MINERAL RESOURCE AVAILABILITY and the FUTURE OF CIVILIZATION John L. Berry John Berry Associates, Austin, TX ©John Berry Assoc. Slide 1 of 54
OUTLINE Introduction and Manifesto Minerals and the Law of Supply and Demand • “Ore is where you find it” • Deposit Types, Prices and Volumes • Mineral processing and Price • Implications of “Lumpy” Supply Curve • Ore grade and external (environmental) costs. Strategic Minerals: • • • List of Strategic Minerals Uses of Strategic Minerals Growth rates of strategic minerals use. “Ore is where you find it” – haves and have-nots “War and Peace”: Strategies for security of supply. Conclusions: Problems and Opportunities. ©John Berry Assoc. Slide 1 of 54 MINERAL RESOURCE AVAILABILITY
INTRODUCTION BASIC HUMAN SUSTENANCE: Air, Water, Useful Plants, Useful Animals SUSTENANCE OF CIVILIZATION: The above, plus minerals and fossil fuels. Tools: Stone>> Bronze>> Iron >>Machines (Alloys)>> Semi-conductors (Exotics) ALL are mineral resources: without them we are hunter gatherers using wooden sticks. Fossil Energy is the basic enabler: (wood) > Charcoal -> Coal -> Oil -> Nat. Gas -> Nuclear >? ? <------e l e c t r i c i t y------ Grime’s Graves ©Nic Mc. Phee: 433 shafts, 96 ac. WHERE ARE MINERAL RESOURCES USED? ? Home: Steel (nails, rebar), Copper (wiring, plumbing), Plastics, Concrete (slab) Roads: Concrete, Steel, petroleum (black-top), sand gravel Cars: Steel, Copper, Fossil Fuels, Plastic, Lead, Sulfuric Acid, etc. Clothes: (Natural Fibre), Fossil Fuels (Fibre and Manuf), Steel etc (manuf), IT: REE, Copper, Lithium, Germanium, Cesium, etc. ©John Berry Assoc. Slide 1 of 54 MINERAL RESOURCE AVAILABILITY
MANIFESTO ALL non-renewable resource extraction and use is harmful to the planet Direct harm: Holes in the ground (Athabasca tar Sands) Waste tips (Aberfan disaster, Wales) Air pollution (Nkana smelter) Water/groundwater disturbance and pollution “Destructive “ use of water – can’t be returned. Indirect Harm: Massive transport arteries (Land destruction) Litter, junk, wastage (land & water destruction) Megacities (land, esp. agric. land, destruction) Air pollution, CO 2 and Methane. Climate Change (probably) Athabasca Tar Sands, Ft. Mc. Murray, Canada Don’t blame ONLY the extraction companies: we are ALL responsible: DEMAND is the driver. We do not know where lie thresholds of permanent, irreversible, runaway harm to Earth. 350 -ton Truck Thus, sooner or later, we have to completely REVAMP our CIVILIZATION to survive. ©John Berry Assoc. Slide 1 of 54 MINERAL RESOURCE AVAILABILITY
IMPORTANT TERMS MINERAL RESOURCE: any naturally occurring non-living substance that is, has been, or may be useful to human beings RESOURCE BASE: The volume of rock in a given area that contains more than the Clarke, or average concentration of that mineral in the Earth’s crust. INFERRED RESOURCES: volumes of mineralization above some mini mum grade that are known to exist, or are hypothesized on geological grounds to exist, in a given area, but have not been measured. May be orders of magnitude less than resource base and greater than the quantities of known ore. INDICATED RESOURCES: mineral occurrences that have been sampled to a point where an estimate has been made, at a reasonable level of confidence, of their contained metal, grade, tonnage, shape, densities, physical characteristics. Generally orders of magnitude less than inferred resources in same area. LEAD: an area in which there are specific indications of valuable mineralization. PROSPECT: an area in which there are sufficient indications of the presence of ore to carry out a serious evaluation campaign (drilling, test mining). (It takes 10 – 100 LEADS to find 1 PROSPECT) DEPOSIT: a defined or partially defined body of mineralization, which may or may not be ore, depending on economic conditions. (It takes 10 -100 PROSPECTS to develop 1 DEPOSIT) GRADE: the percentage of the rock composed of valuable material. E. g. 62% Fe, 1% Cu, ORE: rock that can be mined for its mineral content at a profit. ORE GRADE: any grade above the lowest grade that can be mined at a profit. Varies with time and deposit. RESERVES: thoroughly explored and characterized volumes of ore (rarely amounts to more than a few years’ extraction, because it costs a lot of money to convert resources to reserves). “Peak” people and many economists do not understand the difference between Resources and Reserves. ©John Berry Assoc. Slide 5 of 42 MINERAL RESOURCE AVAILABILITY
ORE GRADE for SELECTED ELEMENTS Clarke: the average abundance of an element in the earth’s crust Metal Clarke (in percent) Ore Grade (in percent) Clarke of Concentration for Ore Grade Clarke of Concentration: the concentration of an element in a rock compared with its average concentration in the earth’s crust. Aluminum 5. 13 30 4 Iron - Fe 5. 00 60 12 Titanium 0. 66 15 23 Copper 0. 0055 0. 25 45 Rare Earths 0. 019 1. 6 84 Nickel 0. 0075 1. 5 200 Gold - Au 0. 0000005 0. 00023 460 Manganese 0. 10 35 350 Uranium 0. 0002 0. 1 500 Zinc 0. 007 4. 0 600 Lead – Pb 0. 0013 4. 0 3000 3. Advances in mining and refining technology Chromium 0. 01 30 3000 4. Changes in the value that society places upon the metal (e. g. Gold, REE, Lead, Tin). Tin – Sn 0. 0002 1. 0 5000 Silver – Ag 0. 00001 0. 05 5000 Ore Grade, or the Clarke of Concentration changes over time and is affected by: 1. The availability of minerals with high concentrations if the element (e. g. Cu 2 S, Pb. S, etc. REEs, for example, lack such minerals) 2. The difficulty and expense of recovering the metal from its ore (e. g. Aluminum, Titanium) In general, the larger the Clarke of Concentration, the smaller the typical orebody becomes ©John Berry Assoc. Slide 1 of 54 MINERAL RESOURCE AVAILABILITY
