Early in September, a mud rush estimated to be 800,000 tons erupted and quickly swept through a large section of the Grasberg mine owned by Freeport-McMoRan in Indonesia. Two workers are confirmed to have died in this disaster and five more are still missing.
Grasberg ranks as the number two largest copper mine around the globe, and its output in 2024 accounted for 4% of the total output around the world. Right now, operations at the mine have been suspended as all focus goes to locating the missing employees. Freeport estimates that at the earliest, normal operations at the mine will resume in 2027.
The Grasberg incident brings to light a number of factors showing how fragile the supply chain of the metal is around the world. For starters, extraction companies are being compelled to dig ever so deeper into the ground in order to reach additional deposits of the metal to meet the growing demand. This increases the risk of incidents happening at mining sites, and with each incident that happens, there is a shock to the expected supply.
This fragility is driven home by the fact that thus far in the year, three disasters have already struck copper mining operations around the world. The first incident happened in May when a mine owned by Ivanhoe Mines in the DRC flooded after seismic activity in the area. Several months after the incident, the company is still busy pumping out the flood water before other restoration activities can begin. In July, Codelco, the government-owned copper mining company in Chile was hit by a collapsed tunnel at one of its locations. To-date, no definitive cause of the incident has been identified in the ongoing investigation.
Each such major incident shocks the supply side of the market and prices quickly climb. This is especially true given the fact that copper production is increasingly being concentrated in the hands of a few major players. For example, the leading 20 producers of this metal account for nearly 40% of output around the world. When one such company is hit by an incident, the resulting shock to supply tends to have an outsized impact since it throws out of whack the global output forecasts for a given year.
The Grasberg incident has, unsurprisingly, caused copper to jump to its highest level in 15 months, reaching $10,485 a ton last week after Freeport announced force majeure in its operations.
Because of the incident in Indonesia, the expected supply deficit for next year has suddenly ballooned to 400,000 tons from the previous estimates of 72,000 tons. That’s how much an incident at a major firm can shock the supply chain the world relies upon. As exploration companies like Torr Metals Inc. (CVE: TMET) advance their programs, hopefully, more production sites will ease the shocks triggered by incidents.
NOTE TO INVESTORS: The latest news and updates relating to Torr Metals Inc. (CVE: TMET) are available in the company’s newsroom at https://ibn.fm/TMET
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