Using Scenarios To Investigate The Long-Term Future of Copper Mining and Guide Exploration Targeting Strategies

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Using Scenarios to Investigate the Long-term Future of Copper Mining and

Guide Exploration Targeting Strategies
Conference Paper · August 2016
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Using Scenarios to Investigate the
Long-term Future of Copper Mining and
Guide Exploration Targeting Strategies
J P Sykes1,2 and A Trench3,4,5
ABSTRACT
The common-held view of the future of copper mining is one of declining quality of mineral
resources and increasingly limited long-term development options. This decline, in turn,
is viewed as inevitably leading to increasing economic, socio-political and environmental
costs. As a result, new technologies and innovations will be required to mitigate cost
escalation. The future is therefore typically summarised as a battle of a ‘below-ground’
declining quality asset base pushing costs upward versus ‘above-ground’ technology and
innovation driving costs downward. The role that high quality new mineral discoveries
could play in mitigating industry cost pressures is typically understated, if considered
at all. New high quality discoveries can be mined at lower cost than existing assets and
potentially if discovered in the right locations within a more amenable contemporary
environmental and socio-political setting. Such deposits, once discovered, would improve
the overall quality of the industry asset base, as well as benefitting their owners substantially
through higher margins. However, to target new high quality deposits explorers need
some understanding of the nature of high quality copper mines in the long-term future.
Conventional scientific and economic techniques for analysing the future of copper supply,
generally by studying the project pipeline, ignore as yet undiscovered resources and also
struggle to fully incorporate the multiple internal and external factors that could impact
upon copper mining practices in the future.
Scenario analysis is specifically designed to consider multiple factors interacting in the
future, and is thus more creative than simply looking at the visible project pipeline. The
use of scenarios is therefore potentially capable of providing insight into aspects of the
future of copper mining about which little is currently known or that remains considerably
uncertain. In this study, the Oxford University Scenarios methodology was employed to
analyse different plausible futures for copper mining and the consequent implications for
exploration targeting strategies. The scenario analysis highlights two key dimensions or
axes that serve to map out potential industry futures: firstly the technical and economic
optimisation of the existing industry; and secondly the generation of new prospects or ‘search
space’ for the copper industry. These two axes in turn frame four different scenarios for the
future of the copper mining industry. These copper mining scenarios are then compared
to the 20 largest existing copper mines and projects, and their owners, to determine if any
represent an appropriately robust exploration targeting proxy: none do. The paper therefore
concludes that efforts by industry are required to generate mine concepts that would be
viable across all scenarios, and thus act also as exploration targeting proxies. In the interim,
companies will have to seek to build portfolios that create an overall robust asset base, out
1. MAusIMM, Provisional PhD candidate and Adjunct Research Fellow, Centre for Exploration Targeting, School of Earth and Environment, The University of Western Australia,
Crawley WA 6009.
2. Director, Greenfields Research, Hunters Chase, Highfield Farm, Hartwith, Harrogate, North Yorkshire HG3 3HA, UK. Email: john.sykes@greenfieldsresearch.com
3. FAusIMM, Professor of Practice, Business School, The University of Western Australia, Crawley WA 6009.
4. Professor – Progressive Risk and Value, Centre for Exploration Targeting, School of Earth and Environment, The University of Western Australia, Crawley WA 6009.
5. Associate Consultant, CRU Group, Chancery House, London WC2A 1QS, UK. Email: allan.trench@crugroup.com
INTERNATIONAL MINE MANAGEMENT CONFERENCE / BRISBANE, QLD, 22–24 AUGUST 2016 265
J P SYKES AND A TRENCH
of individually less robust assets. Failure to do this implies that consequential, irreversible
strategic decisions lie ahead for the copper mining industry, which may be a threat to both
incumbents and the very industry itself. This situation makes strategic exploration targeting
in the copper industry very difficult.
BACKGROUND
It typically takes several decades to discover and develop a new copper mine (Sillitoe, 1995; Davis
and Samis, 2006; Schodde, 2012, 2014; Sykes and Trench, 2014a). Minerals explorers therefore need
some idea of the parameters of high quality copper mines several decades into the future, so that
they can begin targeting exploration towards appropriate deposits in the present day.
Both the global inventory of copper and each individual copper deposit itself is a finite resource.
The long-term future of a minerals extraction industry, such as copper, is therefore defined by
various economic and scientific paradigms for assessing resource depletion or scarcity (Tilton, 1996,
2003, 2006; Tilton and Lagos, 2007; Humphreys, 2013; Sykes and Trench, 2014a). Sykes and Trench
(2014a) reviewed the main resource depletion paradigms to determine their views of the long-term
future of copper mining and their implications for exploration.
The consensus view on the long-term future of copper mining is one of declining quality copper
resources causing increased economic, environmental and socio-political problems for copper
miners (Humphreys, 2010, 2013; Mudd, 2010; Crowson, 2012; Prior et al, 2012, 2013; Mudd, Weng and
Jowitt, 2013). It is therefore often concluded that radical technological development and innovation
of either copper extraction (Tilton, 1996, 2003, 2006; Humphreys, 2013) or the copper supply chain
(Mudd, 2010; Prior et al, 2012, 2013; Humphreys, 2013) is required in order to prevent long-term
economic, environmental and socio-political cost escalation. Conversely few authors investigating
the long-term future of the copper mining industry suggest a major role for minerals explorers.
Commonly it is assumed that there is already enough copper resource in place (Mudd, Weng and
Jowitt, 2013; Dobra and Dobra, 2014), and that any further discoveries of copper resources will be of
lower quality (Tilton and Lagos, 2007), reinforcing the decline in quality of copper deposits.
This view is contested by Sykes and Trench (2014a) within the context of copper mining. First, the
amount of available copper resource is likely overestimated, as in addition to economic viability,
the socio-political and environmental viability of the resource must also be considered. Key
considerations are sustainable development (Eggert, 1995, 2001, 2008, 2013; Tilton, 1996, 2003, 2006;
Ali, 2009; Mudd, 2010; Prior et al, 2012, 2013; Mudd, Weng and Jowitt, 2013; Sykes and Trench,
2014a, 2014b) and social licence to operate (Eggert, 2001, 2013; Prior et al, 2012, 2013; Franks et al,
2014; McCuaig, Vann and Sykes, 2014; Sykes and Trench, 2014a, 2014b) along with accessibility
(Sykes and Trench, 2014a, 2014b), all of which are set to become ever more critical to the mining
sector. The economic, environmental and socially viable component of the copper resource (termed
the ‘accessible reserve’ in this paper), must be smaller than the economic component of the copper
resource (traditionally what is thought of as the ‘reserve’ – CRIRSCO, 2013), and also by definition
smaller than the copper resource as a whole (Sykes and Trench, 2014a, 2014b) as demonstrated in
Figure 1. Further, such analysis focuses mainly on the known discovered resources, which indeed are
of declining quality (Crowson, 2012; Mudd, Weng and Jowitt, 2013), but which ignores the potential
of undiscovered resources, which could be of higher quality, and can be quantified via exploration
(Hronsky and Groves, 2008; Hronsky, 2009; Sykes and Trench, 2014a).
The discovery of new, high quality copper deposits could therefore also help mitigate the
increasing economic, environmental and socio-political challenges the copper industry faces over
the long-term (Sykes and Trench, 2014a). Although, the best mineral deposits are generally amongst
the first discovered in a given area, explorers have not yet exhausted all the places to explore, or
‘search space’ (Hronsky and Groves, 2008; Hronsky, 2009; Sykes and Trench, 2014a; Sykes, Trench
and Hronsky, 2016b; Trench and Sykes, in press). That is, despite the recent wave of globalisation
minerals explorers have not yet searched everywhere on earth. More critically search space also
exists at a virtually infinite conceptual level rather than simply a constrained physical level (Hronsky
and Groves, 2008; Hronsky, 2009; Sykes and Trench, 2014a; Sykes, Trench and Hronsky, 2016b;
Trench and Sykes, in press). For example, previously ‘mature’ regions for minerals exploration
USING SCENARIOS TO INVESTIGATE THE LONG-TERM FUTURE OF COPPER MINING AND GUIDE EXPLORATION TARGETING STRATEGIES
FIG 1 – A theoretical construct of the types of copper resource. There are known, discovered resources (left) and unknown, as yet undiscovered
resources (right). There are then components of each of these resources, which are economic and accessible, ie they are socio-politically
and environmentally viable (top front, green). However, some resources may just be economic (top back, red), accessible (bottom front,
blue) or neither (bottom, behind and not seen, black). In theory only the existing resources that are economic and accessible (top left,
green) can be mined. Similarly of the undiscovered resources, only a portion also contains the potential to be economic and accessible
– these are the undiscovered resources that minerals explorers should be targeting. Adapted from: Sykes and Trench (2014a, 2014b).
can be reinvigorated by exploration innovations and technologies, which either allows previously
undiscoverable mineral deposits to be discovered, or previously unmineable deposits to become
mineable. Technology and innovation can therefore not only improve the optimisation of existing
mines and known mine projects, but also lead to the discovery of new, potentially higher quality
mineral deposits (Figure 2). Economic and socio-political factors can also open up new search space,
in a similar manner to technology and innovation (Sykes and Trench, 2014a). For example, if a
change in government allows foreign companies to explore for minerals; or if a change in social
attitudes allows access to a region which previously restricted exploration activities. Understanding
the opening up of new search space is critical for mineral explorers, however, it is a multifaceted
issue spanning, at the least, a combination of geology, technology, economics, the environment and
socio-politics.
The purpose of the scenarios exercise

