Copper Miners' Profits Face A Rare Rival: Extreme Weather

Heavy rains, extreme heat and other types of extreme weather around the world will eat into miners' profits and curb supplies of copper and other widely used minerals.

It is an unusual situation for companies with experience operating projects around the world, from miles underground to mountaintops and in areas where temperatures range from -18 to -38 degrees Celsius.

But in the first quarter of 2022, the mining industry dealt with a series of weather-related events that were not its own at all.

Mining executives detailed weather-related problems in their earnings reports this week and warned that they were likely to continue.

"We are evaluating several different scenarios for the possibility of further strange weather patterns," said Peter Rockandel, CEO of Lundin Mining Corp.

Lundin cut its 2022 copper production forecast after heavy rains affected output at its Chapada project in Brazil.

Duncan Wanbald, chief executive of Anglo, said: "The extremes we saw in the first quarter of this year exceeded all our reasonable forecasting capabilities."

The disruption caused by extreme weather is even more pronounced at a time when inflation and high energy costs are already eating into corporate cash reserves.

Ben Davis, analyst at Liberum, said: "When the market gets tight, these things become more substantial... But there's not a lot you can do."

In Chile, the world's largest copper producer, miners have been facing an ongoing water crisis, exacerbated this year by a historic drought that has lasted more than a decade.

Water is essential in the production of copper, and large amounts of water are needed to separate the mineral from the ore. In response to water shortages, many mining companies desalinate seawater and use it in their production processes.

Earthworks, an environmental group that tracks the mining industry, said miners must do more to fund infrastructure improvements in a changing climate.