A startup backed by Bill Gates and Jeff Bezos hopes to accelerate the development of a copper mine in Zambia
Ed Crooks, Vice-Chair, Americas, Wood Mackenzie
Copper has often been important for technological progress. It was copper cladding for sailing ships’ hulls that led to dramatic improvements in speed, manoeuvrability and durability in the late 18th and early 19th centuries. That history continues in the modern era: copper is one of the critical metals – arguably the most critical – for the transition to low-carbon energy.
Electrification is central to the energy transition, and copper’s combination of conductivity and ductility makes it ideal for electrical uses. Low-carbon technologies often need more metal than their higher-carbon counterparts. Offshore wind, for example, uses about three times as much copper as coal-fired power generation in terms of tons per gigawatt of capacity. An upper-end electric car might include about 78 kilograms of copper per vehicle, compared to about 22 kg in an equivalent gasoline-fuelled model.
That is the crucial context for the announcement this week from KoBold Metals, a mining startup backed by Bill Gates and Jeff Bezos, that it has found a large-scale copper deposit in Zambia that is suitable for rapid development. The discovery is the first significant example of developers and investors working in low-carbon energy becoming directly involved in mining to increase supplies of the metal they need.
KoBold’s backers include Breakthrough Energy Ventures, Gates’s investment firm that backs companies working to cut greenhouse gas emissions. Microsoft, which was founded by Gates, and Amazon, which was founded by Bezos and where he remains executive chairman, have ambitious goals for using only renewable energy and achieving zero greenhouse gas emissions. Another backer is Equinor, the Norwegian energy group that is active in offshore wind.
The location of the discovery, known as Mingomba, is not particularly surprising. It is in Zambia’s northern Copperbelt province, on the same geological formation that includes large copper mines in the neighbouring Democratic Republic of Congo. Zambia is already a significant copper producer, although at only about half the rate of its peak back in the 1970s.
Zambia’s President Hakainde Hichilema is hoping to encourage a rapid revival in the industry. The government has set a target of increasing copper production from about 800,000 tons a year today to 3 million tons a year over the next 10 years. President Hichilema this week described the Lobito Corridor, a US- and EU-backed development plan that includes a new rail link to connect Zambia’s copper mines to a port on the coast of Angola, as “a generational opportunity” for the nation.
What is unusual, says Nick Pickens, Wood Mackenzie’s research director for global mining, is the consortium that KoBold has assembled, and the signal that sends about the chances of the project going ahead and coming into production.
International mining groups have for decades been wary of investing in Zambia. Unstable fiscal terms, inadequate power infrastructure, particularly when hydro output is hit by low rainfall, and worries about reputational risk have been effective deterrents.
Copper production in the DRC has soared over the past two decades, hitting about 3 million tons a year, but that has largely been the result of investment by Chinese companies.
International mining companies’ capital spending, in general, remains relatively subdued, constrained by investor pressure for dividends, political risk in many of the countries with the best deposits and concerns about the need to ensure compliance with ESG standards and emissions reduction goals. The total capital being allocated to growth by the five major international mining companies – BHP, Rio Tinto, Vale, Anglo American and Glencore – will be up this year, to over US$10 billion. But as a percentage of their total capital spending, it will be within the range of recent years, and on an inflation-adjusted basis it will only be about US$500 million more than the industry planned to spend in 2020.
The companies backing KoBold, which also include BHP, raise the possibility that capital could be raised to support the development of Mingomba with a clear focus on delivering copper to enable the energy transition.
The share of global copper demand coming from “green” sectors including renewables and EVs is on course to double over the next 10 years, from about 8% to about 16%.
In Wood Mackenzie’s base case forecast, world copper consumption rises about 24% between 2023 and 2033, to reach about 32 million tons a year. To get on course for net zero emissions by around 2050, which is required for the Paris agreement goal of attempting to limit global warming to 1.5 °C, copper supplies would have to increase even faster.
“Countries are just not pushing forward with investment fast enough to deliver the supply that will be needed,” says Wood Mackenzie’s Pickens. “And that has to change if we are to hit net zero.”
There is still a long way to go to bring Mingomba into production. KoBold has not yet conducted a pre-feasibility study. Reuters reported that the mine could cost US$2 billion, and that KoBold is open to bringing in more partners to help develop it. Other reports said KoBold was aiming to start construction in 2027 and begin producing in the early 2030s.
But it is still significant that this group of influential companies and individuals agrees that a world with fewer greenhouse gas emissions has to be a world with more copper mining. KoBold’s progress in Zambia will be an indicator of how far the rest of the world, including governments, investors and other companies, can be persuaded to help put that insight into practice.
In brief
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Original article l KeyFacts Energy Industry Directory: Wood Mackenzie