USGS study brings to light seismic risks to mineral supplies, as powerful earthquake hits Chile's copper and lithium region.

On the same day that the United States Geological Survey released a study warning of seismic risks to global mineral supplies, a magnitude 7.3 earthquake struck near Chile's Escondida mine, the world's largest copper mine. This confirms the vulnerability of these resources to earthquakes, emphasizing the potential for significant supply chain disruptions in highly seismic regions.

Yesterday, the USGS released a detailed study introducing a new methodology for assessing the potential risk of seismic activity on global mineral supplies. Initially focused on copper and rhenium, it examined the potential effects of earthquakes on mining, smelting, and refining operations.

"The potential impacts of earthquake hazards on global mineral commodity supplies have previously not been systemically quantified," said USGS Chief of Minerals Intelligence Research Nedal Nassar

The study highlights that many of the world's largest copper mines and processing facilities are located in highly seismic regions like South America, East Asia, and the Pacific – areas well known for their frequent tectonic activity due to their position along major fault lines.

Public Domain

World map of expected annual disruption of copper refinery production, in metric tons, from potential seismic activity.

In fact, 76 of the 101 copper-producing facilities in South America, which account for over 80% of the continent's copper output, are situated in hazard zones.

According to the data, this means that earthquakes could potentially disrupt 0.3 to 1.1% of global copper mine production, 1.8 to 4% of smelter output, and 1.5 to 3.3% of refinery operations annually.

For rhenium, a copper byproduct that is used in jet engines, the expected annual disruption ranges from 0.32 to 1.32%.

While these percentages might seem small, they translate to substantial quantities when considering the worldwide scale of production.

Given the global dependence on copper for various industries, even minor disruptions can lead to substantial economic impacts and ripple effects across supply chains. For example, a 1% disruption in copper production could equate to a shortfall of hundreds of thousands of metric tons, directly impacting construction, electronics, energy transmission, and transportation.

Similarly, disruptions in rhenium supply can significantly affect the aerospace industry due to its critical role in high-performance alloys.

"While our study assessed the potential for the disruption to the supplies of copper and rhenium due to earthquake hazards, this published framework will serve as a template for other mineral commodities of interest around the world," said USGS research structural engineer and lead author of the study Kishor Jaiswal.

The economic implications of such disruptions are also a major factor. The study estimates potential lost revenue from earthquake-induced interruptions to range from $315 million to $1.29 billion for copper mining, $1.92 billion to $4.33 billion for smelting, $2.06 billion to $4.52 billion for refining, and $337,000 to $1.4 million for rhenium production capacity.

These financial losses can trickle down through the entire supply chain, causing operational setbacks, job losses, and increased costs for manufacturers. Ultimately, this impacts consumers with higher prices and can even affect national economies that rely heavily on mining revenues.

Seismic impact

USGS

Just a few hours after the USGS released its study, a magnitude 7.3 earthquake struck northern Chile near the Escondida copper mine and Salar de Atacama lithium operations.

This major seismic event emphasizes the findings of the USGS report, as the Antofagasta region where the earthquake is centered is a critical hub for both copper and lithium production.

The epicenter of the tremor was located roughly 28 miles (45 kilometers) outside San Pedro de Atacama, at a depth of 73 miles (117.4 kilometers) and 265 miles (164 kilometers) east of the coastal city of Antofagasta. The quake struck at 9:50 p.m. local time on July 18, 2024.

Initial reports indicate that while the quake caused some operational disruptions, no significant damage has been reported at major mining operations, including Escondida and the Salar de Atacama lithium operation.

Escondida, owned by BHP (57.5%), Rio Tinto (30%), and Japan-based JECO Corp. (12.5%), produces approximately 2 billion pounds of copper annually, essential for various industries, including construction, electronics, and energy.

Similarly, SQM's Salar de Atacama is one of the world's richest sources of lithium, a metal crucial for the production of rechargeable batteries used in smartphones, electric vehicles, and other electronics. Any significant disruption at these sites could exacerbate global supply shortages and drive up prices, impacting both the broader industrial sector and the renewable energy market.

Chile is situated along the Pacific "Ring of Fire," a loop of intense seismic activity that stretches from Japan through Southeast Asia and across the Pacific basin.

This geographic context highlights the vulnerability of Chile's mining operations to such natural disasters.

In 2010, an 8.8-magnitude quake unleashed a tsunami that swept away entire villages, resulting in the loss of about 520 lives, underscoring the devastating potential of seismic events in this region.

The recent earthquake emphasizes the importance of the findings in the USGS study, highlighting the seismic risks to critical mineral supply chains. The tremor near the Escondida copper mine and Salar de Atacama lithium operation serves as a reminder of the vulnerability faced by mining operations and the communities around them.

Effective emergency response plans, community education, and sustainable mining practices are important to mitigate these risks and protect lives.

The USGS study provides valuable insights for understanding these risks and preparing for future seismic events. Implementing its recommendations can enhance the resilience of global mineral supply chains and support the communities that depend on these vital industries.