Dr. Adam Simon, University of Michigan — The Copper Time Bomb (#63)
“[…] what the data demonstrate is over the next 30 years, we need to mine 115% more copper than we’ve mined since the Stone Age. […] if we round that out, it’s double. So, we need to mine double the amount of copper than we’ve mined since […] we were walking around using stones as tools.”
— Dr. Adam Simon
In this episode of the Resource Insider Podcast, Jamie sits down with Dr. Adam Simon, a professor and expert in natural resources economics, to explore the challenges and future of copper mining, the energy transition, and the essential role of responsible mining in global development.
Adam provides insights into the demand for copper driven by green initiatives and the massive supply challenges facing the mining industry. They discuss the complexities of meeting climate goals without compromising on metal supply, the underappreciated role of mining in modern society, and what policymakers and tech companies need to address to support responsible mining.
In this episode, Adam and I discuss:
The projected demand for copper and other critical metals due to green energy initiatives
The role of academia and the media in shaping public perception about mining
Why the U.S. and other governments need to support responsible mining for the energy transition
The under-discussed supply chain risks and potential solutions, including new mining projects
Please enjoy!
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The transcript of this episode is included below.
Note: Transcripts may contain a few typos.
Transcript:
[00:00:00] Jamie: All right, Adam, welcome to the Resource Insider Podcast. Thank you very much for joining me this afternoon, but I guess it’s pretty early in the morning for you right now.
[00:00:10] Adam: Yeah. Thanks, Jamie. I’m happy to be here to talk about copper.
[00:00:13] Jamie: So, let me start for our listeners back home how this came about, because anyone who’s been following, investing in, or thinking about the copper space for the last several years has probably heard a statistic somewhere along the line of over the next 30 years, we need to mine more copper than we have done in all of human history to this date. And I have heard senior mining company CEOs say this and junior mining company CEOs and geologists and bankers and investors and no one has ever referenced anyone that I’ve ever heard. And I think I found myself repeating this sometimes too. And then I think I said at one time too many out loud and I thought I should probably really figure out where this statistic comes from. And after a little bit of digging, it turns out this statistic comes from you and a colleague in a report you wrote for the International Energy Forum. So, I am here today to learn why that appears to be true and what the ramifications of that might be, and potentially what we in the mining industry and elsewhere might be able to do about it.
[00:01:20] Adam: Yeah, thanks, Jamie. So, I’ve worked on copper for about 20 years. I focused on copper for my PhD dissertation and I’ve done a lot of research on copper globally. And over the last 10 years, following all of the news about the energy transition, I got really interested in all of the various media outlets coverage of copper and how much we need and you see this I mean it’s almost hourly in media outlets around the world and a couple of years ago I visited Cornell University and gave a talk and a friend of mine Larry Cathles who’s an Emeritus Professor there. He and I hatched this plan to calculate things for ourselves. So, what we did is we looked at historic copper demand. So how much copper has society used every year from 1900 through today? And those data are out there. So, everybody agrees that we know how much copper has been consumed by society. And what we did is We then took various climate mitigation strategies, whether it’s, you know, the European Green New Deal or the Inflation Reduction Act, and we said, okay, let’s calculate how much copper we need if, for example, all of the vehicles in the United States immediately become battery electric vehicles, all of the vehicles in the EU become battery electric vehicles. And so, we went through and we sort of got nerdy on it. And we did all of the map. You know, we looked in detail at batteries, battery sizes, number of kilometers that miles drive. So, we made it really quantitative, and the study that we published with the IEF, it shows conclusively exactly how much copper, like down to the kilogram of copper, is needed per year for the next 30 years for all for various climate mitigation strategies. So, switching to hybrid electric vehicles, switching to battery electric vehicles. If everyone switches to a combination of solar and wind, we calculated how much copper is needed. If everybody has 28 days of battery backup and 28 days we chose because that allows you not only to ride out a hurricane but to last several weeks after the hurricane has gone through your area. And what the data demonstrate is over the next 30 years, we need to mine 115% more copper than we’ve mined since the Stone Age. So, if we round that out, it’s double. So, we need to mine double the amount of copper than we’ve mined since, you know, we were walking around using stones as tools.
[00:04:04] Jamie: And is that assuming we hit all these targets of everyone? Driving electric vehicle, everyone having solar power, everyone having 28 days of battery backup, or is that
[00:04:15] Adam: It, it assumes that no, let me restate that. So, it’s what we did is we simply took existing climate legislation and said, okay. In order to achieve the legislation as it’s written in order to achieve the inflation reduction act. So, if you know if the entire United States gets rid of coal and natural gas, it’s gone no more oil. No more petrol. It’s gone. So a fossil fuel free world That’s what we calculated and we did that because we wanted to really get a sense of you know mathematically how much copper does this actually require and we chose copper because copper is the most fundamental mineral to all technologies, you know, you can play around with the ratio of nickel to cobalt in a cathode, you can play around with how much aluminum versus manganese is in a battery, you know, you can even transition from NMC batteries, you know, lithium ion NMC batteries to aluminum batteries, but you still need copper. And even though we might be able to decrease the amount of copper, we still need a phenomenal amount of copper. And so that was the whole goal behind our study is unbiased, unpolitical, non ideological. How much copper do we need to achieve each one of these various scenarios?
[00:05:36] Jamie: And does this, I’m sorry, I’m digging into this because I, you know, when I read through your report, it mentioned this was kind of the business-as-usual scenario. And I guess you’re accounting for all these projections and I don’t know, like, cause it’s taking into account things like there will be no more ICE vehicles by 2035 and things like that in California and this sort of thing. Right. Is this taking into account just like standard growth and urbanization in places like India and Sub-Saharan Africa and all these places where people are kind of getting lifted out of poverty over time and consuming more metals over time?