LIFE EXPECTANCIES OF WORLD RESERVES FOR SELECTED COMMODITIES ©John Berry Assoc. Slide 1 of 54 Source: Tilton, 2001 MINERAL RESOURCE AVAILABILITY
LIFE EXPECTANCIES OF RESOURCE BASE for SELECTED COMMODITIES Notes: (1) estimates of the resource base for coal, oil and gas are meaningless: the USGS estimates “ultimate recoverable resources” instead, but these estimates can change with technology. (2) the life expectancies are meaninglessly large, since we will never recover (many) commodities from “average rock”. The energy costs alone would be too high! ©John Berry Assoc. Slide 1 of 54 SOURCE: Tilton, 2001, who used Brobst & Pratt, 1973; Lee & Yao, 1970 for the Clarke) MINERAL RESOURCE AVAILABILITY
THE CLASSICAL ECONOMISTS’ VIEW Two approaches to analyzing the exhaustion and depletion Physical Economic Physical Approach: Mineral resources are thought of as a set of deposits in the earth that were formed in geologic time and that cannot be duplicated in human time. Removal of ore from this set of deposits reduces the remaining ore and depletes the resource. The Pure Theory of Exhaustion (the Gray-Hotelling Theory), has been developed to fit this physical view. (p. 457) Economic Approach: Mineral and materials … have not limited society’s welfare in the past. Nor do they have the potential for limiting the welfare of mankind in the future, so long as certain conditions are maintained. Internalization of external environmental damages, Access to the earth’s crust for exploration, Worldwide trade access to raw materials and, Prevention of market control by either sellers or buyers. If these rules … are followed, markets will provide supplies and ration use so that minerals and materials will be available to meet society’s needs without significantly increasing costs for a very long time, probably for ever. (p. 457) … (this) has become the mainstream of economic thought, even though those who engage in resource assessments using an engineering or physical view of resources and reserves disagree. (p. 460) VOGELY, William A. , Nonfuel Minerals and the World Economy. Chapter 15 in REPETTO, Robert, ed. , 1985: The Global Possible. Resources, Development, and the New Century. Yale UP, New Haven. ©John Berry Assoc. Slide 1 of 54 MINERAL RESOURCE AVAILABILITY
PROBLEMS WITH THE PHYSICAL AND ECONOMIC VIEWS • The Gray-Hotelling Theory is nonsense because it ignores new discovery, technology, and substitution (e. g. Tin, Lead). • The Economic Approach has severe limitations, stemming from: • Internalization of external environmental damages: We have not found a good way to internalize external costs. Taxation vs regulation vs markets in “credits” 2. Access to the earth’s crust for exploration The Earth is not infinite, AND Cities, farms, Wilderness Areas & Parks put a lot of it out of reach 3. Worldwide trade access to raw materials and, Deposit distribution is “lumpy” – haves and have nots. Some people don’t play by our rules (e. g. China, Zimbabwe, Congo) 4. Prevention of market control by either sellers or buyers. Mineral deposits are log-normally distributed There are many more low-grade deposits than high grade There are many more small deposits than large ones Log-normal distribution and capital intensive operations give opportunities for market control by companies (De. Beers) & countries (China) ©John Berry Assoc. Slide 1 of 54 MINERAL RESOURCE AVAILABILITY
MORE PROBLEMS WITH THE “ECONOMIC VIEW” OF MINERAL SUPPLY Log-normal distribution curve and high capital requirements also mean that the supply curve gets increasingly “lumpy”, causing major price troughs and spikes. 3. 4. ©John Berry Assoc. Slide 1 of 54 Technology sometimes creates more problems than it solves Many more elements used for very specific properties Huge capital investments required for low-grade deposits Exploration “bubbles”. Substitution is not always possible (e. g. Copper vs Silver) MINERAL RESOURCE AVAILABILITY
ENVIRONMENTAL ISSUES - MINING Grade and amount of earth moved: • If the grade is halved, size of the mine is doubled, etc. • All of the rock is ground up, and the tailings (fine waste) have to be disposed of (in general they can’t go back in the hole as they can liquify and contain noxious chemicals). Overburden: • Can be more than ten times the volume of the ore (see Right) Dewatering: Bingham Canyon, UT Dewatering well soil overburden Cone of dewatering dy y bo od e b • In general, mine workings must be kept free of water. or re O • Means lowering the water table to the level of the Stripping Ratio = vol. overburden/vol. ore bottom of the mine by pumping, up to = 12: 1 in this case 100 s of millions of gals/day (see sketch at right) • Lots of problems for surface owners, potential pollution problems (e. g. Bastrop Co. lignite. ) Dust: • Dust from tailings is the worst. ©John Berry Assoc. Slide 1 of 54 MINERAL RESOURCE AVAILABILITY
COMPETITION FOR LAND 800 ©John Berry Assoc. Slide 1 of 54 1600 2400 3200 4000 4800 5600 6400 sq. mi. MINERAL RESOURCE AVAILABILITY