A key challenge facing explorers for copper is to gauge which parts of the current global copper
resource are economically, environmentally and socio-politically viable and are therefore able to act
as a useful guide for present and future exploration targeting. These are the ‘discovered economic
and accessible resource’, or ‘accessible reserve’ (Figure 1). Next, the question is: How might these
parameters evolve over the coming decades as technology, innovation, economics, environment,
socio-politics and other external factors change? These are the ‘undiscovered economic and accessible
resource’ or ‘undiscovered accessible reserve’ (Figure 1). Minerals explorers need a conceptual tool
to aid exploration targeting that can develop some understanding of the complex interaction of
these factors with the copper mining industry over the long term.
This paper describes the use of the Oxford Scenarios methodology (Ramirez, Khong and
Selin, 2014) to begin defining some parameters for these undiscovered accessible reserves. The
methodology allows consideration of the complex interaction of geological, economic, socio-
political, environmental, technological and other factors. Four scenarios were generated about the
future of copper mining. The scenarios were then compared to the 20 largest existing copper mines
FIG 2 – A demonstration of the ‘search space’ concept using porphyry copper resource data for Chile in the 20th century. The largest resources
(El Teniente and Chuquicamata) were discovered first. These deposits were amongst the easiest to find as they outcropped at surface.
Further, discoveries of this type did not add much more to the resource base. New ‘search space’ was opened later in the 20th century,
when the development of the porphyry geological model allowed exploration beneath the surface, an area previously difficult to explore,
leading to another major discovery – Escondida. New processing technology (primarily solvent extraction electro-winning – SXEW) also
made oxide copper resources extractable. Not covered here are the changes in political regime and economic policy in Chile in the 1970s
and 1980s, which encouraged minerals exploration by foreign companies. Socio-political and economic factors can therefore open up
search space as well as technology and innovation. Adapted from: Hronsky (2009); Hronsky and Groves (2008); Sykes and Trench (2014a).
and projects to determine which of these deposits are the best proxies to guide exploration targeting
for deposits that can host mines which will remain viable decades into the future. This paper shows
that the application of scenarios maybe a useful conceptual tool for minerals exploration targeting
within industry.
WHY SCENARIOS?
Tilton and Lagos (2007) acknowledge that innovations, technologies, discoveries and other external
factors will play a role in the future of copper mining, and that current extrapolative economic
techniques for understanding the future of copper mining may not appropriately consider these
factors. However, they caution that it is not possible to predict how these factors will interact over
the long-term due to the broad uncertainty around the issue. Since 2007 there has been an increase in
the use of techniques for forecasting that aim to better understand uncertain systems into the future
(Silver, 2012; Trench, Sykes and Robinson, 2015; Sykes and Trench, 2016; Trench and Sykes, in press).
One of the most important groups of techniques in this category are scenarios (Wack, 1985a, 1985b;
Ilbury and Sunter, 2011; Wilkinson and Kupers, 2013; Ramirez, Khong and Selin, 2014; Ramirez and
Selin, 2014; Deverell, 2015). Most uncertainty based techniques aim for broad accuracy as an outcome
over precise inaccuracy: That is scenarios aim to be broadly accurate about the future, using new
information as it arises to become more accurate (De Geus, 1988; Senge, 2010; Harford, 2011; Ilbury
and Sunter, 2011; Silver, 2012; Deverell, 2015) rather than focusing on being precise about the future,
as with statistical extrapolative techniques (Silver, 2012). A scenarios approach is recommended by
Ramirez and Selin (2014) particularly when ‘…change is novel, unexpected, unforeseen, unique, and
/ or radical’ and ‘the future and the uncertainty it holds means organizations can no longer rely on
past or unfolding trends’.
Probabilistic or plausibilistic scenarios?

Scenario analysis seeks to reduce the large numbers of key variables into a smaller number of discrete
options by developing internally consistent views of the future. Two broad schools exist within
the field with one focusing on plausibility and the other on probability (Wilkinson and Kupers,
2013; Ramirez and Selin, 2014). The complex mathematical techniques deployed by the probabilistic
school are beyond the intellectual, time and financial constraints faced by minerals explorers, thus
application of these techniques is unjustified for this study. However, the other scenarios school
focuses on plausibility, taking a qualitative and artistic approach, more akin to storytelling, or ‘scene-
making’ as done for a stage-play or film (Wack, 1985a, 1985b; Wilkinson and Kupers, 2013; Ramirez,
Khong and Selin, 2014; Ramirez and Selin, 2014). Importantly from a methodological perspective,
the probabilistic approach tends to reduce options and uncertainty, thus, in essence is another form
of forecasting. By contrast, the plausibilistic approach seeks to generate new ideas and open up
possibilities (Ramirez and Selin, 2014), which can at best be thought of as hypotheses (Wilkinson
and Kupers, 2013). The generation of new hypotheses and insights seems to require a different set
of cognitive instruments than the type of analytical approach required for hypothesis testing (Klein,
2013; Sykes, Trench and Hronsky, 2016a). In addition, the relative less human resource intensive
approach of plausibilistic scenario planning is more likely to be of use to a minerals exploration
sector dominated by small companies.
Generating ‘multiple working hypotheses’

