Local opinion: Economic study on Copper World Project is flawed

The following is the opinion and analysis of the writer:

In debates over economic development projects, rigorous and unbiased analysis is essential. Unfortunately, the recent report by Power Consulting, commissioned by Save the Scenic Santa Ritas (SSSR), on the economic impact of Hudbay’s Copper World Project, falls short on both counts.

Peer reviews by Rounds Consulting Group (RCG), a respected Arizona-based economic consulting firm, and Davis Economics Group, Inc., a Colorado-based mineral economics firm, highlight critical flaws that undermine the credibility of the Power Consulting study. These reviews, available on copperworldaz.com, leverage RCG’s expertise in Arizona-specific economic impacts and Dr. Davis’s extensive background in mineral economics to expose significant issues in the report’s methodology and conclusions.

Flawed methodology and assumptions

The most glaring issue identified in the Power Consulting report is its flawed methodology, which fails to apply standard economic analyses to assess the project’s costs and benefits. The report selectively references outdated literature, suggesting it started with a conclusion and worked backward to find supporting data. For example, it exaggerates the impact on property values and environmental concerns without substantiated analysis. This bias detracts from a balanced evaluation of the project’s true economic impact.

Additionally, the report overstates Tucson’s economic resilience, misleadingly comparing it to broader state trends. Tucson’s slower job recovery during the last recession contradicts the report’s claim of the region’s economic robustness, overlooking the potential benefits of mining to drive significant economic growth in the area.

Inadequate assessment of benefits

The report downplays job creation and economic multipliers from the project without a rigorous analytical basis. It trivializes potential tax benefits and dismisses the significance of property and state taxes generated by the project. Contrary to the report’s claims, bringing mining jobs to Pima County would expand the local economy, introducing new skills and resources. RCG’s analysis shows that the region’s current industry composition is skewed towards lower-paying sectors. Embracing high-paying base sector businesses like mining is crucial for Tucson’s economic advancement.

Furthermore, the report’s assumption that copper price volatility dictates production and employment is flawed. Mines cannot halt operations during low-price periods due to substantial fixed costs and operational disruptions. Industry expectations even anticipate a 20% price increase by 2027, further underscoring the project’s economic viability.

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A misunderstood opportunity

The SSSR-commissioned report fails to grasp the essential role of mining in the green energy transition. Arizona’s lag in producing “green jobs” compared to the national average represents a missed economic opportunity. Partnering with mining companies to advance environmental technology could position Arizona as a leader in sustainable practices.

The report also makes a critical error in its copper demand projections. Contrary to its claims of stagnant demand, industry leaders like McKinsey & Company and Goldman Sachs project a significant increase in global copper demand driven by electrification, electric vehicles, and green technology. By 2031, demand is expected to soar to 36.6 million tonnes, while supply is predicted to fall short by 6.5 million tonnes. The notion that the Copper World Project is unrelated to green energy ignores copper’s critical role in renewable energy systems and electric vehicles. As the clean energy sector grows, so will copper demand, making mining projects like Copper World integral to the state’s future.

Disregard for economic realities

The Power Consulting report also shows a lack of understanding of Arizona’s economic dynamics and public policy. The assertion that mining is irrelevant to the local economy demonstrates a fundamental misapprehension of economic principles. The report’s incorrect assumption about the mine’s break-even copper price reveals a serious oversight and failure to understand the economics of the Copper World Project. The report states the break-even point at $3.75 per pound, but Hudbay’s Pre-Feasibility Study shows a sustaining cash cost of $1.81 per pound, which is equivalent to its break-even point. This error undermines the report’s credibility and casts doubt on its overall conclusions.

Additionally, consider the broader economic context of U.S. copper production. In 2023, U.S. mines produced copper worth an estimated $9.9 billion, with Arizona contributing about 70% of that total. This underscores the substantial economic contributions of mining projects like Copper World to both the state and the nation.

Conclusion: A call for reassessment

In light of these critical flaws, both RCG and Dr. Davis recommended that the SSSR-commissioned report be withdrawn as it fails to provide an accurate, unbiased analysis of the Copper World Project’s economic impact. The economic future of Pima County hinges on informed decision-making grounded in reality, not ideology. As stakeholders in Tucson’s growth, it is imperative that we support projects that can drive sustainable development and secure the region’s economic future.