“ORE IS WHERE YOU FIND IT” “If it isn’t there you won’t find it” • Ore deposits are rare • If you make a mineral deposit inaccessible (e. g. ANWR), you can’t replace it. • There has to be favorable geology A porphyry copper deposit will never be found in the Permian Basin You can’t move a deposit from where you don’t want it to somewhere else. (e. g. Crested Butte, Green River Oil Shale, ANWR, etc. ) Some countries have it all, some have none (Strategic Minerals) • Exploration requires access to lots of land Rule of thumb: 100 leads > 10 prospects >1 mine (This also implies a need for large companies) It usually takes 5 exploration campaigns to delineate a mineable deposit. • Mines are Ugly and Destroy Lots of Land Thus, conflicts are inevitable (NIMBY). ©John Berry Assoc. Slide 1 of 54 Dia. Vik Diamond Mines, NWT, Canada MINERAL RESOURCE AVAILABILITY
ACCESS TO MINERAL DEPOSITS ©John Berry Assoc. Slide 1 of 54 MINERAL RESOURCE AVAILABILITY
STRATEGIC MINERALS Definition: Minerals essential to the national defense for which during war we are wholly or partly dependent upon sources outside the continental limits of the United States Most critical: Platinum Group Metals (PGM), NAS (2007) Rare Earths (REE) (La>Nd>Dy>Tb) Indium, Manganese Niobium (Columbium) (Col. Tan) also Beryllium http: //www. helium. com/items/ Uranium 1949042 -what-are-strategic-minerals Chromium Cobalt Tungsten Petroleum (pers. knowl. ) Helium Stockpiles: PGM Platinum: 4. 704 mt Palladium: 16. 715 mt Iridium: 0. 784 mt Manganese 1, 700, 000 metric ton Tantalum 635 mt Bauxite (Aluminum ore) 10, 500, 000 mt Chromium 1, 400, 000 mt Tin 59, 993 mt Cobalt 189 mt ©John Berry Assoc. Slide 1 of 54 Data: USGS, Mineral Commodity Summaries, 2011. MINERAL RESOURCE AVAILABILITY
STRATEGIC MINERALS (cont) • “Ore is where you find it”: Mineral Distribution is SPATIALLY “LUMPY” • Thus, different mineral commodities are Strategic for different countries (e. g. China and copper, chromium, platinum) • Strategic Mineral Endowment and War: • In 1925 the American economic geologist C. K. Leith predicted WWII and the line-up because the USA, the USSR, The British and French Empires were virtually self-sufficient in mineral resources, but Germany, Italy, and Japan were lacking in all but a few. These countries were lacking, in particular, strategic minerals – the fossil fuels, copper, manganese, nickel, etc. (C. K. Leith. Political Control of mineral resources, Foreign Affairs, July 1925. ) • Strategic Mineral Crises and Consequences: Threatened US Embargo of Petroleum to Japan - Pearl Harbor (Butts, et al) USA/EU Sanctions against Iran, 2011 - Blockade of Hormuz Straits? ? Tungsten, Tin - scarce after Japan conquered Malaya, WWII (Arab Petroleum Embargo, 1973 -4 – Runaway inflation in western countries) Dem Rep Congo civil wars - Cobalt, Col. Tan supply interruptions Soviet embargo of Mn, Cr during Berlin & Korea – Threat of war by USA ©John Berry Assoc. Slide 1 of 54 MINERAL RESOURCE AVAILABILITY
CHINA “Because China’s economy and resource import dependence continue to grow at a high rate ( 13% in 2010) it has adopted a geopolitical strategy to secure strategic resources. China’s resulting role in the mineral trade has increased Western security community concern over strategic minerals to its highest point since the end of the Cold War. ” “The uneven distribution of strategic mineral reserves and their concentration in a handful of politically unstable or potentially hostile countries makes it necessary that U. S. policymakers recognize the security of resource supply as a top national security issue. ” “In 1973 Leonid Brezhnev said: “Our aim is to gain control of the two great treasure houses on which the West depends, the energy treasure house of the Persian Gulf and the mineral treasure house of Central and Southern Africa”(Nixon 1980). “ "China has made the assured access of strategic mineral imports a critical component of its geopolitical strategy and is moving aggressively to purchase control of mineral concessions and mining companies. " Butts K H, B Bankus & A Norris, 2011. Strategic Minerals: Is China’s Consumption a threat to United States Security? US Army War College, CSL Issue Paper, v. 7 -11. ©John Berry Assoc. Slide 1 of 54 MINERAL RESOURCE AVAILABILITY
CHINA (cont. ) • High growth rates essential for Communists to retain legitimacy • The Chinese people are seeking affluence on par with the industrial West. • Chinese consumption patterns are driving world commodity markets. In 2009, 35 % (37. 7 Mt) of world’s primary Aluminum production (#1 in world) consumer of primary aluminum. (Halpern 2010). • China’s supplies of minerals such as Cr, Pt and Cu are inadequate (i. e. strategic for China), Between 2002 and 2010 the price of copper rose from $0. 70/lb to over $4. 00/lb (Blas, 2010). • China has high quality reserves of, and exports, tungsten, REEs, tin, antimony and zinc 47% of the 19 minerals on which the USA is 100% import dependent come from China In 2002 mineral imports and exports accounted for nearly 20% of China’s total trade (CIMG 2003). • China views the world financial and trade systems as creations of the West and does not trust them to supply its needs. • China’s “Go Out Strategy” to reduce its geopolitical vulnerability to mineral and energy import cut off: Pursuing equity ownership of fuel and mineral producing companies & deposits worldwide Approx. $3 trillion in foreign exchange reserves to support this strategy. In 2008 China offered $18. 5 bn for UNOCAL (which owned the Mountain Pass, CA, REE mine) $19. 5 bn for a stake in the 2 nd largest minerals company, Rio Tinto. In 2009 China’s National Oil Companies established approximately $50 billion in energy agreements with Brazil, Russia, Venezuela and Kazakhstan (Jiang 2009). ©John Berry Assoc. Slide 1 of 54 MINERAL RESOURCE AVAILABILITY
