Mineral Economics

The purpose of this report is to update projects carried out previously in the area for the
Spatial Development Initiative (SDI) programme by Mintek. Although the project deals with
spatial development initiatives that go beyond the borders of Mozambique, the central focus
of the work is on Mozambique.

Following a review of Life of Asset work at MMG’s Rosebery mine in which a proposal to increase production from 0.8 Mtpa to 1.2 Mtpa was mooted, questions were raised as to the seemingly arbitrary reasoning for the production increase.  Questions raised included: did the proposal actually add value, was the production rate from the mine sustainable, and was it the best identifiable value adding configuration.


A multiple scenario analysis study was commenced to model how various cut-off grade values against mill throughput, along with associated capital expenditure, would impact on the potential value of the operation. This was carried out utilising the “Hill of Value” approach promotedby AMC Consultants.

The traditional approach to these studies uses a constant cut-off value (Net Smelter Return) for the whole mine analysis.  . This was thought to potentially introduce a large amount of variability to the model as different ore types were thought to have different processing costs and different underground lenses were thought to have different mining costs. With the aim of developing a consistent value measure which would be comparable between the lenses, an alternative measure was suggested for all ore block values in this model, irrespective of lens location. 



The new measure used was a Mine Variable Value (MVV) this allowed for the variable factors of final metal concentrate production to be removed from the ore value. From a mining point; this was the haulage distance from ore source to ROM.  Whilst for the mill; it was the amount of reagents required, varying based on grade, together with the amount of power required for crushing, grinding and tailings handling.

From the initial run of the model, preliminary results lead to a conclusion of increased value being gained by either increasing cut-off grade or increased mill throughput rate. The validity of the result was tested using alternative price scenarios, which although changing the absolute value achieved did not significantly change the identified value adding strategies..  The realisation of these value increases identified are however contingent on higher sustainable development rates being able to be achieved mine-wide; higher backfilling rates being able to be achieved and overcoming recognised ventilation constraints.  Further detailed studies are being put into place to identify the practicality of overcoming these recognised constraints to achieving the higher value strategies identified.

The ongoing objective of the Hill of Value model that has been built is to keep the model alive as a Life-of-Asset planning tool and to continue refining the foundation data, such that various mining strategies can be analysed with increased confidence.

A 'critical metal' is one that has important economic uses, but which also faces supply risks for geopolitical or environmental and sustainability reasons. The constrained nature of critical metals supply means proposed solutions to the problem commonly involve reducing demand and therefore reliance, via recycling, substitution and thrifting. However, most critical metals are presently only small markets and therefore such an approach ignores the potential of transformational market growth to reduce supply risk, by creating large, diverse, transparent markets with multiple sources of primary mine supply, akin to modern base metals markets. Research is therefore required into which critical metals have the greatest potential for such transformational market growth. This study therefore conducts an evaluation of 49 critical metals to determine which are nearest to the combined breakthroughs in discovery, supply and demand that may lead to transformational market growth. The study concludes that 13 markets from the 49 critical metals, being magnesium, silicon, barium, boron, lithium, cobalt, chromium, vanadium, gallium, strontium, cerium, lanthanum and scandium have the highest potential for transformational market growth and thus efforts to resolve supply risk in these markets may be better focussed on overcoming current market constraints and growing these markets, rather than lessening reliance by reducing demand.

'Country risk', including the threat of 'resource nationalism', market-related 'commodity price risk' and corporate-level 'going concern risk' are identified as amongst the principal non-technical risk types having the greatest impact on the mining industry. 'Exchange rate risk' acts alongside commodity price risk at the corporate level where mine-related revenues
are in United States dollars (US $) and the mine cost-base in a local currency. Other market-related risks comprise the various indirect price-influencing forces that drive mineral...

