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PEAK MINERALS IN AUSTRALIA:

A REVIEW OF CHANGING IMPACTS AND BENEFITS

Cluster research report 1.2 Prepared by: Institute for Sustainable Futures University of Technology, Sydney and Department of Civil Engineering Monash University For: CSIRO Minerals Down Under Flagship
Institute for Sustainable Futures University of Technology, Sydney PO Box 123 Broadway, NSW, 2007 http://www.isf.uts.edu.au/ UTS 2010

PEAK MINERALS IN AUSTRALIA:


A REVIEW OF CHANGING IMPACTS AND BENEFITS

Authors:
Damien Giurco Timothy Prior Gavin Mudd Leah Mason Johannes Behrisch

Final Report
March 2010

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ABOUTTHEAUTHORS
InstituteforSustainableFutures:UniversityofTechnology,Sydney
TheInstituteforSustainableFutures(ISF)wasestablishedbytheUniversityofTechnology, Sydneyin1996toworkwithindustry,governmentandthecommunitytodevelopsustainable futuresthroughresearchandconsultancy.Ourmissionistocreatechangetowardsustainable futuresthatprotectandenhancetheenvironment,humanwellbeingandsocialequity.We seektoadoptaninterdisciplinaryapproachtoourworkandengageourpartnerorganisations inacollaborativeprocessthatemphasisesstrategicdecisionmaking. Forfurtherinformationvisitwww.isf.uts.edu.au Researchteam: Dr.DamienGiurco,ResearchDirector; Dr.TimPrior,ResearchPrincipal; Ms.LeahMason,ResearchConsultant; Mr.JohannesBehrisch,ResearchAssistant.

DepartmentofCivilEngineering:MonashUniversity
TheDepartmentofCivilEngineering,withintheFacultyofEngineeringatMonashUniversity aimstoprovidehighqualityCivilEngineeringeducation,researchandprofessionalservices globallyforthemutualbenefitofthestudents,thestaff,theUniversity,industry,the professionandthewidercommunity Forfurtherinformationvisitwww.eng.monash.edu.au/civil/ Researchteam: Dr.GavinM.Mudd,Lecturer.

CITATION
Citethisreportas: Giurco,D.,Prior,T.,Mudd,G.,Mason,L.andBehrisch,J.(2009).PeakmineralsinAustralia: areviewofchangingimpactsandbenefits.PreparedforCSIROMineralsDownUnderFlagship, bytheInstituteforSustainableFutures(UniversityofTechnology,Sydney)andDepartmentof CivilEngineering(MonashUniversity),March2010.

ACKNOWLEDGEMENT
ThisresearchhasbeenundertakenaspartoftheMineralsFuturesResearchCluster,a collaborativeprogrambetweentheAustralianCSIRO(CommonwealthScientificIndustrial ResearchOrganisation);TheUniversityofQueensland;TheUniversityofTechnology,Sydney; CurtinUniversityofTechnology;CQUniversity;andTheAustralianNationalUniversity.The authorsgratefullyacknowledgethecontributioneachpartnerandtheCSIROFlagship CollaborationFund.TheMineralsFuturesClusterisapartoftheMineralsDownUnder NationalResearchFlagship.SpecialthanksareextendedtoProf.DavidBreretonandDr.Daniel Franks(CentreforSocialResponsibilityinMining,SustainableMineralsInstitute,Universityof Queensland)andDr.BrettCohen(TheGreenHouse,SouthAfrica)fortheirhelpfulreviewand comments.

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CONTENTS
FIGURES TABLES EXECUTIVESUMMARY 1. INTRODUCTION 1.1. Overviewofdocument 2. BACKGROUND
2.1. Mineralsasresources 2.2. MineralsintheAustralianeconomy 2.3. Wealthfromminerals 2.4. Resourcedepletionandnationalwealth:managingtechnologyandtransitions

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1

2
2 5 14 16

3. EXPLORINGTHECONCEPTOFPEAKMINERALS
3.1. Finitesupplyofmineralresources 3.2. Peakoilmodelforresourcedepletion,energyservicesandtransitionplanning 3.3. Peakmineralsversuspeakoil:assumptions 3.4. Changingores:fromlowertohigherprimaryproductioncosts 3.5. Meetingfuturedemand:amixofminingandrecycling 3.6. Casestudyforcopperandgold

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19 19 20 24 25 25

4. THEECONOMICSOFPEAKPRODUCTION
4.1. Benefitsfromdependenceontheresourcesector 4.2. Threatsfromdependenceontheresourcesector 4.3. Thestructureofthemineralseconomy 4.4. Economicscarcityasaconstrainttomineralsupply 4.5. Demandforminerals

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30 32 36 37 44

5. TECHNOLOGYINTHEMININGINDUSTRY
5.1. Accessingresoures,creatingproducts 5.2. Evolutionintechnologyinthemineralsindustry

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49 51

6. ENVIRONMENTALCONSTRAINTS&IMPACTS
6.1. Environmentalfactorsaffectingproduction 6.2. Environmentalimpactsofmineralandmetalproductionandconsumption 6.3. Linkingenvironmentalissuesandtechnologicalsolutions

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60 62 68

7. ACHANGINGSOCIALLANDSCAPE 7.1. Respondingtosocialimpacts 7.2. Peakmineralsandsocialissuesacrossscales 8. UNDERSTANDINGAUSTRALIASLONGTERMMINERALWEALTH


8.1. Linkingnationalwealthtomineralendowment 8.2. MaximisinglongtermnationalbenefitfromAustraliasmineralendowment

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70 71

83
83 85

GLOSSARY REFERENCES APPENDIXA

87 90 101
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FIGURES
Figure1:Overviewofdocument...................................................................................................1 Figure2:Differingcategoriesandrelationshipsbetweenorereservesandmineralresources.4 Figure3:GrowthintheminingsectorinAustraliaandenergyintensity....................................7 Figure4:Percentageemploymentbysector................................................................................8 Figure5:Capitalandlabourinputstotheminingindustryandmultifactorproductivity...........8 Figure6:Australianproductionincreaserequiredtomeet2020demand.................................9 Figure7:WorldGDPandsteelproduction.................................................................................10 Figure8:IncreasingpercapitasteelconsumptionofChinastillrising......................................10 Figure9:HubbertspredictionforpeakoilproductionintheUnitedStates............................20 Figure10:EconomiccopperresourcesinAustralia,CanadaandUSA.......................................21 Figure11:Indexedrealpricesforcopper,lead,zincandnickelovertime ...............................23 . Figure12:Goldpricesovertime.................................................................................................23 Figure13:Conceptualmodelofpeakminerals;illustratinghighercostspostpeak..................24 Figure14:Energy,environmentalandsocialimpactsfromproduction&decliningoregrade25 Figure15:ApplyingpeakcurvestoGoldandCopperproductioninAustralia,Canada,USA....26 Figure16:ApplyingmultiplepeakcurvestoGoldproductioninAustralia...............................27 Figure17:Declinesinoregradesforgold&copper;CO2intensityproductionvsoregrade...28 Figure18:Theboombustnatureofresourcedependence.......................................................32 Figure19:Australianpopulationemployedinrural,mining&manufacturingsectors............35 Figure20:TherelationshipbetweentheHubbertsupplytrend,productionandprice............41 Figure21:Thetypicallifecycleofminingandmineralproducts ..............................................49 . Figure22:Incrementalandnextgenerationrolesoftechnologyforpeakminerals.................51 Figure23:Containedmetalsinmobilephonescrapversuscoppergoldore............................59 Figure24:Economicvalueandenvironmentalimpactatresourceprocessingstages.............63 Figure25:Possibleenvironmentalimpacts(indicatedbydots)atphasesofminingprocess..64 Figure26:Illustrativeenvironmentalimpactsofpeakmineralsatthelocalscale.....................65 Figure27:Illustrativeenvironmentalimpactsofpeakmineralsatanationalscale..................65 Figure28:Illustrativeenvironmentalimpactsofpeakmineralsatglobalscale.........................66 Figure29:TheenvironmentalKurznetsCurve..........................................................................67 Figure30:Illustrativesocialimpactsofpeakmineralsatthelocalscale...................................73 Figure31:Illustrativesocialimpactsofpeakmineralsatthenationalscale .............................78 . Figure32:Illustrativesocialimpactsofpeakmineralsattheglobalscale.................................80 Figure33:MaximisinglongtermbenefitfromAustralia'smineralendowment......................83 Figure34:TherelationshipbetweenmineralresourcesandorereservesunderJORCcode..102

TABLES
Table1:IndustryGrossValueAdded200809.............................................................................6 Table2:ContributiontoAustraliantotalexportsbysector(BalanceOfPaymentsBasis)..........7 Table3:OverviewofaustralianmineralsindustryIn2008........................................................12 Table4:Minerals,metalsandtheircommonuses....................................................................13 Table5:Approachestomeasuringwealth .................................................................................15 . Table6:ComparisonofResourceCurseandDutchDisease......................................................33 Table7:Issuesandimpactsassociatedwithminingonthelocalscale(attheminesite).........75

BOXES
Box1:WillAustraliafacearesourcecurseinthefuture?..........................................................13 Box2:Newtechnology&adoptioninertia:HighPressureAcidLeachforNickelLateriteOres 57 Box3:BaiaMare:fromglobaltolocalimpacts..........................................................................72

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EXECUTIVE SUMMARY
ThebenefitsandimpactsofmineralresourceextractionandprocessinginAustraliaare changing.AsAustraliaslargestexportindustry,miningbringsfinancialbenefitstothenation andwhilstourvastendowmentofmineralswillnotbeexhaustedsoon,extractionand productionarebecomingmorechallenging.Decliningoregradesareindicativeofashiftfrom easierandcheapertomorecomplexandexpensiveprocessinginsocialandenvironmental termsaswellaseconomic.Decliningresourcequalityhasalsoleadtodecliningproductivity andtheenergyintensityofprocessinghassubsequentlyrisenby50%overthelastdecade. GlobaldemandforAustralianmineralsandmetalscontinuestorise.However,asamineral dependenteconomyfacingthechallengesofadaptingtocarbonconstraintsandanewtax structure,acomprehensiveassessmentoftheindustryscurrentandfutureroleinthe Australianeconomyisimperative.Thefollowingquestionsarerelevantinsuchanassessment: Whatwilltheworldneedmineralsandmetalsforinfuture?WhatrolewillAustraliaplayinthe supplyandreuseofmetals?Howdoweensurebenefitsoutweighcosts?Whatwillwedowith theproceedsofminingtosustainlongtermbenefit?Wherearetheopportunitiesfor innovationandtransitionintechnologyandpolicy? Whilstpeakoilwilldirectlyaffectthemineralsindustrythroughrisingfuelcosts,italsooffersa usefulconceptualmodelforunderstandingtheimpactofgoingfromeasierandcheaperto complexandexpensiveresourceprocessing,andcritically,toplanningatransitiontonew waysofprovidingenergyservices.Therearefundamentaldifferencesbetweenoilandmany minerals(e.g.therecyclabilityofmetals).Notwithstanding,thispaperestablishesaconceptual modelofpeakmineralsasapowerfultoolforcommunicatingthecrossscaleimpacts(i.e. local,national,global)ofcomplexandexpensiveprocessingwithrespecttoeconomic,social andenvironmentalissues.Aswithenergyservicesprovidedbyoil,thepeakmineralsmodel helpstoopenthediscussionregardingtheultimateuseofmineralsandmetals.Withan understandingofwhenprocessingbecomesverycomplexandexpensive,itthenfocuseson whattransitionscandeliverthesameusefulfunctionsthatmineralsandmetalsperform(e.g. oceanbasedresources,greaterrecyclingorreprocessing,dematerialisation,substitutionwith othermaterials);andwhichenablingtechnologiesandpoliciescansupportthesetransitions. Thekeyfindingsofthisreportare: Miningrepresentedapproximately7.7%ofAustraliasGDPin200809andcombined mineralandenergyexportsof$160brepresentednearly56%ofthetotalinthatyear. Mineralsprocessingfaceshigherenergycostsandisbecomingmoreenergyintensive despitetechnologicalimprovements,asaresultofprocessinglowergrademore complexoresinmorechallenginglocations(i.e.refractory,moreremote,deeper). o Peakmineralsoffersausefulmodelforrepresentingtheeasierandcheaper thenmorecomplexandexpensiveimpactsassociatedwithprocessing decliningresourcequalities. o Asanexample,copperfitsthepeakcurvewellandisapproachingapeakin Australia.Goldreflectsmultiplepeaksinproductionduetotechnological transitionsthathaveoccurredintheindustry. o Thispresentsopportunitiesforinnovativetechnologies,policiesandbusiness modelsalongtheproduction,consumptionandreusecycleformineralsand metalstounderpinfutureprosperity. Australiaisheavilydependentonminingexportsandshoulddevelopstrategiesto ensurelongtermnationalbenefitsfrommineralssocial,economicand environmentalwhilstactingdecisivelytoavoidtheresourcecurse.

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1. INTRODUCTION
ThispaperreviewsAustraliascurrentuseofitsmineralresources,futureissuesthatwillaffect processinganduseofmineralsandmetals,andthelongtermbenefitsthatAustraliamay derivefromsuchuse. ThisworkispartoftheMineralFuturesResearchClusterwithintheMineralFuturesInitiative oftheCSIROMineralsDownUnderFlagshipcomprisingtheUniversityofQueensland(Centre forSocialResponsibilityinMiningattheSustainableMineralsInstitute);Universityof Technology,Sydney(InstituteforSustainableFutureswithinputfromDr.GavinMudd, MonashUniversity);CurtinUniversityofTechnology(ResearchCentreforStronger Communities);CQUniversity;AustralianNationalUniversityandCSIRO. SpecificallyitispartoftheP1clusterproject,whichtogetherwithresearchonstrategic foresightformstheCommodityFuturesprogramofwork.Otherresearchisbeingundertaken concurrentlyonTechnologyfutures(P2)andRegionsinTransition(P3).

1.1.

OVERVIEW OF DOCUMENT

AnoverviewofthedocumentisprovidedinFigure1.Followingthisintroduction,Section2 providesabackgroundtomineralsasresources,theirroleintheAustralianeconomy,how wealthfrommineralscanbeassessedandtheroleoftechnologyintransitionsthatstrengthen longtermbenefitforAustralia.Section3thenintroducesthepeakmineralsframework, drawingonsimilaritiesanddifferencestopeakoil.Anoverviewofeconomicsandscarcitywith respecttoresourceuseisgiveninSection4.Section5,thenshowswherehistorical technologicalbreakthroughshavebeenandreexamineshowpeakmineralsandeconomics suggestanexpandedfuturefocus.Sections7and8explorethechangingenvironmentaland socialissuesassociatedwithprocessingincreasinglychallengingores.Thefinalsectionframes thekeyelementstobeconsideredinfurtherdevelopingstrategiestorealiselongterm nationalbenefitfromthecurrentandfutureuseofAustraliasmineralresources.
1. Introduction

2. Background

3. Exploring peak minerals

4. Economics of Peak Production

5. Role of Technology

6. Environmental Issues

7. Changing Social Landscape

8. Pursuing long term national benefit

Figure1:Overviewofdocument

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2. BACKGROUND

SECTIONTWO:OUTLINE
Thissectionexplores: mineralsasresources;outliningtheirfunctioninsocietyandspecificdefinitions(2.1) theroleofmineralsintheAustralianeconomy;theirdominanceofexportmarkets,the risingenergycostsofproductionanddecliningproductivityofthesector;.theimpacts ofrisingglobaldemandformineralsandmetals,andtheusestowhichtheyareput. (2.2) approachesforassessingwealthfromminerals;thisprovidesanimportant backgroundtofutureworkthatwilldevelopstrategiestoensurelongtermbenefit fromresourcesuse(2.3) resourcedepletion,technologyandtransitions;framingtheintersectionofissues importanttofutureuseofmineralsandmetals(2.4)

2.1.

MINERALS AS RESOURCES

2.1.1. Resources are valued for their function in society


Naturalmaterialsandobjectsholddifferentmeaningfordifferentmembersofoursociety,and thisinfluenceshowweattributevalue.Whethereconomic,culturalorphysical,theattribution ofvaluedesignateswhatweconsidertoberesources(Blunden,1985).Thevalueweplaceon resourcesisdeterminedbythefunctionorfunctionsthosematerialsorobjectsperforminour society. Whileconsumersdemandpreciousmetalsandgemsasfinalgoods,theseonly accountforasmallfractionoftotalmineraldemand.Themainuseofmineralsisas inputsforfinalproductsandservices.AustralianMineralEconomics(2006,p.39) MineralsandmetalsareamongAustraliasmostvaluablenaturalresourcesbecauseofthe diversityoftheiruses,forwhichdemandontheworldmarketisincreasing.Thecurrentand futurevalueAustraliaderivesfromminingandprocessingmineralsintometalsistwofold: 1. theycanprovidemetals,usedinequipmenttoharvestandtransportourfood;inthe constructionofourbuildings;inthepipesthatsupplyourwater;andinwiresthat powerourlightingandtelecommunicationsinfrastructure;inthejewelleryand medicaldevicessupportingourculturalandphysicalwellbeingwevaluethe propertiesandfunctionalityofmetalcontaininggoodsandtheservicestheyprovide. 2. theycanprovidemonies,viarevenueandroyalties,whichareusedtopurchasegoods andserviceswevaluethepropertiesandfunctionalityofmetalandnonmetal containinggoodsandtheservices,whichcanbepurchasedwiththeproceedsof miningandmineralprocessing. AsAustraliapurchasesmoregoodsandservicesfromoverseasthanthevalueofgoodsand servicesitexports(ABARE,2009a),whatwechoosetospendourexportproceedson(ofwhich miningandenergyexportsrepresentsover50%)andhowwestructureaneconomythatcan continuestopayforthesegoodsandservicesinthelongertermisafundamentallyimportant question.Notwithstandingoureconomicdependenceonmineralresources,manyaspectsof ourglobalsocietyaresociallyand/orculturallydependentonmineralsandmetals. Consequently,almosteveryaspectofourdailylivesisaffectedbytheavailabilityofmany

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mineralresources,andthecurrentmineralproductionandconsumptionpatternsreflectthe valuesweimplicitlyorexplicitlyattributetotheseresources.

2.1.2. Defining mineral resources


Thereareavarietyofcommontermsusedtodescribeorquantifymineralresources,including somethathavestatutorysignificance.Asdescribedabove,amineralresourcecan,atitsmost simple,beconsideredassomethingthathasinherentvaluetosociety.Amineralresourcecan thereforebeidentifiedthroughgeologicalexploration,andwhenprofitable,thiscanbemined toproduceagivenmineral.Thechallenge,therefore,istoascertainanddescribewhatisa potentiallyprofitablemineralresource.Thiscanvaryduetomarketconditions(e.g.price fluctuations),inputcosts(e.g.fuels,labour),oreprocessability(howeasilythemineralscanbe extracted),orevensocialissues(e.g.bansonmininginnationalparks). Giventhecomplexityofdefiningamineralresourceasprofitable,andtheneedtoprovide clearcommunicationofsuchresultstothepublicandinvestors(sincemostminingcompanies arepubliclylistedonthestockexchange),theAustralianminingindustryestablishedtheJoint OreReservesCommittee(orJORC)Codeforreportingmineralresources(AusIMMetal., 2004).AnyminingcompanylistedontheAustralianstockexchangeisrequiredbylawtouse theJORCcodetoreportonmineralresourcestheycontrol.Therearealsoequivalentcodesin othermajorminingcountriessuchasCanadaandSouthAfrica. ThetwoprimaryaspectswhichtheJORCcodeconsidersaregeologicalandeconomic probabilityinclaimingamineralresourceaseconomic.Arangeofimportantmodifying factorsarecompulsorytoconsidersuchasmining,metallurgical,economic,marketing, legal,environmental,socialandgovernmentalfactors.Furthermore,therearetwoprimary categoriesofmineralresourcesorereservesandmineralresources.Thetypicaldistinctionis thatorereserveshaveaveryhigheconomicandgeologicprobabilityofprofitableextraction, whilemineralresourceshaveareasonablegeologicalprobabilitybutarelesscertain economically.Shortdefinitionsare: OreReservesassessmentsdemonstrateatthetimeofreportingthateconomic extractioncouldreasonablybejustified.OreReservesaresubdividedinorder ofincreasingconfidenceintoProbableOreReservesandProvedOreReserves. MineralResourcesthelocation,quantity,grade,geologicalcharacteristicsand continuityofaMineralResourceareknown,suchthattherearereasonable prospectsforeventualeconomicextraction;notallmodifyingfactorshavebeen assessedandhencesomeuncertaintyremains.MineralResourcesaresub divided,inorderofincreasinggeologicalconfidence,intoInferred,Indicatedand Measuredcategories

ToavoidpossibleconfusionwiththeJORCcode,allreferencetoresourceswillbeusedinthe generalsenseasdiscussedinAppendixA.Whenthespecifictermsoforereservesormineral resourcesareused,theyareintendedtobeconsistentwiththeJORCcode.Forcompleteness, thefulldefinitionsoforereserves,mineralresourcesandtheirsubcategoriesareincludedin AppendixA.AconceptualrelationshipoforereservesandmineralresourcesisshowninFigure 2.

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Figure2:Differingcategoriesandrelationshipsbetweenorereservesandmineralresources (Lambertetal.,2009) TheUnitedStatesGeologicalSurvey(USGS)usethecategoriesofreservesandreservesbase (seeUSGS,2009).ThesearebroadlysimilartoJORCsorereservesandmineralresources, respectively,althoughtheUSGSalsoallowsforgreaterinclusionofinferredmineralresources inthereservesbasecategory(AppendixA).AnexcellentanalysisofJORC,anditscomparison toothersystemsisgivenbyLambertandcolleagues(2009).

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2.2.

MINERALS IN THE AUSTRALIAN ECONOMY

ThissectiongivesanoverviewoftheroleofthemineralssectorintheAustralianeconomy,the structureofthemineralssectoranditsexportstomeetglobalcommoditydemand.

2.2.1. Contribution of mining to the Australian economy


MineralsareoneelementofAustraliasnaturalresourcebase.Otherkeynaturalresources includeforestryandfisheries,andtogetherwithagriculture,theymakeasignificant contributiontotheAustralianeconomyandAustraliasGrossDomesticProduct(GDP).Table1 showsacomparisonofvariousindustriesinGrossValueAdded(GVA)totheAustralian economyoverthe20082009periodandprovidesusefulcontextforunderstandingthe contributionofminingandminerals(inbold)toAustraliasGDP.Miningcontributed7.7%GVA in20082009,upfrom4.9%1in20052006.Manufacturingrepresents9.4%GVA,someof whichislinkedtodownstreamprocessingfrommining.Specificmineralscontributetovarying degreeswithblackcoalcontributingthemost(1.3%),comparedto0.49%forGoldandLead and0.06%forSilverandZinc)2.

1 2

Basedoncalculationsusingtable15.1inABSfiguresinABSYearbook2008 FigurescompiledfromBalancingActCSIRO2005volume2

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Table1:IndustryGrossValueAdded200809(Source:ABS5204.0Table5) ANZICDivision Agriculture,forestryandfishing Mining(total) Mining Explorationandminingsupportservices Manufacturing(total;onlysectorsrelatedtominingitemisedbelow) Petroleum,Coal,ChemicalandRubber Nonmetallicmineralproducts Metalproducts Electricity,gasandwatersupply Construction Wholesaletrade Retailtrade Accommodation,cafesandrestaurants Transport,postalandstorage Informationmediaandtelecommunications Financialandinsuranceservices Rental,hiringandrealestateservices Professional,scientificandtechnicalservices Administrativeandsupportservices Publicadministrationandsafety Educationandtraining Healthcareandsocialassistance Artsandrecreationservices Otherservices Ownershipofdwellings Totalgrossvalueaddedatbasicprices Taxeslesssubsidies Statisticaldiscrepancy GROSSDOMESTICPRODUCT Exportvaluedominatedbymineralandenergyresources MineralandenergyresourcehavedominatedAustralianexportsforthepastdecade.Today theyrepresentoverhalfoftotalexportsonabalanceofpaymentsbasis(Table2),andthe totalvaluehasincreasedfourfold.Bycontrast,theexportvaluesfromforestryhasnearly doubled,ashavemerchandiseandservices.Thevalueoffarmexportshasincreasedby40% whilstthecontributionfromfisherieshasremainedconstant. 200809$million GrossValueAdded 30979 80830 72599 8231 103139 16969 5388 25560 27806 81601 53842 54189 26801 59499 34234 118181 36033 70517 28182 60677 48731 66654 10112 21837 85311 1099137 89266 6093 1194496 Percentage oftotal 2.6% 7.7% 9.4% 2.5% 7.4% 4.9% 4.7% 2.5% 5.8% 3.4% 10.8% 3.0% 6.1% 2.7% 5.3% 4.3% 6.1% 0.8% 2.0% 8.0% 100.0%

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Table2:ContributiontoAustraliantotalexportsbysector(Balanceofpaymentsbasis) (ABARE,2009b) 2008/09 $m 32027 2343 1529 159677 36152 53973 285701 2008/09 Percentage 11.2% 0.8% 0.5% 55.9% 12.7% 18.9% 100.0% 1998/99 $m 23009 1347 1511 39213 20703 28312 114095 1998/99 Percentage 20.2% 1.2% 1.3% 34.4% 18.1% 24.8% 100.0%

Farm Forestry Fisheries MineralandEnergyResources Merchandise Services Total ThesefiguresplaceAustraliafirmlywithintheUNscriteriaforamineraldependenteconomy (AusIMM,2006),andfocusesattentiononhowtheserevenuesarebeingusedforlongerterm benefit.Theriseinvalueofmineralexportsismorearesultofincreasingpricesthanvolumes (Figure3).Figure3(a)showsthevalueaddedintheAustralianminingindustrybetween 1989/90and2005/06intermsofvalueandvolume.Ithighlightsthatwhilstproduction volumeshaverisenby60%attheendoftheperiod,pricesforcommoditieshavemorethan trebledinvalue.

(a)

(b)

Figure3:(a)GrowthintheminingsectorinAustraliarelativeto1989/90and(b)Growthin energyintensityofminingsectorinAustraliarelativeto1989/90(SanduandSyed,2008) Energyinputstominingarerising Figure3(b)showsthatenergyconsumptionhasrisenfrom1989/90to2005/06by220PJ(red line).Thiscanbeattributedtoariseinproductionactivity(solidbluelineinbothFigure3(a) andFigure3(b))andaconcurrentriseinrealenergyintensity(dashedline). Directemploymentfromminingisrelativelylow Whilsttheminingsectorcontributessignificantlytogrossvalueaddedandexports,itsdirect contributiontoemploymentislowcomparedwithothersectors(Figure4),andhasnot increasedsignificantlyoverthedecade.Alsoofnoteinthisfigureisthesteadydeclineof employmentinmanufacturing,agriculture,forestryandfishing,andinwholesaletrade. Employmenthasrisenconsiderablyinconstruction,propertyandbusinessservicesandhealth andcommunityservices.