[00:06:12] Adam: It is. So, so we started with calculating business as usual. So, taking copper consumption globally for 120 years and projecting into the future. The, a compound annual growth rate for copper consumption that is consistent with historical growth rates. And, you know, you bring up a really good point. You know, if we think about per capita consumption of copper in the United States, the European Union, other more technologically and economically advanced countries, we consume about double the amount of copper per year than less developed countries. And if you put that in numbers, it’s about 1.4 billion people that consume copper at the rate that we do in the US and Canada and the EU. We’ve got another 6.6 billion people around the world who use half or even less copper. So, business as usual is simply the amount of copper that we need to continue to develop globally. And then we calculated on top of that how much additional copper is needed for various energy transition scenarios.
[00:07:26] Jamie: So, what is the response you got to this? So, you released this obviously, you know, everyone in the mining industry is ecstatic to see something like this, but there’s a lot more people that care about copper than just the miners. There’s the people that actually use it. What was the response you got? Was it. Was it disbelief? Was it disinterest? Was it fascination? Like, what, what were people coming to you and saying?
[00:07:50] Adam: So, so initially our goal was to publish this in one of the many sort of mainstream academic journals. And without naming names, your listeners can probably think of names that they’ve heard of. And Larry and I submitted it for publication and we thought, you know what, let’s just There’s no opinions here. It’s literally just math. And we provide, with the study, a comprehensive spreadsheet that literally details, line by line, how we did the math and what the numbers are that went into all of the equations. So, we thought, you know, let’s publish this in an academic journal. And we attempted to publish it in about six journals, and it was summarily rejected by each of them. And it didn’t even go to an associate editor. So, in each of the cases, we would get an email back that said something along the lines of, while we can, while your study is interesting, we don’t think that it is of wide enough interest, globally, to merit publication in our journals. Which really threw us for a loop, because if copper is the most fundamental metal for all things electrification, how can this not be of interest? So, I then reached out to Joseph McMonigle, who’s the Secretary General for the IEF. And I pitched this idea to him. I said, you know, look, would you be interested in publishing this? And he said, sure. And we had it fact checked by about 20 experts around the world. So, Larry and I were really open sending all of the details to about 20 PhDs around the world. Many of whom have had careers in the mining industry. And they fact checked every letter in the study. And since it’s been published, it’s been picked up by over a thousand outlets around the world. So, we’ve been really happy with that.
[00:09:44] Jamie: Yeah. So, I mean, what do you make? What is your conclusion in terms of why the more mainstream academic journals rejected it? Because, you know, you just said it’s been picked up by over a thousand groups pushing this out to the world. So clearly, it’s not a lack of interest, right? There’s clearly thousands of people interested in this. I would say there’s probably millions of people interested in this. So how would you, what would you, how would you characterize that?
[00:10:09] Adam: You know, all I can do is offer some opinions and some hypotheticals. I think in academia in the United States and others similarly economically developed countries. Academia has, over the last few decades, lost an appreciation for the role that mining plays for humans. And it’s not a role that’s just, you know, your newest iPhone or your newest laptop, but it’s literally development globally. And if you look at how mining is portrayed in academia, you know, whether it’s textbooks or college classes, syllabi, it’s generally portrayed negatively. You know, mining is used as examples of here is how pollution happens. And I think what that does is it almost inculcates students going through high school and college Some of whom become professors. They just developed this, you know, it’s not a hatred, but it’s a very strong dislike of mining. So, you know, now we’re at a, we’re at a, you know, a fork in the road where it’s pretty crystal clear that if we if the collective we in academia want the energy transition to happen, we need the resources to make that happen. But that means that we, as an academic community, have to support responsible mining. And I just don’t think academics are ready to make that next step.
[00:11:43] Jamie: And you, would you say that’s true across the geology schools and the engineering schools, in addition to sort of maybe more general sciences or business or what have you, like, do you even see that? I mean, and we should have, I’ll start people who are listening to this. We’ll have seen an introduction to your background by the time they’re listening to this. We didn’t talk about your background yet, but you are a professor at the University of Michigan. Have you seen that amongst your peers, even geologists that are a little hands off from mining these days, or is there a, what do you think?
[00:12:15] Adam: Yeah, I think it’s, you know, it goes beyond even hands off, you know, I think what I observe and it’s not across all faculty. I would say it’s a majority of faculty who think they understand mining. And they’ve convinced themselves that mining is to some extent inherently evil, you know. There’s the resource there’s it’s colonialism. It’s the resource curse. It’s forcing the extraction of minerals on land owned by another group of people and taking all of that value away for some benefit of a small group of people and I think they’ve simplified it to an extent that does a disservice to not the mining industry, but it does a disservice to the students taking classes because the students are taking classes and up on the stage, you know, to the students, it’s an expert in whatever field it is. And so, if that expert only uses mining in the context of negatives, then that’s what students take away. And I think that’s really what we’re seeing in academia writ large today.
[00:13:23] Jamie: How have you found these people recognize, like reconcile this? Like, how do they do the mental gymnastics to say, you know, mining’s bad. We need we don’t want to do it. Well, whilst also saying we need to electrify the entire world. We need to take all these steps because of climate change. We still need our standard of living and our quality of life. Like, is that just sort of swept under the rug and ignored? Or have you seen at least attempts at credible arguments about how we’ve take these steps without the mining.