The practical application of Lane's theory on optimum cutoff grade policy has to date proved difficult for selective stoping in large-scale underground mining. The key to determining an optimum cutoff grade is the ability to rapidly perform complex mine layout designs combined with rapid output of multiple potential schedules. This paper describes aspects of the detailed investigation into estimating a practical static cutoff grade for the two main orebodies in Mount Isa Mine's Enterprise Mine. Rule based automated scheduling software was used to evaluate thirteen different stoping layouts (including design infrastructure and capital development) of the Enterprise Mine's two main orebodies, with over 200 schedules generated. The investigation illustrates the application of commercially available software to solve the problems of generating multiple cutoff grade stope designs and achieving the otherwise insurmountable task of rapidly generating and valuing multiple scenarios for each stoping layout. Each scenario was evaluated using modelled net cash flows of the mining, concentrating and smelting operations of the company and calculating NPV. The cutoff grade for each orebody was selected based on the cutoff grade that achieved maximum NPV – with an appropriate production rate. Underground mine scheduling is a complex task involving the adherence to a number of simple scheduling rules and the balancing of several competing drivers. The study also found that: • while each scheduling rule itself is simple, the compounding complexities of their interaction preclude manual scheduling from being a realistic option. • there is a maximum sustainable rate of production possible for any given stoping layout, and that the actual maximum production rate is also a function of the required number of years of sustainable production. • the optimal cutoff grade was different for each orebody – a recognition of the impact of the different characteristics of each orebody.

It is rare for a US president to address an issue as grubby and abstract as a minor metals
market, but Barack Obama did just that. In March 2012 he announced that the USA would be
joining a WTO complaint about China's apparent abuse of the rare earth market. So what are
these things?

Pembangunan industri berbasis sumber daya alam seperti pertambangan memerlukan keterkaitan yang jelas dari sisi hulu maupun hilir. Hal ini penting dilakukan bagi keberlanjutan ekonomi maupun sosial bagi masyarakat sekitarnya. Kabupaten Bandung Barat memiliki industri pertambangan khususnya bahan galian berupa batuan (batuan andesit, pasir dan lainnya). Adanya aktivitas pertambangan tersebut, secara otomatis memberikan dampak signifikan terhadap masyarakat di lokasi penambangan maupun pemerintahan daerah, salah satu hal dampak adanya aktivitas tersebut yaitu perekonomian lokal dan pajak.

Saat ini, pendapatan asli daerah (PAD) dihasilkan tidak berdasarkan teknis produksi yang dihasilkan, namun lebih ke target yang diinginkan dari pihak pemerintah daerah dalam memenuhi kebutuhan PAD-nya, sehingga ada komunikasi terputus antara aspek teknis dan ekonomis, yang apabila terkoneksi dengan baik maka akan mampu memaksimalkan PAD. Metoda yang digunakan untuk memahami permasalahan diatas yaitu kunjungan perusahaan, diskusi, penyebaran kuesioner dan literatur dari SKPD terkait di Kab. Bandung Barat.

Hasil kegiatan menunjukkan 83% lingkungan masyarakat sekitar lokasi pertambangan mengalami peningkatan, besaran nilai ekonomi yang diberikan perusahaan untuk masyarakat dirata-ratakan berkisar antara 5.000.000 – 15.000.000 per bulan, tenaga kerja lokal yang diberdaya 95% dari 17 perusahaan yang disurvey. Sehingga pengembangan ekonomi lokal dengan adanya pertambangan batuan dan pasir di Kab. Bandung Barat sangat memberikan dampak yang positif.

Increasing demand for nonfuel mineral commodities has increased concerns regarding the reliability of their supplies. “Criticality” assessments over the past decade have attempted to capture this concern through a set of indicators, the most common of which quantifies the risk associated with market concentration by applying the Herfindahl–Hirschman Index (HHI) to the world production of a given commodity by country in a given year. Although this approach is useful, it inherently assumes that all of world production is available to the market and is thus potentially at risk. In this analysis, the HHI, as well as HHI weighted by country governance, is calculated for mined and refined zinc via the standard approach of including all world production data and comparing that to the HHI when using the best estimate of what is available to the world market. The results indicate that although the HHI of both mined and refined zinc world production has increased markedly over the past decade...

The low crude oil prices in 2019 add momentum to Nigeria’s need for economic diversification as its foreign earnings come primarily from crude oil sales. As a result, Nigeria is seeking to explore other economic potentials, such as developing a Mining Resource Corridor (MRC) to reduce poverty and assist the country’s sustained growth and development. MRCs catalyse mineral extraction, transportation, processing, and infrastructural development and integrate other sectors of the economy, thus, creating jobs and promoting economic diversification and inclusive growth. However, achieving this requires drawing up an articulated delivery mechanism through a framework strategic implementation plan to attain a strategic diversification away from hydrocarbons to minerals. This article takes an applied research approach to examine the critical considerations and actions that Nigeria should take in developing an MRC to ensure a diverse and sustainable economic future. Additionally, it discusse...