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Figure4:Percentageemploymentbysector Productivityisdeclining In2008,theProductivityCommissionreleasedareportentitledProductivityintheMining Industry:measurementandinterpretation.Itshowsthemultifactorproductivity3ofthe miningindustrydecliningfrom2000/01to2006/07asshowninFigure5(Toppetal.,2008).

Figure5:Capitalandlabourinputstotheminingindustryandmultifactorproductivity Itstatesthatapproximatelyonethirdofthiseffectisexplainedbycapitalinvestmentinnew capacitythatisyettobeginproductionduetolongleadtimes.However,thecontinued depletionofthequantityandqualityofAustraliasresourcebasewasproposedtohavea significantandadverseeffectonthelongtermmultifactorproductivityofmining: Whilenaturalresourcesareobviouslyamajorinputintominingproduction,changes intheirqualityarenotgenerallytakenintoaccountinstandardmeasuresof


3

Multifactorproductivityisanindicatoroftheefficiencywithwhichcapitalandlabourinputsareused togenerategoodsandservices(Toppetal.2008).

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productivity.Thisomissionwouldnotbeaproblemifnaturalresourceswereininfinite supplyandofhomogeneousqualitythatis,availablewithoutconstraintatthesame unitcostofextraction.Butneitheristhecase:resourcedepositsarenonrenewable, anddepletedbyongoingextraction.Andasmineralandenergydepositsaredepleted, thequalityandaccessibilityofremainingreservesgenerallydecline.Miners,bychoice, focusinitiallyonhighquality,readilyaccessibledeposits,sincetheyproducethe highestreturns.Asthesedepositsaredepleted,remainingdepositsmaybeoflower grade,inmoreremotelocations,deeperintheground,mixedwithgreaterimpurities, requiremoredifficultextractiontechniquesandsoon. Asthequalityandaccessibilityofdepositsdecline,greatercommitmentsofcapitaland labouraregenerallyneededtoextractthem.Whendepositsaredeeper,more developmentworkisneededtoaccessthedesiredresources.Iftherearegreater impurities,greatercostsmaybeincurredinextractingandprocessingthematerialinto saleableoutput.Inshort,moreeffortisneededtoproduceaunitofoutput. Theadditionalcapitalandlabourrequiredperunitofoutputshowupasadeclinein measuredproductivity.(Toppetal.,2008,pxvii) TheProductivityCommissionsanalysisemphasisestheimportanceofdevelopingastrategyto linktheuseofAustraliasmineralresourcestonationallongtermbenefitandanticipatea futurecharacterisedbygreatereffortstoproducedesiredoutputs.Suchastrategymustbe informedbyadeeperunderstandingoftheroleoftechnology,changedimpactsandpractices, andultimatelywhatmineralsandmetalsareusedforandhowtheydelivervalue;allofwhich areexploredinsubsequentsectionsofthisreport.

2.2.2. Australian mineral production: societys use of metals and minerals


Currentproductionandfuturedemand AnoverviewofAustraliasmineralindustryisprovidedinTable3(p.12).Australiaisa significantglobalsupplierofminerals(andmetals)toamarketwheredemandisexpectedto increase(Figure6).
120%

100%

80%

60%

40%

20%

0%

Lead

Coal

Copper

Iron ore

Aluminium

Zinc

Nickel

Figure6:Australianproductionincreaserequiredtomeet2020demand(AccessEconomics, 2008)

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TheseincreasesaredrivenbyincreasingglobalGDPgrowthasshowninFigure7forsteeland increasingpercapitaconsumptionforChinainFigure8.Understandingthecurrentandfuture impactsofAustralianproduction,includingtheroleofnewtechnologiesinmeetingthis demand,isdiscussedlaterinthisreport.

Figure7:WorldGDPandsteelproduction(Grantetal.,2005;citingMaddison,2003and Mitchell,2003)

Figure8:IncreasingpercapitasteelconsumptionofChinastillrising(Grantetal.,2005) Societysuseofmineralsandmetals Metalscommonlyfillavarietyofuses(Table4)thatwillcontinueintothefuture,whilenew useswillemergewithnewneeds,technologiesandpractices.Otherusesmaybesubstituted withdifferentmetalsornonmetals.Theimportantpointtoemphasiseisthatconsiderationof longtermnationalbenefitfrommineralswilldependon: theservicesdemandedbymetalsinthefutureglobaleconomy(health,education, housing,transport,defenceandsoon);

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thelevelofglobaldemandforservicesdependsonpopulation,andthe intensityofservicesperperson(itselfdependentonwealthandresource availability,sustainability,geopoliticaldriversandthestructureofour economiesandsocieties)

thedegreetowhichAustralianmineralsandmetalsareusedinprovidingthese services; o o dependentonroleofmetals(e.g.copperorplasticforwaterpipes;steelor timberforconstruction) Australianresourcedevelopment,technologydevelopment,financing,market accessandcompetition(bothfromothermineralandmetalsupplying countriesandnonmetalsubstitution) themineralsintensityoftheeconomyandofservicesprovidedbyminerals andmetals

thedegreetowhichwealthfromtheuseofAustralianmineralandmetalresourcesis realisedandusedtosupportlongtermnationalbenefitwhethertheseareresources fromterrestrialore,oceanresources,reprocessedtailingsdumps,landfillsorother sourcesofsecondaryscrap.

SubsequentsectionsexploretheissueswhichmustbeconsideredinframingAustralias responsetothesechallenges.

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Table3:OverviewofAustralianmineralsindustryin2008productionstatistics,mineralresources,exportsandeconomicvalue Commodity
BlackCoal(raw) BlackCoal(saleable) BrownCoal(raw) IronOre Steel Bauxite Alumina Aluminium Gold Lead Zinc Silver Copper Rutile Ilmenite Zircon Diamonds Manganese Nickel Tin Uranium Lithium Tantalum
a

Mine Production

OreGrade

Identified Resources
47.4Gtb 92.3Gtb 25.9Gt 8.8Gt 7,856t 33.9Mt 61.7Mt 79.6kt 85.4Mt 29.5Mt 236.2Mt 49.0Mt 419Mcarats 371Mt 28.5Mt 252kt 1,179ktU3O8 609ktLi 66.3ktTa

Inferred Resources
66.7Gtb 101.1Gtb 28.9Gt 0.91Gt 4,596t 18.6Mt 21.9Mt 30.0kt 34.2Mt 32.1Mt 123.2 36.5Mt e 133Mt 20.9Mt 429kt 500ktU3O8 25ktLi 80ktTa

Consumption
71.58Mtc 66.03Mtd ~32.95Mt ~5.913Mt ~55.38Mt ~3.54Mt 0.312Mt nodata 23kt 0.085kt nodata 154kt nodata nodata nodata nodata nodata nodata nodata 0 nodata nodata

Exports
261.21Mt 0Mt 309.47Mt 1.811Mt 8.66Mt 15.91Mt 1.679Mt 415.2t 604kt 1.497Mt 347t 811kt 438kt 1.019Mt 655kt 15.67Mcarats 4.002Mt 209.8kt 2,783t 9,663tU3O8 nodata nodata

ExportValue (millions)
$46,858 $0 $33,352 $1,562d $226 $6,382 $5,244 $13,332 $1,709 $2,314 $212 $6,734 $271 $120 $476 $618 $2,021 $4,173 $45 $737 nodata nodata

World Production
5,715Mt 1,725Mt 1,330Mt 216.4Mt 78.91Mt 39.26Mt 2,416t 3,896kt 11.70Mt 19.84kt 15.53Mt 609kt 11.33Mt 1,235kt 170Mcarats 34.51Mt 1,509kt 312.4kt 51,598tU3O8f 27,400tLih 815tTah

430.61Mt 332.11Mt 66.03Mtd 342.42Mt 61.1%Fe 7.724Mt 64.04Mt 36.9%Al2O3 19.45Mt 1.974Mt 215.2t ~1.9g/tAu 650kt 3.50%Pb 1.519Mt 7.77%Zn 1,926t 98.4g/tAg 885kt 0.95%Cu 325kt nodata 2.082Mt nodata 550kt nodata 15.66Mcarats 1.04carats/t 4.812Mt 48.0%Mn 199.2kt ~1.2%Ni 1,783t nodata 0.098%U3O8 9,989tU3O8 ~8,900tLig ~4%Li2Og i nodata 435t

IncludeseconomicallydemonstratedresourcesandsubeconomicresourcesfromGA(2009).bRecoverablecoalonly(notinsituresources).c2005/06datasince2007/08isnotreported.dDatafor e f g 2007/08financialyear(notcalendaryear2008). IncludedinIdentifiedResources. WorlduraniumproductionfromWNA(2009). Lithiumisproducedasspodumeneconcentrate(LiAlSi2O6),the h i productionestimateisbasedondatafromWADMP(2009)andTalison(2009). WorldproductionestimatefromUSGS(2009). Tantalumisproducedastantaliteconcentrate((Fe,Mn)(Ta,Nb)2O6) (680tconcentratein2008;WADMP,2009),althoughtheproportionofTaisnotreportedinAustralia,USGS(2009)report435tTa. DatafromABARE(2009a,b),GeoScienceAustralia(2009),Mudd(2009a).Someconsumptiondataisnotdirectlyreported,andisestimated(~)asthedifferenceofproductionandexports.


12

Table4:Minerals,metalsandtheircommonuses(adaptedfromIIED&WBCSD,2002) Mineral/Metal
Aluminium Coal Cobalt Copper Gold Iron Lead Lithium Manganese Magnesium Molybdenum Nickel Phosphaterock PlatinumGroupMetals Silver Tantalum Titanium Tungsten Uranium Vanadium Zinc Zirconium

Commonuses
Aircraft&automotiveparts,railroadcars,seagoingvessels,packaging,buildingconstruction,electricalapplications,pharmaceuticals,watertreatment Electricitygeneration;steelmaking;chemicalmanufacture;productionofliquidfuels,plastics&polymers Superalloy(engines),magnets,stainlesssteel,electroplating,batteries,cementedcarbides&diamondtools,catalysts,pigments,radiotherapy Buildingconstruction(wire,cable,tubing/pipes,roofing,climatecontrolsystems),aircraft&automotiveparts,industrialapplications&machinery(tools, gears,bearings,turbineblades),furniture,coins,crafts,clothing,jewellery,artwork,musicalinstruments,cookware Jewellery,electronics,dentistry,watchcases,pensandpencils,spectacleframesandbathroomfittings,decorationofchinaandglass,storeofvalue Steel(construction,vehicles),numerousalloys Batteries,cablesheathing,leadcrystal,solderandradiationprotection,antiknockcompoundinpetrol,plumbing,ammunition Lubricants,glassandceramics,lithiumcarbonate(usedforaluminiumreduction,batteries,pharmaceuticals),highperformancealloysforaircraft,carbon dioxideabsorberinspacecrafts,nuclearapplications Steelmaking,alloys,batteries,colourantsandpigments,ferrites,weldingfluxes,agriculture,watertreatment,hydrometallurgy,fueladditives,oxidizing agents,odourcontrol,catalysts,sealants,metalcoating,circuitboards Alloysusedforaircraft,carenginecasings&missileconstruction,refractorymaterial,agriculture(feedandfertilizer),fillerinpaper,paints&plastics, automobile&machinery,ceramics,fireretardant,pyrotechnics&flares,reducingagentfortheproductionofmetalsfromtheirsalts Alloys,catalystinpetroleumrefining,heatingelements,lubricants,nuclearenergyapplications,missile&aircraftparts,electricalapplications Stainlesssteel,corrosionresistantalloys,gasturbines,rocketengines,plating,coins,catalysts,burglarproofvaults,batteries Fertilizers,detergents,flameretardants,food&beverages,animalfeeds,metaltreatment,watertreatment,pulp&paper,glass&ceramics,textiles& syntheticfibres,plastics,rubber,pharmaceuticals,cosmetics,petroleumproduction,pesticides,toothpaste,mining,leather,paints,fuelcells Jewellery,coins,autocatalysts,electronics,glass,dentistry,chemical&electrochemical,catalysts,petroleum,laboratoryequipment,antipollutiondevicesin cars,investment,anticancerdrugs,medicalimplants(pacemakers,replacementvalves) Photography(includingXrays),jewellery,electricalapplications,batteries,solder&brazingalloys,tableware,mirrors&glass,coins Electrolyticcapacitors,alloys,liningforchemical&nuclearreactors,wires,medicalsurgery,cameras Productionoflightweightalloys,aircraft&automotivecomponents,jointreplacement,paints,watches,chemicalprocessingequipment,marineequipment, pulp&paperprocessingequipment,pipes,jewellery Alloys(electriclampfilaments,electron&televisiontube,metalevaporationwork),ammunition,chemical&tanningindustry,paints,Xraytargets Nuclearfuel,nuclearweapons,Xraytargets,photographictoner Alloys(especiallysteel),catalysts,pigmentsforceramics&glass,batteries,medical,pharmaceutical,electronics Galvanizing,alloys,brass,batteries,roofing,waterpurification,coins,zincoxide(widelyusedinmanufacturedgoods),zincsulfide(luminousdials,Xray& TVscreens,paints,fluorescentlights) Ceramics,refractories,foundrysands,glass,chemicalpipingincorrosiveenvironments,nuclearpowerreactors,hardeningagentinalloys,heatexchangers, photographicflashbulbs,surgicalinstruments

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2.3.

WEALTH FROM MINERALS

Wealthfrommineralshasmonetaryandnonmonetaryaspects.Differentmodelsfor evaluatingnationalwealthbringdifferentperspectivestowhatmineralwealthmight represent,andhowitcanbemanaged.TherangeofapproachesusedareoutlinedinTable5. CalculatingAustraliasmineralwealthrequirescarefulassessmentbecauseofthediverseroles mineralsandmetalsplayintheprovisionofmanyofthegoodsandservicesrequiredby industry,thepublicsector,ortothepublicintheformofconsumergoods(CRUInternational 2001). ThefirstmeasureshowninTable5iscontributiontoGrossDomesticProduct(GDP),whichhas becometheworldsubiquitousindicatorofeconomicprosperity(Talberthetal.,2007). Governments,internationalagenciesandeconomistshavehistoricallyusedthismeasure extensively.Anevaluationofwaystomeasuresustainabledevelopmentundertakenbythe OECDin2008statedthattheuseofGDP(percapitaorotherwise)wasunjustifiableforuse inasustainabilityframeworkasitignoreschangesinstocksofhuman,social,financial, manufacturedandnaturalcapital.GDPdoesnotaccountfordeclinesinstocksofmineralsand metalsyetisstronglylinkedtoperceptionsofnationalwealth.Forexample,ifoneimagines discoveringgoldinonesownbackyard,andthen,inaparticularyearexchangingitforcash (therebycontributingtoGDP)doesthismakeonefeelricher?Wouldthefeelingofwealthbe thesamewhenexchangingafinitequantityofgoldjewelleryacquiredbyinheritance?What roledoexpectationregardingfurtherhighvaluediscoveriesplayinperceptionsofwealth? InadditiontoGDP,otherstandardeconomicmeasuressuchastheBalanceofTrade,Balance ofPayments,InterestandInflationRatesareusedtoassessconditionsforpurchasinggoods andservices. ImputedNettValueinsitu(orresourcerent)isthemonetaryvalueattributedtoAustralia havingstocksofmineralresourcesin,forexample,terrestrialores.Thisvaluecanchangeover time,influencedbylocalandglobalsupply,demandandscarcity.InhisreportManaging AustralianMineralWealthforSustainableEconomicDevelopmentWillett(2002,p8)writes thatwithoutimputednettvalueformineralsinthegroundthereisnomineralwealthto manage. TheGenuineSavingsRatedevelopedbytheWorldBankisdesignedtomonitorthelevelsof naturalresourcedepletionandlevelsofinvestmentinhumanandbuiltcapital.Whilst criticisedbyPillarisetti(2005)foradoptingaweaksustainabilitypositionallowinginter changeabilityofcapitals,Pearceandcolleagues(2008)arguethatcountriesfailingonweak sustainabilityarealsolikelytobefailingonstrongsustainability.Australiawastheonly developedcountrytoregisteranegativepercapitasavingsrateresultingfromlowsavings, highmineraldepletionandsubstantialpopulationgrowth(Hamilton,2000). Thefourthapproach,titledMeasuresofAustraliasProgress(MAP)combineheadlineand supplementaryindicatorsintheareasofindividual,community,economicandenvironmental progress.Exampleindicatorsincludenetgreenhousegasemissionsperperson,numberof threatenedbirdsandmammals,lifeexpectancy,andareaoflandcleared.Themostrecent10 yearassessmentexaminedmanyeconomicandenvironmentalindicatorsashavingimproved butsocialresultsweremixed(AustralianBureauofStatistics,2009). Finally,GenuineProgressIndicatorsassessnaturalandsocialcapitalstocktoassesswealth. Outliningarangeofapproachestoevaluatewealthhighlightsthatmineralsofferthepotential tomakeongoing,usefulandsignificantcontributionstotheAustralianeconomy.Themethod ofwealthassessmentwillinfluencethedevelopmentofstrategiesformaximisingwealth.

14

Table5:Approachestomeasuringwealth
Criticism/Comments doesnotincludeadjustmentsforcapitalconsumption,depreciationofnaturalcapital,or environmentaldegradation.(AustralianMineralEconomics2006p10) GDPfailstoproperlydistinguishbetweenwelfareenhancingandwelfaredegrading expendituresandignoresnonmonetizedcostsandbenefitsincludingallinformalsector exchanges..TheGenuineProgressIndicator2006(2007) ResourceRent, Dollarvalueoftheresourcerent, Imputednettvaluewillbeaffectedby: Doesnotcaptureotherformsofwealthprovidedbytheseminerals,suchasendusesora MineralRents mineralrentarisingfrompossession Demandforminerals materialinputtogoodsandservices,orasaninputtoprocuringsuchgoodsandservices. or ofmineralsthatareindemand. SupplycharacteristicsofAustralianminerals thedevelopmentofcompetitivemineraleconomiesinothernationsmaythreatenthe Imputed ImputedNettValuehasplayeda localexhaustibility,variability(heterogeneity) competitivepositionoftheAustralianresourcessectormayhaveimplicationsforthe NettValue roleindeterminingorinformingthe economicfortunesofstatesandsmallerregionsthatdependonmarginalmineraldepositsfor andglobalscarcity. (insitu) priceofaresource,asourceof theireconomicwellbeing.ItmayalsoadverselyaffectAustraliannationalwelfare.Australian Hotellinganda incomeandwealth,andabasefor MineralEconomics2006p1718 rangeofothers. taxation,.Willett(2002) Criticisedforsinglefocusonhumancapitalasindicator(Brownetal.2005).However,this GenuineSavings Ongoingabilitytotranslatefunds GSR=[GrossDomesticSavings substitutionofoneformofcapitalforanotherishighlycontested,withthemostrecent Rate(GSR) fromexploitationofnaturalcapital +ExpenditureonEducation intohumancapital(currentlycounted Depreciationofphysicalcapital discussionofOECDmeasurementofsustainabledevelopmentdividedonthisissue(OECD WorldBank intermsofeducation)thatcanbe Rentfromdepletionofnaturalcapital(energy, 2008p3).AstudythatappliedGSRtoQueenslandalsoindicatedthatasubnationalregion sustainedoverthelongterm.Tracks mineral,forestareincluded) canachieveaGSRthatrunscountertothenationaltrendandviceversa(Brownetal.2005). naturalresourcedepletionandlevels DamagefromCO2emissions] ofinvestmentinhuman/builtcapital. expressedperunitGDPperperson. Measuresof Notstrictlyameasureofwealthbuta Increasingprogressineachdomainimportant. Eachdomainiscomprisedofarangeofheadlineandsupplementaryindicators.Somekey Australias measureofprogressdefinedby indicatorsincludeGDPpercapita,victimsofpersonalcrime,netgreenhousegasemissions Social:increasewellbeing,reducethreats, Progress(MAP) ABSassynonymouswithlifegetting perperson,numberofthreatenedbirdsandmammals,lifeexpectancy. increasesocialcohesion;protectionand better. Themostrecent10yearassessment,issuedinAprilof2009assessedmanyeconomic enhancementofrights AustralianBureau indicatorsashavingimprovedbutmanysocialandenvironmentalindicatorshavenot. Economic:raisenationalincome(realper ofStatistics personlevels)whilemaintaining(orpossibly enhancing)thenationalwealththatwillsupport FulldetailsofindicatorscanbefoundontheABSwebsite http://www.abs.gov.au/AUSSTATS/abs@.nsf/mf/1383.0.55.001 futureconsumption Environment:reducethreatstoenvironment, improvemehealthofecosystems. GenuineProgress Thestatusofnaturalandsocial Maintenanceorimprovementofnaturalandsocial Privilegesfuturewelfareoverpresentwelfare.ThisissuesplittheOECDgroupevaluating measuresofsustainabledevelopmentin2008Someindicatedaneedtoprovideasystemof Indicators capitaluponwhichgoodsand capitalstocksareapotentialsignofincreasing variantofthe servicesdepend(i.e.thematerials wealth.Declines;decreasingwealth. indicatorsthataccountedforpresentandfuturewelfarenotjustfuturewelfare(OECD Indexof thatgointogoodsandthetrustthat ifGPIisstableorincreasinginagivenyearthe MeasuringSustainableDevelopment2008).TheGenuineProgressIndicator2006 Sustainable allowstransactionstotakeplace). implicationisthatstocksofnaturalandsocialcapital EconomicWelfare onwhichallgoodsandservicesflowsdependwillbe SeealsoIndexofSustainableEconomicWelfare(ISEW)(CobbandDaly1995) (ISEW).GPI2006 atleastasgreatforthenextgenerationwhileifGPI isfallingitimpliesthattheeconomicsystemis erodingthosestocksandlimitingthenext generationsprospects.GPI2006

Approach GrossDomestic Product(GDP) SimonKuznets

DescriptionofWealth GDPmaybedefinedasthe unduplicateddollarvalueof productionthatoccursinAustralia duringayear.

Indicators Increasingordecreasingdollarvalueofconsumption. GDPReportedasannualcountrytotaloronaper capitabasis.

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2.4.

RESOURCE DEPLETION AND NATIONAL WEALTH: MANAGING TECHNOLOGY AND TRANSITIONS

Havingreviewedapproachestomeasuringwealth,thissectionintroducestheconceptof resourcedepletioninthecontextofAustraliasnationalwealth.Webrieflyexplorehow mineraldepletiondrivesnewtechnologydevelopment,andthechallengespresentedin respondingtochangingtechnology.Thisleadstoadiscussionofourabilitytocapitaliseon transitionopportunitiesinvolvingnewmodesofwealthgenerationthatwilldelivernational benefitintothenextcentury.

2.4.1. Mineral resource depletion


Australianmineralresourcesarefinite,hencegivencontinuingextraction,theywilleventually bedepletedwellintothefuture.However,ofmoreimmediateimportancethandepletionper seisthechangingattractivenessofthecostandimpactprofileofresourceextractionin Australia. Giurcoetal.(2009)indicatethatthedebateabouthowtoframeresourcedepletionis ongoing.TiltonandLagos(2007)suggestthatusingafixedstockparadigm(i.e.thatthereisa givenquantityofaresourceavailableintheEarth)isamisleadingindicatorofresource availability,andthatanopportunitycostparadigm(thatsuggestsauseableresourcequantity isbetterrepresentedbypriceandtheopportunitycostofusingtheresource)givesabetter pictureofresourcedepletionandavailability.Theyarguethatwhilemineralssuchascopper maybecomescarce,andthusmoreexpensive,thosemineralsmayalsobecomemore availablebecausetechnologyhasthecapacitytomoveamineralresource,toanorereserve andintothestockinuse,consequentlyincreasingtheamountinuseoraswaste.Thiswill drivethedevelopmentofnewtechnologiesthatsupportthehighreturnsoninvestment. TiltonandLagosconcludethattheresourcebasecanbetheonlyfixedstock,andthereisno waytoknowtheavailabilityofcopperdecadesinadvance(2007,p23). Therehasbeenlittleeffortfocussedondevelopingdepletionmodelsformineralresources sincethelate1990s.Thiscanfirstlybeattributedtothegeneralexpectationswithinthe industrythatknowledgeandtechnologywilladdressanyshortfallsinproduction(e.g.the abilitytomaintainhighproductionoutputevenwhenoregradesaredeclining).Secondly,the historicalrecordofexpandingresourceswiththeglobalisationofmininghasmadephysical constraintsatthenationallevellessimportantbesideconsiderationsofhowfutureneedswill besupplied(Willett2002,Tilton1996).Manyanalysesalsoarguethatdepletedreservescould beeffectivelyextendedthroughinterventionsbygovernmentorprivateentities(regulation), orbyhigherrealpricesleading,forexample,totechnologydevelopmenttoprofitablyaccess lowergradeores. Gordonandcoauthors(2006)contendthattherelativeproportionsofmineralsinthe lithosphere,inuse,andinwastedeposits,areausefulindicatorofhowscarceaparticular resourcewillbeundersuchcircumstances.ThetechnologytrendpredictedbyGordonand colleaguesisonethattendstowardshighlevelsofrecyclingandreuse,andsubstitutionof appropriatealternativeswheremineralsarelockedintousephasesorwhoseusefulqualities aredissipatedbytheiruseinparticularapplications(Gordonetal.,2006). AnexampleofthistrendinpracticecanbeseeninJapan,whereproductstewardshipand extendedproducerresponsibility(EPR)initiativesarecreatinganincreasinglylargeand progressivelyinexpensivepoolofresourcesforuseinnewproductlines.Metals(including copper,steelandaluminium)thatmayhaveoriginallycomefromarangeofothercontinents areeffectivelycapturedbyJapansverticallyintegratedproduction,disassembly,recyclingand reusesystem(DepartmentofTradeandIndustry(UK),2005).

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Thecontrastbetweenthefixedstockandopportunitycostparadigmalignstosomedegree withtechnologicalpessimismversustechnologicaloptimism(seeforexampleForanandPoldy, 2001).Willett(2002,p12)suggeststhatthekeyissueistheappropriatenessoftheoptimistic viewofnewdiscoveriesandtechnologicalprogress.Theoptimists,likethepessimists,have notprovidedadequatedatatosupporttheirposition,althoughhistoryisonthesideofthe optimists. Inanycase,mostmineralsandmetalsareunlikelytorunoutinthenearfuture.Whilststocks ofhighgradeoilorcoalorphosphatecanbeexhausted,metalsareinherentlyrecyclable(and aremorereadilyrecoverablefromenduseswherethemetalisusedinapureformandnot dissipated)andalsoaccessibleatarangeofgrades.Soalthoughfewmetalsarecurrently facingphysicaldepletion,theyarebecominghardertoobtain,andtheenergy,environmental andsocialcostofacquiringthemcouldconstrainfutureproductionandusage.