[00:13:56] Adam: I honestly, I think I like your terminology there, mental gymnastics. I don’t hear many credible arguments, you know, I’ve heard arguments that range from, well, Adam, do you really think people in Sub-Saharan Africa want to have a lifestyle similar to ours in Michigan? And I don’t know how to even respond to something like that, because when I travel around Sub-Saharan Africa, trust me, everybody there wants a lifestyle somewhere closer to where we are than where they are today. I think a lot of people who view the mining industry in a negative way, they exonerate themselves from any any part of the benefit of the mining industry right. And so, you know, you’ve got people that will upgrade their phone every single September when a new one rolls out, even though the old one works perfectly fine and probably would work for the next 10 years. And if you engage them in a conversation of all of the resources needed for that new phone every single year or all of the resources needed for you know, refrigerating foods and hospital infrastructure, they ignore it. And I think it’s sort of on some level it’s, they know that they enjoy the benefits of mining, but they don’t want to give the perception that they support mining. And for a lot of people, I don’t know that they really understand why they have that viewpoint. I don’t think they’ve really thought it through.
[00:15:30] Jamie: This is a bit of a point of never-ending frustration for me because. There are so many call it climate change champions out there that are insistent that we must, you know, change to renewable energy and take all these steps to address emissions. But unwilling to look at any real solutions to actually do that, you know, I’ve had numerous debates with, you know, very well-educated people from Oxford, people from industry, people from banks, who’s who basically have just said, look, you know, we just need to stop emitting. We just need to stop emitting you know, the CEO of Fortescue, you know, Andrew Forrest and I think he’s worth like $20 billion. He’s putting in place you know, a hydrogen, green hydrogen plant at Fortescue. And he’s basically said, look, we need to lead the world and it’s got to be zero emissions. And I don’t see how anyone can spend more than 10 minutes, just looking at the math of what that would require to understand that going from what we are today to zero emissions is not only unlikely, but impossible over the next, say 30 years, which is often the timeframe that’s been given and then. Even if we were to do that, the like sheer amount of copper and nickel and cobalt and lithium, et cetera, et cetera, et cetera, that would be required as astronomical. And there’s a complete unwillingness to look at the compromises that will be made. And I know, I don’t know if I expect you to have an answer to that. It’s just, I’m like shocked at how the cognitive dissonance that often occurs here.
[00:17:03] Adam: I agree. You know, I teach a few classes at the University of Michigan, one of which is, it’s called Natural Resources, Economics, and the Environment. And over the course of the semester, you know, I get somewhere between 120 and 150 students, depending on the size of the classroom. And over the course of the semester, it’s interesting to listen to students, to talk to them before and after classes, and to really hear how their perceptions change over the course of the semester. You know, I get students who come in and say, I’m anti-mining. Mining is colonialism. Mining is bad. Mining is pollution. I am also 100% pro-energy transition. And so, over the course of the semester, for that student, what I do is I present them with lots of information. And I encourage the students as they take in this information, which is factual, and I have students do a lot of their own calculations, you know. Let’s figure out how much copper we need, how much cobalt we need, how much lithium we need. And at the end of the semester, what I find is, across the board, those students have changed their own perception of mining. I haven’t changed it, but they changed it. And they’ve changed it through information gathering and really teaching themselves about how much of each of these metals we need. For students who come in who are pro-mining and who are let’s say anti energy transition. They also changed similarly over the course of the semester, which is that they are pro-mining throughout, but over the course of the semester, their capitalism, you know, kicks in and they see how much financial opportunity exists in responsible mining. And what they do by the end of the semester is they really develop an appreciation for 21st century mining. Right? And mining, I mean, it’s got a checkered history, but so does everything else. And if we think about mining today and mining into the future, you know, we’re always going to expect some accidents going to happen somewhere. There’s some risk involved. But the students at the end of the semester who came in pro-mining, they realize how well mining can be done, so they feel more empowered to be able to have conversations about mining and they recognize that even if they’re, you know, they can be pro-oil, they can be pro-natural gas, but they recognize now how much of each of these metals we need just for business-as-usual growth. So, it’s sort of, it’s an all of the above.
[00:19:40] Jamie: So. We’ve talked about this demand, this kind of looming demand that very few people are aware of. Let’s talk a little bit about the supply, right? Because say, and I want to also talk about what it takes to kind of bridge that gap or what conceptually it will take, but let’s for a moment, assume that the entire world got on board and said, hey, you know what, there’s this, you know, massive demand coming on copper, let’s meet it. What do we do there? Because, you know, as I understand it, and you’ve done, obviously, more research than I have on this, those mines don’t exist today, right? Like, they’re not they’re not, there’s not enough known projects to meet that demand globally, I would think. And I don’t even mean projects that are not built. I mean, they’re not, they’ve not been discovered yet to meet that demand.
[00:20:31] Adam: Yeah, so, so in order to tackle that, we looked at historic mine production from 1900 to 2018, and we picked 2018 because then there’s no impact of the pandemic. And what we did is. We then used 118 years of mine production data. So that’s business as usual. That’s here’s how much copper mining companies in aggregate have produced every year. And what we did is we then mathematically modeled future mined copper production, assuming that the future is the same as the past. And when we did that what that math reveals is that If mining companies over the next several decades could operate and make the same number of discoveries and open the same number of mines at the same rate as they have for the last century, we would just about be able to meet business as usual demand. So that’s hypothetical. Then what we did is we dug into mining company reports for all the publicly traded mining companies. And we pulled data from countries where companies don’t disclose those data, but you can make some pretty good you can come up with some pretty good numbers. And what you realize is that over the next decade, globally, mining companies have released, communicated to the public, that from all existing mining operations, they will produce about the same amount of copper in 2032 as they did in 2022. Right. And so, this is from the mining companies, right?
[00:22:09] Jamie: 2022. Okay. Yeah.
