A declining rate of copper deposit discovery poses a long-term threat to copper supply for an industry where it typically takes more than 15 years to steer discoveries to production, according to S&P Global Market Intelligence analyst Kevin Murphy.

"These future mines really need to be in feasibility now, but they aren't," Murphy said.

Calling it a "dismal decade," Murphy said in a June 15 research report that 2010-2019 will stand as the worst 10-year period for major discoveries since 1990. Murphy noted that 224 major copper discoveries were made since 1990, but only 16 were found in the past decade, and there has been just one major discovery since 2015.

While the sector has ample reserves to meet demand in the near term, the sector faces a drop-off in mine supply in a decade or so, with few major copper developments entering the project pipeline. It is a long-term issue without a simple solution.

Murphy, as have other analysts, said the mining sector increasingly steered exploration funds to near-mine targets in recent decades rather than riskier early-stage projects or greenfield exploration. Greenfield copper budgets have been cut in half since 1990 in terms of their share of exploration spending, Murphy noted.

"Companies are focusing more on established assets: juniors at projects with established resources and majors at and around their mine sites," Murphy said in the research report. "Although some new major discoveries have been found at late-stage projects and existing mining camps, the probability of finding new major discoveries at such projects is lower than at riskier, early stage prospects."

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A supply crunch, should it materialize, may push copper prices higher in the longer term, which could make lower-grade deposits more economic to develop and incentivize greenfield exploration.

Overall copper exploration budgets peaked in 2012 at US$4.70 billion but have since declined, with major miners focused on driving down costs and paying back debt. Cost discipline has emerged as a key theme for miners in recent years as they seek to avoid chasing volume and instead target higher margins.

As a result, copper exploration budgets have been slashed, falling to US$1.58 billion in 2016 and subsequently climbing gradually to hit US$2.32 billion in 2019. Less funding and a move away from greenfield exploration have contributed to declining discovery rates as miners focus on their bottom lines, according to Murphy.

"If you need tires for your truck, you're going to buy those first," he said, adding that exploration is often one of the first items to see budget cuts when miners face weaker metal markets, as they have in recent years.

Joe Mazumdar, who heads up Exploration Insights, described the sector as lacking incentive to focus on copper and, like Murphy, said declining discoveries would eventually catch up to the market.

"These guys are not finding enough copper, and the problem is, there's going to be a window, 2025 plus, where a lot of these projects, if they don't exist now, they're not going to fall from space to Earth and deliver a deposit," Mazumdar said.

Mazumdar said the dearth of copper discoveries has pushed miners to move forward with deposits that are more challenging to exploit, particularly in terms of metallurgy. Mazumdar noted that cleaner ore, with less toxic material that needs to be removed, is increasingly rare.

"Those are the things that are happening in the background to make deposits that, probably in a good copper market with a lot of projects, would be at the bottom of the barrel," Mazumdar said. "Everybody's got the same problem."

One bright spot for copper discovery and project development may come in the price of gold, which has climbed in 2020, Mazumdar said. Gold and copper are often paired in some larger deposit types, such as porphyries, and gold explorers and more diversified miners may leverage that pricing strength to focus on this type of ore.

"The people that can see it and could do something about it are the diversifieds and the gold miners looking for porphyry copper with gold credits," Mazumdar said. "But the copper miners right now can't do anything about it."