2.4.2. Technology, transitions and sustainable resource management


Lowerimpactminingandmineralsprocessingdoesnotautomaticallyequatetosustainable miningandresourceprocessing.Australiamustaimtoshapeitsminingandminerals processingoperationstounderpinsustainableeconomiesofthefutureminimisingnegative impacts,strengtheningpositiveandrestorativeimpactsandembeddingitselfwithinsystems ofsustainableresourceuseandreuse. Broadconsiderationmustbegiventothefollowingquestions: whataresustainablepatternsofproductionandconsumption,nationallyandglobally, withwhichAustralianresourceextractionandprocessingcanlink? whatmodelsofsustainableresourcemanagementarerelevantforAustraliaandhow canthebeimplemented? whatrolewillminingandmineralsprocessingplayintheAustralianeconomyofthis century? o o willAustraliasplatformforprosperitybetiedtothemineralssector? howwillthefactorswhichfavourlocationofmineralsrelatedactivitiesin Australiarelativetoothercountriesdifferfromthosewhichunderpinned activityinthe20thcentury? whatcanbedonetoensurecurrentandfutureminingactivityleadstolong termnationalbenefit? forprimaryprocessingfromoresoroceanresources? fordevelopingproductservicesystems? newbusinessopportunitiesfromdematerialisationorproductleasing? forrecycling?

whatrolewillnewAustraliantechnologyplay: o o o o

howwillexistingoperationsbemanagedatendoflife? whatcanbelearnedfromforesightintoexpectedtransitionsinglobaldemandand endusesformetalintheglobaleconomydriven,forexample,byresponsestoclimate change? o whatcanbelearnedfromthetransitionafterpeakoiltoalternateenergy? howcanthishelptheAustralianmineralsindustry,governmentandcommunity stakeholdersplanourowntransitionsintechnologiesandpracticeswhichwillbring aboutlongtermwealthfromourmineralresources?

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Asearlyas1945,Williamsondescribedtheroleofprophesiesofscarcityingeneratinga conservationresponseforbothrenewableandnonrenewableresources(Williamson,1945). Heconcludedthatconceptsofresourceexhaustionaretriggersforthinkingabouthowa particularresourceismanaged.Thishasbeenexploredinsomedepthwhererenewable resourcesareconcerned,mostnotablywithrespecttoforestryandfisheries.However,the depletionofnonrenewableresources,suchasminerals,havenotreceivedthesameamount ofattention.Thisreviewseekstofocusbeyondscarcityperse,toadeeperunderstandingof theimpactsofminingandprocessingharder(morecomplexordifficulttoaccess)oresasa basisforframingaconsideredresponse. Inadditiontoconsiderationsofwhatmineralwealthandlongtermnationalbenefitmight mean,thefollowingkeycharacteristicsoftheAustralianeconomyareimportantfor understandinghowAustraliasmineralwealthcanbeunderstoodandmanagedinthelong term: abundantresourcebase comparativelysmallpopulation limitedmanufacturingbase geographicsize(largelandmasswithgreatdistancesbetweenpopulationcentres) remotenessfromtherestoftheworld

potentialforlanduseconflicts. WhileAustraliasmineralendowmentisvast,thecharacteristicslistedabovecreateamineral incomestreamthathasbeen,andmaycontinuetobehighlydependentupondemandfroma globalmarket,stableregulation,lowcostsforlabourduetotheavailabilityoftechnologies, lowcostsforenergytorunthetechnology,andlowcostsforinternationaltransport. Assuch,physicaldepletionisnottheprimarydeterminantofamineralsavailability.Whilsta concernatthelevelofnationalandsubnationalorregionaleconomies(AusIMM,2006; Willett,2002),itiseconomicdepletiontogetherwithsocialandenvironmentalconstraints andimpactswhichwillinfluencewhichorebodiesareexploited.Aconsiderationofeachof theseindicatorswilldeterminewhenothersourcesofmetalsbecomemoreprofitable(for example,fromoceanresources,tailingsreprocessingorsecondaryscrapprocessing). ExamininghowthefutureAustralianeconomywillbenefitfromAustralianmineralresources musttakethesepointsintoconsideration,andexploreinmoredetailtheimpactoneconomic, socialandenvironmentalsystemsatthelocal,regional,nationalandgloballevel.

SECTIONTWO:SUMMARY
Thissectionhasexploredthenatureofmineralsasresourcesandhowtheseresources contributetoAustraliasnationalbenefit.ResourcesaredefinedwithinthecontextoftheJoint OreReservesCommitteeCode,butgenerallyrepresentobjectsormaterialsthatareattributed valueinoursocieties.Givenmineralresourcesarefinite,theirdepletionwillhave consequencesforAustraliaslongtermprosperitybecauseofthewayinwhichmineralsand metalscontributetoAustraliaswealth.Althoughphysicaldepletionmaynotpresentanissue intheshortterm,continuedproductioncombinedwithfallingresourcequalitybringsgreater technological,environmentalandsocialexpense,andthelikelihoodofeconomicdepletion. Thisraisesquestionsrelatingtosustainablemineralresourcemanagement:howwecanwe bettervalueresourcesinthefuture,andhowcanwerecognisewhenandhowtoplan transitionmechanismstomitigatetheimpactsofresourcedepletion,oritsconsequencesfor anextractivemineralsindustry?

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3. EXPLORING THE CONCEPT OF PEAK MINERALS

SECTIONTHREE:OUTLINE
Thissectionexplores: theunsustainabilityofmineraluse;notprimarilyduetobeingfiniteresources,but ratherarisingfromtheimpactsoftheiruse(3.1) thepeakoilmodelforunderstandingresourcedepletionandtransitionstonewways ofprovidingenergyservices(3.2)andthesimilaritiesanddifferencesforminerals(3.3) aconceptualmodelofpeakmineralsbasedondistinguishinglowerthenhighercosts afterpeakproductionwithrespecttosocial,environmentalandeconomiccosts(3.4) howhighercostscanpromotenewwaysofsupplyingmetaltomeetdemand(3.5) thepeakmineralsconceptforcasestudydataoncopperandgoldforCanada, AustraliaandtheUnitedStatesofAmerica(3.6).

3.1.

FINITE SUPPLY OF MINERAL RESOURCES

Mineralresourcesaregenerallyconsideredfiniteinpotentialsupply(forexample,Young, 1992;Gordonetal.,2006)sincetheyarenotrenewedbynaturalprocesses(excludingvery slowgeologicalprocessesoforeandmineraldepositformation).Onthisbasisitwouldappear reasonabletoconcludethatminingofallmineralresourcesisunsustainableinthelongterm. Atthesametime,almostallmineralsarebeingproducedtodayatgreaterratesthanatany timeinhistory.Thisparadoxhasincreasinglyraisedtheprospectoftraditionalmineral supplieseventuallybeingexhausted(themostfamousexampleofsuchaviewbeingTheLimits toGrowth;Meadowsetal.,1972).Asmentionedearlier,practicalexhaustion(i.e.theinability todevelopresources)arisingfromeconomic,socialandenvironmentalconstraintsisof greaterconcernthanphysicalexhaustion. Globalsocietysincreasingproduction,useanddisposalofmineralsandmetalshasledto adverseenvironmentalimpacts:fromglobalwarmingtolocalpollutionaffectingland,airand water.Suchongoingimpactswilllikelybecomeunsustainableinthemediumtolongterm (GiurcoandPetrie,2007;OECD,2001;McLellanetal.,2009).Inshort,wemustbeconcerned notonlywithhowouruseofmineralsandmetalscontributestotheirdepletion,butalsohow pollutionfromtheproduction,processinganduseofmineralsandmetalsshouldbe consideredinthecontextofouruseparticularlybecausemetalsarehighlyrecyclable.

3.2.

PEAK OIL MODEL FOR RESOURCE DEPLETION , ENERGY SERVICES AND TRANSITION PLANNING

Givenincreasingglobalpopulationandrapidlygrowingconsumption(especiallyinChinaand India),frameworksfortheanalysisofresourcedepletioncanassistindevelopingappropriate responses.Themostpopularcontemporaryfocusforresourcedepletionisoil(orpetroleum) resources.In1956,oilgeologistMMKingHubbertfamouslypredictedthatconventionaloil productionfromthelower48(mainland)statesoftheUnitedStateswouldpeakby1970and thenenteraterminaldecline,showninFigure9(seeHubbert,1956).Thismodelwas subsequentlyproventobeaccurate(althoughthepeakyearwas1971).Hubbertalso predictedthatglobalconventionaloilproductionwouldpeakaroundtheyear2000,whichhas provedtobeslightlyoutgiventhatconventionaloilproductionhasonlyplateauedrecently (seeBardi,2005).ThisphenomenonisnowcommonlycalledPeakOil,withpeakproduction curvesknownasHubbertCurves.

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Energy Services

Figure9:Hubbertspredictionforpeakoilproductioninthelower48statesoftheUnited Statesandtheenergytransitiontonuclearpower(adaptedfromHubbert,1956) Overthepastdecadetherehasbeenarapidlygrowingglobalmovementanalysingand debatingPeakOil,whichincludesnumerousformeroilgeologistslikeHubbert.Thecollective workhashelpedtoreachabroadconsensusthatPeakOilwillhappen,thoughtimingofthe globalpeakisstillcontestedandsomearguethatithasalreadypassed.Theuseofthepeak metaphorforresourcemanagementisinterestingforseveralreasons.Inadditionto representinganapproximatemodelforpredictingannualproduction,itintroducesafocuson theservicesprovidedbytheresourceinthiscasetheenergyservicesprovidedbyoiland highlightstheneedtoprovidesuchservicesbydifferentmeanspostpeaktoavoiddisruptions totheeconomy.Hubbert,anticipatedatransitiontonuclearpowertoprovidetheenergy services(Figure9);forecasterswouldnowaddwind,solar,geothermalandbiomass.

3.3.

PEAK MINERALS VERSUS PEAK OIL: ASSUMPTIONS

3.3.1. Modelling assumptions


ThemathematicalmethodsusedbyHubbertwerebasedonlogisticgrowthcurves,commonly usedtomodelpopulationgrowthandotherbiologicalsystems.Themodelshaveaminimal numberofvariablesbutrequiresomekeyassumptions.TheprimaryassumptionsthatHubbert usedtounderpintheapplicationofpeakcurvestoanalyseconventionaloilproductionare (seeBentley,2002;Hubbert,1956;MohrandEvans,2009): 1. 2. 3. 4. The population of producing fields is sufficiently large so that the sum of all fields approachesanormaldistribution. Thelargestfieldsarediscoveredanddevelopedfirst. Productioncontinuesatitsmaximumpossiblerateovertime. Ultimaterecoverablereservesareknown.

Furtherfactorsthatunderpintheaboveassumptionsinclude(e.g.Hewett,1929;Cook,1976; Laherrre,2000;Cavallo,2004): Accurateestimatesofeasilyaccessibleprovenreserves; Politicalandmarketstability;

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Affordable,stablepricesforconsumersandenticingprofitsforproducers; Exponentiallyincreasingconsumption; Independentproducersfocusedonlyonmaximizingtheirimmediateprofits; Perceivedabundanceofandavailabilityofotherreserves(e.g.US,MiddleEastern).

Theseassumptionsarelessapplicabletomineralsthantheyaretooil.Thereislimited substantiveworkbeingundertakentoexaminehowtherelationshipsbetweentheconcepts andassumptionsofPeakOilcanbeappliedtomineralsPeakMinerals(seeforexample Heinberg,2007;Giurcoetal.,2010).Itisthereforeworthanalysingtheseassumptionsand factorsinmoredetailwithrespecttominerals,astheyprovideausefulstartingpointto examineaconceptualframeworkforresourceuseandtheservicestheyprovide.

3.3.2. Estimating resources and the role of exploration


Resources Estimatingeconomicmineralresourcesovertimeisadifficulttask,andestimatesare frequentlyunderreview.Somecountriesmaintainsimplenationalaccounts(e.g.Canada NationalResourcesCanada;AustraliaGeoscienceAustralia),whileothersundertakemore regular,detailedassessmentsofmineralresourcesandstrategicmineralresources(e.g. UnitedStatesUSBureauofMines;USGeologicalSurvey).InAustralia,stocks(asdefinedby theJORCcode,seeAppendixA)ofseveralmineralresourceshaveincreasedoverthepast30 yearsalthoughsome,suchascoalandironore,appeartohaveplateaued(Mudd,2009).In contrast,Canadasestimatesoverthesameperiodshowlongtermdeclinesformostminerals (e.g.copper,nickel,gold;seeNRC,variousdates)althoughbyanalysingformallyreported companyreservesandresources,itiseasytoshowforcopper,nickelandgoldthatthese significantlyexceednationalestimates. Exploration Mineralexplorationplaysaverysignificantrolewithrespecttoknowneconomicmineral resourcesovertime.Fewdetailedstudiesanalysediscoveryratesofnumerousmineralsover time,withmostgovernmentagenciesorotherresearchgroupsrelyingonestimatesofknown economicresources.Arangeofanecdotalevidence,however,orindustryobservation,canbe considered.Asacasestudy,letusexaminecopper.Nationalestimatesofeconomiccopper resourcesovertimeforCanada,USA,andAustraliaareshowninFigure10.
60 Australia Economic Copper Reserves (Mt Cu) Canada 50 USA

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Figure10: EconomiccopperresourcesinAustralia,CanadaandtheUSA(Mudd&Ward, 2008,includingrecentdata)

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ThereappearstohavebeennomajorcopperdiscoveryinCanadaformanyyears,withall productionfromlargescalemineswithsubstantiveremainingresources(e.g.HighlandValley inBritishColumbiaortheSudburydistrictinOntario).Incontrast,therehavebeenarangeof majordiscoveriesinAustraliasincethe1970s,suchasthegiantOlympicDamcopperuranium goldsilverdeposit,theErnestHenry,CadiaRidgeway,NorthparkesandProminentHillcopper golddepositsandtheNiftycopperdeposit,aswellascontinuedexpansionofremaining copperresourcesatMtIsaandMtLyell.TheUnitedStatesappearstobeinbetweenAustralia andCanada,withonlythegiantResolutioncopperandPebblecoppergolddepositsinArizona andAlaska,respectively,beingdiscoveredinrecentyearsandmostremainingcopper resourcesbeingrelatedtoexistinglargescalemines,especiallyinArizonaandUtah. Amajorchallengeisthatexplorationwilloftentargetnewdepositsthatarewithintherange ofexistingtechnologicalandeconomiccapacitybutoftenlowergradethanatpresent.Over time,thisleadstoadeclineinaverageoregrade.However,itisnotalwaysthisclearsince therearemanyexampleswhereexplorationdiscoversnewdepositswhicharehighergrade thantheindustryaverage.Forexample,thedevelopmentoftheMtIsacopperdepositsinthe 1950s,withanoregradeof~4%Cu,wassomesixtimeshigherthanotherminesat~0.7%Cu (MtLyell,MtMorgan)(Mudd,2009a).InCanada,thediscoveryoftherichuraniumdepositsin northernSaskatchewaninthe1970sto1980ssawaveragedepositgradesrangefrom120% U3O8,comparedtothepreviousdominanceofElliotLakeminesinnorthernOntariowith typicaloregradesof0.1%U3O8(Mudd&Diesendorf,2008). Furthermore,astheoregradedeclinesthetendencyistowardslargerdepositsizesthereby offsettinglowergradesandevenallowingsubstantialincreasesinproduction.Overtime,as demandgrowsandtechnologyevolvestoenableextraction,thisleadstothecasewhereby averageoregradesgraduallydecline.Thisistheclassiccasetypifiedbygold,copper,leadzinc silver,nickelandothermetalsandminerals(asshownbyMudd,2009a).Althoughthereare alwaysexceptionstothisprocess,asnotedabove,thelongtermtrendforAustraliais generallyforaneffectivelyterminaldeclineinoregrades.Therealityisthatexplorationand miningmillingtechnologycannotbeseparatedfromeconomicconsiderations,nor environmentalandsocialissues.Thechallengeforpeakmineralsis,therefore,understanding whatthisongoingindustrytransitionandevolutionmeansforthefutureoftheminerals industrygenerally.

3.3.3. Production assumptions


Mineralproductioncanriseandfallinresponsetooveralleconomicconditions,especially supplyanddemandbalanceandmarketprices(seesection4.3).Someminingcompanieswill reduceproductionorevencloseminestemporarily(orpermanently)duringadverseeconomic conditionstoensureeconomicviabilityoverpricecycles.Peakcurvesarelessusefulfora particularmine;butmoreapplicabletoacollectionofminesnationallyorglobally.

3.3.4. Real prices over time


Oneargumentusedtojustifytheongoingavailabilityofmineralresourcesisthatrealprices (i.e.adjustedforinflation)continuetotrenddownwards,asshownforcopper,lead,zincand nickelinFigure11(dataformostothermineralcommoditiesshowssimilardownwardtrends, oranevengreaterdeclineinrealprices).However,recentresearchsuggeststhatrealprices overtimeareanunreliableindicatorofscarcityovertime,duetostandardpricedeflators(e.g. USproducerpriceindex)overestimatinginflation,towhichthecalculationissensitive(see SvedbergandTilton,2006).Adjustingforthisshowsnotrendovertimeoranincreaseinprice overtimedependingonthelevelofadjustment.Inanycase,asshowninFigure12,goldisa notableexceptionwithrealpricesclearlytrendingupsincethe1970s(whenthegoldpricewas

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deregulated)despitethedevelopmentofcarboninpulpprocesstechnologyandamassive boominproduction. Thedifficultyinrelatingrealpricestotheparadigmofpeakmineralsisthatthehistoric patternsshowninFigure11andFigure12aremostlyformoreeasilyaccessibleresources comparedtothefutureofmoredifficultoresandhighercosts,likelytoincludesome environmentalexternalitiessuchasacarbonprice.Whilstitremainsuncertainwhatrealprice patternswillemergeintime,economic,socialandenvironmentalcostsarelikelytorise.


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3.4.

CHANGING ORES FROM LOWER TO HIGHER PRIMARY PRODUCTION COSTS

Asimilarpictureofchangingavailabilitycouldbedevelopedforvariousminerals,orspecific metals,suchasgold,lithium,lead,zincandsoon.Theroleofcontinuedmineralexplorationis clearlycriticalinidentifyingtheextentofeconomicmineralresources,meaningthatthekey assumptionofknowingultimaterecoverableresourcesisproblematicatbest,orinvalidat worst.Thismakesusingpeakcurvesforaccurateprojectionsoflongtermsupplydifficultto implement,althoughtheyremainausefulconceptualtoolwhenusedwithassumptions concerningthepossibleextentofeconomicresources.However,itisnotonlyresource exhaustionthatisofconcernwithrespecttosustainability,butthechangeincostsand impactsfromprocessingeasier,lowercostorespriortopeakproductionforagivenmineral, tomoredifficult,highercostorespostpeak.ThisisillustratedconceptuallyinFigure13.

Annuallocalproduction(t)

Peakminerals: conceptualmodel

lowercosts* higheroregrades shallowermines simpleores lowminewaste *costs aresocial economic environmental

highercosts* loweroregrades deepermines complex/refractoryores moreminewaste

time

Figure13:Conceptualmodelofpeakminerals;illustratinghighercostspostpeak Additionalissuesexistwithrespecttoexplorationandascribingmineraldepositsaseconomic. Firstly,explorationformanymineralsisincreasinglytargetingzonesfornewdepositsdeeper thanexistingmines.Thisincreasingdepthtrendisevidentincopper,nickel,platinumgroup metals(PGMs)andgold,especiallyintheSouthAfricangoldandPGMsindustryandmajor CanadiannickelfieldsofSudburyinOntarioandThompsoninManitoba.Secondly,oresthat areeasiertotreatareoftendevelopedfirst,withmorerefractorydepositsremaining uneconomicuntiltechnologychangesorsupplyshortagesjustifymoreexpensiveproduction. AgoodexampleofthisistheleadzincsilverindustryinAustralia,whereeachmajorproject fromBrokenHilltoMtIsatoMcArthurRiverbecameincreasinglydifficulttoprocess especiallyMcArthurRiverwhich,despitebeingdiscoveredin1955,tooksomefourdecadesof researchtodevelopmillingtechnologycapableofeconomicallytreatingtheore(Mudd,2007c, 2009a).Finally,oregradesareinterminaldeclineforawidearrayofmineralsespeciallygold, copper,nickelandleadzincsilverores(Mudd,2007a;2009a,b;Mudd&Ward,2008).Thus, althoughexplorationcanstilldiscovernewmineraldeposits,thecharacteristicsofaparticular depositthatmakeiteconomiccontinuetochangeandevolveastheminingindustryfaces theseissues.Itisimportantthatsocialandenvironmentalcostsalsobemoreexplicitly includedinfutureassessmentsofeconomicresources(asrequiredbytheJORCCodeinany casewhenreportingreservesandresources;seeAppendixA).

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Furthermore,theoregradedecline,combinedwithincreasingproduction,leadstoanoverall increaseinenvironmentalandsocialcosts.Thisoccursdespitestepchangereductionsdueto technologicalbreakthroughs,whichgenerallydelayincreasesinimpactratherthanreversing themthisisillustratedconceptuallyinFigure14.


Energy Costs & Environmental Impacts

Production

Ore Grade Social Impacts Time

new technology

Time

Time

individual mine closures over time

Time

Figure14:Risingenergy,environmentalandsocialimpactsasaresultofincreasing productionanddecliningoregrades,despitenewtechnologies(adaptedfromGiurco,2009)

3.5.

MEETING FUTURE DEMAND A MIX OF MINING AND RECYCLING

Ultimately,howlongthehistoricalpatternofdiscoveryandexpansionofresourcesatcurrent minescancontinueisverydifficulttopredict.Thereiscertainlyroomforoptimismovera mediumtermtimeframeto2025,butbeyondthisisinherentlyuncertain.Thisdilemmaalso hastobeconsideredinthelightofcontinueddemand,andconsumptiongrowth,lead presentlybyChina,andincreasinglybyIndiaincomingyears. Furthermore,mostmetalsarerecyclable,eithereasily(e.g.aluminium)orwithcareful programs(e.g.lead,platinum).Thisprovidesapotentiallysubstantialresource,which effectivelycontinuestogrowovertimeasprimaryminingpersists.Atpresent,existing technologyandeconomicconditionsstillfavourprimaryminingastheeconomicallycheapest supply,howeverthissituationislikelytochangeinthefuturegivenenergy,water,climate changeandarangeofothercomplexissuesnotedpreviouslythatalreadyaffectthemining industry.

3.6.

CASE STUDY FOR COPPER AND GOLD

3.6.1. Peak minerals: Australia, USA, Canada


ArecentstudybyMudd&Ward(2008)modelledpeakcurvesforcopperandgoldproduction intheUSA,CanadaandAustralia(Figure15).Fromthesemodels,itistemptingtoconclude thattheUSAandCanadahavepassedtheirpeakincopperproduction,whileAustraliaisstill someyearsawayfromthispoint.

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Figure15:ExamplesofapplyingpeakcurvestoAu(leftside)andCu(rightside)productionin Australia(top),Canada(middle)andtheUnitedStates(bottom)(Mudd&Ward,2008) Basedonvisualobservation,itispossibletosaythatthecurvesforgoldfitpoorly,whilethose forcopperappearmorereasonable.Thereareseveralfundamentalreasonsforthisstark differenceandwhyinterpretationsofbeingpostpeakmaybepremature.

3.6.2. Gold: technology transition drives multiple peaks


Forgold,therehavebeenanumberofgoldboomsduetodiscoveriesofmajornewfields, particularlyevidentinAustraliasproductionboominginthemid1800swiththediscoveryof goldineasternAustralia,thenanewboominthe1890sasthemajorcentralWesternAustralia goldfieldswerediscoveredandexploited.Therelativelyminorboomsofthe1930swere

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largelyrelatedtoeconomicconditionsfavouringgoldmining.Thelargestboom,recorded duringthe1980s,wascausedbothbyamajorriseintherealpriceofgold(from~$30/ounce to>$300/ounce)aswellasthedevelopmentandwidespreadadoptionofthenewcarbonin pulp(CIP)processtechnology.TheuseofCIPallowedlowgradeorestobeprocessed economically,evenwithhighsaltbrinesiffreshwaterwasunavailable.Thismostrecentboom isalsoevidentinCanadaandtheUSA.Recently,FrenchPeakOilresearcherJeanLaherrerehas usedseveralpeakcyclestomodelAustraliangoldproduction(Figure16).Theessentialbasis forapplyingseveralpeaksisthatindustryconditionsweresubstantiallydifferentforeachpeak drivenbyeconomicortechnologicalfactors.Consequently,thepeakmetaphorofrisingand fallingproductionunderexistingcircumstancespointstothepossibilityofnewpeaksbeing drivenbychangesintechnologyandeconomics.Infutureweshouldalsoanticipatepeaks(and coincidentalresourcescarcity)drivenbyenvironmentalandsocialfactorsinadditionto economicandtechnologicalonesthathavelargelydrivenproductionpeaksinthepast.This raisesthepossibilityofasituationwheretechnologyisnolongerabletomakecontinuing productioneconomicallyviable.
Western Australia gold boom 1980s price/CIP gold boom

Eastern Australia gold boom

Figure16:Applyingmultiplepeakcurves(h1h7)toGold(Au)productioninAustralia (courtesyJ.Laherrere)

3.6.3. Copper: dominant technology fits single peak


Conversely,forcopper,thecurvesappearreasonablesincetheeconomicconditions,extentof discoveries,processtechnologyandotherfactorsinfluencingcopperproductionhavebeen morestableoverthetimeperiod,oratleastchangewasmoregradualandinlinewith demand.Thisdoesnotmean,however,thatthecoppercurvesinFigure17areaperfect modeloflongtermcopperproduction.Asnotedpreviously,explorationcontinuestoexpand knownresourcesatexistingmines,plusnewdiscoveriesarestillbeingmade(e.g.Australia). Thustheultimateresourceisnotaccuratelyknown.Theincreasingroleofhydrometallurgical solventextractionelectrowinningtechnologyincontrasttothehistoricaldominanceof pyrometallurgicalsmeltingtechnology(bothreverberatoryandflashsmelting)isalso importanttoconsider.

