The great metals boom: A retrospective

The metals boom that ran from 2003 to 2008 represented the most powerful and sustained such boom since the Second World War. As the boom gathered momentum, the notion began to emerge that commodities were at the beginning of a multi-year ‘super cycle’ driven by demand growth in the emerging economies and, in particular, China. The persistence of the boom helped sustain this belief right up to the point when metal prices collapsed in the second half of 2008. Looking back over the period, much of what occurred can be readily explained by the unusual strength of the demand shock and the lagged response of the supplying industry, with prices receiving an additional boost from the activities of commodity investors. There is, however, some evidence to suggest that the combination of downward pressure on the costs of manufactured goods and upward pressure on the costs of mineral commodities which accompanied the boom marked a shift in the terms of trade between these two product groups. This in turn seems to have brought to an end the sustained decline in real terms metal prices that occurred in the years following the boom of the 1970s. In sum, the key structural change taking place may not have been on the demand side of the industry as the super cyclists maintained, but on the supply side.     

The forgotten resource curse: South Africa's poor experience with mineral extraction

Studies of the resource curse as it affects African states abound, yet few deal specifically with the experiences of South Africa. The inability of countries to convert natural resource wealth into income and improved development measures remains highly pertinent and is especially apparent in Africa's largest economy. This paper takes a unique approach to study the resource curse by comparing South Africa's political economy with the existing resource curse literature. Using data from international organisations, studies of poverty and qualitative evidence this paper examines South Africa's experience with mineral extraction. It is found that South Africa has experienced many of the symptoms outlined in the resource curse literature including relatively slow GDP growth, gross inequalities, entrenched poverty and the creation of a rentier state. Overall, it is concluded that South Africa has failed to benefit from natural resource wealth and can be classified as a resource cursed state. Not only has mineral wealth failed to benefit much of South Africa's population, sections of society have actually been harmed through the process of mineral extraction. This paper is the first to examine South Africa in light of the current resource curse literature and to conclude that the state far more closely resembles its sub-Saharan African neighbours than its upper-middle income peers.     

Statistical considerations of progressive value and risk in mineral exploration

Financial markets recognise maximisation of expected value (E), in an essentially risk-neutral context, as the main corporate financial objective of private enterprise. This may be valid for large, integrated mining companies. Yet, most junior and middle-size exploration companies behave in a risk-averse fashion when making decisions about progressively more expensive exploration programs. From their perspective, a potential increase in expected value from either an increase in target value or related probability of discovery, or both, may not be a sufficient incentive to embark in an exploration programme if the resultant increase in expected value is accompanied by a significant increase in possible maximum loss. Risk-averse explorers may be unwilling to bear larger, albeit less probable losses, when the cost of successive exploration programmes is taken into account. The paper provides a practical methodology for such explorers to optimise the decision whether to progress to the next stage of exploration or to farm out a risky project. It uses a decision-tree model incorporating the effectiveness of the proposed exploration programme, the explorer's risk tolerance and related utility values and the probability distribution of the possible value of the exploration target.     

New mercantilism: A perspective on how politics is shaping world metal supply

The major countries consuming metals tended historically to be also the major countries producing them. It was in their interest to promote mine development to provide low cost raw materials. Over the past fifty years, the share of global production accounted for by consuming countries has declined and producers and consumers of metals have been slowly moving into separate camps having distinct and differing interests. As a consequence of this, governments of producing countries have become more focused on how to maximise the benefit of metal extraction to their economies rather than on how to supply cheap raw materials; a tendency which has found expression in resource nationalism. Governments of consuming countries have in response become increasingly concerned about the implications of this tendency to their economic development and some countries, most notably China, have adopted robust policies to secure their supplies. Through their actions to influence capital flows within the mining industry and to force metals trade into channels which better serve their national interests (a process characterised here as ‘new mercantilism’), metal producing and metal consuming countries are reshaping global supply.     

Mercury: An agent of poverty in Ghana's small-scale gold-mining sector?

There is consensus worldwide that the artisanal and small-scale mining (ASM) sector is comprised of individuals who are trapped in a vicious cycle of poverty, lacking the necessary financial and technological means to improve their standards of living. Minimal work, however, has been undertaken to identify the very factors behind miners’ plight, which inevitably vary from country to country. This paper uses a case study of Ghana to argue that an increased dependence upon mercury for amalgamation in artisanal gold-mining communities is one such—albeit overlooked—“agent of poverty”. There is mounting empirical evidence which suggests that dealings with the monoponistic middlemen who supply mercury, purchases of costly medicines to remedy ailments caused by mercury poisoning, and a lack of appropriate safeguards and alternatives to amalgamation, are preventing gold miners from improving their practices and livelihoods. The solution to the problem lies in breaking this cycle of dependency, which can be achieved by providing miners with robust support services, mercury-free technologies and education.     