The aim of this research was therefore to use scenarios to take a hypothesis generating and then
testing approach to understanding the long-term future of copper mining, rather than attempting
to forecast or predict the future. This presents a more evolutionary approach to the future mentally
testing what may or may not work, pursuing the better ideas and discarding the weaker ones
(Harford, 2011). By applying Chamberlin’s (1890) method of ‘multiple working hypotheses’, it is
possible to challenge the ‘controlling idea’ or common-held view – in this case that copper deposits
will decline in quality into the future and will face increased economic, environmental and socio-
political challenges; and instead open up new ideas about the future of copper mining. Over time, as
new information arises, each hypothesis can be re-evaluated and either rejected, modified or kept.
The various multiple working hypotheses can then be used to guide exploration targeting, by
converting them into ‘multiple hypothetical reserves’, as demonstrated in Figure 3. Because it is
inherently impossible to precisely predict what copper mines (and the accessible reserves they extract)
will look like in the future, each ‘hypothetical reserve’ can instead represent a different internally
consistent view of the future of copper mining. Each hypothetical reserve would incorporate ideas
of how geology, economics, innovation, technology, environment, socio-politics and other external
factors may co-evolve and thus what sort of copper deposit potentially would be economic and
accessible in this situation. In line with the iterative process of scenario development (Ramirez
et al, 2015), and the fact that we are constantly learning new facts about the future (De Geus, 1988;
Senge, 2010; Harford, 2011; Silver, 2012); the multiple hypothetical reserves would remain ‘working
hypotheses’. These could then be adjusted, abandoned or recreated as new evidence about the future
arises (Harford, 2011). Copper explorers can then respond by adjusting their exploration targeting
strategies appropriately.
SCENARIOS METHODOLOGY
The deductive approach of the Oxford Scenarios methodology was used for this research (Ramirez,
Khong and Selin, 2014). It has three main parts:
1. understanding the business idea of the client (Ramirez, 2014b; Selin, 2014a) – in this case copper
mining and exploration companies in general and discussed in this section
2. generating the scenarios (Khong, 2014b, 2014c; Selin, 2014b), which is described in this section,
with the scenarios themselves presented in the next section
3. converting the scenarios into strategies for comparison to industry practice (Ramirez, 2014c; Selin,
2014c), which is discussed after the presentation of the scenarios.
Understanding the business idea
Three tools were used to develop an understanding of the business idea of a generic copper mining
and exploration company:
1. construction of a systems diagram of how the typical copper mining and exploration company
generates its profits (Selin, 2014a) as shown in Figure 4
2. mapping the strategic environment (Ramirez, 2014a; Selin, 2014a) for the copper mining industry
as shown in Figure 5, including:
FIG 3 – A theoretical construct for the ‘hypothetical reserve’. Ideally minerals explorers search for undiscovered accessible reserves (ie those
that are both economic and environmentally and socio-politically accessible). However, because the future is uncertain and it is impossible to
predict what copper mines (and the reserves they extract) may look like in the future, explorers should instead develop different hypotheses
of what the accessible reserves may look like in the future – hypothetical reserves. The method of multiple working hypotheses suggests that
in highly complex and uncertain environments it is best to entertain multiple working hypotheses that are tested, adjusted, abandoned or
re-created, each time new information arises. In this case, mineral explorers should maintain several different hypotheses about the nature
of future accessible reserves, or ‘multiple hypothetical reserves’, that can then be used as a guide for exploration targeting strategies. As new
information about the future arises, each of the multiple hypothetical reserves are tested, then adjusted, abandoned, or re-created as required
and exploration targeting strategies are adjusted in line with the new hypothetical reserves. Adapted from: Sykes and Trench (2014a).
FIG 4 – A systems diagram of the business plan of a mining and exploration company, based on a
template provided by Selin (2014a) as part of the Oxford Scenarios programme.
FIG 5 – A map of the strategic environment of the copper mining and exploration industry, based on
a template provided by Selin (2014a) as part of the Oxford Scenarios programme.
•• the transactional environment where the client company interacts with other industry
participants – competitors, suppliers, traders, governments, non-governmental organisations
(NGOs) etc
•• the contextual environment, which is the wider world around the industry where political,
social and economic etc, changes can occur, that ultimately affect the industry’s transactional
environment and the client, whilst remaining outside of the client’s control
3. construction of a timeline of copper mining industry history since the Second World War, as
shown in Figure 6, to identify key industry trends and as a reminder that history is non-linear and
unpredictable (Davies, 2011; Khong, 2014a; Ramirez, 2014a, 2014b; Selin, 2014a).
In general, mining and exploration companies focus on the scarcity of mineral resources in society.
They can either mine and sell minerals such as copper into the economy or else they can discover new
copper resources which can be brought to market at a later date. Traditional mining and exploration
companies need core capabilities most obviously in mining and processing, and minerals discovery,
but also in logistics, marketing, dealing with governments and other third parties, along with
the ability to raise substantial finance for the capital intensive business of mining. The key assets
mining and exploration companies need are good quality mines and projects, talented technical
and commercial professionals, access to specific technologies and innovations, and assets located in
convenient and competitive locations.
The business model of an exploration-only junior company differs slightly in that they have no
operating cash flow, so the ability to raise capital is relatively more important. These companies
are also more focused towards exploration rather than mining-related skill sets and capabilities.
There are also some mining companies that no longer focus on exploration, beyond limited mineral
resource-focused work around existing mines. As such exploration-related skill sets and capabilities
are less important to these companies.
Key actors in the transactional environment include competitor mining and exploration companies;
employees; consumers of copper; financiers and investors; commodity traders; industry clients;
government lobby groups; non-governmental organisations; local, national and international
regulators; utility firms and consumables and equipment suppliers. Key factors in the contextual
environment include geo-politics; conflict and security; macroeconomics; commodity prices and
exchange rates; energy and water prices and supply; international finance and commerce; science,
technology and innovation; the climate, environment and natural disasters; social values and
legislation; and demographics.
FIG 6 – A timeline showing the recent history and the main drivers of the copper mining and exploration
industry, based on a template provided by Selin (2014a) as part of the Oxford Scenarios programme.
Six drivers of change were identified: commodities demand and prices; the financial sector; socio-
political trends; labours laws and availability; geopolitical trends; and technological innovation. Key
factors for demand include post-war reconstruction in Europe and Japan, and the more recent rise
of China (Lynch, 2002; Sykes, Wright and Trench, 2016). Financial crises affecting the industry have
arisen as a by-product of the Second World War; the various oil crises of the 1970s and 1980s; the
Asian Flu and dot.com bubble in the late 20th century and most recently the Global Financial Crisis
(Reinhart and Rogoff, 2011).
Key socio-political trends affecting the industry include strategic resource concerns during the
Second World War and early stages of the Cold War, which were repeated during the oil crises, and
more recently in accompaniment to the growth of China (Sykes, Wright and Trench, 2016).
The 1960s and 1970s also saw the rise of the modern environmental movement (Tilton, 1996,
2003; Sykes, Wright and Trench, 2016); the concept of sustainable development was developed
and advanced in the 1980s and 1990s (Eggert, 1995, 2001, 2008, 2013; Tilton, 1996, 2003, 2006; Ali,
2009; Mudd, 2010; Prior et al, 2012, 2013; Mudd, Weng and Jowitt, 2013; Sykes and Trench, 2014a,
2014b; Sykes, Wright and Trench, 2016); with social licence to operate the most recent conceptual
development of this lineage (Eggert, 2001, 2013; Franks et al, 2014; McCuaig, Vann and Sykes, 2014;
Prior et al, 2012, 2013; Sykes and Trench, 2014a, 2014b; Sykes, Wright and Trench, 2016).
Key labour trends include the decline in unionism in the developed world through much of the
mid- to late 20th century (Lynch, 2002); improved work and management practices in the 1980s and
1990s (Schodde, 2010); the use of lower cost labour in the late 20th century as globalisation took hold
(Schodde, 2010); and most recently severe labour cost inflation across the sector accompanying the
recent mining industry boom (Humphreys, 2010).
The major geopolitical factor during the latter half of 20th century was the Cold War and separation
of the ‘Eastern’ and ‘Western’ mining industries (Lynch, 2002; Tilton, 2003; Sykes, Wright and Trench,
2016). The collapse of the Soviet Union and privatisation of state assets in the 1990s and 2000s had
a big impact on the mining industry (Ericsson, 2011). There was also substantial globalisation in
the late 20th and early 21st centuries and communications technologies began to make the world a
metaphorically smaller place (Schodde, 2010).
Many technologies and innovations have had an influence on the copper industry since the Second
World War, four of which are highlighted in Figure 6, all of which played a key role in opening
up new search space in the Chilean copper industry, as described in Figure 2. The technologies
and innovations include airborne geophysics (Schodde, 2010; Sykes and Trench, 2014a) and the
development of the porphyry geological model (Lowell and Guilbert, 1970; Sillitoe, 1972; Berger
et al, 2008; Hronsky and Groves, 2008; Hronsky, 2009; Sillitoe, 2010; Schodde, 2010; Sykes and
Trench, 2014a), both of which assisted exploration. Solvent extraction electro-winning (SXEW)
technology was implemented in the 1970s allowing the processing of previously uneconomic oxide
ores (Hronsky, 2009; Hronsky and Groves, 2008; Schodde, 2010; Sykes and Trench, 2014a) which
now makes up around 20 per cent of the mined copper market (International Copper Study Group
(ICSG), 2014). Finally, advances in computation and modelling have greatly assisted the efficiency
of both mining and exploration in the late 20th and early 21st centuries (Schodde, 2010; Sykes and
Trench, 2014a).
Generating the scenarios