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3.6.4. Major factors contributing to the peak declining ore grades, increasing footprints
Acrucialaspectindeterminingthepeakoilphenomenonisthedecliningqualityof conventionalcrude,ineitherenergyterms(e.g.energyreturnonenergyinvested),or deleteriousimpuritiessuchashydrogensulfide.Forminerals,theanalogousaspectareore gradeandqualitythatis,theconcentrationofaparticularmetal(ormetals)beingmined,as wellasthequalityoftheorewithrespecttoprocessing(e.g.fineorcoarsegrainedore, mineralogy,impuritiessuchasarsenicormercury,etc).Asoregradesand/orqualitydecline, theenergyrequirementsandpollutionburdensincreasesubstantially.Basedonrecently compiledhistoricaldatasets,longtermtrendsforcopperandnickeloregradesinAustralia, CanadaandtheUnitedStates,aswellasgoldoregradesinseveralcountriesareshownin Figure17.Arecentanalysisofthecarbonintensityofgoldproduction(i.e.tCO2e/kgAu) versusgoldoregradeisalsoincluded,showingnotonlytheeffectofprimaryelectricitysource onoverallcarbonintensitybutalsothatasoregradesdeclinethecarbonintensitybeginsto increasesignificantly.Thescatterismostlikelyduetothevaryingconfigurationsofgoldmines andmills(e.g.underground/opencut,severalmines,heapleachversusCIP,relativeenergy sources(coal,hydro,diesel),projectage,depth,oretypes,etc.).
40
1857, 50.05; 1858, 41.23

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Figure17: Declinesinoregradesforgold(a:topleft)andcopper(b:topright),and (c:bottom)carbonintensityofAuproductionversusoregrade(Mudd,2007b; Mudd,2009a,b;Mudd,2010includingunpublisheddata)

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SECTIONTHREE:SUMMARY
Theconceptofpeakmineralsprovidesausefulparadigmwithinwhichtoexplorethe futurethreatsto,andbenefitsfrom,theAustralianmineralsindustry. Peakmineralsoccursatthepointwhenmineralproductionpeaksandbeginstodecline sometimesoccurringatnumeroustimesduringthehistoryofproduction(e.g.gold,which hadmultiplepeaksduetothedevelopmentofnewtechnologies). MuchoftheevidencetodatesuggestsAustralianmineralsareunlikelytorunoutinthenear future,butitisbecomingmoredifficulttoobtainandproducethequantities(andquality)of productdemandedbythemarket,andtheconsequencesofmoredifficultproduction (environmentalandsocialimpacts)arealsoincreasing.Whatwasonceanindustry characterisedbycheapandeasyproduction,isnowmorelikelytobecharacterisedby difficultandmoreexpensiveproduction. Thepeakconcepthaslargelybeenappliedinthecontextofgeneralresourcedepletionand physicalscarcity(particularlyforPeakOil).However,theconceptmayholdgreater significanceinthemineralscontextwhenappliedinrelationtotheconsequencesof continuedextractiveexploitationuptoandpostpeak. Withgreaterenvironmentalandsocialimpactsfromminingcomegreatercostsforthe miningindustrytominimisetheseimpacts.Ultimately,peakproductionmayoccurbecause oftheeconomicscarcityofminerals,ratherthanphysicalscarcityalone.

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4. THE ECONOMICS OF PEAK PRODUCTION

SECTIONFOUR:OUTLINE
Thissectionexplores: theeconomicbenefits(4.1)andthreats(4.2)thatadependenceonmineralresources presentstoAustralia thestructureoftheAustralianmineralsindustry,particularlyfocussingonthe influenceofeconomiesofscaleandcorporatefinancingandmarkets(4.3) howsupply(4.4)anddemand(4.5)influenceproductionandresourceprice,andhow changingcostsasaresultofpeakmineralsmayaffecttheabilitytosupplyproductin thefuture. Theincreasedcostsassociatedwithminingandprocessinglowergradeoresfrommore challenginglocationshassignificanteconomicimplicationsespeciallyforacountrylike Australia,whichhasbecomeincreasinglyboundtomineralsasasourceofnationalwealth. WhileAustraliacurrentlygainsconsiderableeconomicbenefitfromitsmineralendowment,it isbecomingincreasinglyapparentthatwithoutconsideredandappropriatemanagement,this benefitmayfade.MuddandWard(2008)demonstratethatalthoughscarcityofmineral resourceswilltheoreticallyplaceeconomicconstraintsonthemineralindustry,itislikelythat environmentalandsocialsustainabilityissueswillraisepracticalimpedimentstotheindustry longbeforeissuesofscarcitybecomeapparent. In200809,mineralsandfuelexportsmadeuparound56%ofAustraliastotalexports(Table 2).Consequently,mineralsplayamajorroleinAustraliascapacitytoparticipatein internationaltradeandcontributetotheinternationalstrengthofitscurrency(AusIMM, 2006).WhetherthissituationcontributestoAustraliaseconomicwealthorweakensits economicpositioniscontested.WhilethosesupportingAustraliasrelianceonmineralscite thetheoryofcomparativeadvantage,opponentssuggestarelianceonresourcesleadsto issuesassociatedwiththehypothesisedresourcecurse. Thissectionwillexploretheeconomicsofmineralextraction,particularlyexploringthe benefitsandthreatsassociatedwithrelianceonaneconomicallyexhaustibleresource.It examinesthestructureoftheAustralianmineralseconomyandthekeymarketforcesof mineralsupplyanddemand.Inunderstandingmineralsupplyitexploreseconomicscarcity, andhowthismaybeinfluencedbytheincreasedinternalisationofcostsassociatedwith environmentalandsocialneglectormismanagement.Fromademandperspectiveweexamine aspectsassociatedwithconsumption,transportandtheimpactofsubstitutionandrecycling technologiesontraditionalextractiveproduction.

4.1.

BENEFITS FROM DEPENDENCE ON THE RESOURCE SECTOR

4.1.1. The comparative advantage


IntheirbookOnthePrinciplesofPoliticalEconomyandTaxationRicardoandKolthammer (1911)introducetheconceptofthecomparativeadvantageasamajordriverofinternational tradeandfacilitatorofnationalandglobalwelfare.Thetheoryofcomparativeadvantage describesacountryscapacitytoproduceoneunitofacommoditymorecheaplythananother commodity.Inotherwords,ithasloweropportunitycostsallowingittoproducethatspecific commoditymorecheaply.Ifallcountriesfocussedonthegoodswheretheyheldthe

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comparativeadvantage,aglobalmaximumofgoodscouldthenbeproduced.When consideringthepossibilityofinternationaltrade,andwhenconsideringnoartificialtrade barriers(e.g.tariffs),Ricardohypothesisedthatallcountrieswouldgaingreaterwealth. Wheremineralscanbecheaplyandeasilyextractedmineralreservesoftenbringa comparativeadvantagetothenationaleconomyoftheproducer.AccordingtoRicardoand Kolthammer,anationshouldfullyembraceitscomparativeadvantagetodevelopmaximumof wealthforsociety.Theysuggestthatafterthenationalresourceendowmenthasbeen depleted,theeconomysfocuswillshifttoothersectorswherethecomparativeadvantage canbesecured.Heindicatesthatanationaleconomythathasgainedamaximumofwelfare fromthemineralendowment,willtransitionanddiversifymoresmoothlythanifthe endowmentisnotfullyexploited.EventhoughRicardostheoryisalmost100yearsold,itis stillconsideredakeydriverinnationaleconomicspecialisation,developmentofeconomiesof scaleandglobalisation.

4.1.2. Australias benefits from the minerals industry


ThroughoutAustraliashistory,themineralssectorhasplayedamajorroleinthecountrys prosperity.Historically,miningwasconsideredanactivitythatpushedbackthebordersof wilderness,makinglandaccessibleforcultivationandcivilisation(Mercer,2000).Throughthe goldbooms(Mercer,2000),andmorerecently,duringtheglobaleconomiccrisis,Australiahas greatlybenefitedfromtheeconomicbufferprovidedbythemineralindustry(Mining Australia,2009).MostrecentlythisbenefithasbeenrootedinAustraliaslongtermmineral exportcontractswithChinesecustomers.TheAustralianeconomyhaseffectivelybeen shieldedbyaChinesewallfromtheimpactoftheeconomiccrisis(MiningAustralia,2009). Australiasmineralproductionislargelysoldoninternationalmarkets.Thisproductionand foreigninvestmentinAustralianminingcompaniesstrengthensAustraliaspositionin internationaltradebybolsteringitscurrencyvalueandcapacitytoimport(AusIMM,2006). Miningcontributesindirectlytothenationalbenefitthroughgovernmentrevenuecollected fromroyalties,taxesandfees,whicharegenerallyusedtosupportthedevelopmentof infrastructureandpublicservices(MMSD,2002;Hall,2009).Fromanationalperspective,itis thesetwocontributionsfromthemineralssectorthataremostsignificant.Theshareofmining (7.7%)inthenationalGDP(Table1)isprominent,butemployment(1.5%showninFigure4) appearsoflessimportance.However,miningscontributiontoAustraliasrateofemployment maybeweightedmore,becauseeveryminingjobisconsideredtoaccountfor2.5jobsinother sectors,likeintheservicessector(Mercer,2000).Thiscanbeattributedprimarilytothefact thatjobsinthemineralssectorusuallypayhighsalaries(averageof$78,400)comparedtothe Australianaverage($33,500),thusboostingtheimportanceofminingasasourceof employmentandgeneratingjobsinsectorswhichprovideinputstotheminingindustry. Inthepast,mininghaschangedfromalabourintensivetoacapitalandknowledgeintensive activity.Thishasincreasedtheneedforskilledpeople,miningknowhowandspecialised services.Withalongtraditioninmining,Australiahasbeenabletoestablisheducation facilitiestomatchthisneed.Australiannowexportsthisknowledge,alongwithmany specialists,whofillpersonneldemandintheglobalmineralssector(AusIMM,2006).This specificknowhowrepresentstradablegoodscontributingtoAustraliasbenefit(Wrightand Czelusta,2007). ThislastpointespeciallysupportsthecontentionthatAustraliahasembraceditsmining potential.Ithasusedtheeconomicgainsfromminingtosuccessfullydiversifyitseconomy, enablingittotransformtowardaservicebasedeconomy(MMSD,2002;Willett,2002; AusIMM,2006;WrightandCzelusta,2007).Asidefromthislastpoint,manyofthebenefits associatedwiththeminingindustrycanpersistonlywhilemineralsareavailable.Thisraises

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theneedtoconsiderhowthemineralsindustry(whichfacesincreasingimpactsfrom extractingafiniteresource)canmostmeaningfullycontributetotheAustralianeconomyinto thefuture.

4.2.

THREATS FROM DEPENDENCE ON THE RESOURCE SECTOR

4.2.1. The Resource Curse and Dutch Disease (or Gregory effect)
ResourceCurse Contrarytothetheoryofthecomparativeadvantage,manymineralresourcerichcountriesare oftenoutperformedbyresourcepoorcountries(AutyandMikesell,1998).Thisparadox,where naturalresourceabundanceactuallyhasanegativeimpactonthegrowthofthenational economyistermedtheresourcecurseandisillustratedinFigure18.Afteraninitialeconomic boost,broughtonbytheboomingmineralseconomy,negativeimpactslinkedtotheboom surpassthepositive,causingeconomicactivitytofallbelowthepreresourcewindfalllevel.

EconomicActivity

Negativeimpacts associatedwithresource dependency

Economyrecovers Initial Impact

Time

Figure18:Theboombustnatureofresourcedependence(fromAusIMM,2006). Thenegativeimpactsassociatedwiththeresourcecurseareofpolitical,social,environmental andeconomicnature(GoodmanandWorth,2008).Anationsufferingfromtheresourcecurse realiseshugegainsfromexportingminerals,whichstrengthensthelocalcurrency(because othernationsmustbuyitscurrencytoobtainthecommodity,forcingthepriceofthecurrency up).Thisalsomeansthecountrysotherexportsbecomemoreexpensive,decreasingthe competitivenessofothersectorsthatproduceinternationallytradablegoods.Furthermore, thestrongercurrencymakesimportingforeigngoodscheaper,increasingthecompetitionfor locallyproducedgoodsonthenationalmarket(GoodmanandWorth,2008;Palma,2005). Whilestrugglingwithmaintainingitsnationalandinternationalmarketshare,thealready weakenednonminingsectorsfaceadditionalchallengescompetingwiththehighsalariespaid bytheboomingresourcesector.Ultimately,thepointisreachedwhenthesectorcanno longerattracttheworkforcerequiredtoremaincompetitiveorviable.Thiseffectisworsein countriesthatareclosetofullemploymentandhavedifficultysupplementingtheworkforce throughmigration(PapyrakisandGerlagh,2003;StevensandDietsche,2008).

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DutchDisease(orGregoryEffect) DutchDiseaseisarelatedphenomenontotheResourceCurse,inthatbothderivefromrich resourceendowments.ItwasnamedfollowingthediscoveryintheNetherlandsinthe1960s oflargereservoirsofnaturalgaswhichledtoappreciationofthecurrencyandadeclinein competitivenessofnonresourceindustries.Larsen(Larsen2006)distinguishestheResource CursefromDutchDiseasebynotingtheformerimpliesstagnantgrowth,whilstthelatteris associatedwithcontractedmanufacturingasshowninTable6:ComparisonofResourceCurse andDutchDisease(afterLarsen,2006).Table6. Table6:ComparisonofResourceCurseandDutchDisease(afterLarsen,2006).


No DutchDisease DutchDisease Present

ResourceCurse(reflectedbystagnantgrowth) No Yes
Overallgrowth Diverseexportbase Overallgrowth Stronglycontractedmanufacturing Stagnantgrowth Diverseexportbase Stagnantgrowth Stronglycontractedmanufacturing

IntheAustraliancontext,DutchDiseaseisalsocalledtheGregoryeffectafterProfessorRobert GregoryfromTheAustralianNationalUniversity,whodescribedin1976,thepotentialburden anexpandingminingsectorwouldhaveonruralandmanufacturingsectors(Gregory1976). Simplysuppressingresourcebasedindustrieswhereanationhasthecomparativeadvantage isnottheanswer(Willett2002).CraigEmerson(theAustralianFederalMinisterforSmall Business,IndependentContractorsandtheServiceEconomyandMinisterAssistingon Deregulation)writesthattoavoidtheDutchDisease,Australianeedsanewprogramof productivityraisingreformswithafocusontheseamlessflowofcapital,labourandskills acrossstateboundaries,andoneducation,innovationandwiseinfrastructureinvestment (Emerson2008) Discussionandimplications Governmentdependenceonincomefrommininghasbeenshowntocontributetocorruption andpatronage(BannonandCollier,2003).Thestrengthofpoliticalinstitutionsinplaceisalso animportantvariable.Corruptionandoverregulationiscommonlyviewedasanimpediment totheoperationofmarketequilibriums,andmayfurtherdecreasethepossibilitiesof successfullyestablishingoroperatingotherindustrysectors(GoodmanandWorth,2008). Box1. WillAustraliafacearesourcecurseinthefuture? WhilefewauthorsarguethatAustraliasmineralsboomislikelytoendinthenearfuture,the economicviabilityoftheindustrywillcontinuetobechallengedbydecliningoregradesandthe increasedenvironmentalandsocialcostsassociatedwiththeexpandedscaleofminingthatwill compensateforthisdecline(MuddandWard,2008).Afailuretoanticipatehowtheseadded costsmayinfluencetheeconomicviabilityoftheAustralianmineralindustrymayresultin adverseimpactsassociatedwiththeresourcecurse.Inparticular,astheinternalisationof previouslyexternalisedcosts(likethosefromsocialorenvironmentalimpactsofmoreintensive mining)mayconstraintheeconomicrewardassociatedwitharesourceboombeforemineral reservesareexhausted,thenecessitytoplanforsucheventualitieswitheconomic,regulatory ortechnologicalmeasuresbecomescritical.

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Evenwherecorruptionorpatronagearenotevident,theresourcedependentgovernmentis likelytofavourandsubsidisethedevelopmentofthemineralssector(Productivity Commission,1991),asaboomingresourcesectornotonlyprovidesattractivegovernment revenuebutalsooffersemployment(GoodmanandWorth,2008).Thiscreatesfurther economicimbalancetowardstheresourcesector. Theconsequenceofresourcedependenceisacrowdingoutofmanufacturingandother sectors(Krugman,1987),andadependencyonexportmarketsthataresubjecttofluctuations outofthecontroloftheaffectedcountry(Palma,2005;GoodmanandWorth,2008).Italso becomescoincidentallydependentonimportedgoodsthatarenolongerproducedlocally. Oncetheresourceisdepleted,itwillbedifficulttorecovertheothersectorsoftheeconomy, andthecountrywillbeleftwithanarrowbasedandweakenedeconomy(Krugman,1987).A usefulreferenceonthisissueistheResourceEndowmentToolkitdevelopedbytheICMMand WorldBank4. Althoughstudiesconsideringtheresourcecursephenomenonaresupportedbymany examples,economicunderperformanceisnotnecessarilytheoutcomeforcountriesthat embracetheirmineralendowment(Hajkowiczetal.,2009;Walker,2001).Mosteconomists statethatifproperlymanaged,theDutchdiseaseandresourcecursecanbeavoided(Wright andCzelusta,2003;PapyrakisandGerlagh,2003;Walker,2001),andAustraliaandCanadaare oftencitedasexampleswheretheyhavebeenavoided(AusIMM,2006).Thechallengeisto ensurethisholdstrueforthefuture.

4.2.2. Disadvantages of resource dependence for the Australian economy


GoodmanandWorth(2008)indicatedthatAustralia,withanexportfocusonminerals,is increasinglyresourcedependent.Theyfoundagriculture,onceoneofthepillarsofAustralian exporting,wasindecline,whilethemanufacturingsectorshowedonlymarginalgrowthin exportoutputvolume.Inaddition,employmentinthemanufacturingsectordeclineddespite theslightincreaseinoutputvolume,andtheminingsector(thoughcontributingrelatively littletonationalemploymentfigures)istheonlysectorshowingemploymentincreasesinthe lastfiveyears(Figure19).Thesecouldbeseenasindicatorsoftheresourcecurse,confirming oftheviewofGregory(1976)whoassertedthatourresourcedependencewouldseethe resourcessectordisplacingotherexportingindustries.Furtherimbalancemayresultbecause ofthelimitedextenttowhichAustraliaengagesindownstreamindustrieslikemineral processingandmanufacturing.MostofAustraliasmineralproductionisextracted,partly refined,andexported.Underdevelopeddownstreamactivitiesmayreflecthighlabourcostsin Australia(Harris,1980),thelackofestablishedeconomiesofscaleforprocessingand manufacturing(AusIMM,2006),orminimallocaldemandtodrivelocalmineralsprocessingor manufactureactivities(Harris,1980).Thesefactorsresultinacomparativedisadvantagefor Australiainregardtodownstreamactivities.Bycomparison,AsiancountrieslikeChinaand Koreahavehugemarketsforendproducts,lowerlabourcosts,andaresituatedmuchcloserto otherinternationalmarketsthatcanabsorbmineralsandmineralproducts.

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Figure19:ProportionoftheAustralianpopulationemployedintherural,miningand manufacturingsectors19802009(datadrawnfromABARE,2009b). ThissituationmeanstheAustralianeconomyonlypartiallycapitalisesontheabilitytovalue addtomineralproductionwithdownstreamactivities.Italsomeansalossingovernment revenues,astaxesoneconomicactivityarenormallyrelativetothevaluegainedfromthem. Thislossisparticularlyapparentwhenconsideringthenecessitytoaddresssocialand environmentalcostsencounteredduringmineclosureandsiterehabilitation.Importantly,itis oftenlocalgovernmentsthatmustshoulderthefinancialburdenofminesiterestoration. Norwayforexample,anothermajormineralexporter,hasestablishedaspecificfundtocover endoflifeminecosts.TheabsenceofsuchafundinAustraliaisheavilycriticisedandmaybea sourceoffuturedifficulty(GoodmanandWorth,2008).Eventoday,thelocalcommunities mostaffectedbyminingmayhavedifficultiesgainingenoughbenefitfromminingactivity becausethecurrentpublicfinancesystemdoesnotincludeamechanismforeffectively returningmineralsrevenuestominingcommunities(ICMM,2009;FreudenburgandWilson, 2002). Anothernegativeaspectofthefocusonmineralextractionandthelackdownstreamactivities inthemineralssectoristhestrongdependencyontheeconomicconditionsinothercountries. AstheseconditionscannotberegulatedintheAustraliancontext,thisposesanuncontrollable riskfromanationalperspective.TwomainissuescanendangertheAustralianeconomy: Australiascapacitytoparticipateininternationaltradeishighlyvulnerabletofluctuationsof theinternationaldemandforitsminerals;and,duetoitspaucityofdownstreamactivities, Australiaimportsmanygoodsproducedfromminerals.Thisconundrumcanbeobservedin thesituationwhereAustraliaexportscrudeoil,butatthesametimeimportsfuelanddiesel. Clearlytheeconomicconditionsassociatedwiththeseimportsdependsignificantlyonthe economicsituationsinothercountries.IftheyarenotfavourablefromanAustralianimporting sense,Australiamaybeindangerofnotbeingcapableofmatchingitsownimportdemandfor mineralservicesandgoods(GoodmanandWorth,2008).

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4.3.

THE STRUCTURE OF THE MINERALS ECONOMY

GrowingdemandforAustralianmineralsandpressureforincreasedprofitabilityraisethe economiesofscaleofproduction.Largescalemines,mechanisationandcompanymergers increasethesizeandcapitalintensityofmining(AusIMM,2006;Krautkraemer,1998).Infully exploringhowthesefactorsmaybeimpactedbypeakingmineralproduction,itisimportantto brieflyreviewthestructureoftheminingindustryinAustraliaanditsassociatedinvestment flowsandtradingarrangements.

4.3.1. Multinational, intermediate and junior companies


Theglobalmineralsindustryisnowdominatedbyasmallnumberofmultinational corporations.Otherparticipants,operatingatthenationalscale,areconsiderablysmaller,and markedlylessdiversified.Intermediatecompanies,generallylocallyownedandoperated,may onlyrunasinglemine(MMSD,2002).Smallercompaniesandanextensivenetworkof consultantsgenerallyprovidethemineservices,primarilyexplorationandextraction. Thecapitalintensityofminingmeanssmallercompanieswithlesscapitalstockmustbehighly speculative,andarethusmorevulnerabletodrawbackssuchasfluctuationsinmineralprices anduncertainties.Theneedtooperateintensivelymeansmergersarecommon,orsmall companiesaresimplyboughtoutbylargerones.Thishascausedthenumberofintermediate companiestodeclineinAustralia.Ifpeakingmineralproductionorincreasingcostsresultin significantmineralmarketfluctuations,thesesmallerserviceorientedcompaniesarelikelyto behardhit.Miningserviceprovidersarealsosignificantemployersinthemineralssector (AusIMM,2006),andtheirclosuremayhaveconsiderableemploymentrelatedimpactsfor Australiaparticularlyinresourcerichregions. OutsideAustralia,therearemorestateownedcompaniesintheminingbusiness(e.g.China, Chile).WhiletheAustralianGovernmentoperatesnominingcompanies,inthepastmeasures toensureamajorityofAustralianshareholdersintheAustralianminingcompanieshavebeen introduced.Neverthelesstheirsuccessvariesinanincreasinglyinternationalminingbusiness. EspeciallyfromChina,theinterestininvestinginminingincreasesinternationally(Cohen, 2007).

4.3.2. Corporate financing and economies of scale


Asthetypeandsourceoffinancingcangreatlyinfluenceacompanysbehaviour,acloserlook atthecapitalinflowsintheAustralianmineralsindustryisnecessary.TheAustralian governmenthashistoricallyattemptedtoensureatleast50%shareownershipbyAustralian stakeholdersinAustralianminingcompanies(Mercer,2000).Bycontrast,multinational companiesandothergeoeconomicdrivers(likeoverseaslinkstodownstreammarkets)favour internationalinvestment.Thesedrivershavegraduallydrivengreaterforeigninvestmentin theAustralianminingindustry(Harris,1980).China,inparticular,showsgreatinterestin increasingitsinvolvementintheAustralianminingindustry(Wallace,2009).Additionally,low commodityprices,generatedbywhatisnowreferredtoastheGlobalFinancialCrisis,further favourinternationalinvestmenttrends(Williams,2009).EventhoughAustralianmining welcomesforeigninvestmentfromChina(Hall,2009),andhighlyvaluesitsmarketlinks, worriesareexpressedaboutthecurrentandfuturelevelsofforeigninvestment.BHPBilliton chairmanDonArgusexpressedhisconcernsabouttheinternationalisationofAustralian miningcompanies,suggestingthatnewgovernancearrangementsmustbedevelopedto ensurelocalinvestorsarenotsqueezedoutofthecountry'snaturalresourcesmarkets (Chambers,2009). Projectfinancingisalsolinkedtosocialandenvironmentalimpactsfrommining.TheEquator Principlesestablishesavoluntarysetofstandardsaimedatdetermining,assessingand

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mitigatingsocialandenvironmentalrisksassociatedwithprojectfinancing(EquatorPrinciples, 2009).SignatoriestotheEquatorPrinciplesarelargelyfinancialinstitutionsandfundingbodies thatsharethebeliefthatpromotingresponsibleenvironmentalstewardshipandsocially responsibledevelopmentcanoffersignificantbenefitstothemselves,theborrowersandlocal stakeholders.Suchmeasuresencouragegreatersocietalandfinancialscrutinyoflargescale exploitativeoperations.

4.3.3. Minerals trading and pricing


Theeconomicsofacommodityaregenerallydeterminedbysupplyanddemand.The frameworkoftheinteractionbetweensupplyanddemandcanbeunderstoodasthemarket structure.ForAustralianminerals,threedifferentmarketsstructuresareofinterest: CompetitiveMarkets,OligopolisticMarketsandTerminalMarkets(AusIMM,2006). CompetitiveMarketsaretransparentandonlysupplyanddemanddeterminecommodity price.Someminerals,wheretherearemanysuppliersandbuyers(suchasgold,copperor zinc),areoftenCompetitiveMarketcommodities(AusIMM,2006).Whereonlyafewsuppliers exist,buttherearemanybuyers,themarketstructureisconsideredtobeOligopolistic.Foroil, lithiumorplatinumthisoftenisthecase(AusIMM,2006).Oligopolisticmarketsallowthe suppliergreaterfreedomtocontrolthecommodityprice. Terminalmarkets,whichincludetheLondonMetalExchange(LME)andtheNewYork MercantileExchange(NYME),areorganisedlikeastockexchangeforminerals(AusIMM, 2006).Theyareopentoanyinvestorandthepricesaresetonadailybasisandmaybesubject tosignificantshorttermpricefluctuations.Eventhoughonly5%ofworldmetalsuppliesare actuallytradedthroughtheLondonmetalexchange,ithasamajorinfluenceoverglobalprices becausethemajorshareofnonferrousmetaltrade(90%)ismadeinreferencetoLMEprices (AusIMM,2006;MMSD,2002).Inmanycases,longertermcontractsarebeingreplacedwith shortercontractsclosertothespotpriceformetals. Mineralsupplyanddemandwillchangedramaticallyasallcosts(economic,technological, socialandenvironmental)associatedwithproduction,processingandtransportationof mineralsincreaseswithfallingoregrades.Thesecostswillultimatelyinfluencetheabilityof companiestosupplycommodities,andtheabilityofconsumerstopurchasethem.Itislikely thatsocialandenvironmentalissueswillincreasinglydriveeconomiccostsassociatedwith supplyanddemandpatterns(Esteves,2008;Hamann,2004;JenkinsandYakovleva,2006).In thesecases,metalexchangesliketheLMEandNYME(thatcansignificantlyinfluenceglobal commodityprices)mayplayagrowingroleaspointsoftradeinterventionthatpriceand mitigatethesocialandenvironmentalconsequencesoflargescale,intensivemining operations.Marketfocussedregulationofsociallyandenvironmentallyresponsible productionwillultimatelygovernsupplyanddemandpatterns.

