ECONOMICS OF MINING��MINNESOTA MINERALS EDUCATION WORKSHOP��Hibbing Community College, Hibbing Minnesota�June 18, 2013��
presented by Henry (Rick) Sandri, Ph.D., Mineral Economics
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Rick Sandri – Background
Education
Work Experience
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Some General Definitions:
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Non-Renewable Mined Metals & Minerals
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Economics – The Study Of Choice
As an individual, for example, you face the problem of having limited resources with which to live, as a result, you must make certain choices with your time and money.
You'll probably spend part of your money on rent/ mortgage, energy, food and clothing. Then you might use some of the rest to purchase entertainment or a vacation. Some may go to education or savings.
Economists are interested in the choices you make, and inquire into why, for instance, you might choose to spend your money on a new DVD player instead of replacing your old TV.
They would want to know whether you would still buy a carton of cigarettes if prices increased by $2 per pack, $8 per pack, $20 per pack.
The underlying essence of economics is trying to understand how both individuals and nations behave in response to certain material constraints.
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Economics, including Mineral Economics,
is made up of two basic fields of study:
Micro Economics & Macro Economics
Micro Economics – The study of the economic behavior of individual units of an economy (such as a person, household, firm, or industry) and not of the aggregate economy.
Macro Economics – Study of the behavior of the whole (aggregate) economies or economic systems instead of the behavior of individuals, individual firms, or markets
Natural Resource Economics (including Mineral Economics) – The study of economics as it applies to the natural resource industry and environment, including Micro and Macro Economics.
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The Essence of Economics
Supply, Demand & Price
Supply - A fundamental economic concept that describes the total amount of a specific good or service that is available to consumers. Aggregate supply is the supply from all suppliers.
Demand - An economic principle that describes a consumer's desire and willingness to pay a price for a specific good or service. Aggregate demand is the demand from all consumers.
Price - A value that will purchase a finite quantity, weight, or other measure of a good or service.
Price Equilibrium - The equilibrium price is the price where the goods and services supplied by the producer equals the goods and services demanded by the customers.
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The Law of Demand
The law of demand states that, if all other factors remain equal, the higher the price of a good, the less people will demand that good.
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Demand & Price
Example: Coffee Demand per Month
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The Law of Supply
The law of supply states that the higher the price of the good, the higher the quantity supplied to the market.
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Supply
Example: Cumulative supply of copper from 10 individual mines
Supply Curve
$ per Pound
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Supply, Demand & Price Equilibrium
When supply & demand are equal the economy is said to be at equilibrium. At this point, the allocation of goods is most efficient because the amount of goods being supplied is exactly the amount of goods being demanded.
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Surpluses & Shortages
Surpluses occur when supply exceeds demand (no longer in equilibrium) and shortages occur when demand exceeds supply (no longer in equilibrium). Over time the market will adjust to equilibrium.
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Demand Curve Adjustment
A movement along the demand curve will occur when the price of the good changes and the quantity demanded changes in accordance to the original demand relationship. In other words, a movement occurs when a change in the quantity demanded is caused only by a change in price, and vice versa.
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Supply Curve Adjustment
A movement along the supply curve will occur when the price of the good changes and the quantity supplied changes in accordance to the original supply relationship. In other words, a movement occurs when a change in the quantity supplied is caused only by a change in price, and vice versa.
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A Change in Supply, Demand & Price
A new equilibrium will be established with a change in supply and demand. This may or may not result in a new equilibrium price.
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The Economics of Mining
This is the traditional view of the competition between Environmental Concerns, Social Needs, and Economic Desires, resulting in a Sustainable Target Area.
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The Economics of Mining
However, this is the newer view of the “nested” competition between Environmental Concerns, Social Needs, and Economic Desires, resulting in much larger Sustainable Target Area.
This is one of the major challenges in Natural Resource Economics.
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The Economics of Mining
Copper – As An Example
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The Economics of Mining – Copper
2012 Copper Uses (Demand)
2012 World Copper Demand – 20,000,000 metric tonnes (44 billion pounds) of copper.
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Where is Copper Found?
Numerous countries, but most occurrences are small and uneconomic. Most active copper mines are clustered in geologic formations, such as the Chile-Peru-Ecuador-Colombia Porphyry Copper Belt.