CHINA AND REE • China’s growing control of some important mineral resources will enable it to deny mineral imports to the United States or other countries for political reasons. • China demonstrated that it will do that when it embargoed REE exports to Japan in 2010 (Bradsheur 2010). • Rare Earth Sources Mines: Bayan Obo REE-Fe-Nb deposit, Inner Mongolia Bayan_Obo type: lenses in metamorphic rocks –NOT a Carbonatite Discovered as an iron deposit in 1927. REE minerals were discovered in 1936 Nb-bearing ores in the late 1950 s. Reserves > 40 million tons of REE minerals grading 3 -5. 4% REE, 1 million tons of Nb 2 O 5 and 470 million tons of iron. The deposit also contains 130 million tons of Fluorite, making it the world's largest fluorite deposit. Contains 70% of world's known REE reserves. • Export Quota Reductions began 2006 • Used punitively against Japan 2010. • Therefore, REE consumers are relocating to China to ensure supply security. (Causing destruction of supply chain and multiplication of job losses in west) ©John Berry Assoc. Slide 1 of 54 From Butts et al. MINERAL RESOURCE AVAILABILITY
CHINA AND REE ELEMENTS (Cont) Mining more rare earths in the West is just the beginning. Developing a downstream supply chain for them is equally important. More emphasis needs to be put on downstream operations, such as creating highly pure versions of the metals, fabricating them into alloys, and turning them into permanent magnets, advanced batteries etc That is what the far-sighted Chinese are doing. Slashing Chinese exports of REE has little to do with dwindling supplies or environmental concerns. It is about moving Chinese manufacturers up the supply chain, so they can sell valuable finished goods to the world rather than raw materials. Because of their similar chemical properties, the rare earths tend to clump together in rocks, often along with radioactive thorium or uranium. That makes extracting, separating and refining them difficult. A lot of water, acid and electricity has to be used in the ion-exchange, fractional crystallisation and liquid-liquid extraction processes used to manufacture them. Handling the radioactive and chemical waste produced in the process adds significantly to the cost. Lax environmental standards, along with low wages, has allowed Chinese producers to undercut competitors abroad and corner the market. (The Economist, 9/17/2010) ©John Berry Assoc. Slide 1 of 54 From Butts et al. MINERAL RESOURCE AVAILABILITY
EFFECT OF TECHNOLOGY RAW MATERIALS PYRAMID, 2002 (Ranked by Weight) Pre-industria. L minerals Notes: World-wide consumption Scale is only relative (1 bn cu. yd. = 1 sq. mi. by 1000 feet) Sand/Gravel: 18 billion tonnes/year (approx 7 bn cu. yd). Iron Ore: 2. 4 billion tonnes/yr(2010) (approx 1 bn cu. yd/yr ore) Copper 17 million tonnes (2010) (approx 3. 5 bn cu. yd. ore) Gold: 3. 1 tonnes (approx 2 million cu yd ore) ©John Berry Assoc. Slide 1 of 54 MINERAL RESOURCE AVAILABILITY
©John Berry Assoc. Slide 1 of 54 MINERAL RESOURCE AVAILABILITY
CAPITAL REQUIREMENTS for NEW PRODUCTION COMMODITY ANNUAL NEW PRODUCTION REQUIRED, 2012 NEW PROJECT INVESTMENT, 2010 ($BN) SOURCE Oil 1 million BOD $100 Bishop, SIPES talk Iron 84 million tons $28 http: //www. wpgresources. com. au/pdf/Iron%20 Ore% 20 Outlook%20 UBS%2010%20 Nov%202010. pdf Gold ? $7 E&MJ Copper 400, 000 tons $6 Economist REE ? $3 Excluding China $562 bn 6% of total world funds available for investment, or 4% US GDP Total Mining Notes: 58 projects more than $1 billion in Latin America alone ©John Berry Assoc. Slide 1 of 54 SOURCE: EMJ 2011 Annual Survey, March 2012 MINERAL RESOURCE AVAILABILITY
World’s Largest Iron Ore & Copper Producers, 2010 IRON ORE Capacity Base % Company mt/yr 1 Brazil 417. 1 19 2 Rio Tinto Group UK 273. 7 13 3 BHP Billiton Group Australia 188. 5 9 4 http: //www. steelonthenet. com/plant. html Vale Group Arcelor. Mittal Group UK 78. 9 4 5 Fortescue Metals Group Australia 55. 0 3 6 Evrazholding Group Russia 50. 4 2 7 Metalloinvest Group Russia 44. 7 2 COPPER Company Codelco Produc’n 1000 mt/y 1, 757 % of World 11 1, 441 9 8 An. Ben Group China 44. 7 2 3 Freeport-Mc. Mo. Ran Copper & Gold Inc BHP Billiton Ltd 1, 135 7 9 Metinvest Holding Group Ukraine 42. 8 2 4 Xstrata Plc 907 6 10 Anglo American Group South Africa 41. 1 2 5 Rio Tinto Group 701 4 11 LKAB Group Sweden 38. 5 2 6 Anglo American Plc 645 4 12 CVG Group Venezuela 37. 9 2 13 Cliffs Natural Resources USA 34. 6 2 7 Grupo Mexico 598 4 14 NMDC Group India 32. 6 1 8 Glencore International 542 3 15 Imidro Group Iran 29. 8 1 9 KGHM Polska Miedz 426 3 16 CSN Group Brazil 28. 0 1 17 Shougang Beijing Group China 26. 5 1 18 US Steel Group USA 23. 5 1 19 ENRC - Eurasian Natural Resources Kazakhstan 19. 7 1 20 Wuhan Iron & Steel Group China 18. 6 1 1 2 NOTE: The Iron Ore mining industry is more concentrated than the Copper m. Ining industry, with the top 3 companies having 27% and 41% of the market, respectively ©John Berry Assoc. Slide 1 of 54 Total capacity 2177. 3 MINERAL RESOURCE AVAILABILITY