4.4.

ECONOMIC SCARCITY AS A CONSTRAINT TO MINERAL SUPPLY

Becausemineralsarenonrenewableresources,theoverallstockofamineralisfixed.Sucha perspectivemightfavourphysicalmeasuresofscarcitytoinfluencefuturesupply.Physical measuresofmineralscarcityareappliedverybroadly.Themostprominentexampleofthis approachmightbeTheLimitstoGrowth(LtG)reportproducedbytheClubofRome(Meadows etal.,1974).TheLtGapproachgenerallysuggeststakingtheknownstock,sometimes extendingitwiththeprobabilityofsuccessfulnewexplorations,andcalculatingthetotaltime lefttodepletionwithregardtocurrentconsumptionorgrowthinconsumption(Yaksicand Tilton,2009).Asneitheroverallstocksnorfuturemarketsareknown,mosteconomistsdonot considerphysicalscarcityasagoodindicatorfortheavailabilityofaresourceforsociety

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(Barnettetal.,1981).Economicscarcityhassubsequentlybeenintroducedasamorevalid approachtoassessthesupplyofminerals. Whilephysicalscarcityoccursthroughdepletion,economicscarcitycanhavevariouscauses including:war,embargoes,cartelsandothermarketmanipulations,naturaldisasters, accidents,cyclicalboomsinglobaldemand,inadequateinvestmentinnewminesand processingfacilitiesordepletion.YaksicandTilton(2009)suggestthatfactorsotherthan depletionnormallydonotcauselastingeconomicscarcity,butdonotconsidertheimpactof socialandenvironmentalconsequencesoneconomicscarcity.Historically,therehasrarely beenacaseofeconomicscarcityinducedbydepletionprimarilybecausetechnologieshave improved,offsettingtheimpactsofdepletionandactuallycausingpricestofall.However,itis worthnotingthattechnologicalmechanisms,tooffsettheimpactsofsocialandenvironmental aspectsofminingandprocessingoneconomicscarcity,haveyettobefound. Therearethreecommonlyacceptedmeasuresforeconomicscarcity:theusercostsassociated witharesource,therealpriceoftheresource,andtheresourcesextractioncosts. Importantly,thesemeasureshavehistoricallyexternalisedimpactsofasocialor environmentalnaturesomightbeconsideredinaccuratemeasuresofeconomicscarcity givenincreasedenvironmentalorsocialscrutinyintheminingindustry.Internalisationof thesecostswillcontributetoeconomicscarcitybyincreasingtheusercosts,therealpriceof theresource,anditsextractioncosts.

4.4.1. The User Costs associated with mineral production


TheHotellingmodelofresourcescarcity Theusercostsorscarcityrenthasbeenintroducedinaneconomicmodeldevelopedby Hotelling(1913).Hismodelformsthebasisformanyeconomicapproachestomineral resources.Heidentifiesmineralresourcesasfinite,andassertsthatthemotivationforhis modelwastodefinethetimeduringwhichafiniteresourceshouldbeextractedtogainthe highestpossiblebenefitfromit.BasedontheworkofRicardoandKolthammer(1911), Hotellingassumedthatthecheapestavailableresourcewouldalwaysbedepletedfirst.Two opposingforcesinhismodel,theresourcerentandtheinterestrate,determinethespeedof extractionandthereforethetimeofextraction,becausethestockisfinite. Clearly,ifaresourceisfinite,extractingandsellingitincreasesitsscarcity.Increasedscarcity alsocausestheshadowpriceoftheresourcetoriseandprovidesanincentivetoextractthe resourcemoreslowly,thuswaitingforitspricetorisefurther.Theshadowpricereflectsthe implicitcostassociatedwithaconstraint(inthiscasescarcity),andrepresentsthemaximum pricethatcustomersarewillingtopayforanextraunitofalimitedresource(Smith,1937). Theopportunitycostofextractingascarceresource,andthereforelosingpartofanassetwith increasingvalue,isconsideredausercost.Inthecaseoffiniteresources,suchusercostsare alsotermedscarcityrentorHotellingrent.Bycontrast,theopportunitycostincurredby leavingtheresourceinthegroundandwaitingforitsvaluetoincreaseistermedthecurrent interestrate. Backstoptechnologies:substitutesdrivenbyeconomicscarcity Asnoted,themechanismofthescarcityrentcausesanincreaseinpriceovertime.Whenthis pricerisestoohighitstiflesthedemand,andthescarcityoftheresourceeffectivelyprices itselfoutofthemarket(Solow,2009).WithhisconceptoftheBackstoptechnology,Nordhaus andcoauthors(1973)offeranapproachtoestimatethischokingprice.Thebackstop technologyactsasasubstitute,givingthefiniteresourceaquasinondepletablecharacteristic (Nordhausetal.,1973).Thesubstitutionoffossilfuelswithrenewableenergyresources providesandexampleofbackstoptechnologyintheenergycontext(Nordhausetal.,1973).

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Whilethesubstitutemaybeavailabletoday,itiseconomicallyuncompetitiverelativetothe resource.Asthescarcityrentdrivesupthecostofthefiniteresource,thebackstoptechnology becomeseconomicallycompetitiveandistakenup(Solow,2009).Thereissomedisagreement intheliteratureregardingwhetherabackstoptechnologytakesoverassoonastheprice becomestoohigh(DasguptaandHeal,1980),orifthenewtechnologycoexistswiththefinite resourceforaperiodbeforetakingover(TsurandZemel,2003). Neverthelessthebackstoptechnologyalsorequiresresearchanddevelopmenteffortto becomefeasible.Increasedresearchanddevelopmenteffortcanlowerthecostof implementingthebackstoptechnology,andthereforethechokingpriceforthefiniteresource. Tomanageanoptimaltransitiontothebackstoptechnology,arapidapproachtotheR&Dof thebackstoptechnologyisrecommendedbyTsurandZemel(2003).AssuggestedbyLevy (2000),theavailabilityofadevelopedbackstoptechnologymayalsohaveanimpactonthe priceoftheresourceandmayleadtoaccelerationinratesofdepletion. However,thepracticalitiesoftheoperationofbackstoptechnologiespresentchallengesinthe contextofenvironmentalandsocialissues.Thetheoryofbackstoptechnologieshaslargely beenappliedinthecontextoftechnologicalimprovementtowardsmoreefficientresource exploitation.Withincreasedsocialandenvironmentalpressureontheminingindustry,itis likelythatbackstoptechnologiesthatovercomeissuesoriginatingfromfallingoregradeswill becomeapparent.Materialsubstitutionandrecyclingpresentpotentialforbackstop technologiesthatmayfillinfortraditionalmineralextractiveproduction.Bothofthese potentialbackstoptechnologiesarelikelytoinfluencedemandforminerals,andare discussedfurtherinsection4.6.4.

4.4.2. The Real Price of resource dependence


AdamSmith(Smith,1937)introducedtheconceptoftherealpriceinhisclassicbookThe WealthofNations.Therealpriceofacommodityiswhatpeoplearewillingtogiveupinorder toobtainthatcommodity.Thelongterm,deflateddevelopmentofmarketpricesshould reflecttherealpriceofthemineral(Barnettetal.,1981).Thisishasbeenafrequentlyused, andhistoricallywellregarded,approachtoassessingeconomicscarcity(BarnettandMorse, 1965;Tilton,2002;YaksicandTilton,2009). Toassessphysicalscarcity,therealpriceapproachbuildsontheHotellinghypothesis,but operatesitinreverse(Norgaard,1990).Asdiscussedabove,Hotellingsuggeststhatthe shadowpriceofthemineralrisesastheresourcebecomesdepleted,thusprovidingan indicatorofthemineralsscarcity.However,whentakingtherealpriceapproachtomeasuring economicscarcity,evaluatingtheshadowpriceoftheresourcedirectlyisseenastoo complicatedanduncertain(YaksicandTilton,2009).Nevertheless,theshadowpriceshouldbe reflectedintherealpriceofthemineral,whichcanbedrawnfromempiricalmarketdataas mentionedabove.Manyrecentempiricalstudiesconcludethatresourcepricedoesnotrise overtime(BarnettandMorse,1965;Barnettetal.,1981;Simon,1998),contradicting Hotellingstheory,whichsuggestsanincreaseintheshadowpriceifaresourcegetsextracted (becauseitsscarcityactsasaconstraint).Theypointoutthatresourcepriceactuallyfellwhen examininglongtermtrends,demonstratingdecreasedeconomicscarcity. Decreasedeconomicscarcitycanbeexplainedbytheexpansionofknownmineralreserves (throughexploration),theimprovementoftechnologicalsolutionsformining,andthe innovationofmineralsubstitutes(Simon,1998;BarnettandMorse,1965).Thesemechanisms currentlyoutweightheincreaseinpricecausedbythescarcityrent,andthereforethe availabilityofaresourceswampsanynegativeimpactthatitsrelativelyslowerdepletionmight induce(Barnettetal.,1981;YaksicandTilton,2009).Newtechnologiesthathaveoffsetthe impactsofmineraldepletiononpriceincludeadvancesinhaulingtechniquesinmines,asin

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theuseoftrucksandconveyorsystemsinplaceofrailways,economiesofscaleinmilling,and thereplacementofreverberatoryfurnacesmeltingbynew,energyefficienttechniques (Gordonetal.,2007b). Accordingtothoseinfavouroftherealpriceapproach,thetrendthatseestechnologyand explorationoutweighingdepletionislikelytocontinueintothefuture(TiltonandLagos,2007). Someevenpredictthistrendtocontinuequasiindefinitely(Simon,1998). UserCostsandtheRealPrice:criticismandintersectionofthetwoapproaches Itcanbearguedthatneithertherealpricenortheusercostsappeartobedirectindicators capableofassessinglocalresourcedepletion.Neverthelessglobalresourcescarcityislikelyto haveanimpactonmineraldemand/supplyequilibriums,andonthedynamicsofpotential backstoptechnologies.Thesetwofactorswillinturnhaveimpactsonthemineraleconomy (Gordonetal.,2007a).Adetaileddiscussionofmineraldemandispresentedinsection4.6. TheHotellingapproachhasbeencriticisedprimarilyonafailureofthreeofitskey assumptions. 1. thecheapestavailableresourcedoesnotalwaysgetdepletedfirst,simplybecauseitis notnecessarilydiscoveredfirst; 2. formostminerals,theoverallstocksareunknown; 3. veryfeworebodiesexhibithomogenousquality. ThefailureoftheseassumptionsinlightofempiricaldatawouldsuggestthatHotellingsmodel falselysupportsdecreasingscarcity,wheretheresourceexploiteristemptedtorecognisethe insituvalueexpressedbytheshadowpriceoftheresourceandextractmoreslowly (Krautkraemer,1998;Reynolds,1999). Reynolds(1999)showedhowthedynamicsofmineralexploration(principallytechnological advancement)cankeeptheresourcepricelowandcauseittopeaksuddenly.Hefoundthat withongoingexploration,theknowledgeaboutthelocationofpossibleresourcesincreases. Thiscontributestothelikelinessofsuccesswitheverynewexplorationuntilthepointis reachedwheretherearesimplynomorestocks.Beforethatpointisreached,theknownstock iscontinuallyexpandedwithdecreasingeffort,falselyindicatingdecreasingscarcity.Figure20 showstherelationshipbetweenscarcity(asafunctionofproduction)andresourceprice becauseactualproductioncanpeakbeyondatheoreticalproductionpeak(inthiscasethe Hubbertpeak)withthehelpoftechnology,commoditypriceandresourcescarcitycanbekept artificiallylowonlyuntiltheresourceisveryclosetobeingcompletelydepleted.

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Figure20:TherelationshipbetweentheHubbertsupplytrend,actualproduction(where technologycandelaytheproductionpeak)andcommodityprice(fromReynolds,1999). EventhoughtherehavebeenattemptstoextendtheHotellingmodeltoovercometheseand othercritiques(Reynolds,1999;Krautkraemer,1998),atheoreticalmodelwillalwayssimplify acomplexsituation.Thisisparticularlytrueinthecaseofpeakminerals,wheremanyaspects oftheproblemhavenotbeenexploredinatheoreticaleconomicssense.Theconundrum presentedbyusingeconomicmodelstopredictresourcescarcitywaspointedoutbyNorgaard (1990,p21)whenheidentifiedthatnoonehassuccessfullyusedtheorytodescribethe historyofcosts,royalties,andpricesforanyresourceindustry. CriticismoftherealpriceapproachmostlyidentifiesthatononehanditbuildsonHotellings modelandregardsahigherpriceanindicatorforscarcity,butontheotherhandignores Hotellingsbasicassumptionthatsays(Norgaard,1990,p22): MajorPremise:Ifresourcesarescarce,and; MinorPremise:Ifresourceallocatorsareinformedofresourcescarcity; Conclusion:Theneconomicindicatorswillreflectthisscarcity. Norgaardsubsequentlypointsoutthatthatitislogicallyfallacioustotrytodetermine whetherresourcesarescarcebylookingateconomicindicators(1991,p195).Astheoverall resourcestockanditsscarcityisnotknownbyallocators(everyoneinvolvedinformingthe price),thenallocationmechanisms,likeprice,donotreflecttheactualscarcity,butthelevelof informationtheallocatorsdohave(Norgaard,1990;Norgaard,1991).Furthermore,the marketpriceofaresourceoftendoesnotnecessarilyreflectallthecostsinvolvedinextracting theresource,commonlyoverlookingtheenvironmentalandsocialcosts(Gordonetal., 2007a).Decidingwhethertoincludeorexcludetheseexternalitiescanhaveamajorimpact onthepriceoftheresource(YaksicandTilton,2009). TheseexternalcostscanbeincludedintheinitialHotellingapproachviathemarginal extractioncosts.Neverthelessitoftenisassumedthattheindustryoperatesunderconstant costs(Solow,2009)sotheydonothaveanimpact.Theinclusionofpreviouslyexternalised costsintotheextractioncostofaresourceisseenasakeyeconomicdriverinfuture discussionsconcerningmineralscarcity(Gordonetal.,2007a;DalyandFarley,2004;Mudd andWard,2008).Theactivityofinternalisingthesecostsisinvestigatedmoreclosely.

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4.4.3. The extraction costs


Thethirdapproachtomeasuringeconomicscarcity,theextractioncosts,incorporatesthe marginalextractioncosts(i.e.netprice)andthefixedcostsfortheminingoperation.The marginalextractioncostdefinestheexpenseincurredbyextractingoneunitofaresource.The fixedcostsdescribetheinitialcostsinestablishingaminingoperationincludingexploration andtheinstallationoftheoperationalinfrastructure.Ifthesecostsexceedthebenefitgained bysellingtheresourceunit,productionbecomesuneconomic(DalyandFarley,2004). Additionally,resourceproductionhasotherhiddencoststhatshouldbeincludedintheoverall costofproducingtheresource.Manyoftheenvironmentalandsocialcostsareeither overlookedorpassedontosocietyafterminesiteabandonment(Gordonetal.,2007a).Inthe future,itislikelyforthesetoincreasingbecomesustainabilityconstraintsinaccordancewith heighteneddemandfortheinternalisationofcosts.Gordonandcolleagues(2007a,p27) specificallycitethatpotentialconstraintsontraditionalminingcouldresultfromthe availabilityofenergysources,fromwaterlimitationsorfluctuationsrelatedtoclimatechange, orfromlegalrestrictionsrelatedtoenvironmentalprotectionorsocialdisruptionwillplaya significantroleinfuturemineralproduction. Thissectionprovidesabriefoverviewoversomeoftheseconstraintstoproduction.Close inspectionisrequiredtomakespecificpredictionsaboutfutureproductionforparticular resources,andthissectioncoversonlythebroadaspectsofextractioncostsacrossthewhole spectrumofminerals.Theextractioncostasalimitationtoproductionwillalsobeinfluenced bywhetherthemineralisminedasabyproduct,acoproductsoramainproduct(AusIMM, 2006). Decreasingaccessibilityofminerals Themostaccessibleofknownreservesarenormallydepletedfirst(DalyandFarley,2004; Hotelling,1913).Thismechanismleadstotheextractionofincreasinglylowergradesoforein increasinglyinaccessibleareas(DalyandFarley,2004).Thecutoffpointthatdetermineswhen theextractionofenergyresourcesremainseconomicallyviablemaybeeasiertoevaluatethan inthecaseofotherminerals.Assoonastheenergyrequiredforgettingaunitoftheresource outofthegroundandtransportedtoitsfinalpurposeexceedsitsembodiedenergy,the resourcewillnolongerbeeconomicallyviabletoextract(DalyandFarley,2004).However, determiningthiscutoffpointformineralsisdifficultbecauseofthediversityofbenefits providedbyminerals(whichbroadentheirbenefitandvaluetosociety)overthoseofenergy resources. Decliningoregrades Withcontinuingproduction,mostoresdecreaseinquality.Consequently,toobtainthesame amountofmineral,anincreasingquantityoftheorehastobeminedandprocessed.This increasedeffortalsorequiresgreaterenergyandwateruseandresultsinincreasedwaste production(Norgateetal.,2007;Mudd,2007a,c;2009a,2010).Increasedconsumption contributestorisingextractioncosts(MuddandWard,2008).Also,anincreaseinminewaste willleadtohigherlandfillcosts.Someauthors,likeDaly(DalyandFarley,2004)seethesecosts asthemostcriticalformining,predictingthattheirimpactmayovershadowtheeffectof physicaldepletionontheeconomicviabilityofamineral. Risingoilprices Ariseofthefuelpricecausesamajorincreaseintheoverallcostsofmineralexploration, productionandprocessing.Theoilshockofthe1970swasacaseinpoint.Theartificiallyhigh oilpricescausedbyOPECssupplyrestrictionswerereflectedinheightenedmineralprices

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(Barnettetal.,1981).NotwithstandingtheGlobalFinancialCrisis,areturntorisingpricesasa resultofpeakoilwillalsohaveabigimpact. Greenhousegasemissionconstraints Theissueofclimatechangeurgentlycallsforgreenhousegasemissionconstraints. IndustrialisedcountrieslikeAustraliaareputunderpressuretosetgoalsforcuttingbacktheir emissions.Reachingthosegoals,usingmechanismslikecarbontrading,islikelytocause increaseddownstreamcostsforminingproduction.Becausemuchofourenergycomesfrom burningfossilfuelsthatemitgreenhousegases,theincreasedcostsbroughtonbycarbon tradingarealsolikelytocausetheenergypricetorise.Thiswillhaveasignificantimpacton energyintenseindustrieslikemining(MuddandWard,2008).Increasingenergyprices becomeanevengreaterpressureonthecostsofminingwhenconsideringthegrowingenergy needpromptedbydecliningoregradesandgreaterdifficultyaccessingreserves(Muddand Ward,2008).Eventhoughtherehavebeenmajorimprovementsinminingenergyuse,itis likelythatthistrendmaybecomeverydifficulttomaintain(Gordonetal.,2007a). Thetimingofemissionconstraintsisahighlypoliticalissue.InAustralia,emissiontradinghas beendelayedtonowstartin2011andmanyGHGemittingindustrieshavebeengrantedfree permits. Otherenvironmentalcosts Fromaneconomicperspective,emissionconstraintsareanefforttointernalisemajorglobal environmentalcosts.Butespeciallyformining,therearealsoenvironmentalcostsatalocal level.Thesecostsincludeminesiteclosureandstoringofwasterock.Togetherwiththe discussionregardinggreenhousegasemissionalsootherenvironmentalconsiderationsmay gainmoremomentum.Neverthelessmeasuringtheseenvironmentalcostsandallocating themproperlycanbequitedifficult(Mercer,2000).Suchcostsarenormallyaddressed throughobligationsfortheindustryestablishedbygovernments;includingprohibitingcertain miningtechniques,demandingshutdownplansorcharginghighertaxesandroyalties(to coverenvironmentalremediationcostsforexample).IntheUSandEurope,stricter environmentalregulationsandgreaterdifficultyobtainingminingpermitshasmadeopencut miningeconomicallyunattractive(AusIMM,2006). Fees,levies,taxesandroyalties Fees,levies,taxesandroyaltiesrepresentfurthercoststotheindustry.Especiallyunder politicallyunstableconditions,whichareoftenencounteredindevelopingcountries,these costscanrepresentahugeuncertaintyfortheminingindustry(Humphreys,2001).Itshouldbe notedthatAustraliahasadecentralisedtaxsystemformining.Thestatesowntheresources andthereforeeachstatehasitsownminingactsandregulations(ICMM,2009).Thereforethe costsforminingassociatedwithfees,levies,taxesandroyaltiescandifferwidelybetween differentminesandbetweenstates(Mercer,2000).ThecurrentHenryTaxReviewisin deliberationatthetimeofwritingandwillalsoimpacttheindustry(Stevens,2009). Capitalcosts Duetothehugeinvestmentsnecessaryforestablishingtodayslargescaleandhighly automatedminingoperations,mininghasbecomeacapitalintenseindustry.Asitpartly dependsondebtfinancing,itisvulnerabletofluctuationsonthecapitalmarket(AusIMM, 2006)andextractioncostsriseandfallwithinterestratechanges. Outputconstraints Costsattheproductionfacilityoftendeterminethequantityandqualityoftheminedoutput andformatechnicalboundaryforreactingtochangesindemand.Thiscanhandicapthe

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miningindustrysabilitytoseizeeconomicopportunitieslikegrowingdemand,butcanalso limittheircapacitytodecreaseproductionwhenitbecomeseconomicallyappropriate (Krautkraemer,1998).Thisissueiscausedbytheneedforaminetooperateatitsmost economicallyefficientlevel,whichoccursclosetotheirmaximumoutput(AusIMM,2006) Opportunitycostsofdifferentlanduse Minesitesthatareclosetoagriculturalareas(e.g.theHuntervalleyandLiverpoolPlains)orin regionsthatattracttourism(e.g.catchmentsadjacenttotheGreatBarrierReef)cancausea conflictinlanduse,linkedtoamenityandthepotentialimpactonsurfaceorgroundwater. Toxicemissionsfromminingcanalsobedetrimentaltohumansettlementsandthenatural environment.Opportunitycosts,resultingwheremininghindersorcauseseconomiclossesfor otherindustries,mustalsobeconsideredbecausetheyarelikelytoincreaseextractioncosts. Explorationcosts Reservesarefinite,buttheoverallstockoftheresourceisgenerallyunknown.Consequently, explorationplaysamajorroleinthemineralsindustry.Explorationcostsformostmineral commoditieshaveincreasedovertime.Forexample,inthe1950sontheUSmainland,one barrelofoilinvestedinexplorationleadtothediscoveryof50newbarrels.By1999thisratio ofdiscoverycosthaddeclinedto1to5(DalyandFarley,2004),meaningtherelativecostof discoveryhasincreasedtentimes. Formostminerals,successfulexplorationhasnotkeptupwithgrowingdemandforthe commodity.Gordonandcolleagues(2007a`,p27)arguethatdiscoveryofnewsourcesof copperorehasnotkeptpacewiththeamountoforeextractedtosupplytheincreaseinthe copperstockinuseandmakeupforlossesarisinginthedisposalofendoflifeproducts.This meansthatcopperisbeingusedfasterthanitcanbeproduced,andthatwithoutadequate usemanagement,thesupplywillultimatelybeexhausted.Similarfindingsshowthat successfulexplorationforgoldhasnotkeptpacewithextractionandthegrowingdemandfor themetal(Hill,2009;Fitzgerald,2009).

4.5.

DEMAND FOR MINERALS

Whiletheabilitytosupplyacommoditydeterminesitsavailabilityashasbeendemonstrated, demandformineralscanalsoinfluencetheiravailability.Theuseofanddemandforminerals isasdiverseastheirspecificproperties.Themajorityofmineralsareinputsforvariousgoods andservices,feweraretradedasfinalgoods.Howmineralsareused,wheretheyare distributed,andhowtradebarriers,downstreamuseindustries,substitutionandrecyclingcan potentiallyinfluencedemandformineralsand,ultimately,theiravailability.Thesedriversof mineraldemandarediscussedinthefollowingsection. Economistsarecognisantoftheroleofdemandasanavailabilitydriver,butmanydonot regardfactorsbesidesdepletionashavingalongtermimpactonmineralavailability(Yaksic andTilton,2009).Thosewhodonotagreewiththishypothesisstatethatseveralotherfactors mayalsohavealastingimpactonmineralavailability(Norgaard,1990;DalyandFarley,2004; Gordonetal.,2007a).Forexample,greenhousegasemissionregulations,wherepolitical decisionswithalongtermimpactmaysignificantlylimitfuturemineralproductioncapability.

4.5.1. Cheap transport facilitates international trade


Miningisultimatelyalocalactivitybecauseitisboundtoareaswheretheresourceisinthe ground:rarelyaremineralsfoundclosetotheirmarkets.Consequently,mineralsmustbe transportedtotheirfinalmarket,incurringtransportcoststhatoftenaddsignificantlytothe overallcostofmining.Whetherthedemandforamineralisglobal,nationalorregionalusually

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dependsontheirvaluerelativetotransportcosts(MMSD,2002).ThehighvalueofAustralian goldallowsittofindbuyersallaroundtheworld,whereasAustralianIronoreisprimarily distributedtotheclosermarketsofChina,KoreaandTaiwan(AusIMM,2006).Thelowerthe valueofthemineral,themorelikelyitwillbethattransportationcostswilllimititsmovement and,hence,themineralsabilitytomeetdemand.Whilehistoricallycheaptransportationcosts (especiallyinshippingsincetheSecondWorldWar)hasestablishedaninternationalmarket formanyminerals(AusIMM,2006),futuredevelopmentsintransportcostsandtechnology mayhaveamajoreffectonthecompetitivenessofminerals(AusIMM,2006).Increasesinthe costsfortransportation,duetorisingfuelprices,mayconstrainthedemandforlowervalue minerals,asfossilfuelsremainthemajorsourceofenergyfortransport.Thedynamicsofoil priceincreasesandvolatility,aswellasemissionconstraints,areincreasinglylikelytopresent restrictionsonthespatialextensionofmarketsforAustralianmineralsinthefuture. Consideringitsremotelocation,thisisparticularlysignificantforAustralianmineralexporters.