Mining and corruption

This study examines the links between mineral dependency and corruption. Specifically, it develops a cross-section econometric model that estimates the effects of per capita income, fuel exports, non-fuel exports, and average per unit value of mineral exports on corruption.     

Is corporate social responsibility possible in the mining sector? Evidence from Catalan companies

This paper examines the role and diffusion of corporate social responsibility (CSR) management, especially in relation with the adoption of other management systems, in small and medium sized companies in the surface mining industry in Catalonia (Spain). Specifically, it identifies the most salient CSR practices, procedures and metrics and the profiles of companies more prone to adopt them. To fulfill this aim, a survey has been conducted. Results show that mining companies are familiar with CSR practices, but there is not much formalization of procedures and measurement systems of CSR yet. Results show that the majority of socially responsible practices are related to environmental issues and therefore there is a relation between CSR and the application of environmental management systems. The analysis reveals that the management of CSR activities improves with the diffusion of knowledge on CSR practices. A second survey collected the opinion of professional associations in the sector. Respondents indicate that an improvement in CSR management will lead to a better global competitive position.     

The supply behaviour of state mining enterprises: A case study of the Jordanian phosphate industry

An important feature of export-oriented production in mineral-rich developing countries for almost three decades after 1960 was the growth of state-owned enterprises. For the phosphate industry, this was reflected in the expansion of companies such as Office Cherifienne des Phosphate (OCP) in Morocco and the Jordan Phosphate Mines Company (JPMC). There was a strategic importance of the industry for these nations and the large capital outlays necessary for phosphate and fertilizer production expansion often required considerable government assistance because of the perceived high risks of private investment in the industry.     

Challenges of transformation: The case of Norilsk Nickel

As Russia’s largest mining company, Norilsk Nickel was for much of its history an archetypal Soviet institution. Following the collapse of the Soviet Union and the subsequent prolonged economic crisis, in 2001 new management came into the company with the objective of transforming the company into a modern global corporation. In the years that followed, management pushed through a series of radical changes to the organisation and its operations. Simultaneous with these changes, the company extended its asset base in Russia and acquired assets outside the country. The progressive direction of the company was, however, taking it further and further out on a limb and the programme of transformation was not being matched and supported by public policy and regulation. Pressures came to a head in the middle of 2008 when a change in the structure of company’s ownership and a collapse of metal prices combined to bring about increased involvement of the state in company’s affairs and a more national emphasis to its strategic orientation.     

An uncertainty based multi-criteria ranking system for open pit mining cut-off grade strategy selection

Cut-off grade strategy (COGS) is a concept that directly influences the financial, technical, economical, and environmental issues in relation to the exploitation of a mineral resource. Despite the simple definition of cut-off grade, the COGS problem is one of the complex and complicated problems in the mine planning process. From the optimization point of view, the COGS with an objective of maximizing the present value of future cash flows is a non-linear and a non-convex problem that even in its deterministic form can be solved using approximate optimization methods. This optimization problem will also be more complex and complicated under uncertainty conditions. This paper proposes an uncertainty based multi-criteria ranking system to investigate the problem of COGS selection considering metal price and geological uncertainties. The proposed system aims at selection of the best COGS among technically feasible alternative COGSs under uncertainty circumstances. Our developed system is based on integrating metal price and geological uncertainties as well as operating flexibility to close the mine early. We incorporate this operating flexibility into the proposed system using a Monte Carlo based real options (RO) valuation model. For this purpose, in addition to the expected value, other risk criteria are considered to rank the alternatives. These risk criteria include abilities of strategies in producing extra profits, minimizing losses, and achieving the predefined goals of the production. In this study, the technically possible COGSs are generated using the Lane comprehensive algorithm. To demonstrate the effectiveness of the proposed system, we utilize data of an Iranian gold mine. Results show that the proposed system outperforms conventional methods in the sense that it shows significantly lower average mis-ranking than the other methods and also selects a strategy with a higher value. The sensitivity analysis of the proposed system relative to the gold price shows that the system is highly dependent on the parameters of the stochastic process used to model the evolution of the metal price. Therefore, special consideration should be given in estimating stochastic process parameters.     