The development of the scenarios has three stages:
1. building the scenarios (Selin, 2014b)
2. deepening the scenarios (Khong, 2014b, 2014c)
3. refining the scenarios (Khong, 2014b, 2014c).
Scenario construction is an iterative process, so these later stages of deepening and refining the
scenarios are an important requirement (Ramirez et al, 2015).
As described in Figure 7 the first stage of building the scenarios involves:
•• assessing which of the key drivers from the contextual environment are both important to the
industry, but which are also surrounded by high levels of uncertainty
•• grouping the drivers into similar categories in order to reduce the analytical load and provide
insight into potential strategic commonalities
•• plotting the categories of drivers onto different combinations of 2 × 2 matrices.
The ideal drivers to form the 2 × 2 scenarios framework are largely independent of each other; have
polar outcomes; and are challenging to the mind-set. This approach creates four scenarios: These
scenarios are then assigned short, descriptive, objective but memorable names (Selin, 2014b). The
four scenarios are then deepened and refined by constructing systems diagrams and storylines of
the dynamics of each scenario to ensure plausibility. During these iterations the scenarios may be
substantially altered and are often renamed.
To simplify the analysis and reduce the number of factors under analysis, the individual
contextual factors were then clustered into general groups. The clusters were loosely based on
FIG 7 – The deductive scenario generation process stream as designed by Angela Wilkinson.
a PESTEL framework6 and thus included economic (commodity prices, energy prices, exchange
rates, international commerce, international finance and macroeconomics); environmental (climate,
environment, natural disasters, water availability); political (conflict and security, geo-politics and
legislation); and technological (innovation, science and technology) clusters.
Axes were created for each of the clusters that showed divergent outcomes. For technology the
two opposite points represented whether technological application was either successful at driving
down long-term industry costs, or unsuccessful this allowing long-term industry costs to rise. This
dichotomy has been highlighted by Tilton and Lagos (2007) as an important industry-shaping
dynamic. The key divergent outcomes for social values were considered to be increased or reduced
societal support for the mining industry. The divergent outcomes for the environment were whether
climatic and environmental changes or related policy either reduced or increased the amount of
prospective land available to the mining industry. Similar end-member outcomes were envisaged
for political factors, with legislative and political issues either increasing or reducing the amount
of prospective land available. Finally, the key end-member economic outcomes were whether the
industry entered another ‘boom’ with high commodity prices, favourable exchange rates and readily
available finance; or whether it entered a ‘bust’, thus presenting greater economic and financial
challenges.
The analysis of the end-member outcomes of the driver clusters highlighted that three of the driver
clusters were similar in implication for the mining industry, whilst two other driver clusters were
two parts of the same calculation. The social, environmental and political driver clusters all had
the effect of either increasing or decreasing the amount of ‘prospective land’, or what could be
termed ‘search space’ available to the mining industry – in this case using ‘search space’ in its very
broadest term to represent any, currently unknown, new physical or conceptual space the mining
industry can move into that is not already described within the current ‘known’ industry (Sykes and
Trench, 2015d; Sykes, Trench and Hronsky, 2016b; Trench and Sykes, in press). ‘Search space’ could
therefore represent one of the scenarios axis, where availability could be determined by a variety of
social, political or environmental factors, which nonetheless had similar implications for the industry
(Hronsky and Groves, 2008; Hronsky, 2009; Sykes and Trench, 2014a). Similarly the technology
cluster focused on either rising or falling costs, sharing some commonalities with economic factors
such as energy prices and exchange rates which affect industry ‘costs’ in the broadest terms. Other
key economic factors such as commodity prices affected the revenue side of the economic margin
equation thus technological and economic factors could be seen as either increasing or decreasing
industry profit margins (Tilton and Lagos, 2007). Economic margin then became the other axis.
THE SCENARIOS
The four scenarios created by using the two axes of ‘prospect availability’ and ‘economic margins’
are shown in Figure 8. Names along a medieval warfare theme were chosen as they presented good
metaphors of each scenario and helped make them more memorable: ‘Under Siege’; ‘Counting
House’; ‘Crusades’; and ‘Peasants’ Revolt’. The scenarios were first discussed at a Curtin University
students’ colloquium (Sykes, 2015) before initial web-based publication (Sykes and Trench, 2015a,
2015b, 2015c, 2015d) and then printed compilation (Trench and Sykes, in press) in order to increase
industry engagement. The section below provides a brief summary of each scenario, along with
a description of the scenario. Each scenario is written from the perspective of an industry analyst
in 2040, looking back at how the industry has involved since 2015. The scenarios are obviously
fictional; however, to enliven thinking on the issue, real countries, real and hypothetical companies,
operations, technologies and sometimes people are included within the scenarios. Such use does not
imply these actors will behave in the manner described, nor does it reflect the authors’ opinions of
the relative merits of the various actors. These are thought-experiments only.
Under Siege – defending current operations with few new opportunities available
The Under Siege scenario described an industry struggling with current profitability and with few
future options for growth. The name suggests an industry defending its current operations (or castles),
completely unable to go on any adventurous forays outside of its operations. In this scenario, falling
6. PESTEL framework considers six types of environmental influences: political, economic, social, technological, environmental and legal.
FIG 8 – The four scenarios for the future of copper mining and exploration, generated during this research. They were developed using
the deductive scenario generation process stream, adapted from Selin (2014b) as part of the Oxford Scenarios programme. ‘Under Siege’
is highlighted as the scenario most similarly to current industry conditions, as well as the ‘official future’ of the industry discussed in the
introduction to the paper – one of declining quality resources, increased costs and more frequent environmental and socio-political problems.
commodity prices and falling productivity have reduced economic margins at existing operations,
whilst a breakdown of the global order limits access to foreign projects and talent. The shrinking
nature of the mining industry means that outside industries also benefit, particularly those willing to
take over the management of the metals supply chain. With the mining industry currently suffering
falling copper prices (Ernst & Young (EY), 2015; PricewaterhouseCoopers (PWC), 2015), asset write-
downs (Mulligan, 2015; PWC, 2015), and the curtailment of capital investments, exploration and
research and development (EY, 2015; PWC, 2015), the industry may feel that it is in the Under Siege
scenario at the moment. The scenario published by Sykes and Trench (2015a) is described below:
How it started in 2015

In late 2015 a property bubble in China was already correcting – only to then reach all-out collapse by
the end of 2016. The bad economic news spread across Asia. Renewed growth in the West stalled. The
2016 Chinese Financial Crisis (CFC) resulted – and then spread globally. Risk appetites were reduced.
Western Governments responded not with Keynesian-stimulus as for the GFC but instead imposed ever
greater austerity. Commodity prices reached new lows. All investment in mine projects, exploration and
R&D suddenly ground to a halt.
What had happened by 2025

The Chinese economy suffered a lost decade – struggling to maintain social order as domestic income
disparities grew but overall growth was anaemic. Economic and financial crises rumbled on around the
world causing geopolitical instability.
Populist governments introduced anti-immigrant and protectionist measures in an effort to insulate
their countries from global woes. Trade agreements were rescinded. Foreign-owned mines were
increasingly heavily taxed or in several cases nationalised. This started across several African states, but
eventually spread to South America, Asia and even Europe. Australia introduced the Mining Revenues
to the People Tax Act of 2021 (MRPT) at federal level to counter ever increasing state royalties and
charges. The increased prevalence of local employment and local content laws further reduced mine
productivity.
International political co-operation was impeded by complex attempts to resolve the ongoing economic
and financial issues. As a by-product a lack of global coordination on environmental policy allowed
national and local environmental legislation to be used increasingly as a protectionist measure.

Environmental issues became conflated with the foreign exploitation of local people.
An increasing distrust of foreigners made access to foreign mine projects nearly impossible. Even
domestic projects in remote regions became difficult to access as faith in ‘the state’ receded and rural
residents increasingly distrusted ‘urbanites’.
Anti-immigrant measures meant companies were increasingly restricted to domestic talent pools. This
worsened a shortage of young engineers and scientists caused by demographic decline in the West and
China, and continued dis-interest in science and engineering degrees.
Where we are now in 2040

The lack of investment in mining has led to decreased productivity. The industry has fractured.
Former global mining companies have retreated back to safe ‘home’ locations and are now focused on
local assets. Most countries have a quasi-state mining company running local mines, with governments
using the funds to appease unhappy populations. Mining is a highly politicised industry.
Australia is a perfect example. The largest domestic mining company is now ‘Big Australian Mining’.
The Australian government owns a golden share, using it to encourage the purchase and support of
struggling mines, smelters and industrial facilities.
Codelco maintains its position as the world’s leading copper miner, though it is state subsidised.
Chile chose to forcefully expand the state’s interest in private-sector copper mines to grow Codelco’s
production. Globally, the next biggest copper miner is ‘SinoCopper’, a relatively new Chinese state
miner, which has consolidated Chinese copper mining. Codelco, SinoCopper and the emergent state
mining companies of Peru, DR Congo and Zambia recently attempted to form a cartel.
A combination of supply chain management improvements and tech-firm backed ‘internet of things’
companies means copper recycling has increased substantially. As much as 60% of copper is now
recycled. Most copper in products is tagged with nanochips and flows around a circular economy
constantly being re-used.
Both recycling and circular economy measures proved simpler to implement at a national level, than
at an international level, thus benefitted from the deglobalisation. The overall ‘raw material intensity’
of the world economy has shrunk.
The mining industry is widely seen as an ‘old industry’, a relic of the 20th century.
West Perth has become a bio-technology hub, thriving in proximity to large new hospitals and greater
concerns about health and longevity from an aged population.
Winners and losers

In this ‘declining sum’ scenario, state mining companies backed by governments concerned about
the limited number of profitable operating mines are the main long-term beneficiaries, along with
environmental groups keen to restrict new horizons for the mining industry.
The major listed mining companies are barely hanging on – having been forced to restructure, as
they faced declining profits, closed mines and suffered repeated waves of asset-level ‘incremental
nationalisation’.
The listed junior exploration sector has all but disappeared due to a chronic lack of funding – although
some privately-owned exploration syndicates with close government relationships remain active.
The shrinking nature of the traditional mining industry has meant that outside industries have taken
over ever-larger parts of the role of copper supply.
Crusades – many exciting opportunities in new areas

