SMM3, March 8: the global supply of copper is far from guaranteed because mining companies face many environmental, social and governance risks, according to a study by Xinhua on March 7.
Global demand for copper is expected to grow by 300 per cent by 2050, and analysts expect a shortfall of 600000 tons by 2021.
To meet this demand, mining companies will dig deeper and wider than ever before.
A team from the University of Queensland in Australia studied 308 undeveloped copper mines around the world and concluded that 75 per cent of them faced environmental, social or governance challenges, which could hinder their future development.
In the past, mining companies have responded to supply challenges by using price increases, economies of scale and technological innovation.
However, the team's research shows that the problems caused by copper mining are far from being solved by raising prices.
The team believes that environmental risk, social risk and governance risk are the key to success or failure.
First of all, environmental risk mainly refers to the use and consumption of natural resources, as well as the pollution. It is the most important problem in risk management.
Because of the larger size of modern copper mines, this will consume more water and energy and generate more waste. In addition, harmful elements in copper orebodies, such as arsenic, have also caused serious pollution to the surrounding environment.
Secondly, social risk refers to the relationship between mine operators, local residents and the society of the host country.
The team says future copper mines may be located in remote and ecologically fragile areas, local indigenous protected areas, and areas of corruption and poverty. At the same time, the investment community also recognizes that these social risks can damage the value of assets. In extreme cases, it can also hinder the development of the project.
Finally, corporate governance is also crucial, but also an important focus of attention of investors. For example, corporate guidelines define transparency, operational practices related to bribery and corruption.
The study lists three major copper projects. In the late 2000s, the company was abandoned because of concerns about three risks in the project, even though copper was already at a record high price.
The team believes that the mining industry has been successful in reducing costs through technological advances and increased production, but that does not mean that these mines can be exploited. Investors are increasingly aware of environmental, social and governance risks, so there is still a long way to go to take advantage of these important copper reserves.
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