“BREAKDOWNS” OF THE STANDARD MODEL OF THE LAW OF SUPPLY AND DEMAND “If demand increases and supply remains unchanged, then it leads to higher equilibrium price and quantity, etc. “ D 3 Sm Mineral Supply Curve • The graph shows a smooth response, which seems to be what every economist envisions (the Marshallian Model), too, BUT the Price vs Quantity curve for minerals tends to be stepped, or “lumpy” (my term). • The volume of mineral supply is price inelastic over the short term (up to several years) once current production capacity is reached (red curve – vertical sections). (e. g. oil since 2003, copper 1953 -7 and 1961 -1971)) • This is because it may require a huge investment of time and money (up to $20 billion and 25 years, see sidebar) to bring in a new deposit. • The reverse is true: if overcapacity develops, production can not easily be shut-in. Therefore there are long periods (up to 20 years) when mineral prices are unsustainably low (oil from 1986 -2002; copper 1975 -2004 (Po. Cu “bubble”, next slide)). ©John Berry Assoc. Slide 1 of 54 Marshallian model of smoothly varying supply and demand. In the case of minerals, once capacity is reached a large price increase is required before additional supply comes on-line. The Economist, 1/24/2112: Oyu Tolgoi Cu/Au Mine, Mongolia Discovery: 2001 Explo Drilling: 2003 Cost to 1 st production (2013): $6 bn Expenditure to 2020: $10 bn Full Prod. Rate (2018): 450, 000 t Cu/yr (3% of global total) Mine represents 30% Mongolian GDP MINERAL RESOURCE AVAILABILITY
MORE PROBLEMS WITH THE MARSHALLIAN MODEL 1. The largest or richest deposits may not be discovered or developed first. 1. This can cause long periods during which demand is increasing but prices are decreasing: it is often more expensive to shut down a less-efficient mine or refinery than it is to operate it at a loss. 2. The supply of some minerals is completely independent of the demand for that mineral, since it is produced as a by-product of the production of another mineral Sulfur : by-product of smelting and oil refining Gallium: by-product of zinc mining Cobalt: by-product of Copper mining in Congo/Zambia Gold: by-product of mining Porphyry Copper deposits 3. Some minerals cannot be produced without the use of other minerals, which may themselves be rare or in tight supply: Aluminum: requires cryolite, available only from one deposit in Greenland Titanium: requires magnesium. The major source is China. Oil & Gas: requires Helium 3, whose supply is in turn dependent on the manufacture of hydrogen bombs. refining requires Platinum, available only from Russia, South Africa. ©John Berry Assoc. Slide 1 of 54 MINERAL RESOURCE AVAILABILITY
The “LUMPY” SUPPLY CURVE Deposit Types, Prices and Volumes • Almost all mineral commodities are found in a variety of different types of deposit • Each type of deposit is characterized by its own average size and grade, etc. • In general, deposit types characterized by high grades are much smaller than deposit types characterized by low grades • High grade deposits require little capital and lots of labor, and have low output U/G Mechn Energy/ton • Large, low grade deposits require lots of capital, energy, other resources, and land, but have low labor costs and low cost in $/ton. nd m ine s Energy und erg rou Opencast s tal – Cap i • Low grade deposits are much more environmentally unfriendly than high-grade deposits (amount of land disturbance, permanence of damage, damage to waterways, carbon footprint). Output al pit ine tm as c en p –O Ca • However, industrial civilization would die if we lost our high-volume low-grade mines. ©John Berry Assoc. Slide 1 of 54 Cost/Ton Grade Deposit Size MINERAL RESOURCE AVAILABILITY
“LUMPY” SUPPLY CURVE (cont. ) • If a mineral’s supply comes from 2 or 3 countries or a few very large deposits, and one country or deposit goes off-line there may be a large but temporary (decade) jump in price until new supplies are found and developed. • If a deposit type becomes ex- GRADES AND SIZES OF COPPER DEPOSIT TYPES hausted, then it may require a HUGE & PERMANENT JUMP in price to bring on stream the next, lower-grade, type. • The price may then decline slightly over time as more de- posits of the same type are found and efficiencies increase. • Or, if there is an “exploration rush” and a “mine development bubble”, then prices may decline Source: Singer steeply and for a long time. ©John Berry Assoc. Slide 1 of 54 Metals Economics Group (December 15, 2011) ”Copper will almost certainly go into surplus for the first time in many years but the lack of significant discoveries and the challenges faced by today’s developers mean that a brief period (3 yrs) of over-supply will be followed by another prolonged period of deficit. ” MINERAL RESOURCE AVAILABILITY
5% $8 4% Veins Land Disturbance (km 2/yr Skarns INVERSE SUPPLY_DEMAND CURVE MANY PORPHYRY COPPERS DISCOVERED $7 Sedimentary Copper $6 $5 800 $4 3% Price (1998$) PRICE SHOCK: SED CU DEPOSITS IN FULL PRODUCTION, NO NEW DISCOVERIES 2% $3 400 $2 Production (106 tons/yr) Transition to Open-Cast Mining Ore-Grade 1000 Price in 1998 $ Land Area Disturbed/yr (km 2) 2000 Massive Sulfides FEW NEW Po. Cu DISCOVERIES INCREASING ENVIRONMENTAL ISSUES 1% Porphyries $1 0. 5% 0 $0 Ore-Grade 0% 2050 Time COPPER SUPPLY 1900 -2030: PRICES, VOLUMES & LAND DISTURBANCE ©John Berry Assoc. Slide 1 of 54 MINERAL RESOURCE AVAILABILITY
GRADE & SIZE OF COPPER DEPOSIT TYPES 1012 Future Types Tons of Ore 109 106 Sea-bed nodules? ? Mn 27 -30 %, Fe 6 %, Ni 1. 25 -1. 5 %, Si 5%, Cu 1 -1. 4 %, Al 3%), Co 0. 2 -0. 25 % Porphyry Coppers (1960 -2100? ) = Marshallian Model of supply and demand breaks down temporarily Sedimentary Copper (1936 -1980) IOCG? ? Olympic Dam Cu 589 mt @1. 81% U 589 mt @ 590 g/t Au 589 mt @ 3. 36 gt Ag 589 mt @ 0. 66 g/t 103 “Clarke” Chuqui Pit: 4. 3 x 1 km ©Till Niermann Native Cu in Volcanics (1800 s) 102 101 10 -3 Veins (to 1920) 10 -2 10 -1 1 10 102 (100%) Grade (%, oz/ton, etc. ) ©John Berry Assoc. Slide 1 of 54 MINERAL RESOURCE AVAILABILITY
