Sustainability of metals production: the case of copper

Abstract

Economic and engineering models are developed for the cost of copper production in the USA in an attempt to answer the question: is copper mining sustainable, particularly if energy costs increase? A translog cost function is employed to develop the economic model. The independent variables are capital, labour, energy, and material prices, copper ore grade and time. The engineering model examines the energy required to mine and concentrate a kilogram of copper. The findings from the models support the proposition that the cost of producing copper will be lower on average in real terms in 2020 than it was in 2002. Time, representing the technology trend, is introduced into the economic model as a natural number, implying that the rate of technical change is constant; however, when time is introduced as the natural log of time, implying a decreasing rate of technological improvement, the increase in energy price is no longer offset by technology improvements, and a twofold increase in the price of energy will result in a forecast increase in the relative cost of producing copper. The true amount by which technology change can offset energy price increases and mineral grade decreases may well lie somewhere between that predicted from the chosen economic model and that flowing from the model, including the technology trend as the natural log of time.