The Crusades scenario envisions a profitable mining industry investing in a range of new ideas and
projects and able to successfully transition into the future. The name in this case suggests profitable
operations (or castles) with ambitious leaders (or knights/crusaders) looking for great adventure
and conquest beyond the confines of the castle. This scenario is analogous to a successful adoption
of disruptive innovation by the industry, as characterised by the Innovator’s Dilemma (Christensen,
2013). A situation similar to this Crusades scenario was perceptible in the recent past. At the beginning
of the recent boom in copper prices, circa 2004–2008, existing operations were very profitable, and
initially there seemed to be many new options for development and exploration (Humphreys, 2013,
2015). Assisted by the latest phase of globalisation, mining companies spread all over the world and
record amounts were spent on exploration (Schodde, 2012; Humphreys, 2013). Technological and
scientific research programs such as Rio Tinto’s Mine of the Future (2014) and UNCOVER (UNCOVER,
2014) were established. The scenario published by Sykes and Trench (2015d) is outlined below:

2015 proved to be the humble beginnings of a sustained resurgence of economic growth in the US and
Europe. The economic wobbles in China proved to be just that with a return to accelerating GDP growth
from 2016 onwards. ‘Abenomics’ finally helped re-start the Japanese growth engine. Narendra Modi’s
economic reform plan in India began to take shape. Locally, Malcolm Turnbull’s elevation to the Prime
Ministership of Australia saw the instigation of a strong push into the commercialisation of technology
and innovation outcomes.
With economic and financial problems receding, governments began to focus on global issues. The
first indication of this was the success of the Paris Climate Summit and renewed global resolve towards
reduced carbon emissions. Investment in shale gas in both Europe and China over the subsequent decade
maintained a trend towards lower prices for cleaner energy that had started with the US shale gas
revolution. Improved off-grid energy solutions opened up new frontiers for mine development in remote
areas.
Miners saw a dual benefit from higher commodity prices and lower energy costs and returned to strong
profitability. Australia’s innovative push into mining equipment automation gathered momentum.
Australian GIS and minerals/agricultural sector software companies become increasingly competitive.

By 2025, it had become clear that the Paris Climate Summit of 2015 marked the beginning of a decade
of multinational agreements on environmental, indigenous peoples, sustainable development, free trade
and foreign investment issues.
The proliferation of multinational rules and frameworks made new technologies and ideas more readily
accessible, opening up numerous areas for new development including several advancements in the
extraction and processing of copper.
Sustained profitability attracted scientific and engineering talent to the minerals sector, keen to adopt
the challenge of re-designing the industry in a less environmental and socially intrusive manner.

A number of significant but ageing large copper mines have now closed, but long before they ran out
of lower-grade pit resources amenable to truck and shovel extraction. These mines had simply become
uneconomic, relying on old-fashioned and uncompetitive technology. Traditional large-scale open pits
now only make up around a quarter of the industry.
New copper mines are now predominantly underground operations in previously politically risky
countries across Africa employing new generation remotely-operated mining equipment. Companies
with long-term experience in Africa such as Anglo American and Glencore enjoyed first-mover
advantage in the now rapidly growing mining sectors of the developing world.
A new type of mine is emerging and is rapidly evolving: that is, highly targeted, automated underground
operations are opening up in remote, covered regions of Australia, Canada, Scandinavia and also in
South America’s ‘copper capitals’ of Chile and Peru. The drift of talent from the deep offshore petroleum
sector has greatly facilitated the technological advances required to facilitate this ‘Real-Time Mining’
(RTM) within months from initial discovery.
Rio Tinto, a long-time leader in underground and automated mining technology, has been amongst
those companies forging the new generation of mines. Mining services companies and start-ups thrive,
most based in one of the industry’s global technology hubs of Perth, Vancouver, Houston and Stavanger.
A number of new in situ leaching mining technologies, variously utilising acid, polymers, bacteria and
nanobots are also gaining broader adoption globally.
Winners and losers

The mining industry saw two main winners in this scenario. Both groups were ‘first movers’.
The major miners that most aggressively partnered with governments, NGOs and aid bodies in
developing world locations gained preferential access to the best mineral deposits.
Similarly, major miners who rapidly embraced dramatic technological change also benefitted.
Beyond the majors, the technology focus also provided countless opportunities for a number of new
start-ups, many utilising skills and methodologies adapted from other industries such as petroleum.
Explorers too underwent successful transition – with renewed strong investor support for frontier
exploration accompanying the widespread profitability of the sector.
The thriving mining sector afforded little scope for disruption from industry outsiders – with the 2040
technology-based mining industry of the future almost unrecognisable from the truck and shovel era of
the past.
Counting House – focus on extracting economic rents from current operations

The Counting House scenario envisages a short-term return to profitability for the industry but
then a lack of long-term options. The name refers to a line in the nursery rhyme ‘Sing a Song of
Sixpence’ where ‘The King is in his counting house, counting out his money’. The metaphor is
of an industry focusing on collecting rents from current operations (or castles) but not interested
in what is happening beyond the castle walls. This scenario is therefore analogous to the failed
defence against disruptive innovation described in the Innovator’s Dilemma (Christensen, 2013).
In contemporary context the failure to develop many new projects in the recent boom alongside
notable capital cost overruns and delays (Humphreys, 2013; EY, 2015), combined with a variety of
environmental and socio-political problems may have left the industry feeling restricted in its future
options (Humphreys, 2013; Mudd, Weng and Jowitt, 2013). The future would therefore be based
on the gradual run down of current assets and the present project pipeline, which would require
higher commodity prices to be economic (Humphreys, 2013). Such a scenario is also the common-
held view or ‘controlling idea’ of the future of copper mining, as discussed in the introduction of this
paper (Humphreys, 2010, 2013; Mudd, 2010; Crowson, 2012; Prior et al, 2012, 2013; Mudd, Weng and
Jowitt, 2013). The scenario published by Sykes and Trench (2015b) is described below:

In late 2015, to help re-energise its economy, China committed to a major shale gas development
programme. Over the next few years the domestic cost of energy fell dramatically triggering a broad-
based economic boom. Demand for raw materials increased sharply, leading to higher non-energy
commodity prices.
Combined with the US shale gas boom, both the world’s major economies now had abundant, cheap
sources of energy. Europe, Japan and other economies, facing increased competition, also commenced
large-scale investment in new gas and nuclear power facilities. Australia’s shale gas and offshore liquid
natural gas (LNG) investments began to come on-stream.
Mining companies returned record profits benefitting from elevated commodity prices and cheaper
global fuel sources. A major wave of M&A occurred over the following two years, with mid-tier companies
in Australia amongst the most prized of targets. For example, each of Iluka Resources, Independence
Group, Northern Star Resources, OZ Minerals, Sandfire Resources and Western Areas were absorbed
by larger global miners in this period, all for significant premiums.
The gap between large and small companies grew – with exploration companies left on the sidelines.

Responding to rapid commodity market growth, mining companies focused on capacity expansions and
brownfields projects. Investors demanded dividends and discouraged wasteful greenfields exploration
and R&D. One prominent CEO was ousted by activist shareholders when proposing a vote to support
the exploration budget at an annual general meeting.
Generally, greenfields exploration projects and R&D programmes have been divested, returned to
governments or simply shut down and abandoned. No minerals related IPO’s have occurred on the
ASX, TSX-V, AIM, Beijing or Santiago exchanges since 2021.
For operating assets, however, cheap energy meant that mines were increasingly able to capture
economies of scale. The additional energy intensity required to process lower-grade ores was more than
offset by the advantages of scale. Major desalination plants were developed to feed water to the giant
copper mines of South America and the southern United States.
Mining fleet automation circumvented an emerging shortage of frontline labour. By contrast
professional workers were in relative abundance, attracted to mining by stable employment and exciting
mega-engineering projects.
However, despite the major investments in clean coal, shale gas and nuclear power, these were
increasingly seen as stop-gap solutions and thus concerns over climate change continued to mount,
combining with a multitude of other environmental and local community issues which remained largely
unaddressed.
Some developing world countries also began to complain about the colonial attitudes of American,
Asian, European and Australian-based companies operating abroad. The few small, usually private
companies attempting to explore and develop new mines in foreign locations found that it was easier to
already have a social licence to operate (such as for the mega miners) rather than to try and gain one.