THE LOG-NORMAL DISTRIBUTION “A continuous probability distribution of a random variable whose logarithm is normally distributed Most of the World’s Mineral Supply is in A FEW BIG MINES For the distribution at left, the threshold for the top 2. 3% of the deposits is 4 times the Median. This is equivalent to a normal distribution with ¯x=100, σ=150 A log-normal distribution with original scale (a) and with logarithmic scale (b). Areas under the curve, from the median to both sides, correspond to one and two standard deviation ranges of the normal distribution. (from http: //stat. ethz. ch/~stahel/lognormal/bioscience. pdf) In a log-normal distribution X, the parameters denoted μ (or x*) and σ, are the mean and standard deviation, respectively, of the variable’s The geometric mean of a log-normal distribution is equal to its median. natural logarithm (by definition, the variable’s logarithm is normally distributed), which means X = eμ+σZ with Z a standard normal variable. (from http: //en. wikipedia. org/wiki/Log-normal_distribution) Limpert, E. , W A Stahel, & M Abbt, Log-normal Distributions across the Sciences: Keys and Clues. Bioscience, 51 (5) 341 -352. May 2001 VIRTUALLY ALL GEOLOGICAL PHENOMENA ARE LOG-NORMALLY DISTRIBUTED, including SIZES AND GRADES OF MINERAL DEPOSITS. Thus MOST OF THE SUPPLY IS IN A FEW VERY LARGE or VERY HIGH-GRADE OREBODIES. ©John Berry Assoc. Slide 1 of 54 MINERAL RESOURCE AVAILABILITY
Laws of Deposit Distribution, Size and Grade: • Ore grade and tonnage statistical distributions are lognormal, both within deposits and across deposits: • Most ore is thus in a few very large deposits. • For Copper - Mines #1: Escondida, Chile: #2: Chuquicamata, Chile: #3: Grasberg, Indon: Bingham Canyon, UT: 8% 1. 3 Mt 2008 6% 0. 9 Mt 2006 4% 0. 6 Mt 2006 265, 600 t 2006 119, 300 t 2008 Highland Valley, BC: The top 3 mines produce around 18% of the world’s copper • For Copper – Production by country, 2009 Chile: Peru: USA: China: Indonesia: Australia: Russia: Zambia: Canada: Poland: ©John Berry Assoc. Slide 1 of 54 5, 941, 000 Mt 34% 1, 407, 000 Mt 8% 1, 302, 000 Mt 7% 1, 171, 000 Mt 7% 1, 098, 000 Mt 6% 62% 941, 000 Mt 5% 745, 000 Mt 4% 614, 000 Mt 4% 540, 000 Mt 3% 484, 000 Mt 3%______ 81% P 90/median = 6. 3 Example: Porphyry Copper Deposits. Lognormal Distribution of Ore Deposit Tonnage. These are the largest class of copper deposits, and also contain Au, Ag, and Mo. The vertical lines indicate the 10 th, 50 th and 90 th percentile of deposits. http: //www. copper. org/resources/market_data/pdfs/annual_data. pdf MINERAL RESOURCE AVAILABILITY
DEPOSIT STATISTICS - Porphyry Coppers (cont). P 90/med=1. 7 NOTES: • Little Correlation between size of deposit and grade within class • Very small number of deposits with grade > 1% Cu. (~0. 3%) • 56 new copper discoveries have been made during the past three decades. • World discoveries of copper peaked in 1996. (http: //en. wikipedia. org/wiki/Peak_copper) SOURCE: Singer, D A. , V I. Berger, and B C. Moring, Porphyry Copper Deposits of the World: Database And Grade and Tonnage Models, 2008. USGS Open-File Report 2008 -1155 2008 http: //pubs. usgs. gov/of/2008/1155/of 2008 -1155. pdf ©John Berry Assoc. Slide 1 of 54 MINERAL RESOURCE AVAILABILITY
DEPOSIT TYPES, GRADES AND TONNAGE: GOLD 1850 -1920 Viable at $24/oz 1890 -1990 Viable at $35/oz 1980 -Present Viable at $300/oz Gold is a by-product Price barely matters NOTES: Not shown: Placer Gold 1800 -1900. Lowest capital requirement, lowest grades. “Gold Rushes” Since 1980 there has been a modern gold rush for SH/HS Gold in Nevada, but it takes ~500 of these deposits to replace the output from 1 Witwatersrand deposit, Their average grade is 1/5 that of the Witwatersrand, which is a “Paleoplacer”. ©John Berry Assoc. Slide 1 of 54 Source: Singer MINERAL RESOURCE AVAILABILITY
WORLD AND NEVADA GOLD DEPOSIT STATISTICS Grades: P 90/median =2 Tonnage: P 90/median = 7 Source: Singer, Donald A, Grade and Tonnage Models for the ANALYSIS OF Nevada’s Mineral Resources. Chapter 11 in ? ? ? ) ©John Berry Assoc. Slide 1 of 54 MINERAL RESOURCE AVAILABILITY
RARE EARTH ELEMENTS DISTRIBUTION: • Ancient Shields – therefore Africa, Australia, Brazil, Canada, Baltic Shield • Very few in USA, Russia, India Euro zone. • Several in China, Mongolia. US IMPORTS 2009: $ 113 M. 2010: $ 161 M USES (2009) - total 1, 400 mt. Chemical catalysts 22%; Cerium, Metallurgical alloys, Jet engines 21%; Yttrium Petroleum refining catalysts 14%; Cerium, Lanthanum Automotive catalytic converters 13%; Cerium Glass polishing and ceramics 9%; Cerium REE phosphors for displays, lasers 8%; Yttrium, Europium Permanent magnets 7%; Gd, Pr, Neodymium Electronics 3%; Tm, Gd, Pm Batteries: 25 lbs La, Nd, Dy, Tb per Prius Other (Fiber Optics (Er), Radar systems) 3%. ©John Berry Assoc. Slide 1 of 54 Unstable Places: • Congo • Gabon • Angola • Mozambique • Mauretania • Tanzania • Namibia • South Africa Stable Places MINERAL RESOURCE AVAILABILITY