4.5.2. International trade barriers


Themostcommoninternationaltradebarriersareimporttaxes,monetaryexchangeratesand protectionistgovernmentpolicies.Globalisationandtheestablishmentoffreemarketshave seenthesebarrierslessenedorremovedinthepast(AusIMM,2006).Whetherornotthis trendcontinueswillhaveamajorinfluenceonthemineralssupply/demandequilibrium.For example,Chinahasrecentlyintroducedprotectionistpoliticsthatlimititsexportofrareearth elements(Chinacurrentlyproduces95%oftheworldsrareearthelements)andother minerals(Lorenz,2009;Boreham,2009).Thisdidnotonlyleadtoapriceriseforthose commodities,butalsofacilitatedthereopeningofsomeformallyabandonedminesitesin othercountries(Lorenz,2009;Boreham,2009).

4.5.3. Downstream industries


Asmostmineralsserveasinputsforothereconomicactivities(AusIMM,2006),theyare embeddedinacomplexframeworkofdownstreamindustries.Thismaybeespeciallytruefor mineralsthataretradedinternationally(MMSD,2002).Oneexampleofthiscomplexityis exhibitedintheChinesesteelindustry,wherethedemandforironiscloselylinkedtothe demandforcokingcoal.EventhoughChinahasextensiveironandcoalreserves,itimports bothinadditiontoextractingthemlocallybecauseitsownproductioncannotmatchthevast throughputofitssteelindustry(Brown,2001).FurthermoreChinesecoalisnotappropriatefor cokingsteel(Williams,2009).Therefore,ariseinthedemandforChinesesteelwillalsoresult inanincreasedneedforcokingcoalimportsinChina.

4.5.4. Substitution and Recycling


Substitutionorrecyclingmayactasabackstoptechnology(introducedinsection4.4.1)as mineralresourcesbecomeincreasinglydepleted.Asmentionedearlier,akeydriverofmineral demandisthediversityofgoodsandservicesforwhichthemineralsarerequired. Consequently,thedemandformineralsisdirectlylinkedtothedemandforthegoodsand services(AusIMM,2006).Thediscoveryofmineralsubstitutes,ordevelopmentofcapacityin recyclingtechnologymaycausesignificantshiftsindemandforthosemineralsaffectedby thesechanges. Thedevelopmentofsubstitutesforallmineralsisseenasquiteunlikely(DalyandFarley, 2004).Furthermore,peakoilraisesthenecessitytoestablishtechnologicalorothersolutions tofossilfueluseinminingbyprovidingrenewableenergyalternatives(Diederen,2009).Even so,manyminerals,especiallymetals,arerecyclable,raisingthequestionofwhetherrecycling mightbeabackstoptechnologyformining.

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Therearediverseopinionsregardingwhetherrecyclingcansubstituteformineralextraction (Ayres,1999).Theoverallstockofrecyclablematerialisrising(MMSD,2002),butthe availabilityofvariousmetalsforrecyclingdifferswidely.Aslongastheinfrastructureor product,theyareembeddedin,isstillinuse,theycannotberecycled.Otherbarriersto recyclingincludethetechnicalefforttogainthematerialsbackfromthespecificproductor infrastructure,andthelogisticeffortrequiredtoeffectivelytransportproductstorecycling institutions.Themorediversetheuseofthemineral,theharderitwillbetoovercomethese recyclingbarriers(MMSD,2002).Legislationandproductstewardshipschemesliketheendof lifevehiclelegislationoftenresultinimprovedrecyclingrates(MMSD,2002). Furthermorethereisanongoingdiscussionconcerninghowthesecondlawof thermodynamicsaffectsmaterialscycling(Ayres,1999).Itsuggests100%recyclingisnot feasible,becausewitheveryrecyclingprocessacertainamountofmaterialwillinevitablybe lost.Thiscausestheoverallstocktodeclineandgivesrisetotheneedfornew,virginmaterial ifthedemandremainsconstant.Theimpactofthislossontheamountofrecycledmaterial leadstofurtherdiscussionconcerningtheneedtomanageingroundresourcessothatthey cancomplementthoseresourcesinproduct(GeorgesuRoegen,1977;GeorgesuRoegen, 1979;DalyandFarley,2004).However,thisideaiscontestedbyothers,includingAyres(Ayres, 1999),whosuggeststhattheEarthisaclosedsystemwherenomaterialislost.Sowith enougheffortandenergy,everymateriallosscanberetained. Aneconomicdriversupportingrecyclingistheratioofthepricesforrecycledandvirgin material(Mudd,2007c).Italreadyrequireslessenergy(andthereforelesscapital)togainsteel oraluminiumfromscrap,thanfromvirginmaterial(MMSD,2002).Otherfactorssuchas reducedlandfillcostsandthestructuraladvantagesoftherecyclingindustrywillplayamajor role.Recyclingamineralfromscrapisnotaslocallyboundasmining,andsothetransport costscanbereduced.Recyclingsmaininputsofsecondarywaste,energyandlabourallowthe industrytobepositionedclosetodenselypopulatedareaswherethereisaworkforce,a constantinputofmaterialgoodsabandonedbysociety,andatthesametimeamarketforthe recycledmaterial(MMSD,2002;DalyandFarley,2004).However,dependingonhow concentratedordispersedthemetalisandthetransportrequired,recyclingmaynotalways havelowerenergyrequirements.Thecompetitivenessofrecyclingwillalsoincreaseasthe productioncostsassociatedwiththesocialandenvironmentalimpactfromtraditionalmining rise,andwhicharelikelytocontributesignificantlymorecostpressureinthefutureasore gradescontinuetofall. Nevertheless,aslongastheworldwidedemandformineralsrises,theneedforobtainingnew, virginmaterialfromthegroundwillcontinue.Consequently,withtheexpectationthatthe futureneedformineralswillnotdeclineortolevelout,recyclingcannotsolelyfulfilthe criteriaofabackstoptechnology.Still,recyclingcertainlyhasamajoreffectontheoverall availabilityofmineralsandtheirprices,andthereforealsoonthespeedatwhichtheyare produced. Australiashouldconsiderwhatroleitwishestoplaywithregardtorecyclingtechnology developmentandhowitscompetitivenesswillbeaffectedbyitsincreaseduptakeinother countrieslikeJapan(UKDepartmentofTradeandIndustry,2005)andChina(Yuetal.,2008)It isalsointerestingtonotethatinthesecondhalfoflastcentury,ageingsecondarycopper smeltersintheUSAclosedduetopoorenvironmentalcontrols(BiswasandDavenport,1994).

4.5.5. Mineral demand varies between nations


Overall,worldwidedemandformineralsisincreasing(MMSD,2002).Butdifferenteconomies aroundtheworldaredemandingdifferentmaterials,whichraisesthedistinctionbetween mineralsmainlyusedforhightechnologylikelithium(whicharenecessaryformanynew

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innovativetechnologiessuchasbatteriesforelectriccars),andmineralsmainlyusedfor classical,wellknownpurposeslikeiron(forexamplestaticpurposesinconstruction)orcopper (foritsconductivity). Thelattergroupofwellknown,structuralmetalsareespeciallyimportantinemergingand developingcountrieslikeChinaandIndia,whichbothpresenthuge,andgrowing,marketsfor mineralandmetalproducingcountrieslikeAustralia(MMSD,2002).Inthesedeveloping countries,structuralmineralsandmetalsarerequiredtosupportinfrastructuredevelopment, whichisahighlymaterialintensephaseoftheindustrialisationprocess(MMSD,2002;Dinda, 2004).Cheaper,nonvalueaddedresourcesarethesecountrieskeyrequirementsbecause financialcapitalisoftenlimited(KeslerandLaznicka,1994). Bycontrast,indevelopedcountries,demandforstructuralmineralsandmetalshaslargely levelledout(admittedlyatahighlevel),causingthemarketforbasicmineralstobequite stable(Dinda,2004).However,thestrongconsumersocietyindevelopedcountries,and mechanismslikeproductcreativedestruction(amechanismemployedbyleadingcompanies tokeepandextendtheirmarketsharebyconstantlydevelopingnewinnovativeproducts, whichinvariablyrequiremoreordifferenttechnicalmineralsormetals)continuetopushthe overallmaterialthroughput,andleadtoagrowingneedformineralsusedfortechnological goods(Brown,2001).Eventhoughtheoverallmaterialefficiencyhasincreasedsignificantly, thethroughputofgoodsandmaterialshasincreasedevenmorequickly(Brown,2001). Thedemandforhightechminerals(e.g.rareearthelements)alsospreadstoemerging countrieslikeChina,causingahighlycompetitivemarketforthesegoods(Boreham,2009). Thecloselinkbetweenthemineralmarketandthemineralsendusecancausehuge fluctuationsasaresultofchangesinthefinaluse(Brown,2001).Oneexampleistheincreasing demandforaluminiuminthecarindustryaccompaniedbyadecreaseofdemandforsteelin thatarea.Risesintheoilpricemadefuelmoreexpensiveraisingdemandforsmaller,lighter, morefuelefficientcars(MMSD,2002).Aslesssteelisrequiredtobuildasmallercar,the demandforsteeldecreased.Furthermorealuminiumreplacedsteelinmanypartsofthecar causingtheneedforsteeltodecreaseevenfurtherwhereasthedemandforaluminium increaseddramatically(MMSD,2002). Also,themineralsusedinrechargeablebatteriesarelikelybeinhigherdemandasplansto decentraliseelectricityarerealised,causingdemandforbatteriestorise(MMSD,2002). Currentdevelopmentsliketheshifttowardselectricvehiclesarelikelytohavesimilarimpacts (YaksicandTilton,2009).Especiallyexpectedgrowthindemandoverthecomingcenturyfor lithiumbatteriestopowerhybridandfullyelectricautomobileshasraisedsomeconcernabout thefutureavailabilityoflithium(Tahil,2007). AsAustraliaexportsahugeshareofitsmineralstoChina,India,KoreaandtheUS, developmentsinthosemarketsshouldbeofmajorinterestfortheAustralianmining economy.

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SECTIONFOUR:SUMMARY
MineralsrepresentasignificantsourceofnationalwealthforAustralia.However,peak mineralsintroducesimportanteconomicimplicationsforAustraliaslongtermmineralwealth especiallybecauseoureconomyisbecomingincreasinglyboundtomineralsasasourceof nationalwealth.WhilethereisnoevidencetosuggestAustraliaseconomicprosperityhas sufferedasaresultofthisclosebondtomineralresources,thereisalsonocertaintythat continueddependencewillnotbringconsequencesinthefuture.Consideredmacroeconomic policytorectifysectoralimbalanceandpatronagetowardsthemineralindustryshouldbea keygoaltoensurelongtermnationalbenefitfromthemineralsindustry.Suchapolicyfocus mayalsoinfluencethewaymineralresourcesarevaluedinanationalsense,andconsequently influencetheirdemandandsupplywheretheactualcostsofmineralproduction(economic, environmentalandsocial)arefactoredintotheresourcesproductioncostsandmarketprice.

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5. TECHNOLOGY IN THE MINING INDUSTRY

SECTIONFIVE:OUTLINE
Thissectionexplores: aconceptualoverviewoftheroleoftechnologyinbeingabletoaccessresourcesand createvaluableproductsfrommineralsandhowthisaffectspeakminerals(5.1) anoverviewofexistingtechnologicaldevelopmentsalongthesupplychain, highlightingbreakthroughsandinertia,bothrelevantforfutureuptakeofmore sustainabletechnology(5.2).

5.1.

ACCESSING RESOURES, CREATING PRODUCTS

Technologyhasalwaysbeen,andremains,afundamentalpartoftheminingindustryandits abilitytotransformmineralresourcesintomineralwealthandusefulendproducts.The technologyofmineralormetalextractionevolvedrelativelyslowlyuntiltheonsetofthe IndustrialRevolution,whichrapidlydrovegrowingdemandforkeycommoditiessuchascoal, ironandcoppermeetingthisdemandrequiredevergreatertechnologicaladvances.Thisled tothedevelopmentofcrucialtechnologiesthatstillformthebasisoftheindustrytoday:such asflotation,theblastfurnace,railways,geophysics,drilling,trucksandtransport,andawide varietyofothers. Inthe21stcentury,technologyformsthebasisofaverycapitalandmachineintensivemining industry,withalabourforceconsiderablylowerthanmanufacturing(Figure19),butwhich contributesmuchmoresignificantlytoAustraliasexportrevenues(Table2).Thetechnological advancesintheindustryalsohavesocialandenvironmentalimplications,bothpositiveand negative,andhowweapplyfutureefforttowardsfurtheradvancementinthesesphereswill playasignificantroleinthefutureoftheindustryssustainabledevelopment. Theroleoftechnologyincreatingmineralwealthwillbeanalysedanddiscussedwithrespect tothetypicallifecyclestagesofminingandminerals,showninFigure21.
Exploration Mining Milling/Concentration Smelting/Refining Manufacture Use

Diffuse Use/Waste

Recyclable Waste

Figure21:Thetypicallifecycleofminingandmineralproducts(Stewartetal.,2004,adapted)

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Arangeofexistingandpotentialfuturetechnologieswithineachmajorstageofmineral wealthproductionprocesswerediscussedbyGiurcoandcolleagues(2009).Improved technologicalperformancehasallowedtheindustryto: extendtheresourcebasethroughimprovedexplorationcapabilities(especiallyin geophysicsanddrilling); extendtheresourcebasethroughnewprocessesthatreducecostsorimproveyields whenprocessingcomplexores(e.g.developmentofflotationandcarboninpulp; hydrometallurgicalcopperprocessingforoxides); limitthecostsassociatedwithregulatorycomplianceforarangeofenvironmental impactsonair,water,orland;(e.g.lowersulphurdioxideoutputsofflashsmelting supersedingreverberatorycoppersmelting) reducecostsassociatedwithlabour,suchaslostlabourduetoinjury(i.e.technology toimprovesafety)orincreasingproductivitythroughgrowingmechanisation(e.g. Longwallmining,automatedandremotelycontrolledvehicles); reducemajorinputcosts,suchasenergyorchemicals(e.g.conversionfromoilto naturalgas,substitutionofpyrolusiteforCarosacidattheformerNabarlekuranium project); recoverresourcesfromwastes(e.g.preciousmetalsfromelectronicwastes).

Asevidencedbythepasttwocenturiesofmineralproduction,thedevelopmentand widespreaduseofnewtechnologieshasenabledastronggrowthinsupplytomeetrising marketdemands.Thistechnologicalsuccesshas,todate,beenthemainargumentagainst treatingmineralsasexhaustiblebecauseratesofmineraldiscoveryandtechnological developmentkeptpacewithproductionanddemand.However,thishistoricpatternreliedon workingeasier,moreaccessiblemineraldeposits.Asdepositscontinuetodeclineinoregrade andquality(withrisingimpurities),minesbecomedeeper,andwasteburdensand environmentalcostsgrow,itisuncertainwhetherfuturetechnologicalsuccesscancontinueto keeppacewithmineraldemand.Thisisthefoundationforpeakmineralsincontrasttopeak oil,whichislargelygovernedbygeologicfactorsandphysicalresourceexhaustion(seesection 3onpage19). Technologyhashistoricallyfocussedonwinningeconomicgainsfromthefirstfourphasesof thetypicalmininglifecycle(i.e.exploration,mining,milling/concentration,smelting/refining; seeFigure21).Theseadvanceshavebeencharacteristicofaminingindustrywhose productionwasprimarilylimitedbytheabilitytogettheresourceoutofthegroundandgetit tomarketascheaplyaspossible.However,withtheonsetofpeakminerals,andthe consequencesthesechangescouldbring,theindustrymustalsofocustechnological advancementeffortstowardsthoseprocessesthatcircumventthesetraditionallifecycle phases(Figure21inreddashedlines),andpromotealternativetechnologieswhileatthesame timeminimisingthesocialandenvironmentalconsequencesofanyongoingminingactivities thatdocontinue(Figure22).Mostimportantly,addressingthesenewcosts(newbecause thesecostsareonlynowbeingincorporatedintothefullcostsofaminingoperation)will contributesignificantlytotheindustrysabilitytoremaineconomicallyviable. Figure22depictstheincrementalinfluenceoftechnologyontheabilitytoincrease production.Forexample,technologyallowedeconomicalprocessingoflowergradeores,thus expandingtheoreresourcesavailableanddelayingpeakproduction.Bycontrast,moreradical technologicaldevelopmentswouldgiverisetoanewpeak(suchaswasthecasewithcarbon

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inpulpandgolddescribedinFigure16andinFigure22,whichshowsthepotential developmentofoceanresourcesandrecycling).

TechnologyandPeakMinerals

Annualproduction(t)

Incremental technological development

Future technological development &uptake

highergrades lowercosts

lowergrades highercosts

time
Figure22:Incrementalandnextgenerationrolesoftechnologyinrelationtothepeak mineralsparadigm. Newtechnologiesalsocreateopportunitiestoexplorenewparadigmsofmineralwealth.In additiontopermittingnewmechanismsforbringingmetalstomarket,newtechnologieswill changeendusesanddemandformetals.Forexample,shiftstoelectriccarswillincrease demandforlithium,currentlyusedinbatteries,andasresearchanddevelopmentincreasingly showsreuseandrecyclingtobeeconomicallyadvantageous,theopportunitiestheypresent willcontinuetogrowinimportance. Eachprincipalstageoftheminingcycleisnowbrieflyreviewedtogaugethehistorical importanceandcurrentstatusoftheirrespectivetechnologies.

5.2.

EVOLUTION IN TECHNOLOGY IN THE MINERALS INDUSTRY

5.2.1. Exploration
Theroleoftechnologyinmineralexplorationhasgrownenormously.Inthe19thcentury, amateurprospectorsorevenpastoralstationworkersmadealmostallmajormineral discoveriesinAustralia.Forexample,shepherdsdiscoveredtherichBurracopperdeposit, northofAdelaidein1845;amateurprospectorsdiscoveredgoldinEasternAustraliain1851; and,apastoralstationboundaryriderdiscoveredBrokenHillsleadzincsilverdepositsin 1883. Bythemid20thcentury,however,scienceandtechnologyhadbeguntodominatemineral exploration.Theemergenceofgeophysicswasalsoamajorbreakthrough,sinceitallowed widerangingsurveysofnaturalgravity,magneticandradiometricintensity,therebyproviding indicatorsofgeology,mineralisedrocksandpotentialmineraldeposits.Inaddition,numerous fieldsurveymethodsalsoevolvedforparticularminerals,suchasexamininggoldinsuperficial materialstoidentifyanomalouszonesandpotentialdeposits(thisapproachwascrucialin underpinningthe1980sgoldboom),trackingnaturalmineralconcentrationsinfluvialsystems

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toidentifypotentialmineralisedterrainsandtargetsourcerocks(thegiantArgylediamond depositwasdiscoveredthisway). OneofAustraliasmostimportantmineraldepositdiscoveriesofthepast30yearshasbeen thesupergiantOlympicDammineraldepositinnorthernSouthAustralia.TheOlympicDam depositcontainseconomicconcentrationsofcopper,uranium,goldandsilver(allcurrently produced),aswellasuneconomicbutsignificantconcentrationsofrareearthminerals(not extracted).Thedepositliesatsome350mdepthandhasnophysicalsurfaceexpression.The discoveryin1975wasmadebytheoreticalworktargetingcoincidentgravityandmagnetic anomaliesasmineralisedsystemswiththemostspectacularresults,sincetheOlympicDam depositisnowrankedasoneofthesupergiantorebodiesoftheminingworld.Thetheory alsoledtoarevolutioninexploration,andwaslaterappliedtohelpdiscovertheErnestHenry (1991)andProminentHillCuAudeposits(2000). TheAlligatorRiversregionoftheNorthernTerritory,nowmostlypartoftheKakaduNational Parkworldheritagearea,hostsarangeofmajoruraniumdeposits.From1969to1973,the Ranger,Nabarlek,JabilukaandKoongarradepositswerefirstindicatedbyaerialradiometric surveysandlaterexploredthroughdrilling.Thisgeophysicalexplorationtechniquewasinitially developedafterWorldWar2tohelpdiscoveruraniumforthenuclearweaponsraceofthe ColdWar,butevolvedrapidlyandisnowawidespreadtoolaspartofgeneralmineral explorationworktodifferentiaterockandsoiltypesorgeologicstructures. Anothermajorareaofexplorationtechnologyisdrilling.Ledlargelybytheneedsoftheglobal oilindustry,drillingtechnologyhasevolvedsignificantlyoverrecentdecadestoallowfaster, moreefficientandlowercostexploration.Thisevolutionindrillingcapabilityhasbeenpivotal totheemergenceofhotdryrockgeothermalprospects,whichrelyondeepdrilling technologytotapintohotgranitesatthreetofourkilometresdepthtoextractenergyand produceelectricity5.Giventheneedtodrilldeeperforfuturemineraldiscoveries,theroleof drillingtechnologywillcontinuetobeanimportantpillaroftheminingindustryand subsequentlyofmineralwealth. Therearearangeofothertechnologiesandmethodologiesusedinmineralexploration,such asremotesensing,bioprospecting,complexgeologicalmodellingtools(e.g.fluidflows),field analysisinstruments(e.g.metalconcentrations,mineralogy),andsoon.Increasingly,manyof thesetoolsandtechnologiesarebeingcombinedinlarge,complexdatabasesandvisualisation systemstofacilitatemoretargetedexploration,loweringthecostsofexplorationand,ideally, increasingsuccessrates. Thecrosslinkingofinformationovertimeasexplorationworkprogresses,especiallywith respecttocriticalenvironmentalaspectssuchassulfidiccontentororemineralogy,willalso bemoreimportant.Thewidespreaduseofexistingtechnology,aswellasthepotentialfor newtechnology,willcontinuetobecriticalinmineralexploration.

5.2.2. Mining
Theprincipalmethodsofminingremainthesameunderground,opencutorthrough extractionoffluids(e.g.oilgas,solutionmining).Overthepastseveraldecades,however,all threetypeshaveundergonechangeastechnologyhasevolved.

Althoughnocommercialscalehotdryrockgeothermalprojectisoperatingasofearly2010, GeodynamicsLtdaredevelopingtheworldsfirstsuchprojectinnortheasternSouthAustraliaand plantoreachcommercialscalewithinthenextfewyears. 52

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Undergroundmining Forundergroundmining,awidevarietyofmethodsarenowused,dependingonoreandrock types,aswellasthegeometryofthedepositanditsstrengthcharacteristics.Inunderground coalmining,thevastmajorityofcoalisnowextractedthroughlongwallmining,whichextracts moreofthecoalresourcebutleadstosignificantsurfacesubsidence.Conversely,inhardrock mining,largescaleblockcavingispossiblewhenconditionsaresuitable(e.g.strongrock,large orebody).Overall,avarietyofdifferentmethodsareemployedtoextractoreinhardrock undergroundmines.Increasingmechanisationisalsoakeyfactorincontinuedunderground mining. Atsomemajorminingprojectsorfields,undergroundminingisnowregularlyreachingdepths ofmorethan1km,suchastheSudburydistrictofOntario,Canada,nowminingataround2.5 kmdepths,orthegoldminesoftheWitwatersrandfieldinSouthAfricanowat4.3kmdepth. GivenSouthAfricaslongtermdeclineingoldproductionoverthepastdecade(Mudd,2007a), itwouldappearthatpresenttechnologyisnolongerabletocompensatefortheincreasing depthoftheirgoldminesagainshowingtheimportanceofunderstandingthekeydrivers andfactorswhichmightgiverisetopeakminerals. Opencutmining Thereareperhapsthreemajorfactorswhichhavefacilitatedthelongtermgrowthinopencut mining:firstly,increasingtrucksizes;secondly,saferandcheaperexplosives;andlastly,cheap dieselfuel.Thesizeofdumptrucksusedtotransportoreandwasterockhasgrownfroma25 tpayloadtonowbeingcapableofsome400t.Overthissametimeperiodtheirenergy efficiencyhasimproveddramatically(Koellneretal.,2004)dueinparttoturbodieselengine technology.Thevastscaleofopencutmines,suchasthoseinthePilbara,Kalgoorlieorthe DarlingRanges,wouldsimplynotbefeasiblewithoutsuchtrucks. Anotherimportant,butperhapslesserknownbreakthroughforopencutmining,hasbeenthe developmentofammonianitratefueloil(ANFO)explosivestechnology.Theintroductionof ANFOinthe1960sallowedastepchangeinthescaleofopencutminesduetoits considerablesafetyadvantagesandmuchlowercosts(OMalley,1988;Oliver,1979). Theissueofpeakoilisoffundamentalimportanceforopencutmining,sincedieselcanoften constituteamajorportionoftheenergycostsforaminingproject.Forexample,ingold mining,dieselenergyforminingcanoftenreachhalformoreoftotalenergyconsumption (basedondatafromMudd,2007a,b,2010).Thecontinualriseinthepriceofcrudeoil,which createshigherdieselprices,presentsamajorstrategicchallengetoopencutmining.Whether thisleadstoincreasedundergroundmining(whichisgenerallymoreelectricitydependent),a switchtobiodieselsources,ortheelectrificationofminingfleets(Koellneretal.,2004)isvery hardtopredict.Opencutminingismoredieselreliantthanundergroundmining,whichuses moreelectricitypertonneofore,butisstillareasonablysignificantconsumerofdiesel. Solutionmining Thethirdtypeofmininginvolvesfluidmovementsonly,andencompassesmainlytheoiland gassectorbutalsominorsectorsorminessuchaspotash,uraniumorevensaltproduction. Anothertermusedforthisbroadcategoryissolutionmining.Foroilandgas,thisinvolves drillingaseriesofboresintotheprospectivelayerofrockorsedimentandpumpingoutthe desiredproduct.Areinjectionboremayalsobeused,tomaintainfluidpressureswithinthe reservoirandoptimiseextractionratesandefficiency(waterismostcommonlyused,but carbondioxideisusedincertainfieldstoenhanceproduction).Analogoustodeep undergroundmining,partofthedrivingforcebehindpeakoilistheincreasingdepthofoiland gasfields,nowreachingseveralkilometres,andincludingdeepoceans(e.g.therecentTiber

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discoveryintheGulfofMexicoisin1,260mofwaterdepthwithafurther9,430m undergroundtotheoilfield6). Whenuraniumisbeingminedwithsolutionminingtechniques,adensenetworkof groundwaterboresaredrilled,andtheacidoralkalichemicalsareinjectedintotheuranium orezonethroughonebore,andtheresultinguraniumrichsolutionisextractedfroman adjacentbore.Overalargeareathisleadstohundredsofinjectionandextractionbores.On thesurface,theuraniumisextractedandpurifiedthroughconventionalchemicalprocessing techniques,withthebarrensolutionthenreinjectedaftertheadditionofmorechemicals. Thistypeofminingisalsoreferredtoasinsituleaching(ISL),sincetheuraniumischemically leachedfromtheorebody.AlthoughISLremovesthetailingsandwasterockfromamining project,therearemajorconcernsabouttheextentofgroundwaterimpactsfromoperations, especiallythelegacyimpactsaftermineclosure(seeMudd,2001).However,Tayloretal. (2004,piii)reportthatasthisgroundwaterhasnoapparentbeneficialuseotherthanbythe miningindustry,thismethodofdisposalispreferabletosurfacedisposal.Althoughnotyet proven,itiswidelybelievedandacceptedthatnaturalattenuationwillresultinthe contaminatedwaterchemistryreturningtopreminingconditionswithinatimeframeofover severalyearstodecades.ItalsoconcludesthatISLminingofuraniumhasconsiderablyless environmentalimpactthanotherconventionalminingtechniques.Theonlyoperating uraniumISLmineinAustraliaisatBeverley,innortheasternSouthAustralia,withtwonearby projectsatBeverleyFourMileandHoneymoonexpectedtostartproductionsoon. ItispossibletoapplyISLmethodstootherminerals,orincombinationwithconventional mining.SmalltrialsofISLforcopperwereconductedintheMtIsaClonclurryprovinceinthe late1960stomid1970s,suchasWeeMacGregor,butverylittleisknownabouttheseprojects (Bell,1984).AtEastville,westofBendigoincentralVictoria,AustraliasfirstISLgoldminewas proposedbutfailedtoproceed(HoreLacy,1982).Alternately,theoreinanunderground stopecanbeblastedandfractured,andleftinplace,withsolutionsthencirculatedthroughit toextractthemineralofinterest(e.g.copper,gold,uranium).Althoughundergroundstope leachinghasbeenusedinAustralia,mostnotablyattheGunpowderMtGordoncoppermine inwesternQueensland(seeLandmark,1992;MiddlinandMeka,1993)andtrialledatthe formerMutooroocoppermineinSouthAustralia(seeBamptonandothers,1983),theextent ofproductionhasbeenverysmall(Gunpowderprobablyproduced<75ktCubystopebased ISL;seeMudd,2009a).Onepromisingresearchfocusistheuseofinplaceleachingtorecover strandedgolddeposits(Robertsetal.,2009). ThereiscertainlymeritandactiveinterestindevelopingandimprovingISLminingmethods, especiallytherestorationofimpactedgroundwater,butsinceISLminestendtobesmalllow gradedeposits,whetherthetechnologycanexpandtomeetexpectedfuturedemandis debateable.