To head-off international governmental pressure to mitigate carbon emissions most mines have now
built extraordinarily expensive carbon capture and mini-nuclear power facilities. The capital cost of
carbon mitigation has however reinforced the advantage of currently operating, energy intensive mines.
The premium on operating assets over development assets has never been wider. Few new mines,
unless heavily government backed, have been developed in the last decade, though most mines have
undergone substantial expansions and upgrades.
With few new assets under development, growth efforts have focused on M&A and after a number
of heavily leveraged takeovers the big three mining companies are now American-Australian Mining
(AAM), Commodities Inc. (COMI) and Mining & Global Metals (MGM) – all far bigger than their
early 21st century predecessors.
2040 has, however, not been a good year for the mining industry. First a major anti-trust enquiry
into the mining sector was launched in the US. A few months later AAM and MGM announced a
write down of 25–35% of their reserves, due to overly optimistic economic assumptions. Their dividend
policies are now under pressure due to their heavy debt loads.
Later in the year there was accident at a mini-nuclear power plant on one of COMI’s mines in China.
Several local executives were arrested. Protests ensued. COMI has put aside $50 billion to meet the
expected damages to be levied by the Chinese Ministry of the Environment. It is likely dividends will be
suspended for several years and assets will have to be divested to meet the damages claims
A powerful group of international environmental and civil rights NGOs, backed by a number of Asian,
African and South American governments, have formed a coalition vowing to block the development
of any new mine; encouraging investors to boycott mining shares; and campaigning for rich-world
governments to provide subsidies for the recycling industry.
Winners and losers

In this scenario, the incumbent major miners are the main beneficiaries initially. Mid-tier companies
also win – albeit by selling themselves to the highest bidder. Exploration and other smaller mining
companies on the other hand wither and in most cases die.
However over the longer term the major miners are found guilty of perpetually living in the short-term
and seeking to engineer their way out of social, political and environmental problems. Whilst major
technological successes have been achieved at operating assets, the development of new search space has
been abandoned and room for manoeuvre has shrunk. The industry is profitable, but has limited social
licence to operate beyond the confines of the existing mine gates. When problems have finally arisen, the
industry has found it has few allies.
Peasants’ Revolt – current plans not working, desperate switch to new opportunities required
The Peasants’ Revolt scenario describes a struggling mining industry, but nonetheless one in which
there are still many future options available that could provide a route to profitability. Such a scenario
however is the one most vulnerable to disruptive outsiders, leading to radical change in the industry
and a re-making of the established order, hence the Peasants’ Revolt name. Looking back to the
mining industry in the early 1990s, this Peasants’ Revolt scenario was perhaps visible. The industry
was enduring a 30 year spell of declining copper prices (Jacks, 2013), reduced profitability (Crowson,
2001; Hitzman, 2002) and increasing environmentalism (Tilton, 2003), sapping long-term investment
in exploration and technology (Crowson, 2001; Hitzman, 2002). Global uncertainty was increasing as
the Soviet Union collapsed (Crowson, 2001), whilst a number of key mining economies seemed to be
in decline such as the former Soviet Union countries (Edelstein, 1994), Zambia (Chundra and Tilton,
1994; Crowson, 2012; Edelstein, 1994) and the Democratic Republic of Congo, then Zaire (Crowson,
2012). The mining industry was seen as ‘old industry’, as the high technology and internet industries
began to establish themselves (Crowson, 2001; Humphreys, 2010) and the whole economy was
apparently moving online in a new ‘weightless world’ characterised by low metal intensity of use
(Coyle, 1999). The scenario published by Sykes and Trench (2015c) is repeated below:

China’s 13th five-year plan proposed a marked switch away from a polluting, industrial economy,
towards a digital economy.
As part of the plan copyright and intellectual property rights protection were strengthened in the
country. These provisions, combined with fewer restrictions on foreign investment triggered a major
technology boom in China.
The Chinese economy began its reorientation towards digital services far quicker than most analysts
expected, leading to significant stall in demand for most industrial commodities.
Surprisingly the only large commodity market to benefit was thermal coal as the rapidly growing
Chinese economy consumed ever more energy. However, increasing media attention turned to the
pollution from coal power plants that used poor quality domestic brown coal.
In a landmark agreement, at the 2016 Marrakesh Climate Summit, China agreed to end its use of
domestic brown coal and import higher quality coals, particularly from the US and Australia. China’s
hunger for energy raised the price of coal, oil and gas.
Globally, miners (with the exception of thermal coal miners) were hit by lower commodity prices but
by higher energy costs. Investment in new mines and exploration was severely curtailed.

At an OECD summit in 2025 it was agreed to implement carbon taxes and trading across all member
countries. In the short-term this led to even higher global energy costs.
The carbon trading schemes had a severe impact on the copper mining industry of Chile. The Chilean
government was forced to undertake a bail-out of several large domestic copper mines.
A decade of low profits meant the industry had suffered a talent drain: Mining was now universally
seen as an ‘old industry’.
Fast-growing technology firms continued re-locating to Asia seeking access to its large talent pools and
young populations. As these companies sought new sectors for growth they began to target the supply of
raw materials as a sector ripe for next generation innovation. Technology firms began to combine with
major manufacturers to take control of supply chains and accelerate recycling rates.
Meanwhile, Chinese oil companies conducted major investigations into undersea metalliferous mining
utilising deep sea oil technology.

The copper mining industry in both the Atacama and Southwest USA has shrunk – a victim of water
shortages, high energy costs, low commodity prices and declining asset quality.
Metals are now increasingly sourced from undersea mining, particularly focused on Asia, with China,
Malaysia and Japan all major producers.
In Europe and North America recycling rates have increased enormously as the circular economy
finally starts to become a reality.
After years of divestments the ‘major miner’ has now all but disappeared with former ‘Tier 1’ mining
assets acquired cheaply by major oil companies and emerging China-based technology companies. The
former mining majors have themselves transformed too – to an investment bank, a global commodities
trading platform and an African-focused heavy industrial firm.
A 12-year minerals IPO drought was however ended this year, with the $25 billion float of Ivanplanets,
a Silicon-valley firm looking to mine asteroids. Former astronaut, space entrepreneur and friend of
Robert Friedland, Anousheh Ansari is the chairwoman.
Winners and losers

Although the major miners survive in the short-term, over the long term, without credible new plans
they reduce their focus on mining and re-invent themselves in other sectors.
Outsiders are able to make significant advances into the mining industry. Some reform the metals
supply chain into a circular economy. Others apply oil industry technology to deep-sea mining.
A few entrepreneurial mining companies have success via the new types of mining and raw materials
provision. The mining universe of 2040 looks vastly different to that of 2015.
FROM SCENARIOS TO EXPLORATION TARGETING STRATEGY

For use in understanding the future of copper mining, the scenarios need to be compared to existing
assets and prevailing practices in the industry to see how the industry is prepared for the potential
different futures, and thus determine which assets and practices are the best proxies for explorers to
use in strategic exploration targeting.
Strategic implications for copper mining and exploration companies

Using the Oxford Scenarios methodology, scenarios are normally compared to existing organisations
and their strategies via a simple SWOT (strengths-weaknesses-opportunities-threats) analysis
(Ramirez, 2014c). This research was focused at the copper mining industry in general, so the SWOT
analysis was conducted for the three main generic types of company in the copper mining industry
(as determined from the owners of the 20 largest copper mines and projects in the MinEx Consulting
2015 data set (Schodde, 2015)). The three types of company are major mining companies (with
several operations); state-supported mining companies (either a state company or one thought to
be closely, if unofficially linked to the state); and small (junior) exploration companies, with no
operating assets.
The results of the analysis of the different types of companies in the copper mining and exploration
industry, and which succeed or fail in the four scenarios are mixed. That is, no entity thrives in every
scenario, though state-supported mining companies seem the most robust. They would thrive in
the Under Siege scenario, were resource nationalism increases and the major miners lack the profits
to compete. In the Counting House and Crusades scenarios they benefit from revenues at current
operations, though may struggle for access to talent and technology over the longer term, as they
have to compete with a profitable private sector. Their government support may also give them time
to adjust to a new future in the Peasants’ Revolt scenario.
The major mining companies are best positioned for the Counting House scenario, where incumbent
advantage is reinforced by strong operating assets, they can outbid state companies, and the barriers
to entry for disruptive junior explorers or outside industries are too high. The situation is less clear
for the Crusades and Under Siege scenarios. In both operating cash flows give time for manoeuvre,
though this time is shorter in the Under Siege scenario. The major miners are most vulnerable to
the Peasants’ Revolt scenario, where the industry changes radically, whilst they are cutting back on
long-term investments, due to reduced profitability.
Junior explorers are a generally more fragile corporate entity, lacking existing cash flows. Their
small size and innovative nature however means some are likely to succeed in the two scenarios
where plenty of future options are available – Crusades and Peasants’ Revolt. Junior explorers will
however struggle in the scenarios where limited future options exist – Under Siege and Counting
House. Mining industry outsiders, like junior explorers, thrive when there is less competition over
the long-term future of ‘copper provision’, ie when the existing mining industry withdraws funding
for long-term projects, research and development or invests in the wrong future options. Outsiders
thus benefit in the Under Siege and Peasants’ Revolt scenarios, and maybe the Counting House
scenario, where although the mining industry is profitable it is focused on the short term.
Strategic assessment of copper mines and projects

