Mining Quarterly, Elko, NV John L. Dobra, PH.D
Ask someone if mining is sustainable and you will likely be laughed at.
You are mining non-renewable resources. Especially metals like gold, silver, and copper are not being made anymore. Their creation requires the energy of a super-nova which we don’t want in our neighborhood. So, there is a finite amount of these resources and, the logic goes, we will eventually run out of these resources. In fact, there is a cottage industry built around proclaiming that we are running out of everything. “Industrial Ecologists” have proclaimed “peak oil,” “peak copper,” “peak fill in the blank,” and they will tell you that we are running out of everything. The only problem is none of this is borne out by the facts. But more on this later.
Another issue that weighs on the mind of mining critics is that it is a “Boom – Bust” industry, i.e., that’s proof enough that mining is not sustainable for critics. But, there are numerous explanations for commodity price cycles. First and foremost is the general business cycle. Since World War II there has been an economic slowdown about every seven years, recessions that were sometimes mild and a few times (like 1981 and 2008) strong. These events have depressed mineral commodity prices but these events have nothing inherently to do with minerals. Mineral availability is a crucial issue for economic and national security.
The other contributor to the “Boom – Bust” mantra is the fact that individual ore bodies get “mined out.” But being “mined out” is contingent on the technology available at the time they are “mined out.” Most of the mines operating today were “mined out’ a century ago. New technologies and mining methods have made re-mining possible. An added benefit of re-mining is that modern mining is subject to reclamation regulations that did not exist a century ago so we get sustainability benefits such as wildlife habitat restoration and remediation of any air and water pollution from previously unreclaimed mining sites. In these cases mining is sustainable development.
But, back to the “peak theorists,” the Chicken Littles who claim we are running out of everything. To evaluate this claim you have to look at the ratio of reserves of a mineral to its annual production, the R/P ratio. The R/P ratio tells us how many years we can keep producing minerals at the current rate of production. In an article recently published in the academic journal Mineral Economics (“Another Look at Non-Renewable Resource Exhaustion,” May 2014) with my son Matt (who is an economics professor at Methodist University in North Carolina – it’s the family business), we look at the “peak theory.” The Table below was in the paper. It shows the R/P ratio for strategically important metals using U.S. Geological Survey data.
Looking at the R/P ratios for these metals shows that we are hardly running out of resources. The metal with the lowest R/P, lead at 19 years, is hardly scarce. The reason it has a low R/P is because very few people are looking for it anymore. We’ve stopped adding it to gasoline and paint, and lead based batteries are increasingly being replaced with Lithium batteries, which we have an almost 400-year supply of based on currently known reserves and production, i.e., its R/P.
In our research we take a closer look at copper, which has a 43-year R/P. It turns out that if you go back to the 1930s, when reasonably accurate reserve and production data became available, the R/P for copper has always been around 40 years. And, it has always been around 40 years in spite of the fact that copper production today is eight times what it was in the 1930s.
The more interesting question is why? The larger point of the paper was to demonstrate that current producers have very little incentive to demonstrate the existence of reserves that cannot be mined until many years in the future. In addition, we have a very vibrant and successful exploration industry made up of small firms that do have an incentive to look for minerals. So, the “Chicken Littles” are wrong. The reserve data do not reflect how much of these minerals exist, but how much has been found (and note that we haven’t really started to explore the two-thirds of the earth’s surface that is covered with water).
Another factor is the role of technology. In the case of copper, for example, we are no longer stringing thousands of miles of copper wires to support telephones. We are substituting cell towers and the electromagnetic spectrum for copper. A common observation on this point is that the Stone Age didn’t end because we ran out of stones – we found something better, like bronze, and iron and steel. Don’t listen to the Chicken Littles. Mining is a sustainable industry, it will just need to continue to adapt.
John L. Dobra, Ph.D., is an Associate Professor
of Economics at the University of Nevada and
a Senior Fellow at the Fraser Institute.
The table below shows the R/P ratio for 15 strategically important metals using U.S. Geological Survey data.
Iron ore 61
Rare earths 846