[00:22:10] Adam: They know their mines better than anybody else. They know copper reserves, they know production rates. So based on future, you know, based on modeled market prices for copper and based on the amount of copper in every deposit, what we’re going to see over the next decade is copper production for mines is going to decline. And, you know, this is probably most notable if you look at, for example, Chile, which produces about a fifth of the world’s copper. Their national mining company, Codelco, they have released this in multiple ways over the last couple of years that they’re really concerned. Because Codelco and copper production in Chile, that has been Chile’s economy for 60 years. And they’ve told us that they’re going to start producing less copper after about 2029 2030. So, what we see then is, mining companies are not going to meet, not only they’re not going to meet the demand for the energy transition, but they’re going to struggle to meet, you know, forecasted annual growth rates for copper consumption from existing mines. Now, then you ask, okay, well, what are the mines in the pipeline? And there are a few, you know, Ivanhoe’s got their Kamoa-Kakula project in the Democratic Republic of the Congo, and that’s going to be truly a world class mine. And then you look and say, well, where else? And you hit zero really quickly, right? You look at places, for example the Resolution Mine in Arizona, which is a joint venture between Rio Tinto and BHP. That deposit was discovered almost 30 plus years ago, and it still is not in production. That deposit alone would overnight provide about 25 percent of domestic copper for the United States. They can’t get the final permits to, to start mining. You look at deposits in Alaska, like the Pebble deposit, which is in this pristine environment. I mean, I love, I have to say one of my favorite things to eat is wild caught salmon from Alaska. And I don’t want any. Possible damage to those aquatic ecosystems, but the Pebble deposit, it would overnight become the world’s leading producer, not only of copper, but copper plus gold, plus silver, plus molybdenum, plus other metals we need for the energy transition. Tellurium, we need tellurium to make cadmium, telluride, photovoltaics, thin film solar panels. And that deposit is, I mean, it’s likely to be unmined for the next few decades. So, the pipeline, it just isn’t there. And again, this is not political or ideological. It’s just the math.
[00:24:52] Jamie: Well, it’s actually almost worse than that if you think about it, because there’s mines kind of getting taken off the board now, right? Like we just God, what was the first quantum mine in Panama that just got shut down by the Panamanian government? And then we just saw Canada block the acquisition of the Warintza deposit in Ecuador by the Chinese for, you know, you know, security reasons. So, like, not only are we seeing known projects not get put into production, we’re seeing mines that are already built being stopped for whatever it is, environmental, political, social reasons. So. What let’s assume, like, what do you think has to happen for meeting that demand to be like conceivably achievable? Like, what do you, what would you like to see happen?
[00:25:40] Adam: Yeah, I think among the things that needs to happen is we need politicians in the US and other countries who are on an hourly, certainly a daily basis, advocate in some way, shape, form or fashion for the energy transition away from ice vehicles to battery electric vehicles. That’s all great. We need those politicians to come out and publicly support responsible mining, you know, in the last few years in the US. We have an administration who has You know sort of one side is all things energy transition. How many new battery manufacturing facilities can you build? Let’s count them, right? I mean, it’s just phenomenal the hundreds of billions of dollars that have been pumped into downstream manufacturing while at the same time the same administration has taken large areas of land in the United States off limits for mining, you know, you look in northern Minnesota there are several what could be really important domestic sources of copper groups off limits. You look at Resolution off limits. You look at Pebble off limits. And so, you can’t have, you can’t have it both ways. You can’t have the, you can’t expect to achieve the energy transition without the resources to make it happen. So, we need politicians to come out and in public acknowledge that this is a wicked problem. But we have a recipe to solve the problem. And here’s how we’re going to do it. And, you know, I think on one side of the political island, the United States. There’s a fear that’s gonna, it’s going to frustrate some of their constituents, but I think that the politicians can move their constituents in the right direction by taking a more public proactive stance in support of responsible mining. I also think politicians, you know, when is the last time we heard of, a roundtable, you know, a roundtable summit at the White House with the CEOs of the world’s top 50 mining companies, right? I mean, if I were Biden, and I really wanted to make the energy transition happen the way it’s described in the IRA. That’s something I might do. I might call up the CEO of, you know, Freeport and and Ivanhoe and Rio and the next 50 and say, all right, I want all of you in D. C. We’re all going to sit down and then I’m going to ask you, what do you need to make this happen? And you’re going to tell me what you need. And, you know, people in the US will say, oh, we’re doing a little bit of this. You know, there’s a little bit of mining money that went into mining engineering and mining geology at West Virginia and North Dakota. But it’s a drop in the bucket of what actually needs to happen. And if you ask those CEOs when they have been called, they’ll say never.
[00:28:35] Jamie: It’s kind of interesting, you know, just thinking about it now that in many ways, the United States is underrepresented in the mining industry, right? Like so many mining companies are based in Canada and Australia in the United Kingdom, you know, where the US you know, just so clearly dominates in tech. So clearly dominates in energy. It’s mining kind of been like the, you know, the, what do they say? The redheaded stepchild that’s been like ignored a little bit. And I think as a result it’s really not on people’s radar and in the United States and politicians and mining companies and CEOs have very limited from what I can see from the outside influence with the political class compared to say you know, the energy CEOs or the energy service CEOs who we see make the jump between government and back and forth to running these companies all the time, or the tech CEOs, right. Who are always part of these, you know, round tables or panels or what have you, but mining has been largely ignored. Do you think it’s because so few comparatively mining companies are based in the United States, or do you think it’s just because it’s. relatively a small industry.