The mining industry differs from some other industries in that the discreet location of mineral
deposits means that the industry is extraordinarily asset focused. As such, any strategic analysis of
the mining sector should include a review of both assets and companies. To do this the 20 largest
copper mines and projects (Table 1), by contained copper in resource (according to Schodde, 2015)
were analysed or ‘wind tunnelled’ under each scenario. The strategic analysis included an assessment
of the strengths and weaknesses of both the asset type and the owner type. The results of the wind-
tunnelling of each copper mine or project in each scenario are in Table 2.
Again the wide range of the scenarios means no single mine or asset would be viable across all
scenarios, suggesting the industry has substantial strategic decisions to make (Ramirez, 2014c). The
TABLE 1
A list of the 20 largest copper mines and projects, by contained copper metal in the resource. Data from Schodde (2015) and company websites.
Mine or project Status Mine type Geology Country Owners
name
Escondida Operating Open pit Porphyry Chile BHP Billiton (57.5%); Rio Tinto (30%);
Japanese group (12.5%)
Andina Operating Open pit and Porphyry Chile Codelco (100%)
underground
Chuquicamata Operating Open pit Porphyry Chile Codelco (100%)
El Teniente Operating Underground Porphyry Chile Codelco (100%)
Olympic Dam Operating Underground Iron oxide Australia BHP Billiton (100%)
copper-gold
(IOCG)
Collahuasi Operating Operating Porphyry Chile Anglo American (44%); Glencore (44%);
Japanese group (12%)
Grasberg Operating Open pit and Porphyry Indonesia Freeport McMoRan (90.64%);
underground Indonesian government (9.36%)
Oyu Tolgoi Construction Open pit and Porphyry Mongolia Rio Tinto (66%);
underground Mongolian government (34%)
Pampa Escondida Advanced Open pit Porphyry Chile BHP Billiton (57.5%); Rio Tinto (30%);
exploration Japanese group (12.5%)
Pebble Feasibility Open pit and Porphyry USA Northern Dynasty Minerals (100%)
underground
Talnakh Operating Underground Magmatic Russia Norilsk Nickel (100%)
Lubin Operating Underground Stratabound Poland KGHM (100%)
Los Pelambres Operating Open pit Porphyry Chile Antofagasta (60%); Japanese group (40%)
Los Bronces Operating Open pit Porphyry Chile Anglo American (50.1%); Codelco JV
(29.5%); Japanese group (20.4%)
Cananea Operating Open pit Porphyry Mexico Grupo Mexico (100%)
Resolution Prefeasibility Underground Porphyry USA Rio Tinto (55%); BHP Billiton (45%)
Udokan Feasibility Open pit and Stratabound Russia Metalloinvest (100%)
underground
Reko Diq Feasibility Open pit Porphyry Pakistan Antofagasta (50%), Barrick Gold (50%)
Kamoa Prefeasibility Open pit and Stratabound DR Congo Ivanhoe Mines (48%); Zijin Mining (47%);
underground DRC government (5%)
Toquepala Operating Open pit Porphyry Peru Grupo Mexico (100%)
TABLE 2
Results of ‘wind-tunnelling’ each of the 20 largest copper mine projects and their owners in each scenario for the
future of the copper mining and exploration industry. Data from Schodde (2015) and company websites.
Mine or project Under siege Counting house Crusades Peasants’ revolt

name/scenario
Escondida No – vulnerable to resource Yes – strong cash flow, global No – too energy intensive No – too energy and
nationalism talent pool water intensive
Andina Yes – profitable mine, strong No – not energy intensive, Maybe – low energy intensity No – too water
local talent pool lack of access global talent but access to global talent? intensive
Chuquicamata Yes – profitable mine, strong Maybe – access to global Maybe – if underground? No – too energy and
local talent pool talent? Going underground? Access to global talent? water intensive
El Teniente Yes – profitable mine, strong No – not energy intensive, Maybe – low energy intensity No – too water
local talent pool lack of access global talent but access to global talent? intensive
Olympic Dam Yes – domestically owned, Yes – open pit expansion Yes – low energy intensity, No – too water
strong local talent pool should work, global talent access to global talent intensive
pool
Collahuasi No – vulnerable to resource Yes – strong cash flow, global No – too energy intensive No – too energy and
Grasberg No – very vulnerable to Maybe – lack of corporate Maybe – if underground? Maybe – if
resource nationalism scale? Going underground? underground?
Oyu Tolgoi No – very vulnerable to Maybe – access to global Maybe – if underground? No – too water
resource nationalism talent? Going underground? intensive
Pampa Escondida No – vulnerable to resource Maybe – potential access No – too energy intensive No – too energy and
nationalism issues? Brownfield? water intensive
Pebble No – no funding and No – access issues Maybe – if underground? Maybe – if
potential resource Access improved? underground?
nationalism issues
Talnakh Yes – domestically owned, No – not energy intensive, Maybe – low energy intensity Yes – low energy
strong local talent pool lack of access global talent but access to global talent? intensity
Lubin Yes – domestically owned, No – not energy intensive, Maybe – low energy intensity Yes – low energy
strong local talent pool lack of access global talent but access to global talent? intensity
Los Pelambres No – vulnerable to resource Maybe – profitable mine, but No – too energy intensive No – too energy and
nationalism lack of corporate scale? water intensive
Los Bronces No – vulnerable to resource Yes – strong cash flow, global No – too energy intensive No – too energy and
Cananea Unclear – domestically Maybe – profitable mine, but No – too energy intensive No – too energy and
owned? USA/Mexico? lack of corporate scale? water intensive
Resolution No – vulnerable to resource No – not energy intensive, Yes – low energy intensity, No – too water
nationalism access issues access to global talent intensive
Udokan Yes – domestic-owned, No – not energy intensive, Maybe – low energy intensity Maybe – if
owner has cash flow, local lack global talent, no owner but access to global talent? underground?
talent scale
Reko Diq No – vulnerable to resource No – access issues, lack of No – too energy intensive, No – too energy and
nationalism owner scale even if access resolved water intensive
Kamoa No – no funding and resource No – access issues, lack of Yes – low energy intensity, Maybe – if
nationalism issues owner scale improved access underground?
Toquepala No – vulnerable to resource Maybe – profitable mine, but No – too energy intensive No – too energy and
nationalism lack of corporate scale? water intensive
most robust mine or project across the scenarios is BHP Billiton’s Olympic Dam mine in South
Australia. As an underground mine it is currently less energy intensive than open pit mines, though
in an energy abundant future it has the option to expand as an open pit, even if this project is
currently suspended (Murdoch, 2015). Based in generally free-market Australia and owned by an
Australian-British company makes it less vulnerable to resource nationalism. The main weakness is
that it is located in a desert region and thus vulnerable to the sort of water scarce future envisioned
in the Peasants’ Revolt scenario. Norilsk Nickel’s Talnakh mine in Russia (Norilsk Nickel, 2016) and
KGHM’s Lubin mine in Poland (KGHM, 2015) are also viable across several scenarios, as they are
relatively less energy intensive underground mines and less vulnerable to resource nationalism as
they have strong existing in-country state-links.
The least robust mines are Antofagasta’s Los Pelambres mine in Chile (Antofagasta PLC, 2016) and
Grupo Mexico’s Toquepala mine in Peru, (Grupo Mexico, 2016). These foreign-owned low-grade
mines in desert regions are vulnerable to energy and water scarcity and resource nationalism, whilst
their mid-tier owners may lack sufficient corporate scale to compete for scarce talent and technology
in the competitive Counting House scenario. It is worth noting that a lack of ‘robustness’ does not
necessarily make these weak or poor assets. They are instead more of a bet on one type of future over
another (Erdmann, Sichel and Yeung, 2015). Indeed such a bet could have greater pay-offs in the
right scenario than more ‘robust’ assets in that given scenario. It is just that in all the other scenarios
the more robust mines will outperform the less robust mines. Arguably such a situation was seen in
the late 20th and early 21st century, where globalisation, free trade, cheap finance, sometimes cheap
fuel and cheaper developing world labour forces have given private sector operated, large open pit
mines in developing world locations, such as Los Pelambres and Toquepala a competitive advantage
over the apparently more ‘robust’ options of Lubin and Norilsk. Indeed in this period KGHM, the
owner of Lubin, has diversified away from its domestic underground operations into the large,
open pit type mines operated successfully by its competitors (eg KGHM, 2012). This perhaps partly
explains why the project pipeline is dominated by such projects, even though the obstacles such
project types face seem to be increasing (Humphreys, 2010, 2013; Mudd, 2010; Crowson, 2012; Prior
et al, 2012, 2013; Mudd, Weng and Jowitt, 2013).
In general, projects are less robust than operating mines as they do not currently generate cash flow
and are also more vulnerable to social and environmental access issues. The most robust project is
the Udokan project in Russia owned by Metalloinvest via the Baikal Mining Company (2015), which
has many similar features conceptually to Norilsk Nickel’s operations in Russia. The project is less
vulnerable to resource nationalism and access issues, and is relatively less energy intensive as it
can be developed as an underground mine. The Reko Diq project in Pakistan previously owned
by Barrick Gold and Antofagasta is the least robust project. The project is vulnerable to resource
nationalism and access issues whilst also being energy and water intensive. The lack of strategic
options perhaps helps explain why the project is currently suspended (Reuters, 2013).
The suite of large copper mines and projects analysed, however, does not present any obvious ‘no
regrets’ moves (Erdmann, Sichel and Yeung, 2015). This perhaps comes as no surprise, as if such
assets and options existed, surely the industry would already be pursing them at the expense of
all other assets. Most assets seem to fall into the ‘real options’ category, such as Olympic Dam and
Udokan, which can be developed in the future in a number of different ways dependent on strategic
environment; or ‘big bets’ such as Toquepala, Los Pelambres and even Reko Diq, which need many
factors to align in one specific scenario – nonetheless if this scenario was to occur (or rather re-occur,
as it is essentially the strategic environment of the early part of the recent mining boom), such assets
would be very much prized. In the absence of ‘no regrets’ assets, the copper mining industry will
need to use portfolio theory (Markowitz, 1952) to develop an overall robust or ‘no regrets’ portfolio,
from a series of less robust ‘real option’ and ‘big bet’ assets, with the former facilitating corporate
survival in an uncertain future and the latter providing leverage to specific scenarios.
Strategic implications for the copper mining and exploration industry

