It’s no secret that mining industry operates in a challenging environment nowadays: trillions in CAPEX requirements, declining productivity, rising costs, labour shortages, meeting capital demand and achieving net zero goals. If this is not enough to give anyone involved in the sector a headache, these is another serious issue at hand: declining average ore grades across multiple mineral commodities.
After centuries of mining, it is no surprise that ore grades across the world started to fall significantly over the past few decades. Gold and copper deposits are of particular concern since the precious metal plays a significant role in world economy, and the base metal is supposed to become one of the critical building blocks for the renewable energy sector of the future. Arguably, news headlines like this are set to become more and more common longer-term:
Copper giant Peru foresees another production plateau in 2025
Rio Tinto weighs options amid declining iron ore quality
Australia’s gold production continues decline in 2024 as costs rise and grades fall
The issue has exacerbated the battle for resources. Recent mergers, acquisitions and takeover attempts by mining conglomerates are a sign of this struggle, when operating a “world-class” deposit with stable long-term high output can give a significant strategic advantage to companies or even countries.
Irreversible trend
“The trend of declining copper head grades1 is well established and unlikely to be reversed,” says consultancy firm McKinsey in its research, adding that less capital-intensive oxide ore bodies are being exhausted across the globe.
Instead, miners have to tap into larger quantities of more labour and energy-intensive sulfide ores. The copper in oxides is soluble, allowing direct extraction through leaching rather than physical separation. Sulfide extraction in concentrators is more complex, requiring physical separation via froth flotation after fine grinding.
According to McKinsey, the volume of ore sent to concentrators has risen by 44% to 1.1 billion metric tons over the past ten years. This volume would need to increase by another 44% by 2031 to produce enough copper necessary for the global energy transition.
As processing volumes pile up, the power requirements increase as well, enhancing environmental and social costs of mineral production, a team of researchers said in a study. Additionally, underground mines are more energy consuming than open-pit mines, and the process of each mine also has a big influence in the energy consumption pattern.
“Analysing only copper mines, the average ore grade has decreased approximately by 25% in just ten years. In that same period, the total energy consumption has increased at a higher rate than production (46% energy increase over 30% production increase),” researchers noted back in 2016.
Less than ten years later we can take a look at a typical example of an aging copper mine at which ore grades are constantly falling. BHP’s Escondida, world’s largest copper mine, has started production in 1990s with a head grade of around 2.5% - 3% copper. It fell significantly over the last three decades, but thanks to constant processing plant improvements and large investments, BHP was able to maintain a higher concentrator feed grade of 1.03% on average in 2024.
Nevertheless, maintaining aging mines could be costly, and the world’s biggest miner would need to invest $10.7 - $14.7 billion in its Chilean copper projects within the next 10 years. Even with those measures, the company’s annual production is set to fall by around 300,000 tons to 1.6 million tons by the end of the decade, largely driven by a slump at Escondida, where output is expected to peak this year.
Diminishing returns
Decreasing ore grades is no longer a theoretical issue but a global reality caused by the increasing consumption of raw materials. In this regard, resource conservation and recycling could be key to long-term sustainability of both markets and industries.
Some researchers argue that the continued expansion of the copper mining may face a number of challenges associated with increased production rates and declining ore grades such as economic and environmental impacts. Because of that, mined copper production may peak during the course of this century.
At the same time, major new copper discoveries are becoming scarcer globally, with older deposits carrying the bulk of the reserve growth over the last decade, according to a recent study by S&P Global. Until there is a reversal in exploration trends, the trend of fewer significant discoveries is likely to persist.
Even if the trend changes, filling a copper supply gap won't be easy considering the average lead time for a new project (from discovery to production). For mines started in 2005-2009 it amounted to 12.7 years on average, but today for projects that started production in 2020 - 2023 it increased to 17.9 years.
Longer exploration, permitting and studies phase and a longer period between the end of feasibility studies and the start of construction lead to the slowdown of the commissioning of new mines. In this environment, increased geological exploration spending does not necessarily mean that global production goals would be met.
