-70s (figure 11), due to the application of new geophysical exploration methods like magnetic and IP/resistivity surveys. Few of these deposits have turned out to be economic, largely due to their depth, but they remain in portfolio for future development with improved prices, changing technology, etc.

By the time copper prices bottomed in 2002 (in real terms), the US industry was a much different beast than it had been in the 1970s. Many North American mines had closed and companies consolidated. Phelps Dodge, later purchased by Freeport-McMoRan, was the only major US-listed producer remaining. All other producing mines and major projects were owned by foreign-listed companies (figure 14). The remaining enterprises had new, often very profitable, foreign mines as well as domestic production, and US costs were competitive on a world scale.

Figure 14. Corporate ownership of SW NA mines and projects, 1967 - 2018.

A comparison of the US and Chilean copper mining sectors highlights some of the features noted above. I use Chile for comparison because it is the largest copper producer in the world, also from porphyry deposits, and Chilean production has grown dramatically, while US production has had its peaks and valleys but, overall, has declined over the 1967-2018 period (figure 15). Chinese demand drove a ramp-up in the copper price (figure 16), starting in 2003, which coincided with a rare spike in molybdenum prices. Chilean head grades dropped dramatically during this time interval but, as of EOY 2018, are still 50% higher than those in the US (figure 17, upper-left-hand panel). Electrical energy costs in the US dropped steadily, in real terms, since the late 70s, rose from 2000-2009, but have been dropping again since then, probably as a result of the fracking/shale gas revolution (figure 17 lower-left-hand panel). If we look at tonnes of copper produced divided by the number of direct employees in copper mining, we clearly see the US advantage: currently at 70 tonnes Cu per man-year, versus 30 in Chile (figure 17, upper-right-hand panel). Together these factors led to cash-positive operations in the US that have generally persisted through 2018 (figure 17, lower-right-hand panel).