Technological Innovation and Sustainable Competitive Advantage in the Copper Industry – Real or Imaginary?

"Technology development and innovation has played a crucial role in the copper industry throughout history. The effective development and implementation of new technologies allows mankind to produce copper at progressively lower cost of production at a given feed grade and mineral type. This progress serves to counteract cost inflation/escalation over time and, depending on the magnitude of the cost benefit, allows ore cut off grades to be reduced thereby improving the availability, accessibility and utilization of resources. Two broad categories of technology development and innovation play a key role in this process: (i) incremental improvements and optimization of existing technology provide benefits in the near- to medium-term, and (ii) step change technologies provide value over the longer term. A key issue for potential developers and implementers of new step change technology is how to justify resource allocation and expenditures for such initiatives. This paper examines this issue with reference to specific case studies in the copper industry. INTRODUCTION AND BACKGROUND Technology development and innovation has played a crucial role in the commodity minerals industry throughout history, and none more important than the copper industry. As new, cost-efficient technologies are commercialized, the cost of production in real terms at a given ore feed grade and mineral type decreases. This progress enables ore cut off grades to be reduced allowing lower grade material to be processed economically, which in turn increases the availability and supply of the metal or mineral of interest. Cost inflation/escalation works in the opposite direction, squeezing margins for operations utilizing incumbent technology to process material from a given ore deposit. A prior review by the author considered the issue of technology development and sustainable competitive advantage. This review concluded that first movers and fast followers can achieve competitive advantage for periods of 10-15 years through effective deployment of new technologies (Marsden, 2004). A new, more comprehensive study and evaluation was completed in 2014. This paper presents a portion of the results from the 2014 study."