Udokan Copper, a company developing Russia’s largest copper deposit, is scheduled to start production in 2023 and is betting big on the Asian markets. Erkozha Akylbek, the Chairman of Udokan Copper’s board of directors and CEO of USM Holdings, its shareholder, spoke to ET's Dipanjan Roy Chaudhury about the details of the project and plans for India.
What makes the Udokan copper deposit important and unique on an international scale?Erkozha Akylbek, chairman of Udokan Copper's board of directors, told ET that the company is ready to supply copper to support India's transition to net zero. India's electric vehicles, solar panels and wind turbines require copper.
Well, it’s one of the largest copper deposits in the world. Udokan contains almost 27 million tons of copper resources. To put that figure into context, the market price for copper is now about $7,700 per ton. This means that these volumes of copper could have a value of over $200 billion once mined and processed. It’s not that simple of course, since we will be processing and selling Udokan.
At a full-scale production with regards to the considered expansion of Udokan volumes are set to reach 0.4 million tons per year.
Udokan is located in the Zabaikalye region in Russia’s Far East. It’s a sparsely populated region with winter temperatures falling as low as -60° Celsius. Soviet geologists compared its riches to the famous Copperbelt in Central Africa. However, the location’s remoteness and geological complexity and lack of proper technology have been curbing the development of Udokan for decades. The deposit contains three types of ore; sulfide, oxidized and mixed, which cannot be separated from each other.
After the world’s renown investor and philantropist Alisher Usmanov acquired the license to develop Udokan in 2008 with his partners, a combined production technology was developed to address this issue. At the moment the deal was the biggest one in the mining industry. Being a visionary Mr. Usmanov considered the project as a step to the sustainable future with perspective increasing demand for copper as a metal of new era.
The developed and patented two-staged technology is environmentally friendly and includes ‘flotation’ and the second step —‘hydrometallurgy’.
What facilities do you plan to launch next year?
Our production complex includes the enrichment plant for flotation and the hydrometallurgical plant. We plan to launch both in 2023, a few months apart from each other. The complex will have an annual production capacity of 135,000 tons of copper.
Also we are working on a feasibility study for the second phase of Udokan’s development that would enable an increase in annual production capacity to 400,000 tons of copper.
Where do you plan to sell your copper?
Due to our geographical location close to the Baikal-Amur Mainline railroad, the Chinese land border and seaports at Russia’s Far East means that it is most attractive to export to Asia, mainly to China, which accounts for over half of the world’s copper consumption.
Given its large population and growing economy, India is likely to catch up, ensuring the growth of global demand of copper. The country’s consumption of the red metal is set to triple over the next decade, according to the International Copper Association. Already used in construction, machinery production and electronics, copper will gain additional demand from sectors involved in the transition to net-zero.
India’s Prime Minister Narendra Modi has committed to reach net-zero carbon emissions by 2070. The country aims to reach 450 gigawatts of installed renewable capacity by 2030. Sales of electric vehicles in India are also set to surge to 17 million by 2030 from less than 0.4 million last year, according to the India Energy Storage Alliance. Electric vehicles, solar panels and wind turbines require copper, which would therefore also boost its demand.
You mentioned the push to reduce emissions and switch to cleaner energy as an important driver for copper demand. What is Udokan Copper itself doing to become more environmentally friendly?
We have started to estimate our environmental footprint and are working to reduce it even prior to the start of operations. We chose the hydrometallurgy production method as it generates much less air pollution compared to pyrometallurgy, which is used by many copper producers.
We started the project with energy sources available in the region. However, in the second phase of Udokan’s development we will rely on renewable energy. In September, we signed an agreement with the Russian renewable energy producer RusHydro. This goal will be implemented through a combination of direct purchases of renewable energy and trading ‘green energy’ certificates on the market.
By 2035, we aim to reduce the carbon intensity of our operations by 75%, which would reduce emissions throughout our supply chain. This is also an important factor for our customers, the majority of which would prefer to purchase copper produced with lower carbon emissions.
Where do you see the price of copper in the future?
Commodities are volatile these days. China, which drives the demand for many of them, has suffered from Covid-19 lockdowns and a property crisis. We are relying on the forecasts for copper prices atabout $10,000 per ton in the mid-term.
We believe that the net-zero transition will boost the demand for copper in the coming decade, though the potential to increase supply is limited for various reasons. New projects take time to develop. Governments in copper-producing countries try to increase taxes for mining companies. Udokan is one of only a few greenfield projects entering the copper market with large volumes of additional supply.