[00:29:48] Adam: I think it’s probably a combination of, it’s a smaller industry than oil and gas. And it’s an industry that has always done its job and done its job relatively well behind the scenes, making all of the metals available for downstream manufacturing. You know, you’re right. I mean, how many times a day do we see Elon Musk is in the news about some new advertisement? But we don’t see the CEO of BHP, for example, the world’s biggest mining companies in the news, you know, almost ever. We don’t see that CEO in the news saying, you know what, we’re here to support Elon because without us, none of what he wants to happen is possible. And I think that you know, if you look at oil and gas, they spend a lot more money on public relations. You know, on average if you have a digital subscription to the New York Times or the Wall Street Journal or the Atlantic or any of the newspapers that sell advertising, you know, I’ll scroll through and there’ll be an advertisement for Chevron or Exxon or, you know, another major oil and gas company. I have never had an ad pop up from a Rio Tinto or from an Ivanhoe. They’re just not there. And I think, you know, this is it in some ways it’s to the detriment of the metals mining industry. Because the only time the public does hear about metals mining is when there is an accident. That’s it.
[00:31:23] Jamie: Yeah. Or when like some executives getting fined, you’re going to jail for bribery or something like that in some destination, you know, part of the problem is that mining is like the, almost the opposite of a consumer product. Right? Like we all use oil. We all fill our cars up with gas. Like it does play at least a small role in our everyday life. Most people have no conception of the role metal play, except for, you know, like looking at it as part of a piece of equipment or whatever but that’s it. That’s the extent of it. So, okay. I’m going to tell you my pet theory and people who listen to this podcast are probably going to be sick of me saying this, but I want to get your opinion on this. The only way for mining to matter, in my opinion, is two things have to happen. I think the United States will have to form some sort of sovereign wealth fund or investment program where they invest directly into mining metals, mining and metals projects. We are seeing that already to a degree, the Department of Energy, the Department of Defense investing in different projects. And I think the mining industry is coming up on a massive consolidation, but not in the way people think. I don’t think it’s going to be all the gold projects together or copper, whatever. I think the tech companies are going to start integrating mining companies and mining projects into their supply chain, right? If we look back, whatever it was 50 years ago, you know, we used to see Chevron and Exxon owning mining projects. We used to see them, you know, I read, I remember as a kid, as a high school student, I read Jack Welsh’s book the CEO of GE, and he talked about selling off a copper mine that GE owned somewhere in the United States, used to see these conglomerates building out their supply chain. That, you know, we’ve gone through a, call it a 50-year period of you know, decentralization in the mining industry. I think it’s going to swing the other way. And I think that’s the only way these industries get the clout that they need and have access to capital at low enough costs to actually go and buy these things and put them into production and pay the price. That’s required right or wrong. What do you think?
[00:33:32] Adam: Yeah, I agree with you. I think mining companies are in desperate need of de risking exploration for new deposits around the world and they need capital, you know I’m calling in from Indonesia, which is a country that is it’s blessed with all possible resources I mean they have an abundance of coal. They’ve got an abundance of oil. They have now an abundance of nickel leading the world in global nickel production. Which by the way, also is going to have a huge impact on cobalt production, which has the potential to reduce cobalt mining in the DRC. And, you know, when I’m here meeting with undergraduate and graduate students and professors, you know, asking them about the presence of the mining industry, It’s really small except for a few companies. And you know, one, one of the things that’s been in the news this week here is Freeport-McMoran, which is a US based company. They produce about 10 percent of the world’s copper. They have now just flipped the switch on a new smelter. So, taking copper concentrate and then ultimately producing copper cathode. Plus, other metals associated with copper, gold, silver, moly, maybe tellurium and selenium, although I don’t think they’ve released that. And the cost for that smelter, Freeport publicizes, 3.7 billion dollars. Now, that seems like a lot of money, but it’s really not. You know, at the University of Michigan, I and, talk about how students here were shocked when you start talking about the amount of money that people spend. The University of Michigan as a business, which it’s really a business. Our academic side of the business is about $3 billion a year, so that’s a smelter. Our hospital system is about $9 billion a year, so that’s roughly two and a half smelters. So, the money is out there. But it’s not being spent in a way that will actually address supply chain shortages.
[00:35:31] Jamie: Yeah, I mean, I think to put it in an even better perspective, if you look at like what Microsoft has committed to building data centers over the next two, it’s hundreds of billions of dollars, hundreds. And this is just one small part of their business, right? If you look at. Apple. Okay. You know, the ear pods at Apple, if they were a standalone business, they would be a Fortune 100 company just to the sale of the ear pods. Right? So, a smelter is a, it’s a rounding error for the, you know, Steve jobs could have put one of those on his credit card. Like it’s tiny in the grand scheme of things for these tech companies.
[00:36:06] Adam: Yeah, it’s not expensive. You know, if if any of these companies, any of these tech companies, if they really wanted to eliminate concerns, for example, about child labor in cobalt mining in the DRC, there is plenty of opportunity for these tech companies to actually pony up, move out of plausible deniability. Well, we didn’t know that there were Children who were mining the cobalt and put boots on the ground and spend the money to help develop the cobalt industry in the DRC you know, I was in the DRC last August for a month, starting a new project on cobalt supply chains. And, you know, I met a lot of men because who wake up in the morning and put in an 18-hour day with a pick and shovel digging cobalt ore out of the ground. And my wife and I have co-parented four kids, two sons and two daughters. Both of my sons are about 6’5 and I thought to myself, if it was the difference between starvation and my sons and I would dig shafts, we’d be digging shafts. And when you meet the people there, they want safety, they want to develop 21st century mines. So, where’s the money to make that happen? You know, I think maybe what we’re really saying is why isn’t the tech industry stepping up? You know, on the subject of data centers, there was an announcement this week that one of the big tech companies is signing an agreement with a new startup for small modular nuclear reactors. You know, that’s great. But where are all the resources going to come from those, for those nuclear reactors? I mean, you need a lot of copper per reactor. You need a lot of uranium per reactor. So there again, they’re only focused on downstream manufacturing, making sure the electricity can be provided to cool the data centers. But there, there seems to be. No meaningful interest in putting their dollars into upstream production of the minerals industry. I mean, sitting last night at dinner here in, in Jogja, in Indonesia. I mean, you know, I pitched to a professor, I said, what if one of these tech companies came to you and said, we want you to develop a mining exploration program to scour Indonesia for all of the possible copper deposits that are here. And then we want you to develop a program to do all of the environmental impact assessments. You know, how much would that cost? And without giving you the dollars here, Jamie, it’s a fraction of what it would cost at the University of Michigan, but nobody’s doing it. Why not? You know, you can then go from that to you take a country such as Indonesia development doesn’t happen for free right?