RARE EARTH ELEMENTS aka “LANTHANIDES”, plus Scandium & Yttrium WHAT THEY ARE: Elements in Group 3 of the Atomic Table, in the 7 th Period MINERALOGY Bastnäsite: US, China Monazite: Rest of world Phosphorites: Florida GEOLOGY: Lanthanum Cerium Prasodymium Neodymium Promethium Samarium Europium Gadolinium Terbium Dysprosium Holmium Erbium Thulium Ytterbium Lutetium REE are found in mineable concentrations mainly in fascinating rocks called Carbonatites. • These are intrusive or, rarely, extrusive igneous rocks consisting of >50 percent carbonate (e. g. calcite) • Carbonatites usually occur as small plugs within zoned alkalic intrusive complexes, or as breccias. • They occur in continental rift-related tectonic settings. • Only one carbonatite volcano is known to have erupted in historical time, Ol Doinyo Lengai volcano in Tanzania. It erupts with the lowest temperature lava in the world, at 500 -600 °C. • Nb; Nb–rutile and Nb–ilmenite occur in some deposits. • Monazite (Ce, La, Di)PO 4, Bastnaesite (Ce. F)CO 3, and synchysite are the most important source of REE elements. • Much of China’s production is a by-product of iron mining in Inner Mongolia (The Economist, 9/17/2010) REE can also be found in clays and in placer deposits derived from carbonatites ©John Berry Assoc. Slide 1 of 54 MINERAL RESOURCE AVAILABILITY
RARE EARTH ELEMENTS =0. 000004 x Cu usage =1/200 th Cu usage 2010: 130, 000 t The “Electronic Metals” form the very top of the Raw Materials Pyramid (2002 Annual Consumption in Tonnes). Data from BGR – databank. (Emphasize highly compressed horizontal scale) REE Source and Supply Av. growth rate, 2002 -2010 = 6% ©John Berry Assoc. Slide 1 of 54 Source: Wagner, M. , and F W Wellmer, Global Mineral Resources, Occurrence & Distribution, in Environ. & Engineering Geology, vol. III MINERAL RESOURCE AVAILABILITY
RARE EARTH ELEMENTS US Import Sources (2006– 09): Rare-earth metals, compounds, etc. : China, 92%; France, 3%; Japan, 2%; Austria, 1%; Other, 2%. US Mine Production None, Stockpiled concentrates from Mountain Pass mine, CA, were processed. The break (red lines) in the cumulative frequency curves suggests the existence of two populations (i. e. deposit types). ©John Berry Assoc. Slide 1 of 54 MINERAL RESOURCE AVAILABILITY
REE EXPLORATION & DEVELOPMENT “RUSH” Mining Companies are trying to reopen old mines and develop new supplies: Hoidas Lake, Canada: could supply about 10% of the $1 billion market for REE in N. America. Mountain Pass Mine: Molycorp has raised $500 million. Projected to reopen in 2011. SE Nebraska: Quantum Rare Earth Devel. , of Canada, conducting test drilling. Alaska: Ucore Rare Metals, of Canada, has started drilling for REE. Kvanefjeld, Greenland: large, recent discovery. Drilling at this site has confirmed significant quantities of black lujavrite, which contains ~1% rare earth oxides (REO). Vietnam: agreed in 2010 to supply Japan with rare earths from Lai Châu Province. Mt. Weld, Australia: Ore to be refined at Kuantan, Malaya. Designed to supply 1/3 of world’s demand, exclusive of China. $730 million already spent on it. The Lanthanide concentrate from Mount Weld is “slightly radioactive”: this has caused permitting and political problems. (At Bukit Merah in Perak, a rare-earth mine operated by Mitsubishi, closed in 1992 and left continuing environmental and health concerns). Estonia (Alum Shale): Tailings from 50 years of uranium, shale and loparite mining at Sillamäe are now ore, and yield 3000 mt, or 2% of world REE production. Nuclear reprocessing: Nuclear fission produces a full range of elements. Due to the radioactivity hazard, it is unlikely that refining can be done safely and economically. ©John Berry Assoc. MINERAL RESOURCE AVAILABILITY Slide 1 of 54
TITANIUM USES: • About 95% of titanium ore is refined into titanium dioxide, an intensely white pigment used in paints, paper, toothpaste, and plastics. • 70% of all titanium metal produced is used in aircraft engines and frames The SR-71 “Blackbird” pioneered its use in modern military and commercial aircraft. An estimated 59 tons are used in the Boeing 777, 45 tons in the Boeing 747 • As a strengthening agent in graphite composite fishing rods and golf clubs and bicycles. • Also in STEEL (Ferro-titanium) to reduce grain size and as a deoxidizer and in aluminium (to refine grain size) and Copper (to harden) alloys, & in Iron, Manganese, Molybdenum, and Vanadium alloys • Titanium mill products used in industrial, aerospace, recreational, and emerging markets. • Powdered titanium is used in pyrotechnics as a source of bright-burning particles. PROCESSING: The Kroll process used to extract titanium from its various ores is laborious and costly: it sacrifices another expensive metal, Magnesium. Chlorine gas is passed over red-hot rutile or ilmenite in the presence of carbon to make Titanium tetrachloride Ti. Cl 4. This is condensed and purified by fractional distillation and then reduced with 800 °C molten magnesium in an argon atmosphere. ©John Berry Assoc. Slide 1 of 54 Highlighted: other minerals required to produce Titanium. MINERAL RESOURCE AVAILABILIT
TITANIUM: MAGNESIUM SUPPLY In the United States, magnesium is principally obtained by electrolysis of fused magnesium chloride from brines, wells, and sea water. The United States has traditionally been the major world supplier of this metal, supplying 45% of world production even as recently as 1995. Today, the US market share is at 7%, with a single domestic producer left, US Magnesium, in Utah As of 2005, China has taken over as the dominant supplier, pegged at 60% world market share, which increased from 4% in 1995. China is almost completely reliant on a different method of obtaining the metal from its ores, the silicothermic Pidgeon process (the reduction of the oxide at high temperatures with silicon). http: //en. wikipedia. org/wiki/Magnesium Note: Both the manufacture of Magnesium and the subsequent manufacture of Titanium require large quantities of energy (electrolysis at high temperatures). ©John Berry Assoc. Slide 1 of 54 MINERAL RESOURCE AVAILABILITY
