COVID-19 and its impact on global economies has done what two World Wars, countless economic cycles, and less-regulated foreign competition has been unable to do for more than a century– bring copper mining to a halt in Cochise County.
In March, Excelsior Mining shut down its new, state-of-the-art Gunnison Copper Project facility in Dragoon, along with the nearby historic Johnson Camp Mine where copper was first pulled from the ground in the 1890s. And even though many businesses in Arizona are reopening under social-distancing and safety guidelines, Gunnison’s mining equipment remains dormant.
The problem, according to the company, is that COVID-19’s ripple effect has left Excelsior unable to secure a reliable mid-term supply of the acid critical to its in-situ mining process.
“Because of the pandemic, supply chains around the world have been disrupted and the supply chain that impacts us is the one that delivers sulphuric acid,” according to JJ Jennex, Vice President of Corporate Affairs. “For example, Grupo Mexico, which is a major acid supplier, is not currently supplying any acid to the USA.”
Jennex noted there is too much volatility in the acid market at the moment, but he believes that as the U.S. and global economies get back on-track, “balance will return to these supply chains and we will then be able to source acid.” He also said Excelsior wants to ensure the pandemic will not require a second round of government-imposed business closures before the company starts to hire back staff.
Yet despite the current challenges, the company absolutely expects to produce copper this year, Jennex said.
“The only thing I cannot give you today is a hard date as we are still waiting for clarity to return to the markets,” he noted. “It would be costly if we re-started and then had to shut-down again.”
Jennex added that some personnel remain at Gunnison and Johnson Camp to provide for onsite maintenance and safety protocols.
In 2015, Canada-based Excelsior bought the historic Johnson Camp Mine out of receivership for less than $9 million for use in processing the copper-bearing solution that would come from the Gunnison wellfield being constructed about one mile away. Industry estimates show more than 2 billion pounds of pure copper cathode can be produced out of the 9,560-acre Gunnison site over the next 24 years.
Then in October 2018, Gunnison became the first new copper mine to be fully permitted in the U.S. in more than a decade. The company then expended millions of dollars for infrastructure, testing, and training that allowed it to commence some mining operations in January.
On March 11, the company announced a purchase-sale agreement with a buyer for 100 percent of the copper cathode that would be produced in 2020 at the company’s two Dragoon properties. At the time, the expectation was that operations would shift to full production mode by the end of June.
But two weeks later, Excelsior suspended operations and let go 65 percent of its workforce in response to COVID-19.
Copper is crucial to a number of industries, including construction, power generation, water sanitation, and transportation. In recent years there has been more demand than supply, with the United States and China being the world’s biggest consumers of copper, but demand has slightly lessened this year, first because of China’s slowing economy and then from the pandemic.
Global prices for copper tanked in mid-March as it became clear COVID-19 would have far-reaching global impacts. However, prices have since steadily increased and are now at the same level as February.
Earlier this month, several financial analysts increased price forecasts for copper, due in part to an uptick in China’s economy. It is also forecast that the five largest suppliers of copper -Chile, Democratic Republic of the Congo, Indonesia, Peru, and the Unites States- will collectively increase output by nearly 2 metric megatons, or more than 4 billion pounds, over the next three years.
Excelsior and its Gunnison mine intend to contribute to that increase, Jennex said.