El cobre ha desempeñado un rol clave en el crecimiento y desarrollo chileno a través del triple impacto macroeconómico en la Balanza de Pagos, los ingresos fiscales y el ritmo de crecimiento. Previamente ello era suficiente, pero ahora no basta: se requiere del cobre un rol adicional vinculado a la innovación tecnológica. Este trabajo presenta la minería cuprífera como una plataforma de innovación basada en tres pilares: (A) Transferencia y Diseminación Tecnológica, (B) Generación de Innovación Tecnológica y (C) Inserción en Cadenas Globales de Valor. El primer pilar desmitifica a la minería como una industria de escasa intensidad tecnológica y critica la escasa transferencia y diseminación de la tecnología moderna existente en la Gran Minería hacia el resto de los sectores del país. El segundo pilar presenta el Programa de Proveedores de Clase Mundial como un mecanismo para generar innovación en la minería y analiza comparativamente el desarrollo del sector de proveedores intensivos en conocimiento de Australia. El tercer pilar cuestiona la escasa inserción de Chile en las Cadenas Globales de Valor de los insumos y servicios asociados a la minería del cobre y explora
las posibilidades de una política de contenido local, bien definida y vinculada a políticas de innovación, como un espacio de aprendizaje para la construcción de capacidades tecnológicas domésticas.

El desarrollo de un sector de proveedores competitivo e innovador es una de las principales preocupaciones de los países mineros. ¿Cómo avanzar en esta dirección? ¿Cuán rápido es factible desarrollar un sector de proveedores de clase mundial en torno a la minería? Australia ha logrado desarrollar un sector de proveedores de la minería (METS) competitivo internacionalmente e innovador. Este trabajo examina la evolución de las METS presentando una perspectiva descriptiva de las instituciones y programas vinculados a su desarrollo y al de la minería australiana.
El origen de las METS australianas se debió tanto a factores estructurales como a oportunidades específicas. Los factores estructurales derivan de la mayor externalización de los procesos productivos en la industria minera y de los desafíos propios del sector como el uso de agua, la relación con el medioambiente, energía, etc. Factores y causas específicas son la diversidad de los desafíos de la minería australiana, capacidades activas y latentes en los proveedores, el vínculo entre mineras-proveedores y la internacionalización de mineras australianas. Varias de las METS fueron fundadas por ex profesionales de la gran minería privada y/o de las empresas proveedoras. El vigoroso desarrollo exportador se debe a la  internacionalización de grandes mineras domésticas y a distintos programas específicos. Nuestras estimaciones sugieren que las exportaciones de bienes y servicios vinculadas a la minería australiana tienden a duplicarse cada 10 años.
La comparación con la experiencia australiana y con la experiencia de sectores exportadores exitosos en Chile sugiere que una meta razonable de exportaciones de METS chilenas al 2035 sería del orden de US$3.500 millones.
Con todo, los resultados de este estudio revelan una brecha gigantesca entre Chile y Australia en el desarrollo de proveedores. Se requiere un esfuerzo público-privado significativamente mayor para empujar un rol de innovación en minería.

Ten states have created natural-resource-based Sovereign Wealth Funds (SWF) to allow a fraction of the wealth derived from the extraction of non-renewable resources to be available for future use. Minnesota does not have a SWF, even though companies have been mining in the state for over 100 years. Herein, we present backward and forward-looking scenarios to estimate the potential magnitude of a “what-if” extraction-based fund. A 1.5% of value tax is suggested as an SWF funding mechanism. Based on historical extraction, prices, and investment returns, a large SWF could already exist. In the forward-looking section, we begin by econometrically estimating the supply and demand of US iron ore production to better understand how an increase in mining taxes would likely effect mining output (i.e., the production effect). After accounting for an estimated 4% production loss, results suggest enough minerals could still be extracted to create a permanent fund with between $930 million (US) ...