From the perspective of the copper mining industry as a whole, it seems most well prepared for the
Counting House scenario and to a lesser extent the Under Siege scenario, as both these scenarios
have a strong element of incumbent advantage – that is things stay somewhat the same and those
that succeed in the present industry continue to do so in the future. In the Under Siege scenario
state-supported operators seem better positioned, whilst in the Counting House scenario major
mining companies seem better prepared. The Peasants’ Revolt scenario is the most problematic for
the industry as a whole and is the scenario where other industries (such as oil, logistics and high
technology) are able to take up a significant proportion of the role of supplying copper. Although,
the mining industry is likely to change under the ‘Crusades scenario, it is difficult to see outsiders
entering the industry, as there are both profitable major miners and well-funded junior explorers,
making access at all points of the industry difficult. In this scenario a thriving junior exploration
sector acts as a barrier to entry to disruptive outsiders by securing the funding for industry sustaining
exploration and technology that would otherwise drift to more radical, potentially disruptive
outsiders.
Though many see scenario planning as a passive exercise, encouraging reaction to different potential
futures, there is also a movement for ‘transformational’ scenario planning (Kahane, 2010, 2012), with
scenarios used to galvanise collective stakeholder efforts towards one scenario over another. Perhaps
the most famous example of such an effort were the ‘high road–low road’ scenarios developed by
Anglo American (Kahane, 2010, 2012; Ilbury and Sunter, 2011), prior to the end of apartheid, which
became part of the national conversation on what South Africa should aspire to be post-apartheid
(Kahane, 2010, 2012). In the authors opinion the copper mining industry as a whole, and individual
companies and actors within the industry do have some agency in shaping future that are seen as
more desirable to themselves, thus these scenarios can also act a stimulus for such efforts.
CONCLUSIONS
The deductive approach of the Oxford Scenarios methodology (Ramirez, Khong and Selin, 2014)
was used to construct four scenarios for the future of copper mining and exploration. The scenarios
investigated the links between a complex range of geological, technological, economic, environmental
and socio-political factors in a manner not possible with conventional economic and scientific
techniques for investigating the future of mineral resource depletion (Sykes and Trench, 2014a). The
‘controlling idea’ or common-held view (Chamberlin, 1890, 1897) of the future of copper mining –
one of declining quality resources creating economic, environmental and socio-political problems
for miners (Humphreys, 2010, 2013; Mudd, 2010; Crowson, 2012; Prior et al, 2012, 2013; Mudd, Weng
and Jowitt, 2013) was confirmed as a potential future, though with different implications for the
industry, as expressed by the Counting House (short-term profitability, long-term problems) and
Under Siege (short- and long-term problems) scenarios. However, potentially different views of the
future of the industry also arose via the Crusades (short-term profitability, long-term solutions) and
Peasants’ Revolt (short-term problems, long-term solutions) scenarios, but again with very different
implications for the industry as a whole in each scenario. This result suggests that the controlling
idea or common-held view of the future of the copper mining industry may not be the one that
necessarily evolves.
On a theoretical level this means that techniques for analysing the long-term future of mineral
industries need to consider a wider range of factors, such as technology, the environment and socio-
politics. For example, all of the scenarios had significant events occurring in China, the world’s
largest copper consumer and one of its largest miners. Other frequently occurring events in the
scenarios related to energy sources and prices; environmental issues and regulation; the movement
of talent and labour; changing societal attitudes; government rules and regulations; innovation and
technological advancement. Any analysis of future of the copper mining and exploration industry
will thus have to consider all of these areas. Practically, minerals explorers need to also incorporate
these factors into their exploration targeting methodologies (Sykes and Trench, 2014a). Scenarios
could therefore also potentially help minerals explorers answer the key questions of what types of
copper deposits are currently economically, environmentally and socio-politically viable; and how
these parameters may evolve in the future.
Scenario planning is often presented as a grand strategic tool, only available to large companies with
substantial financial, human resource, time and logistical resources as evidenced by the history of
large corporations (and their consultants) such as Shell, General Electric, Deloitte & Touche (Ramirez
and Selin, 2014), Anglo American (Kahane, 2010, 2012; Ilbury and Sunter, 2011) and McKinsey
(Erdmann, Sichel and Yeung, 2015) which advocate scenario planning. The authors therefore hope
that the scenarios exercise presented in this paper demonstrates that scenario planning is available
for organisations large and small. It is simply a series of ‘thinking tools’ for creating divergent and
then convergent thinking. Two authors, with no substantive resources beyond everyday media
were able to construct these scenarios. Undoubtedly a larger well-funded exercise with multiple
diverse participants would have led to deeper insights, however the entry-level scenario planning
demonstrated here is also of value, especially to smaller companies.
Overall the general lack of flexibility and limited strategic options of the current major group of
mines and projects in the copper industry suggests that a greater focus on the long-term industry
outlook is required. The industry has to invest in the long term, either as exploration, research and
development, or increasing ‘accessibility’ for the industry via a stronger social licence to operate.
There is currently no strategic approach that is ‘future-proof’, so some strategic choices will have
to be made, and potentially some strategic hedges placed (for companies with enough funds). Key
points of decision will include whether to pursue energy intensive or energy ‘light’ operations; open
pit or underground operations; water intensive or operations with only limited water requirement
(else a focus upon projects with access to sea water); social footprint light or intensive operations;
domestic-owned or foreign-owned projects; mature or immature mineral districts; developed or
developing world locations; mining or integrated value chain focus; operating or future asset focus;
and exploration or engineering focused skill sets.
ACKNOWLEDGEMENTS
The authors acknowledge the continued support of staff and students at the Centre for Exploration
Targeting, School of Earth and Environment, The University of Western Australia and in particular,
Prof T Campbell McCuaig (John’s PhD supervisor), Adj Prof Jon Hronsky whose thoughts on search
space were a strong influence on this paper and Adj Prof Richard Schodde who provided the copper
mines and projects database for the research. John in particular wishes to acknowledge the financial
support from the Centre for Exploration Targeting (The University of Western Australia). Finally,
the authors thank the organising committee and peer reviewer of the AusIMM International Mine
Management Conference 2016 for the opportunity to present this paper.
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The purpose of the scenarios exercise

Probabilistic or plausibilistic scenarios?

Generating ‘multiple working hypotheses’

Generating the scenarios

How it started in 2015

What had happened by 2025

national and local environmental legislation to be used increasingly as a protectionist measure.

Where we are now in 2040

Winners and losers

Crusades – many exciting opportunities in new areas

How it started in 2015

What had happened by 2025

Where we are now in 2040

Winners and losers

Counting House – focus on extracting economic rents from current operations

How it started in 2015

What had happened by 2025

Where we are now in 2040

Winners and losers

How it started in 2015

What had happened by 2025

Where we are now in 2040

Winners and losers

FROM SCENARIOS TO EXPLORATION TARGETING STRATEGY

Strategic implications for copper mining and exploration companies

Strategic assessment of copper mines and projects

Mine or project Under siege Counting house Crusades Peasants’ revolt

Strategic implications for the copper mining and exploration industry

Markowitz, H, 1952. Portfolio selection, The Journal of Finance, pp 77–91.

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