Copper M&A Frenzy Masks Weakness in Greenfield Exploration: Is AI to Blame? – BHP Group (NYSE:BHP)

The recent surge in mining mergers and acquisitions (M&A) masks a slowdown in greenfield exploration projects, as companies increasingly rely on acquisitions rather than the costly and risky process of discovering new deposits.

After hitting a new all-time high in May, copper has fallen and disappeared from the headlines, leaving gold in first place. Despite the decline in copper prices, impending shortages continue to worry analysts, who predict a significant mismatch between supply and demand in the coming years.

BHP Group Sp. z o. o. Health and Safety Oak Dam The Australian project, discovered in 2018, is one of the few large, green, prospective copper deposits currently in development. With an estimated exploration target of 500 million to 1.7 billion tonnes of ore grading 0.8-1.1% copper, it is an exceptionally promising discovery.

“There are few companies in the world that would conduct drilling campaigns of this scale and depth,” said a leading BHP geologist Michael Fonti he told Bloomberg.

Yet despite the promises of Oak Dam, even BHP, the world’s largest mining company, is focusing more on acquisitions than new projects.

The company bought OZ Minerals for $6.4 billion, without making the $49 billion acquisition Anglo-Americanwhich has significant copper resources in South America.

Despite this, BHP has expanded its presence on the continent, recently acquiring Philo copper project on the Argentine-Chilean border in cooperation with Lundin Mining.

The acquisition trend is evident across the industry as rising costs, long permitting timelines and geopolitical uncertainty make greenfield exploration unattractive. Fewer than a quarter of mining projects approved between 2019 and 2023 were greenfield investments.

The economics of new mining investments show a slowdown. Initial investment outlays (capex) for mine construction have increased dramatically.

For example, Precious metals in Dundee The Serbian project is expected to cost an estimated $381 million in capital expenditure, a significant sum for a mine expected to produce just over 129,000 ounces of gold per year.

The cost of producing copper per tonne has already exceeded $44,000 in 2022, according to AOTH, and projects like Cobre Panama are an example of this trend. Built at a capital investment of $6.7 billion, its production capacity was 175,000 tonnes, giving it a capital intensity of $38,000 per tonne – significantly higher than historical averages.

Additionally, many modern copper deposits were discovered in the 20th century. Escondidathe largest copper mine in the world, was established in the late 1970s, and most of the copper mined today comes from this period.

“Everything we produce today comes from this age of discovery,” BHP’s Fonti emphasises.

Despite the troubled state of greenfield exploration, recent technological advances offer hope. Artificial intelligence (AI) can help sift through historical geological data, identifying opportunities that the human eye might otherwise miss. Even Oak Dam nearly missed out because cutting-edge geophysical methods uncovered it.

Startups like KoBold Metals They have been using AI from the beginning, using advanced data analytics to acquire new deposits. Among their famous investors are Bill Gates, Jeff Bezos AND Jack Ma. The company may go public in the near future, with speculation that its valuation will be $2 billion.

Growing geopolitical instability, fueled by conflicts in Eastern Europe, Asia and Africa, could derail even the most promising projects.

Recent unrest in Pakistan threatens to plunge the country into deep political turmoil, with the newly formed government losing control over a disgruntled population struggling with an economic crisis, the New York Times reported last month. The large-scale protests have been particularly noticeable in Balochistan, the province home to one of the world’s most prominent copper projects, Barrel‘S Reko Diq A mine worth $7 billion.

Meanwhile, a regulatory change prompted the Panamanian government to shut down the Cobre Panama mine, a project that accounted for about 1.5% of global copper supply, leaving a historical reminder that external factors can undo years of exploration and billions in investment.

Read more:
• Barrick forecasts strong organic growth through 2030, Bristow CEO slams undervaluation

Benzinga Mining is the bridge between mining companies and retail investors. Contact [email protected] to get started!

Photo: Shutterstock