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The Economics of Mining – Copper
2012 Copper Supplies (Sources)
2012 World Copper Supply – 17,000,000 metric tonnes (34.5 billion pounds) of copper from new mines and 3,000,000 metric tonnes (6.6 billion pounds ) from recycling.
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2% Copper – Medium –High Grade Mineralization
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2 out of 100 parts (2%) are copper, the other 98 parts (98%) are waste.
This is considered medium to high grade for copper .
Mineral Occurrence in the Earth’s Crust verses Mineable Grades
Aluminum 8.2% 49%
Iron 6.3% 25%
Titanium 0.6% 2%
Nickel 0.009% 1%
Copper 0.007% 0.3%
Lead 0.001% 0.1%
Platinum 0.00006% 0.001%
Gold 0.00003% 0.0008%
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Orebodies Are Not Perfect
You Typically Cannot Mine 100%
The extraction of ore usually results in the extraction of significant waste rock as well. This waste must be handled, and in some cases treated.
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3:1 Waste to Ore Ratio
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3 tonnes to the waste pile, 1 tonne to the plant for processing. This can alter the economics significantly. Higher grade is always preferred.
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Example Of A Open Pit Copper Model
Whim Creek, Australia
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Underground Mining
A Possibility If The Grade Is High Enough
Sulphur Springs Deposit in Montana – a new discovery @ +2.5% Cu.
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Discovering & Opening A Copper Mine
On a 100 million metric tonne mine – 10 to 20 years and $500 million to $1 billion expended before the first pound of copper is produced.
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Copper Mine Project – Operations Example
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The Chocolate Chip Cookie Mine
The following handout is a working example of project that you can bring back to your classrooms using chocolate chip cookies as mines.
The project involves the students to ‘acquire’ land assets (cookies), equipment (toothpicks & paperclips), and mine for ore (chocolate chips), while filling out an economic / financial sheet, similar to the one on slide 25. The handout has instruction for carrying out the exercise.
The example allows the students to conceptualize some of the complexity of mining and finance, while having fun extracting chocolate chips.
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Economic Of Mining
Question or Comments?
Thank You
This Session is followed by the
Mineral Economics Lightning Round
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Mineral Economics
Lightning Round
Fun!
Excitement!
Prizes!
33
Mineral Economics
Lightning Round
1 A
Titanium -
Principally
used in:
Aircraft
Paints / Plastics
Sporting Goods
34
Mineral Economics
Lightning Round
1 B
Titanium -
Principally
used in:
Aircraft
Paints / Plastics
Sporting Goods
✔
35
Mineral Economics
Lightning Round
2 A
Where is the world’s largest un-mined copper nickel deposit?
United States
Russia
China
36
Mineral Economics
Lightning Round
2 B
Where is the world’s largest un-mined copper nickel deposit?
United States - Minnesota
Russia
China
✔
37
Mineral Economics
Lightning Round
3 A
Gold -
Largest Producer
South Africa
United States
China
38
Mineral Economics
Lightning Round
3 B
Gold -
Largest Producer
South Africa
United States
China
✔
39
Mineral Economics
Lightning Round
4 A
Oil – What is its
Classification?
Animal
Mineral
Vegetable
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Mineral Economics
Lightning Round
4 B
Oil -
Classification
Animal
Mineral
Vegetable
✔
✔
✔
41
Mineral Economics
Lightning Round
5 A
What is a Picul?
Tin Weight
Steel Acid Bath
Copper Trading Derivative
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Mineral Economics
Lightning Round
5 B
What is a Picul?
Tin Weight
Steel Acid Bath
Copper Trading Derivative
✔
43
Mineral Economics
Lightning Round
6 A
What Two Metals Have Distinct Colors?
Aluminum & Nickel
Iron & Platinum
Gold & Copper
44
Mineral Economics
Lightning Round
6 B
What Two Metals Have Distinct Colors?
Aluminum & Nickel
Iron & Platinum
Gold & Copper
✔
45
Mineral Economics
Lightning Round
7 A
What New Mineral/Metal Discoveries Are Significant For Minnesota?
Platinum, Titanium
Nickel, Cobalt
Copper, Gold
46
Mineral Economics
Lightning Round
7 B
What New Mineral/Metal Discoveries Are Significant For Minnesota?