The evolution of the Canadian mining industry: The role of regulatory punctuation

In this study, we analyze the evolution of Canada's mining industry from 1929 to 2006, focussing on the determinants of the number of firms in the industry and why this number changed over that period. Most empirical studies of industry evolution have focused on manufacturing industries that share similar structural characteristics. Perhaps because of this, extant models of industry evolution tend to ignore industry-specific and national-specific factors that can cause atypical trajectories, that is, heterogeneous industry evolution. Initial inspection of the Canadian mining industry shows that it is atypical in that it exhibits “negative skew” over time in the number of firms rather than the typical “positive skew.” We review two dominant theoretical approaches to industry evolution: the density-dependence theory and variants of industrial organization economics. We also consider possible sources of industry evolution heterogeneity, focussing particularly on “regulatory punctuation”. Using Canadian mining data, we find that the traditional models do not fully explain the changes in population size in Canada's mining industry. As a result, we introduce a number of hybrid models. The results from these hybrid models suggest that Canadian-specific regulatory punctuations, particularly the introduction of significant new taxes, environmental legislation, and incentives have shaped the trajectory of mining firm participation.     

Multiproduct mine output and the case of mining waste utilization

This article addresses the concepts of economies of scope and multiproduct production, subadditivity and transray convexity as it applies to the mining industry. The article goes on to expand these concepts to include the case of mining waste utilization. It discusses how the modification of mining wastes into a marketable product can develop a relationship across the cost functions of the modified mining waste and ore production and how this interrelationship affects the profit maximizing condition. It discusses four possible outcomes from mining waste modification and its development into marketable products on the profitability and production of ore by the firm. Finally, it discusses mining waste utilization effects on rehabilitation costs and the potential for a decrease in the adverse community effects due to mine closure.     

Lithium availability in the EU27 for battery-driven vehicles: The impact of recycling and substitution on the confrontation between supply and demand until2050

The adverse impacts of climate change are widely recognized as well as the importance of the mitigation of carbon dioxide (CO₂). Battery driven vehicles are expected to have a bright future, since GHG emissions can be reduced. Lithium-ion (Li-ion) batteries appear to be the most promising, due to their high energy density. Recently, the discussion concerning adequate lithium carbonate (Li₂CO₃) resources is resolved. The current challenge is the needed increase in flow rate of Li₂CO₃ into society to foresee in forecasted demand. This research determines ten factors which influence the availability of Li-ion batteries for the EU27 in the coming decades. They are used in a system dynamics analysis. The results of this research show that undersupply can be expected in the EU27 until 2045 somewhere between 0.5 Mt and 2.8 Mt. Substitution of Li₂CO₃ in other end-use markets and recycling can relieve the strain on Li₂CO₃ supply to some extent. In 2050, 20% of the vehicle fleet in the EU27 can be battery electric vehicles (BEVs). The lack of resources in the EU27 and the geographical distribution of lithium in politically sensitive areas suggest that the shares of lithium available for the EU27 will be less than assumed in this research. The increase in flow rate shows to be the bottle-neck for a transition to (partly) battery driven vehicles in the EU27, at least when Li-ion batteries are used. Focusing on large-scale application of BEVs with Li-ion batteries in order to substantially mitigate CO₂ emissions in transport is a futile campaign.     

How to evaluate raw material supply risks—an overview

Some strategic raw materials do have an extremely unsecure supply situation. Several working groups around the world have made criticality assessments for metallic raw materials to analyze the driving impact factors for this instability. However, the influences on raw material availability are manifold and therefore criticality assessment methods are very heterogeneous. Here we give an overview about the differences and similarities of supply risk evaluation in 15 criticality assessment methods. We take the example of Indium, which has been rated in 60% of these criticality studies, and show which data base is used for supply risk evaluation. Our results show a lack of consensus about which indicators give reliable information for raw material supply risk and how these indicators should be aggregated. We anticipate our essay to be a starting point for more justified indicator selection and weighting in criticality assessments.     

Sustainable development principles for the disposal of mining and mineral processing wastes

This paper examines the minerals industry's response to sustainable development in the area of waste disposal and argues that leadership and guidance are still needed to forge collective agreement on norms and standards of practise. To encourage further debate, the paper develops a set of sustainable development principles for the disposal of mining and mineral processing wastes, and discusses the implications for current and future practise. In practise, the principles can guide waste disposal decisions through the consideration of what risk and magnitude, in any given local context, a particular management solution poses to their application. The sustainability challenge in the management of tailings and waste rock is to dispose of material, such that it is inert or, if not, stable and contained, to minimise water and energy inputs and the surface footprint of wastes and to move toward finding alternate uses. Future trends in mining and processing may compound the challenges of waste management, as lower ore grades increase the ratio of waste produced for a given unit of resource, and emphasise the urgency and need for the industry to adopt new approaches. New technologies and innovations, such as thickened tailings, dry stacking and paste backfill, have greatly increased the waste disposal methods available to meet the future challenges to sustainable development.     

