The effect of carbon pricing on cut-off grade and optimal pit limits in a high grade copper-cobalt deposit

This paper aims to identify the effect that a carbon price will have on the economic viability of a high grade copper-cobalt mine in the Democratic Republic of the Congo, through examination of Scope 1 and 2 emissions produced directly through mining and processing activities. Four scenarios were analysed ranging from no carbon pricing scaling up to $100/t assuming hydroelectric power was unavailable and replaced with coal fired power. Limited academic literature exists that discusses the effect carbon can have on the economics of a mining operation, with literature predominantly focusing on quantities of carbon produced from mining and processing activities. Results show that a $30/t carbon price increases the mining cost by 2%, while the associated cost in processing from coal and diesel consumption producing carbon, results in an increase of 0.2%. Raising the carbon price to $100/t results in the mining cost increasing by 5%, and processing costs increasing by 0.3%. Quantifying the effect of hydroelectric power over coal fired power concludes that processing costs increase by 12.7% resulting in a cut-off grade change removing 2% Cu of the ore from being economic. The revenue factor 1.00 shell examined in all cases varied less than 1% in volume, however undiscounted cash flow varied as the quantity and cost of carbon in each scenario increased. When carbon does not influence the economic viability of the operation, 4.2 Mt of CO2 is produced with mining activities producing 3.6 Mt and processing activities producing 0.6 Mt, respectively. The use of coal for power generation instead of hydroelectric results in 25.3 Mt of carbon being produced over the life of mine from both mining and milling activities, an additional 21.1 Mt when compared to the base case scenario that utilises hydroelectric power. The influence of a carbon price on a high grade coppercobalt deposit with relative high processing costs due to hydrometallurgy processing requiring gangue acid consumption, has a minor effect on optimal pit limits and cut-off grade.

Automated summary

This paper examines the effect of carbon pricing on the economic viability of a high grade copper-cobalt mine in the Democratic Republic of the Congo. The results show that carbon pricing can increase mining and processing costs, and the choice between hydroelectric and coal-fired power generation also affects the processing costs and ore economics.