The purpose of this paper is to evaluate the efficiency of the global primary aluminum industry. Efficiency is here taken to be evaluated relative to some benchmark, i.e., the smelter or smelters identified as the most efficient in the data set, thus forming the production frontier. The performance of individual smelters, specifically their technical, allocative, and scale efficiencies are calculated by the means of data envelopment analysis. A proprietary database containing data on inputs used, output, and cost of production for 151 primary aluminum smelters operational globally in 2003 were used in the efficiency estimations. In order to assess and contrast the performance of smelters at different locations, facing dissimilar policy and factor supply environments, smelters are grouped into geographical regions. Furthermore, the technology used will also be evaluated in terms of the above efficiency measures. For each region, measures of potential technical and cost-wise factor savings will be calculated in order to assess specifically in what way production factors improvements can be made and approximately how large these improvements are. The findings indicate that; (a) smelters are overall highly efficient given the scale of operation, (b) many smelters operate with increasing returns to scale and thus we find significant scale inefficiencies, (c) substantial allocative inefficiencies exist within the industry, and (d) there are significant variations in the level of efficiency across regions. The allocative efficiency is particularly low in regions such as China and the Commonwealth of Independent States (CIS) region. Finally, the greatest potential for factor reductions is in labor input in China, the CIS region and in Asia.

Due to the long life, most mining projects face the risk of the parameters such as mineral price, grade, and cost. Uncertainty can lead to unfavorable results of the decisions made by managers and mining investors. Therefore, this paper aims to determine the Sari Gunay gold mine’s production planning, considering the certainty and uncertainty over the mineral price. Finally, the proposed planning will lead to the allocation of fixed or variable production rates throughout the mine life. These findings were assessed by Taylor and Zwiagin methods with 22 different scenarios in all conditions, including (a) price certainty and uncertainty such as daily price, 3- and 5-year average, Monte Carlo simulation, and binomial tree; (b) decreasing, increasing, and fixed production rates; and (c) mine life conditions. The scenarios evaluated under the price certainty conditions (scenarios 1 to 12) have lower NPV values than those under the price uncertainty conditions. This is because the price ...

The study analysed the waste statistics of European Union (EU) countries with particular emphasis on waste from extractive industries. Assessment of the data available at EU level (Eurostat) and presented by individual countries showed that even with a number of EU regulations and guidance, there are no complete, consistent and integrated reports that monitor the implementation of measures and support for waste management. Based on the example of Poland, a detailed analysis of the environmental reports from each mining company (to the regional database) and a grouping of the data according to EU waste codes were conducted for the 2017 data. The results were then compared with the data provided by the Central Statistical Office. It has been shown that there is a need for the reporting to be improved in order to avoid inconsistencies and to be able to undertake a detailed assessment of the approach and activities carried out with regard to their impact on the environment and society. ...

Mongolia has suffered a four-year period of falling strength in foreign exchange: 2012-2016. Oddly though, the dramatic plunge in the power of Mongolia's foreign exchange coincides with the first four years' production of minerals through the world-class mining facility: Oyu Tolgoi. This instant research aims to isolate and model relationships comparing Mongolia's currency's plummeting foreign exchange power against $USD prices of mineral commodities: Copper, Gold, and Silver. This enquiry creates a model isolating correlation between minerals sales and currency strength. Ultimately, this study concludes that Mongolia's foreign exchange is highly influenced by the $USD prices of Gold and Silver, and of Copper to a lesser degree. This research suggests that Mongolia's excessive reliance on minerals export is currently impairing the nation’s ability to manage its foreign exchange. Dutch Disease and insufficient diversification of investment across other economic sectors has created severe volatility in ForEx. Government of Mongolia’s (GoM) explicit dependence on minerals trade has tied ₮MNT exchange rate to $USD prices for minerals. This impacts GoM planning for stable economy and future investment toward infrastructure and improvement of social services. Lastly, this paper will propose arguments toward diversification of investment in Mongolia, especially toward other sectors: tourism, agro/animal husbandry, and textiles; to stabilize economic growth, and minimize volatility in GDP and GoM revenue.

Mining and the permitting process for mineral projects in Sweden has been criticised as inadequately safeguarding the rights of Indigenous reindeer herding Sámi, who hold usufruct rights to more than half the country’s territory. There have been calls for Sweden to ratify the Indigenous and Tribal Peoples Convention (ILO 169) and to change its Mineral Law. This paper evaluates the extent of protection of Sámi rights — and not only those engaged in reindeer herding — in Sweden’s minerals permitting process. It also considers the implications if changes were made to align this process with the Indigenous-rights framework. The paper demonstrates that reindeer herding Sámi are, broadly, treated similar to landowners in the mineral projects permitting process. However, there is discrimination when it comes to being able to have a share in the benefits of a project: impacted reindeer herders have no such option whereas landowners do. Also, the permitting processes do not consider social a...