Permitting a new mine: Insights from the community debate

When a mining company selects a site for development, the company begins a dialogue with the local community about receiving the necessary approvals for the mining permits. The dialogue focuses on how well the company can use science and technology to manage risk to the local environment, and on how much economic benefit will be gained by the local community for accepting the risk. A useful approach to better understand how the debate affects the outcome of the permitting effort is to use the method of “discourse communities and analysis”. This paper analyzes two efforts by Kennecott (Rio Tinto) and one by Exxon to develop base metal mine sites in the Upper Midwest of the USA. As the three case studies show, the local pro- and anti-mining discourse community members will not be changing their basic positions as the permitting of a new mine is debated. Accordingly, both communities are trying to convince undecided stakeholders rather than talking to each other. Both sides are using ever more sophisticated media methods to communicate their message to the undecided residents of the community. By winning the support of the majority of the undecided residents, political pressure can be used to sway the decision.     

Corporate Social Responsibility and development in Africa: Redefining the roles and responsibilities of public and private actors in the mining sector

This paper revisits the role of Corporate Social Responsibility (CSR), suggesting the usefulness of adopting a holistic and historical perspective. It underlines the importance of taking into account the evolving regulatory frameworks within which mining activities take place in order to consider the changing roles played by the various actors involved, whether multilateral, national or local, public or private. In this broad context it then becomes possible to revisit issues of legitimacy, responsibility, and accountability, which CSR strategies aim to address. The article draws attention to the shortcomings of strategies, whether bilateral or multilateral, public or private, which, in an attempt to respond to problems of risk and legitimacy faced by mining companies, have put forward measures in the name of CSR that do not address the origins that give rise to such problems and, in so doing, tend to mask the very nature of the difficulties at hand. The analysis leads to quite different conclusions as compared to those that result from the adoption of a shorter term and investment-led perspective.     

Measurement of market power for the environmentally regulated Korean iron and steel manufacturing industry

For industries in which where market prices of certain inputs are not available, measuring the degree of market power by using the markup over the marginal market cost may be inappropriate. With regard to the Korean iron and steel manufacturing industry, which is subject to environmental regulations, the calculation of the price of abatement capital is hindered by a lack of relevant data. To increase the reliability of market power markups, this paper estimates the restricted cost function in which abatement capital is assumed to be quasi-fixed at an optimal level and the supply relation. The degree of market power for the industry, measured as the ratio of the estimated market power markup to the supply price, was estimated to be 0.54 on average between 1982 and 2001. The results indicate that ignoring environmental regulations can overstate the degree of market power by approximately 12%.     

Linkages in Ghana's gold mining industry: Challenging the enclave thesis

By 2009, Ghana was the second-ranked African producer after South Africa, and had become the world's ninth largest producer of gold, at some 3.8% of global production, up from 2.6% five years earlier. Gold production volumes and revenues rose significantly over the decade from 2000. Yet gold mining tends to be perceived negatively in Ghana, and is seen as providing far less than it should in terms of public revenue, employment, skills development and spillovers, and localised economic development. Gold mining is often depicted as having an enclave status, disconnected and isolated from the rest of the economy. In contrast, the research findings here demonstrate that after a period of strong investment and growth, gold mining can no longer be viewed as an enclave activity: it is in fact more deeply linked into the Ghanaian economy than hitherto understood, through a set of as yet under-researched but promising economic linkages, notably backward linkages, which can potentially be strengthened by policy and support measures.     

From landfill to water,land and life: The creation of the Centre for stone materials aimed at secondary processing

This paper focuses on the creation of a Centre for the recycling of stone materials. The Centre will be able to offer a range of activities amongst which is the improvement of the production chain of the Orosei Marble district in Sardinia, Italy. Several companies operate within the marble producing area, specializing in both quarrying and stone processing. They have formed a Consortium in order to rehabilitate an area of more than 17 ha. The restoration will be carried out through an environmentally sustainable procedure. The area was previously used as a landfill for waste deriving from marble quarrying and processing. At that time unshaped blocks of various sizes (which are unsuitable to block-cutter sawing), waste deriving from both block sawing and slab/strip cutting (such as broken slabs, strips, tiles) and microfine dust from filter presses of water treatment plants were representing an environmental problem. The local administration was struggling to find new areas which could be used for landfills, resulting in an additional cost for the landfill, ultimately affecting the variable production costs. The project involves the building of a venue to be used for temporary storage, treatment of wastes produced by both quarrying and primary processing, in order to make them suitable as secondary raw materials. The project also deals with the catch basin hydrology of the area involved in the project, the building of a multifunctional centre, the landscaping and other environmental features such as vehicle traffic and slopes greening.