After a decade of rising copper mine costs, analysis carried out by SNL Metals & Mining based on its recently-launched mine economics database shows that there has been a steady decline in total cash costs over the past three years. The average spot price of copper averaged only $5,700/t in February, under 260 cents/lb, but remains comfortably above SNL’s prediction of this year’s average mined cost of 168 cents/lb, calculated on a co-product basis. This compares with an average total cash cost of 171 cents/lb in 2014 and 180 cents/lb in 2013. The copper price averaged 334 cents/lb in 2013 and 311 cents/lb in 2014.

On a by-product basis, ie the “normal costing” method, where revenue from secondary products is netted off the cost of producing copper, the industry’s average cost this year is expected to be 126 cents/lb, compared with 129 cents/lb in 2014. Mining costs have risen recently but there have been offsetting credits from by-product metals. Royalty charges have also steadily increased over the past decade; partly as a result of increased metal prices but also due to rising government royalty rates.

Analysis by SNL’s Associate Director Charles Cooper highlights the current mine capacity vulnerable to closure following the decline in copper price over the past 12 months (2015E Copper Supply Cost Curve chart) and the evolution of copper total cash costs since 1991. SNL’s analysis of the cost to price relationship concludes that during cyclical low points in metal prices, the copper price has fallen to at least the 9th decile of high cost producers, which indicates that the copper price would need to fall further before significant capacity became vulnerable to closure.