Hunt for resources
S&P Global says that copper and gold head grades have fallen over the last decade. The average copper head grade in 2022 was 0.52% Cu, and the average gold grade was 1.31 g/t Au, down 7.5% and 13.4%, respectively, since 2012.
The average reserve grade1 over the same period has mostly faced a similar trend - it has dropped 9.1% from 0.54% Cu in 2012 to 0.50% Cu in 2022, while the average gold reserve grade has remained flat at 1.26 g/t Au since 2012.
There are specific issues for iron miners and steelmakers, too. To meet decarbonization goals, steelmakers would have to adopt the Direct Reduced Iron Processes (DRI) which is considered one of the most promising routes for decarbonisation of the steel industry.
However, it requires a higher grade of iron ore than blast furnaces, the dominant global technology. DRI-grade iron ore ideally has an iron (Fe) content of 67% or more and such deposits are scarce - only a small percentage of global seaborne iron ore comes close to DRI-grade.
The scarcity of the so-called “world-class” deposits with high resources and grades has prompted more competition in the mining sector. In turn, this has led to a number of notable mergers and acquisitions over the past year or so, as miners hunt for better assets.
In late 2023, world’s largest gold producer Newmont has acquired an Australian miner Newcrest for around $15 billion. The company has since sold a number of “non-core” gold mines of the latter for a cumulative profit of $4.3 billion to “make a strategic shift to focus” on Tier 1 assets.
In mid-2024, world’s largest miner BHP unsuccessfully tried to take over Anglo American and its stakes in copper mines in Chile and Peru as the most attractive assets in the company’s portfolio. If the deal, valued at over $49 billion at the time, would have been concluded, the fate of other Anglo’s assets such as diamond miner De Beers and platinum producer Amplats would probably be similar to Newcrest’s former mines.
Lastly, geopolitics and protectionist measures by a number of governments may play a certain role in mineral resource availability. Just recently, China has declared an export ban on a number of critical minerals such as antimony, gallium, germanium and superhard materials, in response to tariffs imposed by the new US administration. As China is a major supplier of critical minerals, these measures can jeopardize the mineral security of US and its allies, leading to increased competition for critical mineral deposits elsewhere in the world.
Silver lining
There are opinions however that declining ore grades may not be a problem in itself, but a kind of a metric to assess the profitability of a deposit. Some researchers argue that the gradual lowering of cut-off grades, at which it is economic to process ore, happened with technological advancements, thanks to which the supply was always able satisfy the demand, at least to a certain extent.
“Porphyry copper deposits are today by far the most important type of copper mineralisation. These deposits are typically of relatively low grade, and in the past, the high mining costs associated with mining them could exceed the revenues. When technology enabled mining costs to be reduced, copper porphyries could be profitably mined even as ore grades declined,” researchers say.
As mining tech progresses, long-term average ore grades decline but new deposits or parts of existing mines that have been considered uneconomical can now be developed for a profit.
“Modern and more effective mineral beneficiation processes lower production costs to such an extent that it is easier and more effective to locate an out-cropping copper deposit of 0.4% copper content than to find a deposit of a grade of 5% at a depth of 1 km,” researchers added.
Now in 2025, with a wider adoption of AI and machine learning, these technologies may become more advanced than ever before. Smart mining solutions enable real-time data collection and predictive analytics to optimize operations and improve productivity. Adaptability “on the fly” to optimize production and utilize resources makes it possible to respond to changing ore grade and adjust processes accordingly.
For example, US-based copper and molybdenum miner Freeport-McMoRan is unlocking significant volumes of copper from material previously considered waste, using technology, data analytics and operational enhancements. The copper extracted through its novel leaching tech currently costs less than $1 per pound, compared with the current market price of about $3 per pound.
To overcome the challenge of declining ore grades, mining companies may try to invest in innovative exploration technologies such as remote sensing, geophysical surveys, and machine learning algorithms. These innovative approaches can help uncover previously overlooked mineral deposits and optimize resource allocation.
Theodor Lisovoy, Managing Editor, Rough&Polished
1 Mill-head grade: metal content of mined ore going into a mill for processing. Recovered grade: actual metal content of ore determined after processing. Reserve grade: estimated metal content of an orebody, based on reserve calculations.
