Digging into U.S. copper supply: CNBC goes inside a critical copper mine

Key Concepts:

• Critical minerals, US supply chain, emergency powers
• Copper demand, copper mines, copper refining/smelting
• Rio Tinto Kennecott Copper Mine, Resolution Copper Mine
• Resource nationalism, vertical integration, capital intensity

Rio Tinto Kennecott Copper Mine Operations

• Location: Approximately 40 minutes from downtown Salt Lake City, Utah.
• Operational Tempo: 24 hours a day, 365 days per year.
• Copper Production: Supplies 20% of the US's refined copper.
• Demand Forecast: Copper demand is forecast to double by the middle of the next decade (according to S&P Global).
• Blasting Process:
  • One blast is carried out every day.
  • Each blast creates more than 500,000 tons of new ore.
  • Each blast is equivalent to 10,000 humpback whales.
  • 120 holes are drilled per blast.
  • 1,600 pounds of explosives are used per hole.
  • After blasting, ore is loaded into specialized hauling trucks.
• Mine Extension: Rio Tinto is extending operations on its northern wall to extend the mine's life further into the 2030s.

Rio Tinto Resolution Copper Mine (Arizona)

• Status: Project has been underway for more than two decades.
• Investment: Rio Tinto has spent in excess of $2 billion.
• Progress: Yet to break ground.
• Significance: Highlights the difficulty of getting a mine operational in the United States.

US Copper Mining Landscape

• Number of Copper Mines: Approximately 25 copper mines in the US.
• Production Skew: Heavily skewed towards major producers like Kennecott.
• Reserves vs. Refining Capacity: The US has abundant copper reserves but limited refining and smelting capacity.
• Smelters: Kennecott has one of just two domestic US smelters.
• Importance of Refining: Reserves are effectively useless if they cannot be turned into a valuable end product.

Kennecott's Significance

• Vertically Integrated Operation: Fully mines and refines US copper.
• Growing Importance: Increasingly important due to rising resource nationalism.

Challenges in Smelting and Refining

• Capital Intensity: Smelting is a very capital-intensive business.
• Thin Margins: Margins are much thinner compared to mining.
• Profitability: Most of the money in mining is made at the mine itself.
• Need for Capacity Addition: Even with new mines in the US, there is a need for more smelting and refining capacity.

Resource Nationalism

• Definition: A country's desire to control and benefit from its natural resources.
• Impact: Makes domestically sourced and refined copper more valuable.

Conclusion

The US faces a challenge in its copper supply chain due to limited refining and smelting capacity despite having significant reserves. The Kennecott mine is a crucial asset because it is a vertically integrated operation. While new mines are needed, increasing smelting and refining capacity is equally important to fully utilize domestic resources and mitigate the risks associated with resource nationalism. The difficulty in launching new mining projects, as exemplified by the Resolution Copper Mine, underscores the need for strategic investment and streamlined processes to bolster the US copper supply chain.