SNL Metals Economics Group, a major provider of global mining industry information and analysis, says global copper production in 2012 was characterized by higher costs and lower grades.

Capital and operating costs are up due to increases in energy bills, taxation, royalties and environmental approval costs. Meanwhile ore head grades are falling, the company reported in a recent study titled “Strategies for Copper Reserves Replacement Study."

The study tracked average capital costs for new copper mines and found that they increased by an average of 15% per year over the past 20 years – particularly in 2008.

"Cash operating costs at major mines also increased significantly, more than tripling over the past ten years, to an average of almost $1.50/lb in 2012," the report says.

Despite discovering 100 additional copper sites between 1998-2012 – with almost 395 million mt of the metal – mining companies have only converted one-tenth of these deposits into reserves. SNL associates this with high costs, political roadblocks and poor market conditions. Latin America accounted for a great majority of new discoveries.

The decline in grades is attributed to companies mining high-grade zones at the onset of operations in order to cover start-up expenditures.

"From 2001 to 2012, the weighted-average head grade at 47 producing mines with comparable data declined by almost 30%," the report reads. "Not only are head and reserve grades declining at existing mines, the average ore grades of copper in new discoveries and developing projects also declined over the period."

On a brighter note, the report also noted that copper production is on the rise. Looking at 22 major copper producers, SNL says aggregate annual production rose by 39% to 11.2 million mt in 2012.

As with other metals, copper prices have been on a downward trend this year but some optimism lies with China increasing imports of the resource. Copper was trading at $3.17 on the New York exchange on Monday, up from $3.06 a few weeks earlier.