Platinum, Titanium
Nickel, Cobalt
Copper, Gold
✔
✔
✔
47
Mineral Economics
Lightning Round
8 A
Elemental Concentration
in the Crust – Highest Metal Concentration
Boron
Iron
Silicon
48
Mineral Economics
Lightning Round
8 B
Elemental Concentration
in the Crust – Highest Metal
Boron
Iron
Silicon
✔
49
Mineral Economics
Lightning Round
9 A
Which metal/mineral is the largest produced in Minnesota?
Iron Ore
Building Stone
Sand & Gravel
50
Mineral Economics
Lightning Round
9 B
Which metal/mineral is the largest produced in Minnesota?
Iron Ore
Building Stone
Sand & Gravel
✔
51
Mineral Economics
Lightning Round
10 A
What is the
best metal for conducting electricity?
Bismuth
Copper
Silver
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Mineral Economics
Lightning Round
10 B
What is the
best metal for conducting electricity?
Bismuth
Copper
Silver
✔
✔
53
Mineral Economics
Lightning Round
11 A
Cobalt is named for what?
Blue Color
Discovery in Kobal, Germany
Gremlin Metal
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Mineral Economics
Lightning Round
11 B
Cobalt is named for what?
Blue Color
Discovery in Kobal, Germany
Gremlin Metal
✔
55
Mineral Economics
Lightning Round
12 A
What is the principle use of Garnets?
Grinding Media
Gem Stone
Counter Tops
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Mineral Economics
Lightning Round
12 B
What is the principle use of Garnets?
Grinding Media
Gem Stone
Counter Tops
✔
57
Mineral Economics
Lightning Round
13 A
Which metal/mineral liquid in its natural state?
Mercury
Nacholite
Molybdenum
58
Mineral Economics
Lightning Round
13 B
Which metal/mineral liquid in its natural state?
Mercury
Nacholite
Molybdenum
✔
59
Mineral Economics
Lightning Round
14 A
What is man’s oldest mined metal?
Gold
Copper
Iron
60
Mineral Economics
Lightning Round
14 B
What is man’s oldest mined metal?
Gold
Copper
Iron
✔
61
Mineral Economics
Lightning Round
15 A
What has the highest melting point?
Tungsten
Nickel
Chromium
62
Mineral Economics
Lightning Round
15 B
What has the highest melting point?
Tungsten
Nickel
Chromium
✔
63
Mineral Economics
Lightning Round
16 A
What percent of world’s diamonds are used for gems?
5%
35%
20%
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Mineral Economics
Lightning Round
16 B
What percent of world’s diamonds are used for gems?
5%
35%
20%
✔
65
Mineral Economics
Lightning Round
17 A
What is (probably) the most important industrial mineral/metal?
Sulfur
Limestone
Iron Ore/Iron
66
Mineral Economics
Lightning Round
17 B
What is (probably) the most important industrial mineral/metal?
Sulphur
Limestone
Iron Ore/Iron
✔
67
Mineral Economics
Lightning Round
18 A
What minerals/metals is Minnesota known for?
Granite, Iron Ore, Aggregate
Iron Ore, Copper, Gold
Frac Sands, Iron Ore, Peat
68
Mineral Economics
Lightning Round
18 B
What minerals/metals is Minnesota known for?
Granite, Iron Ore, Aggregate
Iron Ore, Copper, Gold
Frac Sands, Iron Ore, Peat
✔
✔
69
Mineral Economics
Lightning Round
19 A
Early prospectors in Minnesota explored for Gold, but what did they find?
Copper
Silver
Iron Ore
70
Mineral Economics
Lightning Round
19 B
Early prospectors in Minnesota explored for Gold, but what did they find?
Copper
Silver
Iron Ore
✔
71
Mineral Economics
Lightning Round
20 A
What is (probably) the most dangerous chemical?
Sulfur Dioxide
Di-hydrogen Monoxide
Carbon Monoxide
72
Mineral Economics
Lightning Round
20 B
What is (probably) the most dangerous chemical?
Sulphur Dioxide
Di-hydrogen Monoxide
Carbon Monoxide
✔
73
Mineral Economics
Lightning Round
And The Winner Of
The Lightning Round Is?
74
Mineral Economics
Lightning Round
All Of You!
Thank you Again