5.2.3. Processing
Acriticalstepinmostminingprojectsisthemillingorconcentrationstage.Manybasemetal oreshavelowgradesatpercentlevels(e.g.copper,nickel,lead,zinc),meaningtheratioofore smeltedtoproductretrievedishigh.Smeltingraworeisthereforeveryenergyintensive.To reduceenergyintensityandimprovemetalsrecoverywhensmeltingpolymetallicores,suchas leadzinc,theseparationofpuremetalsismorecomplicatedstill.Toovercomethese problems,avarietyofmillingtechnologieshavebeendeveloped,themostimportantofwhich isflotation.Otherseparationmethodsincludegravityanddensemediaseparation,and
6

Source:http://www.mirror.co.uk/news/topstories/2009/09/03/thatswelldeep11587521643992/, Accessed18December2009.

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magneticorradiometricsorting,thoughthelattertwoarenotwidelyused(exceptinspecific sectors,likemagneticsortinginironore). ThemethodoffrothflotationwasfirstdevelopedatBrokenHill,inordertoseparatethePb fromZnandfacilitateimprovedleadsmelting(sincezincwasconsideredacontaminant) (Mudd,2007c,2009a).Frothflotationinvolvesmixingorewithspecificchemicals(e.g.oilsor bespokeflotationpolymers)inwaterandaeratingthemixture.Thesulfidemineralsstickto theoilorpolymer,whichareforcedtothesurfacebyaeration,therebyseparatingthemetal richsulfidesfromthegangueorremainingrock.Themethodwasfirstappliedtotheextensive tailingsatBrokenHillandthentonewore(afterfurtherprocessimprovements).Theuseof flotationtoproducemetalrichconcentratescanreducetheamountbeingfedtoasmelterby upto50fold,leadingtosignificantimprovementintheeconomicsofsmeltingaswellas enablinglargerquantitiesoflowgradesulfideorestobemilled(especiallycopper).Theuseof frothflotationwentontorevolutionisethemillingofsulfideoresaroundtheworld(Bearet al.,2001;NewnhamandWorner,1983;OMalley,1988). Alimitationoftheflotationtechniquewastheassociatedneedtogrindtheoretoafine powdertoimproveextractionratesduringflotation.Assuch,therehasbeenacontinual evolutioninoregrindingtechnologyoverthepastcentury.Amajortrendisprogressively smalleraverageparticlesizestofacilitatehigherextractionratesandliberatemetalsulfides frommorecomplexores(e.g.McArthurRiverleadzincsilverprojectintheNorthern Territory). AveryrecentexampleoftherisksofimpuritiesaffectingprocessabilityistheArmstrongnickel mineintheKambaldafieldofWesternAustralia.TheArmstrongnickeldepositwasnever developedbyWMCduetothehigharseniccontentandlowirontomagnesiumoxideratioof theore.JuniorminerTitanResourcesbeganopencutmininginmid2004,onlytofindthatthe oreexceededagreedtolerancesforsaletotheKambaldamilland(then)WMCpromptly rejectedallArmstrongore.ThecollapseoftheprojectalmostsentTitanResourcesbankrupt andtheminestillremainsinmothballsin2010. Forthegoldsector,theongoingdevelopmentofextractiontechnologieshasbeencrucialtoits longtermsuccess.Theoriginaldevelopmentofcyanidemethodstoextractgoldinthe1880s wasasubstantialimprovementonpreviousmercurybased(amalgam)methods,sinceitwas fasterandachievedhigherextractionrates.Inthe1970s,theUSBureauofMinesdeveloped carboninpulp(CIP)cyanideprocesstechnologyforgold,whichwassignificantlymore efficientthantraditionalcyanidetechnologiesandallowedverylowgradeorestobe processedusinganylevelofwaterquality(criticalinaridcentralWesternAustralia).Atthe sametime,thegoldpricewasderegulatedbygovernmentanditrosefrom~US$30/ouncein theearly1970storeachastablerangeof~US$300500/ounce.Thesetwofactorscombined haveallowedamassiveglobalgoldboom(seeMudd,2007a),ledbytheUSAandAustralia. Evenso,bothcountrieshaveshownaproductiondeclineoverthepastdecade. Itcanbeobservedthatmillingorconcentrationtechnologiesarecriticalforallcommodities. Thefutureofthisareaofdevelopmentremainsofparamountimportanc,sincethechallenge ofdecliningoregrades,andmorecomplexores,mustbemetbycontinuedimprovementsin millingandconcentrationtechnologies.Significantresearchtodevelopprocessing technologiesiscurrentlybeingundertakenwithintheCSIROMineralsDownUnderFlagship. Thisresearchisfocussingondevelopingtechnologiesto,forexample,removephosphorusand otherimpuritiesfromironoretoenablelowergradeorestobeeconomicallyprocessed (Treadgold,2009).Havingbeguntoexhaustourhigherqualityores,suchtechnological developmentisimportantforAustralia,shoulditwishtomaintainitscompetitiveexport

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positionrelativetocountriesthathavehighergradedeposits.Otherareasofresearchinclude bioflotationandbioflocculation.

5.2.4. Smelting and Refining


Smeltingofcoppersulfideoresinthepastdecadeshasseenthephasingoutofblastfurnace technologyandthedominanceofflashsmeltingtechnology(BiswasandDavenport,1994). Technologydevelopmentsinsmeltingandrefininghaveseenanincreaseduseof AusMELT/ISASMELTTMtechnologyforleadandcoppersmelting.Lowergradecopperoresare alsobeingprocessedbyheapleachsolventextractionelectrowinning(seesection5.2.5 below). SmeltingresearchwithinCSIROisfocussedwithinMineralsDownUnderandtheLightMetals Flagship(Aluminium,Titanium,Magnesium).Partofthisworkislookingatreducing greenhousegases(GHGs)byusingrenewablecarbonasafuelandreductant(e.g.intheform ofcharasaprocessedbiomass),butalsotheabilitytocaptureandutiliseheatfromprocessing activities(Jahanshahi,2008).WhileaimingtoreduceGHGemissions,thesetechnologiesalso havethepotentialtosignificantlyreducewaterconsumptionduringprocessing. Overtime,thegradesofmetalrichconcentrateshaveincreased,especiallyforcopper,suchas throughimprovedgrindingtechnologyormoreefficientflotationreagents.Thuswhilstthe overallvolumeofconcentratetosmeltersisgenerallydecliningovertime,thevolumeofore fedtoflotationmillsisincreasingsubstantiallyduetodecliningoregrades,thegrade/recovery tradeoffandincreasingproductionscales. Opportunitiesforreducedimpactinrefiningincludetheefficientuseandrecoveryofheat. Whereanelectrorefiningstageoccurs,cleanerelectricitysources(thancoal)canbeusedto reduceimpact. Afinalcommenttonoteisthepotentialforfuturesmeltingandrefiningtoreceiveagreater proportionofrecycledandscrapfeedstocks(discussedlaterinsection5.2.7).

5.2.5. Heap Leaching and Refining


Amajorvariantofsolutionminingisheapleaching.Theminedoreisplacedinlargepilesor heaps,withchemicalsolutionssprinkledthroughirrigationonthesurfaceandtheresulting metalrichsolutionscapturedatthebaseandprocessed.Heapleachingworkswellforlow gradegoldandcopperminesinparticular,wherestrongproductiongrowthhasbeenshown overthepastthreedecades.Theextractionofmineralsbyheapleachingsolventextraction electrowinning(SXEW)maybemoreorlessenergyintensivethanconventionalmillingand smelting(seeNorgateandJahanshahi,2010),butrecoveriesarelowerandgiventhetypically loworegrades,heapleachprojectscanoftenbeeconomicallymarginal.Atlargescales, however,someprojectshavebeenveryprofitable(e.g.MorencicoppermineinArizona). Thereissignificantscopeforimprovementinheapleaching,mainlythroughhigherrecoveries andfasterleachtimes.Whilenotthedominantsourceofoverallmineralproduction,the importanceofheapleachingisgrowing(particularlyforcopperandnickel). TheCSIROisalsodevelopingtechnologythatuseslowerimpactlixiviantstoenablegold leaching.

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Box2. NewTechnologyandAdoptionInertia:HighPressureAcidLeachforNickelLateriteOres Majornewprocessingbreakthroughsthatfundamentallychangeacommoditysproductionare relativelyrare(e.g.flotation,CIP).Inthemid1990s,amajornewclassofprocessingtechnology waspromotedforextractingnickelfromrecalcitrantlateriteores.Thetechnology,calledhigh pressureacidleaching(orHPAL),usedtitaniumlinedautoclavesathightemperature(245to 270C)andpressure(upto5.4MPa)toliberatethediffusenickelfromtheore.Themetalrich solutionsarethenprocessedthroughconventionalhydrometallurgicaltechniques. Onaglobalscale,theonlymajornickelprojectthathadusedHPALtechnologywastheMoaBay mineinCuba,originallybuiltinWorldWar2tosupplymilitaryneedsandlatermodifiedandre openedinthe1960s.MoaBayhadatroubledstartandtookseveralyearstoreachfull productioncapacity.However,itisstillinoperationtoday. TheemergenceofimprovedHPALtechnologyinthemid1990swaspromotedasarobust, reliableandlowercostalternativetotraditionalnickelsulfidepyrometallurgicaltechnology.A majorattractionofthetechnologywasitsapplicationforproductionfromnickellateriteore resources,whichareconsiderablymoreabundantthansulfidedeposits.Largerscalesof productionwerebelievedtopushdownunitcostsofproduction.Aminornickellateriteboom occurredasaconsequence,andthreenewprojectswerequicklydevelopedatCawse,Bulong andMurrinMurrin.TheCawseandBulongprojectslasted12yearsandbecamecomplete financialandtechnicalfailures.TheMurrinMurrinprojectsurvived,butproductionmustbe monitoredconstantlytoensurefinancialviabilitybecauseNiproductionisconsiderablymore difficultandexpensivethanexpected. Curiously,thedominantnickelminerinAustralia,WesternMiningCorporation(thenWMC,now ownedbyBHPBilliton),chosetostayoutofthenickellateriteboomwhichinhindsightwasa wisemovegiventhelargeinvestmentsthatfailedatCawseandBulong.Thishighlightstheissue oftechnologicalinertiathedifficultyindevelopingandthensuccessfullyemployingnew technology.AlthoughHPALcertainlyfailedatCawseandBulong,itisnowoperatingeffectively atMurrinMurrin(afterseverefinancialandcorporateturbulenceinitsearlyyears),where productionis~30ktNi/year. AmorerecentHPALexampleistheRavensthorpenickellateritemineinWesternAustralia, recentlydevelopedbyBHPBillitonLtd.Despitesome$2.5billionofinvestment,theprojectwas terminatedduringthecommissioningstage.Whilethemainreasoncitedwasthecollapseinthe priceofnickel(againshowingthehighcostoflateritenickel,althoughseveralsulfidemineshave alsoclosedinWesternAustraliarecently),therehasbeenspeculationaboutwhether Ravensthorpewasachievingitsdesignparametersandoperatingeffectively. Evenwithsuchachequeredhistorythereareanumberofnewnickellateriteprojectsaround theworldthatarelookingtoutiliseHPALtechnology.TheseincludetheGoroandKoniambo minesinNewCaledonia,andAmbatovymineinMadagascar. Itisimportanttonotethatproductionfromnickellateriteismorecostlyintermsofenergyand chemicals.Italsogenerateslargerpollutionoutputs,likegreenhousegasemissions(depending ontheelectricitysource)(Jessup&Mudd,2008)whencomparedtosulfideproduction.Laterite derivednickelisuptofivetimesmoreenergyintensivethanproductionfromsulfides. Assuch,theimplementationanduptakeofnewHPALtechnologyhasbeenshowntobea complexendeavour,andalthoughitworks,itcomesatahigherfinancialandenvironmental costthantraditionalsulfidederivednickel.Theseareimportantfactorstoconsiderwithrespect topeakminerals,particularlyiftheexampledescribedherebecomesindicativeofproduction associateddifficultieswithothercommoditiesinthefuture.

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5.2.6. Manufacturing and Use


Theapplicationofnewtechnologiesinmanufacturinganduseisimportantintermsofboth demandformetalsandtheirendoflifeimpact.Thewayinwhichmetalsareusedin manufacturingaffectstheirultimateimpactinseveralways.Ifthemetalisusedinadissipative application(e.g.copperinpesticidesorphosphorusinfertilisers)thenthedilutequantitiesnot onlyhavedirecttoxiceffectsontheenvironment,butrecoveryofthemetalismuchless economic,orcompletelyimpossible(Giurco,2009;Cordelletal.,2009).Also,combininga numberofmetalsintooneproductinsmallquantities(e.g.inelectronicprintedcircuitboards) makestheprocessofmetalrecoverydifficultandfurtherresearchisrequiredforprocessing technologydevelopment(Reuter,2005).However,theuseofametalcombinationformaking specificalloyswithuniquepropertiesmayenablelongeruse(e.g.nickelinstainlesssteel). Onepromisingapproachinmanufacturingistofurtheruselightweighting,whichcanreduce themetalusedinmanufacturingthesameproduct,howeverthereboundeffectmustalsobe considered(seeBerkhoutetal.2000).

5.2.7. Recyclable Waste


Recyclingmetalsoftenusesmuchlessenergythanproductionfromvirginores(Henstock, 1996).However,thetotalcostofrecyclingdependsonfactorsincludingtheconcentrationof theproductstreamandthedistanceitmusttraveltobereprocessed.Also,therelative investmentrequiredtoestablishrecyclingfacilitieswillbesignificant,andconsideringfacilities forprimaryproductionarealreadyinplace.Otherpressures,likepeakmineralsorinfluences fromothercountriesalreadyrecycling,willdrivethedevelopmentanduptakeofrecycling technologyinAustraliainthefuture.Thiswilldependontheeconomiccostsofandthe differencesbetweenprimaryproductionfromconventionalminingversusthoseofexisting andnewsecondaryproductionfromrecycling(forexample,someoldsecondarycopper smeltersintheUSAhadpoorenvironmentalcontrolsandwereclosed(BiswasandDavenport, 1994).Overtime,thispaperarguesthatpeakmineralswillmeanagreaterneedtoincorporate recyclingintomineralandmaterialflowstocontinueprovidinggoodsandservices. Someresearchisexploringwaysofimprovingthemanufactureanduseofmineralsandmetals tomakeendoflifeproductsmorereadilyrecyclable.GerstandGraedel(2008,p7038)review estimationsoftheinusestocksofmetals,suggestingthattherehasbeenasubstantialshift inmetalstocksfromthelithospheretotheanthroposphere,whichnowrepresentahuge, andlargelyuntappedresource.Forthisreason,KapurandGraedel(2006)speakofcities particularlyasminesofthefuture.Theyintroducetheconceptofemployedstocks,the mineralstocksalreadyinactive(inuse)orinactive(hibernating,i.e.goldinoldmobilephones inpeoplesdrawersathome)use.Theyidentifythatemployedstocksaregrowingrelativeto geochemicalstocks(distributedorasoreinthelithosphere),tothepointthattheywill becomethemostsignificantstocksofsomecommoditiesinparticularcountries(Elshkakiet al.,2004)withinarelativelyshorttimeframe.Assuch,findingwaystorealisevaluefromend ofusestocks,particularlywithinthecontextofpeakminerals(geochemicallyspeaking),will becomeincreasinglyimportant. Establishingefficientrecyclingtechnologyposeschallenges,buttherewardscanbesignificant. Recyclingofelectronicwasteisanimportantsubjectnotonlyfromthepointofwaste treatmentbutalsofromtherecoveryofvaluablemetalslikegold(CuiandZhang,2008). Recyclingmobilephonespresentsaninterestingexample.Usingcurrentrecyclingtechnology (Hagelken,2005),between100and400gramsofgoldcanbeobtainedfromonetonneof electricalcircuitboards(dependingontheirquality).Goldiscurrentlyminedatoregradesas lowonetofivegramspertonneofore(Mudd,2007c),sorecyclingendoflifeelectrical productspresentsanimmenselypromisingpossibility.Reuter(2005),offersusefulinsightsinto

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thetechnologicalchallengesofprocessingendoflifevehiclesandelectronicproducts,noting thatthemetallurgyofprocessingnaturallyoccurringoresisverydifferenttotheprocesses neededforprocessingrecycledelectronicequipment. ResearchexploringthepossibilitiesofrecyclingislimitedinAustralia,wheretechnological developmentfocusesonimprovingprimaryproduction.However,inEurope(Theo,1998), JapanandTaiwanendoflifeproductreturnlegislationismuchstricterandthequantityof recyclablegoodsisconsiderablylargerbecauseofthelargerpopulationbase(whichisthe sourceforrecycledgoodsandmetals).Thesecountriesconsequentlyinvestmoreintothe developmentofefficientrecyclingtechnologies.DrivenbyitsDepartmentofInnovation(not waste),Japanisactivelyseekingtoclosethelooptoavoidenvironmentalproblems associatedwithendoflifeproducts(DepartmentofTradeandIndustry(UK),2005)by recyclingandreusingthesematerialsinnewproducts.Manufacturersintheselocationsare alsostockpilingarangeofmineralinputstosupplementtheirfutureproductioncycles. TheSwedishminingcompany,Boliden,promotestheirrecyclingbusinessandinnovativeuse ofsmeltingtechnologyintheirrecentsustainabilityreportingbyshowingthecontainedmetals inmobilephonescrapversuscoppergoldore,showninFigure23.Theclearmessageisthe potentialbusinessvalueinmetalscraprecycling.ThelackofAustralianresearchinthisareais partlyattributabletothelimitedpopulationbaseandlimitedrecyclingindustrywiththe notableexceptionofSimsMetalManagementwhoaretheworldslargestmetalsand electronicwasterecycler(SIMS,2009).Thisrepresentsanareaoffuturetechnology developmentthatshouldbecapitalisedon.

Figure23:Containedmetalsinmobilephonescrapversuscoppergoldore(Boliden,2008).

SECTIONFIVE:SUMMARY
TechnologicaladvancementhasfundamentallyinfluencedtheAustralianmineralindustrys abilitytofind,accessandproducemineralsandmetals.Technologyhasthereforeplayeda centralroleinAustraliasabilitytocreatewealthfromminerals.Intheabsenceofpeak minerals,technologyhasfocussedonwinningeconomicgainsfromtheearlystagesofthe typicalmininglifecycle.Asproductionhasmovedfromcheapandeasytomoredifficult andexpensive,technologicaldevelopmentisincreasinglyneededtosolveeconomicand productionproblems.However,technologyisalsobeingusedmoretosolvethe environmentalproblemsthataddtothecostsofproduction.Continuingdifficulties associatedwithproductionfromloweroregradesinlessaccessiblelocations(underthe shadowofpeakminerals)willmeantechnologyisincreasinglydirectedtowardsaddressing andmitigatingthegrowingenvironmentalandsocialcosts,andwillalsobegintofocusmore onthelaterstagesofthemineralsproductionchain.

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6. ENVIRONMENTAL CONSTRAINTS & IMPACTS

SECTIONSIX:OUTLINE
Thissectionexplores: environmentalfactorswhichwillaffectmineralproduction(6.1) environmentalimpactsarisingfromminingandmineralsprocessing(6.2);with illustrativeexampleswithrespecttopeakmineralsatthelocal,nationalandglobal scales theintersectionbetweentechnologyandenvironmentalissuesinresponsetopeak minerals(6.3). Thepeakmineralsparadigmusedthroughoutthisdocumentsplitsaccessandutilisationof resourcesintocheapandeasy,locatedatoneendofatime/productioncontinuum,and expensiveanddifficultwhichislocatedattheotherend.Economic,socialandenvironmental costschangeoccurringatdifferentpointsalongthiscontinuum,andtheimpactofthese changesonmineralproductionwillbeofparamountimportance. Thissectiongivesanoverviewofthechallengesandopportunitiesassociatedwiththe sustainablemanagementofmineralsresourcesinAustralia,withregardtothechanging environmentalcostsassociatedwiththepeakmineralsparadigm.Itsfocusisintwodistinct areas,firstly,howenvironmentalfactorsmayaffectfutureproductionandconsumptionof mineralsandmetals;andsecond,howenvironmentalimpactsofmineralsprocessingaffects thelongtermcompetitivenessofAustraliasmineralindustry.

6.1.

ENVIRONMENTAL FACTORS AFFECTING PRODUCTION

Thissectionillustratesthatfutureminingandmineralsprocessingactivitieswillbeaffectedby environmentalfactorsbothcausedby,andexternaltothemineralsindustry.

6.1.1. Climate change


TheeffectsofclimatechangeareanticipatedtohinderAustralianminingoperationsasaresult ofchangedwateravailability,andincreasedfrequencyandintensityofstorms,cyclonesand floods(McInnes,2008).Climatechangeinducedsevereweathereventswillmainlyinterrupt transportserviceslinkedtotheexportofminerals(Stevens,2008). Climatechangemayalsocausemineralandmetalsupplyanddemandfluctuations.Increased demandformineralsmaybelinkedtoclimatechangeadaptation,andthenecessary infrastructuredevelopmentthatwillaidmitigationefforts.Reduceddemandmayresultas marketsbecomeincreasinglycarbonsensitivechoosingproductsandprocessingrouteswith alowcarbonfootprint.Forexample,Icelandisdevelopingitshydroandgeothermalpowerto allowexpansionofaluminiumrefining(KraterandRose,2009).

6.1.2. Input costs and constraints oil, water and energy


Environmentalfactorswillalsoaffectinputstomining,inparticularwaterandenergy,which themselvesareaffectedbyclimatechangeandpolicyresponses.Despiteadeclineinoilprices in2008,linkedwiththeglobalfinancialcrisis,theInternationalEnergyOutlookforeseesa returntohigheroilpricesof$130perbarrel(2007dollars)by2030(EnergyInformation Administration,2009).Transportfuelsinusetodaywillbecomemoreexpensiveasaresultof

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peakoil,affectingcompetitivenessaheadofatransitiontoothertransportationenergy sources. Waterconstraints,fromclimatechangeorcompetitionwithotherusers(urbanandrural),will reduceoverallwateravailabilityand/orqualityinsomeareas.Anticipatingandadaptingto thesepressureswillrequiretheapplicationofpotentialresponseoptionsincludingusingless waterthroughbetterefficiency,installingdesalinisationorwaterrecyclingfacilities(McInnes, 2008). Inthecontextofthepeakmineralsframework,amovefromeasytomoredifficultproduction willreflectincreasingwaterandenergyrequirementspostpeak.Thosemineralresources, whicharehardertoaccessbecauseoftheirremoteness,depthunderground,lowergradeor higherimpurities,ormorecomplexmineralogy,maybecomelesseconomicallyviable(and movefromviablereservetoamoregeneralresourcestock).Thisalsoexacerbatestheimpacts ofinputconstraintspostpeakproduction.

6.1.3. Land use competition


Thelossoffoodandwatersecurityisoneofthemostimmediatethreatsposedbyglobal warming(RajendraPachauri,IPCC,2007).Themanifestationofthisincludescontinuing conflictsoverthequantityandqualityofwaterresourcesbetweencoalminingandagricultural landuseintheLiverpoolPlainsandDarlingDownsofNSW.ASenateinquiryintotheImpacts ofminingintheMurrayDarlingBasinmakesaseriesofrecommendationsincluding,the preventionofnewminesorextractiveindustriesintheMurrayDarlingBasiniftheirimpacts onwaterresourcesareinconsistentwiththeBasinplan,andalsohighlightstheneedto coordinateresearchtobetterunderstandthecumulativeimpactsofmining(Australian Senate,2009),whichisbecominganincreasinglyprominentconcernthroughoutthemining sector(Franksetal.,2009).