TITANIUM GEOLOGY AND EXPLORATION Titanium is mainly mined from beach sands and dunes. There is one such mine in Florida. The continent of Africa accounts for half the world’s supply. Richards Bay Mines in South Africa: largest single producer of titanium products in the world 25% of world output of titanium feedstocks, (titania slag and rutile) 33% of world zircon output, and 25% of high purity pig iron. Mines dunes along the northern Kwazulu-Natal coast, Extracts heavy mineral concentrates from the sands and rehabilites the dunes. Four mining plants Two lease areas; 17 km x 2 km “Tisand”, and (i, e. 10. 5 miles long and 1 mile deep) 20 km x 2 km “Zulti North” (i. e. 12. 5 miles long and 1 mile deep) Paraquay Discovery: Announced by David Lowell, famous porphyry Copper geologist. Indicated and inferred resources are 5. 3 billion tons at an ore grade of 78 percent Requires a $500 million investment to get 5 million metric tons a year of ore, says Lowell Ore concentrate is quoted at $90 to $110 a metric ton depending on the grade, according to Reg Adams, a titanium dioxide researcher at Artikol N. L. in London. NOTE: With an Ore-grade of 78% this cannot be a fossil beach sand – it is a massive Ilmenite (Fe. Ti. O 3) deposit. ©John Berry Assoc. Slide 1 of 54 MINERAL RESOURCE AVAILABILITY
CHROMIUM PRODUCTION, 2000: ~4. 4 million mt of chromite ore, converted into ~3. 3 million tons of ferro-chrome MARKET VALUE: $2. 5 billion PRODUCTION BY COUNTRY: South Africa India Kazakhstan Zimbabwe Finland Iran Braz. Il GEOLOGY: ©John Berry Assoc. Slide 1 of 54 44% 18% 16% 5% 4% 2% Found in peridotite from the Earth's mantle, and serpentinite, its metamorphosed equivalent. It also occurs in layered ultramafic intrusive rocks, of which the Bushveld Complex in South Africa and the Great Dyke of Zimbabwe are the largest The Stillwater igneous complex in Montana also contains significant chromite. Chromite layers occur as early precipitates from the molten rock: The Merensky Reef of the Bushveld Complex is very thin (<1 m) but consists of 90% chromite. MINERAL RESOURCE AVAILABILITY
COBALT PRODUCTION by country, 2009: DRCongo: 44, 000 mt 50% – processed in China Zambia: 11, 400 mt 13% China: 6, 200 mt 7% Russia: Norway: Canada: 6, 200 mt 7% World 88, 000 mt Recycling – 20% of US supply PRODUCTION by Company, 2009: Glencore Ltd. , Switzerland: 33% Note: DR Congo and Zambia supply is a by-product or co-product (depending on the ratio of Copper price to Cobalt price) of Copper Mining. ©John Berry Assoc. Slide 1 of 54 SOURCE: http: //www. technologyreview. com/energy/38458/ MINERAL RESOURCE AVAILABILITY
CONCLUSIONS - 1 1. The Supply Curve for Mineral Commodities is “Lumpy” because • • Mineral Deposit Distribution is Log-Normal – a few large deposits control supply Capital Requirements are huge (billions to tens of billions) Time required to bring in new capacity is measured in decades Exploration and development are subject to “Bubbles” (Po. Cu, Epi. Gold, REE) 2. Population and economic growth is causing the exploitation of larger and larger deposits of lower and lower grade, causing • • • increased “lumpiness” of supply (capital, time, societal constraints) increased political risk (“Lumpy” distribution of deposits) exponentially increasing environmental damage 3. Technology is leading to the use of more and more exotic minerals, which causes: • • increased refining cost (refining is generally complex) increased co-dependence between minerals (rare minerals required) increased environmental costs (low grades, noxious effluents) increased political risk 4. Technology has also led to decreasing mineral costs in general, but has done little or 5. nothing to lower environmental costs. ©John Berry Assoc. Slide 40 of 40 MINERAL RESOURCE AVAILABILITY
CONCLUSIONS - 2 There is no immediate threat of exhaustion of any important commodity There is no (adequate? ) economic theory of the relationship between price, demand supply in a situation of “Lumpy Supply”, therefore companies, customers and countries are unable to make good plans for mineral resource investment and development. Therefore, there will be temporary price spikes, which could cause wars, due to: • Political supply interruptions • Natural disasters destroying capacity • Exhaustion of deposit types and the switch to a lower grade type. In the long-term, prices are dependant on a race between mining technology and resource depletion. Since 1800 technology has been winning the race, but as resource grades approach the Clarke, this becomes more difficult, and raw material prices may rise significantly in comparison to other economic inputs (wages, capital). Environmental consequencies per year, d. D/dt, are a multiplicative product of the growth in world population (d. P/dt) and the growth in in average living standards (gross world product/person – d. W/dt), divided by the change in average ore grades, which is <1. d. D/dt = d. P/dt * d. W/dt * (d. G/dt)-1 All of these are exponential functions, so the environmental impacts of mining are spiralling upward with time. This causes more and more antagonism to mining, and this could be a serious problem for civilization if not addressed. The solutions: radically fewer people; lowered person usage; recycle, recycle. ©John Berry Assoc. Slide 1 of 54 MINERAL RESOURCE AVAILABILITY
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