CERRO VERDE, Peru—In this volcanic desert, a dusty moonscape patrolled by bats, snakes and guanacos, America’s biggest miner is piling on to the new force in industrial resources: supermines. It’s a strategy that could be driving miners into the ground.
Freeport-McMoRan Inc. is completing a yearslong $4.6 billion expansion that will triple production at its Cerro Verde copper mine, turning a once-tiny, unprofitable state mine into one of the world’s top five copper producers.
As Cerro Verde’s towering concrete concentrators grind out copper to be made into pipes and wires in Asia, it will add to production coming from newly built giant mines around the world, in a wave of supply that is compounding the woes of the depressed mining sector.
Slowing growth in China and other emerging markets has dragged metals prices into a deep downturn, just a few years after mining companies and their investors bet billions on a so-called supercycle, the seemingly never-ending growth in demand for commodities.
Back then, miners awash in cheap money set out to build the biggest mines in history, extracting iron ore in Australia, Brazil and West Africa, and copper from Chile, Peru, Indonesia, Arizona, Mongolia and the Democratic Republic of Congo.
They also expanded production of minerals such as zinc, nickel and bauxite, which is mined to make aluminum.
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