[00:38:49] Adam: Charity is not going to develop all of the various areas of Indonesia, or Sub-Saharan Africa, or Latin America. So, you have lots of places around the world that have the resources we need. They’ve got wicked smart people who can help solve these problems, but there’s no investment.
[00:39:06] Jamie: So why isn’t that happening in your opinion? Why aren’t these tech companies doing that? I mean, I actually know people who have worked in sort of supply chain management and blah, blah, blah, you know, high quality supply chain for Apple, for example, sourcing these things. Why don’t they just say, oh, for God’s sakes, I’ll just buy the damn thing and make sure it’s done right. It’s a rounding error to our balance sheet.
[00:39:29] Adam: I wish I knew that answer.
[00:39:32] Jamie: You know, in some ways it touches what you said earlier, right? Maybe the mining industry has just done too good of a job, right? It’s kind of like you’re working behind the scenes, the metals there when you want to buy it, it’s at a price that’s reasonable and like, that’s it. It’s not a problem. So why fix it? Do you think there’s an element to that?
[00:39:48] Adam: I think there has to be. And historically, you know, demand increased at a pretty, you know, consistent rate year over year. Now what we’re talking about is demand on steroids. Right? We’re not talking about just regular demand for metals. We’re talking about demand is going to increase significantly, and it’s going to increase really rapidly, right? I mean, boom, within a few years, we need double the amount of copper we’ve mined for the history of humanity. Coupled with the fact, you know, back to your you know, your Apple product, that sits in your ear that’s designed to be obsolete in 18 to 24 months I mean how great a marketing gimmick is that you’re going to buy something from us that we literally are going to tell you in two years will not work anymore. It is not recyclable. So, you’re going to throw it in the trash and then you’re going to come back to us and buy something new from us for more money. I think that Mining companies have always been there to provide the incremental increase in demand. But with those air pods, what are all of the metals that 10 years ago we didn’t even need? You know, before we had cadmium telluride solar panels, we didn’t need tellurium before we had lithium-ion batteries in, you know, battery electric vehicles. We didn’t need the quantities of lithium, cobalt, nickel, manganese, aluminum, copper, et cetera. And it’s that rapid increase in demand that is really going to, it’s really going to come back and it’s going to bite the tech industry and society in general in the ass. When 30 years from now there are going to be a lot of people saying, you know, oh, why didn’t you tell us? We didn’t know we needed to mine faster.
[00:41:33] Jamie: Yeah. I mean, what do you think has to happen? What is the catalyst? What has to happen for that to occur for, you know, Elon Musk at Tesla or whomever to say, Oh God, like we need to start putting money to work here. What do you think that is?
[00:41:47] Adam: I think that the people with the power of the pen simply need to make the decision that they are willing to put their money into something on the upstream supply. That’s it. That’s all that needs to happen. I mean, honestly, if Elon called me up and he said, Adam, I want to get into copper and cobalt mining in the DRC. Help me make it happen. We could make it happen, right? I mean, seriously we could go to the DRC, we could partner with faculty and students at the University of Lubumbashi and other places, and we could develop a program to supply all of the cobalt that Tesla needs, right? That could happen, and it could happen on a time scale of years to maybe at most a decade, but we’re not getting those phone calls from people in tech who want to spend that money.
[00:42:38] Jamie: Yeah, I think my thought is that something very painful has to happen before there’s action to be, that’s taken, that there has to be a shortage and there has to be a hard time getting something.
[00:42:51] Adam: Well, I guess. I was going to say, I think that’s happening for people on the political left in the US right. I mean, yeah. In the last month, Florida has been slammed with two hurricanes. I mean, it was basically like, you know, God took Florida and, you know, Mike Tyson in his prime and said, I’m going to hit you twice before. And so, they’re down and out and we’ve got people in Florida. And it’s truly a tragedy, right? I mean, myself, nobody wants somebody to have to live through the aftermath of a hurricane. But on one side of the political aisle, we have people telling us that the way to minimize future hurricanes is to rapidly move away from internal combustion engines. And you say, okay, well, here’s the recipe. Oh no, but we also, we don’t want a mine either.
[00:43:39] Jamie: Yeah. Do you think metal prices need to go up? What are your view on that? To bring these things into production?
[00:43:46] Adam: With the current business model, metal prices have to go up to stimulate mining companies to invest more in exploration. More in research and development, new technologies to explore from mineral deposits and to allow mining companies to flip the switch on existing deposits. You know, in, in the US in the western state of Idaho, there’s what we call the Idaho Cobalt Belt. Well, it’s called the cobalt belt cause there’s a lot of cobalt and we know where there are several cobalt deposits. None of them are being mined because the price of cobalt’s too low. So, if the government were to look at that and say, okay. Here is a domestic source of cobalt. We really need cobalt. What is the price that mining company X needs to flip the switch and operate and produce cobalt from this mine for 10 years, 20 years, 30 years? We’ll guarantee that. Right? Some sort of price floor. We’ll eliminate that risk. So if you, as a mining company, you have discovered a cobalt deposit, you have put together your business plan to develop, operate, maintain, and produce cobalt for the life of the mine, and you tell us, you know, it doesn’t have to necessarily be the cash cost on a, you know, dollars per ton of cobalt production, but it could be something along those lines, right? Where you tell us if you need X dollars per ton of cobalt in order to operate in the black. We will guarantee that. So, if market prices go up, you can benefit from that. You take the excess. But if market prices drop lower than your cash cost to operate demand, we’ll cover that. I mean, to me, again, that seems really simple. And we’re doing that in so many other ways with downstream manufacturing. Right? I mean, I think on some level you look at America’s big three automakers, right? They’re certainly, while there was not any, nothing on the level of collusion, right, the DOE looked at the big three and said, okay, what do you guys need in order to transition to battery electric vehicles? And let’s build in subsidies. To me, those subsidies are the same as a price floor for cobalt mining. I mean, you can quibble about the legal definition of terms, but it’s fundamentally the same thing with lithium. You know, you’ve got Albemarle lithium that has access to the Kings Mountain lithium deposit in western North Carolina. It’s one of the biggest lithium deposits in the entire world. And so why not go to Albemarle and say, you know what you tell us, what’s the price floor, right? That’d be great. What do you need us to guarantee? So that if lithium prices are above that, you profit. If lithium prices drop below that, we guarantee that we will cover the difference. Albemarle would start producing lithium from that mine next year.
[00:46:32] Jamie: Have you ever seen this happen? Is there a precedent for this anywhere? These sort of, building in these price floors to critical commodities?
[00:46:39] Adam: Yeah, you know, I, I have I have, I’ve gone down the rabbit hole trying to find really good crystal-clear examples. And in, in what you come up with is, you know, good examples would be the Civil War, World War I, World War II, where if you look at the federal spending as a percent of GDP, it went through the roof, and if you look at World War II with Roosevelt, you know, what did Roosevelt do? He literally, and maybe it wasn’t him personally, but some people suggest it was, he called up people like Henry Ford and he said, you know, look, I know that you’ve got really successful auto manufacturing facilities, but I need you to build bombers. I need you to build tanks, and I need you to build them yesterday. Can you do that for me? And Henry Ford said, yes, sir, we can. And, you know, everybody’s probably seen Rosie the Riveter, you know, I mean, that was 20 miles from my house at Willow Run airport. And literally in the span of weeks to months, these entire production facilities transitioned from making, you know, whatever the model T of 1940 was to building B2 bombers at the rate of something on the order of one per hour. When we look at the medical industry. You know, in the United States, there’s a lot of concern about the cost for prescription drugs. And among the really positive things that our current president has done is he has put price caps on insulin, right? I mean, that’s phenomenal, right? People with diabetes, that is literally the difference between life and death. And so, there are precedents, and maybe they’re not exactly the same, but it the examples that are out there indicate everything is doable. We just need the people who are in positions of leadership to actually lead
[00:48:32] Jamie: If the US government this is my, I’m thinking this through as we talk about it, what a price floor under certain commodities, what do you think would be the repercussion on the price of those commodities globally, right? If there’s a price floor on copper of $5 in the United States. What’s it, what’s the price of copper in China after that, as given China buys, I think something like half of the world’s copper goes to China at this point. How does that, does it potentially undermine the United States as competitiveness in manufacturing and electrification and all these things? Or does it just sort of bring up the price globally? What are your views on that? I’m kind of putting you on the spot here, so I don’t expect you to have it. Perfect answer.
[00:49:14] Adam: I would hope that what it would do, what I would hope is that it wouldn’t be the US only, that it would be a multi country effort. You know, you take all the countries in the OECD and it’s each of those countries that advocate the most strongly for the energy transition. So, what if they got together as a group and said, you know what, let’s use our collective power to put in place these price floors. And I think what that has the potential to do is that would buoy up global prices. That would provide certainty for mining companies to invest more in exploration, to discover the new copper deposits that we need to meet demand.
[00:49:57] Jamie: You know, we’re coming up on an hour now. So, I just have a couple questions left. And I, you know, I want to be respectful of your time. You’re supposed to start your day in Indonesia. Is there anything going on, any discoveries anywhere in the world that you’re particularly excited about that you think there’s a really perhaps under acknowledged or under understood element in the mining industry today.
[00:50:17] Adam: I think in the African Copper Belt. Which stretches roughly from Angola across the southern part of the DRC into Zambia. The discovery of the Kamoa-Kakula deposit, you know, a decade or so ago by Ivanhoe. That, that, that’s a game changer for the African Copper Belt because they discovered a type of copper mineralization that previously was relatively unknown in that area.
[00:50:46] Jamie: This is sedimentary copper, right? Is that right?
[00:50:48] Adam: It’s sedimentary hosted copper, exactly. And most of the deposits in the DRC in Zambia, what you’re mining is copper oxide close to the surface. So, if people can picture like malachite and azurite and beautiful green patinas, it’s oxidized copper that you’re mining. At Kamoa-Kakula, it’s the sulfides at depth that are being mined and that is really, that has, I think, unleashed a lot of interest in searching for and discovering similar copper sulfide deposits in the African Copper Belt. The resolution deposit in Arizona. That deposit contains, it’s got a grade of one and a half weight percent copper, which is about triple the average copper grade at similar porphyry copper deposits around the world. That deposit has the potential to literally redefine 21st century underground mining. I mean, it is responsible mining in a way that people just can’t conceive of with lots of autonomous vehicles to make it a lot safer. The footprint of mining is way lower than the footprint of mining the same amount of copper from an open pit deposit. So, I think what we’re seeing in the mining industry is we’re seeing a combination of the discovery of massive copper sulfide deposits in the African Copper Belt, and we’re seeing underground mining being done at current market prices. And I think that bodes well for copper because Most of the worlds near surface deposits, we already have found them and we’re mining them out or they’ve been mined out. So, we know that we have to go a little bit deeper below the surface in order to find copper deposits in 25 and 30 and 35.
[00:52:35] Jamie: Do you think that’s the future of copper mining? Is it underground? Is it these, maybe these big block cave mines done at scale? Yeah.
[00:52:41] Adam: I think that’s the future. You know, you look at resolution, you look at Grasberg here in Indonesia, you look at Chuquicamata. I mean Chuquicamata is arguably one of the world’s two largest open pit mines relative to Bingham Canyon outside Salt Lake City. And Chuquicamata, they were mining there for a hundred years. And now they’re mining underground and they anticipate another hundred years underground. So, you’ve got some surface footprint. But if you look, for example, at the surface footprint of these massive underground mines, it is much smaller than building and operating a huge open pit mine. And I think on that note, you know, you go back to Pebble in Alaska, there are ways to be creative there. I mean, among the concerns at Pebble is, yes, you’re going to disturb the land area where the open pit deposit will be constructed. And that has potentially negative impacts on the ecosystem, but I think they’re manageable. The bigger concern is around how do you store the tailings, the mine waste, and storing those tailings in an impoundment that is upstream of the Bristol Bay and, you know, the pristine aquatic ecosystem there. Well, why not take those tailings, dehydrate, dry stack, and get them out of there? Right. We’re seeing this happen. There’s a mine in northern Minnesota called Tamarack, and it’s a company called Talon, which is a joint venture with Rio. And Talon has done, they’ve done something in Minnesota that’s just wicked smart. What they did is, to alleviate the concerns about tailings, they said, okay, there’s a rail line that exists from here to North Dakota. There is a suitable landfill in North Dakota. So, what we’re going to do is we’re going to take all the tailings from the Tamarack facility, which is going to produce nickel and copper and cobalt domestically. We’re going to dehydrate those tailings, move them west to North Dakota, and we’re going to store them in an area. That is in no way connected to the boundary waters, which are the big concern. So, you know, there are some really bright examples in the mining industry that I don’t think the general public is aware of.
[00:54:53] Jamie: Okay. Thank you for that. Adam, one last question. If I were to give you a million dollars and you had to buy invest in one metal, can’t be copper because we’ve talked too much about that. What would that be? And say you had to hold it for 10 years. You had to hold it for 10 years.
[00:55:13] Adam: Yeah, I think the backbone for our built environment is steel and iron is that backbone. So, if I think about development around the world and the amount of steel that we need, you know, we globally consume about 300 percent more steel this year than we did in 1960. And we’ve seen how much steel has been used in China over the last 20 years as they went from a severely underdeveloped economy to the world’s number two. We’ve seen it happen in South Korea. So, I think steel and iron, that’d be where I’d put my money.
[00:55:50] Jamie: Okay. Well then, we need a second question to that because iron is not one market. It’s a different geographical market. So where would you invest in iron then?
[00:56:00] Adam: I think the really large banded iron formations that are mined in Australia. You know, they are going to produce iron for decades and decades, if not centuries.
[00:56:09] Jamie: And easy access to China and Asia and India.
[00:56:12] Adam: Absolutely. Yep. Yeah. That, that, that’d be a good place to, to store my million dollars.
[00:56:18] Jamie: That’s a good one. We haven’t had that answer before. So, I like that one.
[00:56:21] Adam: Yeah. Happy to send you my Venmo information. If somebody wants to pony up that million.
[00:56:26] Jamie: All right. I’ll put it in the show notes. Okay. Thank you very much for taking the time today, Adam. Very much. Appreciate it.
[00:56:32] Adam: Absolutely, Jamie. It’s a pleasure to be here. Thank you very much.
[00:56:35] Jamie: If anyone wants to learn more about your work, what you’re doing, is there a good place to check that out?
[00:56:40] Adam: Yeah, you know, I don’t know if I can say my email address online, but I’m happy for people to send me an email.
[00:56:46] Jamie: If you want to get a lot of emails, please do.
[00:56:48] Adam: Yeah. So, my email address is my last name, simonac@umich.edu. And you could probably stick that in the show notes. But I love talking about this topic. You know, I really do. I’m blessed to have traveled all over the world, done research on seven continents and about 75 countries. And I think about the energy transition in two ways, the energy transition to renewables in the more developed economies, And the energy transition to energy for six and a half billion people. And it’s those six and a half billion people that I’m focused on providing the resources to make sure their children and grandchildren can have lives that are similar to what my children were blessed to grow up with
[00:57:35] Jamie: Yeah. I mean, we could have a whole other conversation. I think it’s almost a billion people have access to no electricity, right? They don’t have a light bulb in their house. There’s nothing to read by at night. And, you know, they’re not worried about solar panels or windmills. They’re just worried about anything.
[00:57:51] Adam: Absolutely. And I think that number grossly underestimates the amount of people without energy. You know, if you actually look at how we calculate that, we consider a human to have access to energy if they have enough electricity to light one light bulb for four hours a day and charge two electronic devices. That’s access to energy. That is way different than the access to energy in my 4, 000 square foot house with four kids and a spouse. I mean, it is orders of magnitude difference. So, when we talk about access to energy, it’s not a light bulb and two smart phones. It’s access to medical infrastructure, healthcare infrastructure, etc.
[00:58:30] Jamie: All right, we’re going to have to save that for round two. Thank you very much today, Adam.
[00:58:34] Adam: Thank you, Jamie.
[00:58:35] Jamie: I appreciate your time.
[00:58:35] Adam: Thanks a lot.
Jamie Keech
CIO; Editor
Nick D'Onofrio
Head of Research