6.1.4. Legacy impacts of mined land and technology


Legacyimpactsfrompreviousminingoperationstogetherwitharangeofdriversexplored furtherbyGiurcoandcolleagues(2009)affecttheabilityofmineralextractionand processingoperationstoobtainwhatisoftenreferredtoasasociallicencetooperate.In seekingtoaddressthischallenge,sustainabilitycriteriahaverecentlybeendeveloped, togetherwithanindicatorframeworktoassesstheimpactoflegacyminedland(Worralletal., 2009).Theextenttowhichminedlandrehabilitationwillaffecttheviabilityofoperations varies,butsocial,environmentalandeconomiccostsposesignificantandtangibleobstacles. Whereoperationsimpingeonestablishedcommunitiesindevelopedareas,itismorelikely thatdirectinterventionfrommembersofaffectedcommunitieswillbemorecommon. Additionally,theimpactsofhistoricaltechnologyusecanaffectthedeploymentofcurrent technology(e.g.insituleaching).WithinAustralia,theuseofinsituleachingforuranium extraction,thedevelopmentofoilshale,anduseofbyproductslikeAlkaloam,havebeenthe focusofpublicopposition.Inonecase,publicoppositionhaltedminingdevelopmentusing thesetechnologiesaltogether(Barclayetal.,2009). Perhapsthegreatestpartofthechallengepresentedbylegacyimpactsrelatestominewastes thetailingsandwasterockremainingaftercompletionofaproject.Givendecliningore grades,deeperminesandhigherquantitiesofwasterock(especiallysulfidicmaterial),mine wastemanagementisagrowingstrategicissueandchallengefortheminingindustry(Mudd, 20092,2010).Theexposureofsulfidicmaterialstothesurfaceenvironmentleadstomajor risksofacidandmetalliferousdrainage(orAMD),requiringveryproactiveassessmentand management(TaylorandPape,2007).Althoughtechnologyhasimprovedtoaddressthese

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issues,suchassoilcovers,premineassessmentofAMDrisks,improvedtailingsdamdesigns, aswellasmoreholisticriskmanagement,thesheerandescalatingscaleofannualmine wastesinAustraliawillcontinuetomakelegacyimpactsanissueofgrowingstrategic importancewithrespecttopeakminerals(Mudd,2009a,2010). Asproductionbecomesmoredifficultandmoreexpensive,postpeak,legacyimpactsofmined landarelikelytobroadenandintensify.Miningcompanieswillfacegreaterchallengesin managingandmitigatingtheseimpacts.Whileselfregulation,improvedreportingstructures, anddemonstratedcorporateresponsibilityhavemovedthemineralsindustryalongway towardaddressingtheseissues,continueddevelopmentandapplicationofsustainability initiativeswillberequired.Companiesthatanticipatethesechallengesanddemonstrate investmentintechnologies(mechanicalandconceptual)thatcanmitigatesocialor environmentalissueswillberewardedbypublicandconsumersupportintothefuture.

6.2.

ENVIRONMENTAL IMPACTS OF MINERAL AND METAL PRODUCTION AND CONSUMPTION

Havingreviewedtheimpactofenvironmentalfactorsandtheirimpactonthefutureofmining easierandharderores,thissectionturnsitsfocustodescribingthedifferentimpacts associatedwithmineralsandmetalsproductionalongtheproductionconsumptionchainand acrosslocal,nationalandglobalscales.Theaimistoidentifywhichareaswillbemoreaffected byincreasingenvironmentalcostsofmininglowergradeores.

6.2.1. Impacts along production-consumption chain


Understandingtheenvironmentalimpactsassociatedwithproductionandconsumptionof metalsisimperative,ashighlightedbytheMiningMineralsandSustainableDevelopment project: Connectingtheproductionanduseofmineralrelatedmaterialsiscriticaltoensuring thatthemineralssectorcontributesoptimallytosustainabledevelopment(MMSD, 2002,p286) Therelationshipbetweentheeconomicvalueandenvironmentalimpactofstagesinthe miningproductionchainisillustratedinFigure24.Thisshowsthattheinitialstagesare characterisedbylowvalue,buthighenvironmentalcost:resourceextractionandthen processing/refininghavethehighestimpacts.Bycontrast,laterstageslikeformingand assemblyareattributedlessenvironmentalimpact,butgeneratethemajorityoftheeconomic value.Whilethisexampleisdrawnfromaproductionchainassociatedwithamobilephone, theconvexnatureoftheimpact/valuecurvealsoappliesmoregenerallytootherproducts.As theenvironmentalimpactsofresourceextractionincrease,duetodecliningoregradesand increasedwaste,theenvironmentalimpactcurvesassociatedwiththefirsttwostagesofthe productionchainbecomeevensteeper.Thisincreasepromptsthequestionofwhatbusiness modelscouldharnessmoreeconomicvaluefromextractionandprocessing,whilstreflecting thetruecostsoftheseproductionstages.

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Environmental Impact
Assembly Forming Processing & Refining

Sale Value
Resource Extraction

Res. Proc. Extr. & Ref.

Forming

Assembly

Economic Value

Figure24:Relationshipbetweenaddedeconomicvalueandenvironmentalimpactat resourceprocessingstages(afterCliftandWright,2000) LifeCycleAssessment(LCA)hasalsobeenusedtounderstandandexamineenvironmental impactsalongtheproductionchain.Inthemetalscontext,cradletogatestudies(seefor example,GiurcoandPetrie,2007;Norgateetal.,2007;NorgateandRankin,2000;Mudd, 2007a,b;Ecobalance,2000)havebeenmoreprominentthancradletogravestudiesbecause ofthecomplexityofendusestowhichmetalsareput.Yellishettyandcoauthors(2009)offer areviewofissuesrelatingtotheapplicationofLCAtomineralsandmetals.

6.2.2. Local impacts


PotentialenvironmentalimpactsatthelocalscaleareillustratedinFigure25.Thisfigure identifiesthatsomeenvironmentalimpactsofminingpersistthroughoutallphasesofmining production(e.g.surfacedegradationandcontamination,watercoursecontamination),butthat othersarisevariablyduringorafterproduction(e.g.airpollutionandculturalsitedisturbance). Manyoftheseissuesresultincumulativeconsequencesforminingcommunitiesandthe ecosystemsinwhichminingoperationsaresituated(Franksetal.,2009).

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POSSIBLE TYPES OF ENVIRONMENTAL DAMAGE Surface degradation and contamination Flora and Fauna (e.g. Die back) Damage to historical or sacred sites Contamination of streams and rivers Contamination of dams Underground Water Change in water table Soil Erosion Local air pollution Regional air pollution (e.g. acid rain)

PHASES OF MINING PROCESS


Geological Exploration Establish Pilot Mine Site Establish Mine Operate Mine Close Mine PostClosure

Figure25: Possibleenvironmentalimpacts(indicatedbydots)atphasesofminingprocess (adaptedfromFrostandMensik,1991) Withdecliningoregradescomesthenecessitytointensifyoperationsinordertoproduceone unitofproduct.Deepeningenvironmentalconsequenceswillmirrorthisproduction intensification.Theseconsequenceswillbeparticularlysignificantintheearlystagesofmine siteestablishment,whengreatereffortisdirectedtoexploringlargerareasforbettermineral deposits,orwhenanoperationmustexpandtosupportthegreaterorethroughput requirements. Decliningoregradesmayalsobeimportanttowardtheendofaminesproductivelife (Laurence,2006).Fallingoregradesandtheassociatedintensificationofenvironmental impactsmaycauseaminetocloseprematurely(becauseoftheresourceseconomicscarcity). Asidefromthesocialandeconomicdevelopmentimplicationsofclosure(exploredinmore detailinsection8.2.1),corporationsthatdonotanticipatethesechangesmayalsobeunable toconducttherequiredminesiteremediationactivitiesrequiredofthem. Atthelocalscale,allphasesofproductionhavelocallysignificantenvironmentalimpacts, whichvaryduringthelifeoftheoperation(Figure26).Prepeakmineralsimpactsareprimarily associatedwithmineestablishment,whicharereplacedbyremediationandclosureimpacts postpeak.Importantly,thelocalisednatureofextractiveoperationmeanstheseimpactsare spatiallyconcentratedandoftenbornebyarelativelysmallnumberofstakeholders.

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Local environmentalconsiderations

Annuallocalproduction(t)

Operational impacts Construction Impacts Compliance &Permits


highergrades lowercosts

Postmining structure Remediation& Monitoring


lowergrades highercosts

time
Figure26:Illustrativeenvironmentalimpactsofpeakmineralsatthelocalscale

6.2.3. National impacts


Nationalenvironmentalissuesareconsideredinthecontextoftheproductivelifeofthe resource(Figure27).Whilepermittingissuesareacommonfeatureofearlyproductionstages, asproductioncontinues,governanceandnationalreportingprocessesbecomeafocus.As productionofresourcescontinuetodecline(e.g.asaresultofchangesineconomicviabilityor declinesinreservesize)thenstructuraladjustmentoftheeconomybecomesimperative.

National environmentalconsiderations

Annualnationalproduction(t)

Environmentalmonitoring emissionsreporting Governance structures Exploration& Permits


highergrades lowercosts

Strategic assessment Structural adjustment


lowergrades highercosts

time

Figure27:Illustrativeenvironmentalimpactsofpeakmineralsatanationalscale. Socialandregulatorypressure,andthegrowinginfluenceofcorporateenvironmental responsibilityhascontributedtosignificantimprovementsinstandardenvironmental reportingconductedbytheAustralianmineralsindustry(Brereton,2003;BreretonandForbes, 2004;MCA,2000).Theseadvancementsinselfgovernancedemonstratetheindustrys transparency,needtodisplayhighenvironmentalsustainabilitycredentials,anddesireto meetnationalandglobalsustainabledevelopmentgoals(ICMM,2009;IIEDandWBCSD,2002;

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MCA,2005).Theoperationalchangesthatarerequiredtoensurethesemeasuresare incorporatedintodaytodayproductionandprocesswillprovideastablefoundationfor furtherimprovementasproductionbecomemoredifficultandmoreexpensive,andasthe environmentalconsequencesofcontinuedproduction(underthesepressures)intensifiesthe existingenvironmentalproblemsthesectorfaces. Wherearesourceisapproachingexhaustion(e.g.localoil),astrategicassessmentmusteither identifyhowthecountrycanaccesstheresourceorhowtheresource(oranalternative)can providethesameserviceinadifferentway.Atthenationalscale,decliningviabilityof terrestrialoresmaybeacuefordiversificationthatallowstraditionalproductiontobe compensatedbyincreasedproductionfromdeepseareserves,fromlandfillorfromrecycled scrap(depictedbythedottedlineinFigure27).However,realisingthesealternativesmay bringmoresignificantenvironmentalconsequences,whichmaybelargelyunknownand difficulttoanticipateandplanfor(seeforexampleLittleboyandBoughen,2007). Thetimescaleofthisdiagrammustbeviewedrelatively,andisnottoscale.Theearlystages ofproductionmayrepresentconsiderablylongertimespansthanlaterstages.Impactsover timeatthenationalandglobalscaleswillbedramaticallylongerthanthoseexaminedatthe localscale.

6.2.4. Global impacts


EnvironmentalissuesthatcanbeconsideredgloballyimportantareillustratedinFigure28. Issueslikecrossborderpollution,theconsequencesofexploitation,tradeanduseofminerals ormetals(particularlyhazardousmineralslikeuranium)arelikelytobeimportantas productionincreaseswhileoregradesarefavourableandproductioncostsarelow. Increasingenvironmentalpressurewillcoincidewithfallingoregradesandincreased productioncosts,whichcharacterisetheresourcesgrowingeconomicscarcity(andultimate depletion).Issuesofgeopoliticaltensionandtheneedtoestablishadequateglobalplansfor transitionwillaccompanythechangesinproductionpostpeak.Phosphorousprovidesa relevantexampleofamineralresourcewhoseproduction,andfuturedepletionhassignificant globalenvironmentalandsocialconsequences(Cordelletal.,2009).

Global environmentalconsiderations

Annualglobalproduction(t)

Environmentalimpacts oftradeanduse Crossborder pollution Nogo zones


highergrades lowercosts

Geopolitical tension Transition planning


lowergrades highercosts

time

Figure28:Illustrativeenvironmentalimpactsofpeakmineralsattheglobalscale

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Decliningglobalproductionofmanyimportantmineralsalsoincreasespressuretoallow explorationoftraditionallynogominingareas.Environmentallysensitiveandglobally importantlocationslikeWorldHeritageSites(theGreatBarrierReefandAntarctica)and RAMSARwetlands(KakaduNationalPark)aregenerallysensitivetoresourceextraction,which cancontradicttheenvironmentalvaluesofthesewildernessareas.Theseenvironmentalvalue theseimportantenvironmentsprovide(aesthetically,culturally,andforenvironmental services)areconsideredtheheritageofhumanity,andconsequently,theirexploitationmust attractglobaldiscussionandagreement. Asacarbonintensivesector,themineralsindustryalsohasadutytomitigatethe consequencesofglobalclimatechange.Thecarbonintensityoftheindustryislikelytomirror theproductionpeak(assumingtheindustryremainsdependentonfossilfuelsthroughthe peak).However,astheenvironmentalcostofminingincreasesrelativetothepriceofminerals postpeak,theglobalmineralsindustrywillberequiredtofindenergyalternatives(suchas linkingtogeothermalsitesforexample),orcontendwiththecostpricesqueezebroughtabout bytheneedtoreducethecarbonfootprint(throughanEmissionTradingSchemeorCarbon Tax). Globalpatterns,particularlyglobaltrade,ultimatelydriveenvironmentalissuesatnationaland localscales(Dinda,2004).GlobaltradeinAustralianmineralsleadstotheexpansionofmining operations,andtheenvironmentalconsequencestheseexpansionsbring(whichhavebeen discussedinthissection).Suchtradealsoincreasesthesizeofthenationaleconomy,andGDP. However,environmentalpressure(anddegradation)oftenrisesmorequicklythanincome (Dasguptaetal.,2002;Dinda,2004),slowingdownonlywhenhigherincomespermitsocialor technologicalinterventiontosolvetheenvironmentalissuesapatterndescribedbythe EnvironmentalKuznetscurve(Figure29).

Figure29:TheEnvironmentalKurznetsCurveshowingtherelationshipbetweenincreasing incomeandenvironmentaldegradation(fromDinda,2004)

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6.3.

LINKING ENVIRONMENTAL ISSUES AND TECHNOLOGICAL SOLUTIONS

Technologywillincreasinglyplayakeyroleinaddressingtheenvironmentalimpactsfrom mining(Giurcoetal.,2009;Dinda,2004).Todate,theenvironmentalcostsassociatedwith mininghavebeenaddressedinanindirectmanner,externalisedassideeffectsofproduction, ratherthanincludedasrealcostsinanoperation(e.g.whenaddressingclimatechangeby imposinganemissionstradingscheme).Increasingwealthfromresources(inconjunctionwith theenvironmentalissuesthiswealthcarrieswithit)shouldmeanpartofthatwealthisusedto mitigatetheresultingenvironmentalproblemsencounteredgeneratingthiswealthasis hypothesisedbytheEnvironmentalKuznetsCurve.Technologicaldevelopment(both mechanicalandconceptual)isanimportantinstrumentthatshouldcontributetolevellingoff theenvironmentaldegradationthatcomeswitheconomicdevelopmentofmineralresources. Somehistoricalexamplesoftechnologicalapproachestominimiseenvironmentalissuesfrom miningandsmeltinginclude: Sulfurdioxideimplementingscrubbersystemstocapturesulfurdioxideemissionsfrom smeltersandconvertingthistosulfuricacid(e.g.MtIsa,Kalgoorlie,OlympicDam); BrokenHill,PortPirie,MtIsaimplementingtallstacksfromsmelterstoensureadequate dispersionofatmosphericpollutants(especiallyparticulateboundlead); Coalseammethanebuildingmethanegasextractionsystemspriortocoalminingtoboth reducesafetyrisksaswellaseffectivegreenhouseemissions(e.g.HunterValleyand Illawarracoalfields); Sulfidicminewasteandacidandmetalliferousdrainage(AMD)useofengineeredsoil coverstorehabilitateandmitigatepotentiallongtermpollutionproblemsfromsulfidic minewastes(e.g.RumJungle,Kidstonandnumerousothers). Whiletherearemanymoreexamplesthatcouldbecited,thisshowsthatsignificantissuescan beminimised,oreveneffectivelyeliminated,bytheappropriateuseoftechnology.However, itmustalsobepointedoutthatmanynewtechnologiesadoptedintheminingindustryhave notalwaysledtolowerenvironmentalcosts.Forexample,thedevelopmentofflotation allowedtheprocessingoflowgradesulfideores,includingcopper,leadzinc,nickelandeven somegoldoresbutatthecostofsignificantlygreatertailingsand,whencombinedwithopen cutmining,alsowasterock.Theemergenceandrapiddeploymentofcarboninpulp(CIP) technologyforthegoldindustryallowedthemassive1980sgoldboomtooccur(combined withthesustainedriseinthegoldprice)butalsocreatedamassiveminewasteburden, includingcyanidecontaminatedtailings.Giventhatthecarbonintensityofgoldminingis inverselyrelatedtooregrade,andthatoregradesareinseeminglyterminaldecline(Mudd, 2007a,b),thisalsomeansthatsustainingfuturegoldproductionwillresultinevengreater greenhousegasemissionspertonneofproductinthefuture,unlessamoveismadeto renewableenergysources. Thus,althoughmanynewtechnologiesacrosstheminingindustryhaveenabledeconomic productiontobesustainedorevenboom,thesehaveinvariablyaddressedfinancialcostsonly andrarelyhavetheyreducedexternalenvironmentalcosts.Futuretechnologiesinthemining industrywillclearlyneedtoreducenotonlyfinancialoperatingcosts,butalsotangiblyreduce environmentalcostsastheyareincreasinglyinternalisedintheeconomicsystem.

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SECTIONSIX:SUMMARY
Theenvironmentalcostsassociatedwithminingincrease,approachingandthenbeyondthe yearofpeakmineralproduction.Asaccesstohighgrademineraloredepositsbecomes moredifficult,theenvironmentalconsequencesofminingalsoincrease:greaterwaste, largertailingspondsandgreaterlandscapedisturbance.Futureminingandminerals processingactivitieswillincreasinglybeaffectedbyenvironmentalfactorsbothcausedby, andexternaltothemineralsindustry,including:climatechange,inputconstraintslikewater andenergy,competitionforarableland,andlegacyimpactsfrompreviousmining operations.Theenvironmentalconsequencesofminingcanbecharacterisedbasedontheir impactatvariousscales,andalongtheminingproductionconsumptionchain.Howthese impactschangeasaresultofpeakmineralswillinfluencetheeconomicviabilityofmany miningandmineralsprocessingoperations.Identifyingwheregreatervaluecanbedrawn fromallstagesoftheproductionconsumptionchainwillensurethechanging(increasing) environmentalcostsatthesestagescanbecoveredbythefinancialgainssuchadvances yield.Findingtechnologicalsolutionsforenvironmentallydrivencoststotheminerals industrywillcontributetothelongtermviabilityofthesector,andAustraliasnational benefit.

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7. A CHANGING SOCIAL LANDSCAPE

SECTIONSEVEN:OUTLINE
Thissectionexplores: howsocialissuesandtheenvironmentalconsequencesofminingaretiedtogether, andhowsocietyisincreasinglydrivingsubstantivechangesinthemineralsindustry (7.1) howsocialimpactsvaryacrossscales(local,regional/nationalandglobal),andthe influencepeakmineralshasinthiscontext(7.2). Thesociallandscapesurroundingtheminingandmineralsindustryissteadilychanging.With increasingenvironmentalawarenessduringthe1970sand80s,fortifiedbyseveralsignificant environmentalincidents(Erikson,1976;WarhurstandMitchell,2000;Hamann,2003),public concernsaboutminingoperationshavebroadenedandincreased(Hamann,2003;Jenkinsand Yakovleva,2006;Kumah,2006;Sarin,2006;WarhurstandMitchell,2000;Earthworksand OxfamAmerica,2004).Changingsocialperceptions,andsolidifiedsocialwillhasalso encouragedgreaterregulatoryscrutinyconcerningimprovedcorporatebehaviourand responsibility(Mteghaetal.,2006;Solomonetal.,2008;WarhurstandMitchell,2000;Worrall etal.,2009),muchofwhichhasbeenthroughtheminingindustrysselfregulation(Brereton, 2003;WarhurstandMitchell,2000;Hamann,2003)insteadofformalgovernance arrangements.Thispatternofincreased,sociallyaware,regulationwillcontinuetoshapethe economiccapacityofthemineralsindustryintothefuture(ICMM,2008). Increasingsocialpressurehasconsequentlybeentranslatedintogreatercorporatesocialand environmentaldisclosureinthelasttwodecades(JenkinsandYakovleva,2006;Warhurstand Mitchell,2000).Thispressurehascometoinfluencetheoperationofanindustrywheresocial andenvironmentalcostshavetraditionallybeenexternalised(Bridge,2000;Jenkinsand Yakovleva,2006).AsJenkinsandYankova(JenkinsandYakovleva,2006,p272)observe,a sustainablemineralindustrynowrequiresacommitmenttocontinuousenvironmentaland socioeconomicimprovement,frommineralexploration,throughoperation,toclosure. Importantly,manyoftheenvironmentaldriversnowinfluencingsocietysperceptionsofthe sustainabilityofthemineralsindustryareconnectedtotheconsequencesofpeakproduction. Asoregradesandmineralreservesdecline,theenvironmentalimpactsofminingincrease (Mudd,2007c;Mudd,2009a;MuddandWard,2008).Despitesignificanttechnological developmentsintheindustryaimedatmaintainingeconomicallyviableproductionfromfalling oregrades,thisprogresshasbeenlargelyineffectiveinpreventingenvironmental consequencesandthesocialflowoneffects.Thissectionpresentsareviewofthesocial implicationsofpeakmineralsinthecontextoflocal,nationalandglobalsocieties,andexplores howtheseimpactsoverlapwiththemininglifecycle(exploration,productionandmine closure).

7.1.

RESPONDING TO SOCIAL IMPACTS

Environmentalandsocialcriticism,andchangingpublicperceptionsregardingthe sustainabilityofminingpracticesischangingthewayminingcompaniesoperateandinteract withthecommunity(Bridge,2000;Esteves,2008;Hamann,2003;Hamann,2004;Jenkinsand Yakovleva,2006;Solomonetal.,2008;Jenkins,2004;HilsonandMurck,2000).Inanindustry increasinglyscrutinisedonitssustainablebusinesscredentials,conceptslikecorporatesocial responsibilityandsociallicensetooperatearedrawingseriousconsiderationfrom companiesandcommunitiesalike.

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7.1.1. Corporate Social Responsibility


Corporatesocialresponsibility(CSR)describestheobligationofcorporationstomaximisethe positiveandminimisethenegativesocialorenvironmentalimpactsassociatedwiththeir miningoperations(Hamann,2004;JenkinsandYakovleva,2006;Solomonetal.,2008).Yet, beingprofitdriven,managingthisobligationrequiresakeeneyetomaintainingprofit (Esteves,2008;Garvinetal.,2009;HilsonandMurck,2000;Jenkins,2004).Itencapsulatesthe needtodemonstratecorporatesustainabilitycredentials(Solomonetal.,2008),notonlyto shareholders,butalsotootherstakeholders,includingemployees,customers,affected communitiesandthegeneralpublic,onissuessuchashumanrights,employeewelfareand climatechange(Hamann,2004,p238).

7.1.2. Social License to Operate


Establishingsustainabledevelopmentgoalsthatincorporatetheconceptofcorporatesocial responsibilityrequiressubstantiveoperationalchanges.Butinimplementingthesechanges, corporationsareinvestinginanoperationalreputationboundtotheconceptofasocial licensetooperate(Solomonetal.,2008).LiketheoutcomesofCSR,sociallicensetooperate (SLO)actslikeacomplementarypieceoflegislationtothenormalregulatorylicensestomine. UnlikeCSR,SLOisinformalandunwritten,butcanstillactasapowerfulformofregulation. Mostoften,ithasencouragedcompaniestomaintaintheiroperationsinawaythatdoesnot contradictthevaluesandattitudesofthecommunitymemberslivinginproximitytothe minesoperations.

7.1.3. Corporate self-regulation


CSRandSLOareultimatelyselfregulatoryresponsestothenegativepublicperceptionsand attitudesaboutminingasanextractiveindustry.Theseinformalregulatoryarrangementshave primarilyarisenoutoftheindustrysrealisationthatcommunitydemands(andshouldbe given)somerecoursetoinfluencethebehaviourofcompaniesoperatingintheirmidst.The reputationalinvestmentinCSRorSLOmadebyacompany(throughgreaterinternalisationof environmentalandsocialcosts)mayoffsetthepossibleshorttermreductionsinprofit,caused bylowpublicconfidenceintheiroperations,byensuringfuturelongtermpublicconsumer support(ICMM,2009;MCA,2005). Internalisingsocialandenvironmentalcostsintominingoperationshasimpactsatthe regional/nationallevelandontheglobalscale(EarthworksandOxfamAmerica,2004;ICMM, 2008;MMSD,2002).Asmineoperatorsbecomeincreasinglyconcernedabouthowtoaddress socialandenvironmentalsustainabilityissues,theyalsofacealesseconomicallystablefuture. However,theimpactofthesesocialpressuresismostdirectlyexperiencedatthelocallevel, wherelandholders,consumers,activistsandthegeneralpublicseekthechangetheyfeelis due.Consequently,examiningthesocialimpactsofpeakmineralproductionwithina frameworkofachangingsociallandscapeisusefulwhenconductedinthecontextofespecially local,butalsoregional/nationalandglobalcontexts.

7.2.

PEAK MINERALS AND SOCIAL ISSUES ACROSS SCALES

Whenexaminingtheinfluenceofpeakmineralsonsociety,itisclearthatimpactsvaryat differentscales:local,regional/nationalandglobal.Ataninternationalscale,ClarkandClark (1999)identifiedtenureandsocialissuesasthetwomostimportantfactorsthatwouldimpact onglobalminingoperationsinthefuture.Morelocally,inasurveyofminingindustry representatives(membersoftheAustralianInstituteofMiningandMetallurgy),Moffatetal. (2009)demonstratedthatalthoughsocialissueswerenotconsideredofprimaryimportance

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asfuturedriversintheAustralianindustry(witheconomicandenvironmentaldriversrated morehighly),theywerenonethelessconsideredsignificant.Thattheseconcernsvarymerely demonstratesthevariabilityinherentinthesocialdynamicsofthemineralsindustry. Clearly,themineralsindustryisdependentonavastnetworkofmines,transporters, processingsites,portsandmarketsaroundtheworld.Eachofthesenetworkfocalpoints operatesonalocalorregionalscale,buttheiroperationhasglobalimplications.Societyalso playsakeyroleinthismineralnetwork,drivingconsumptionforexample,80%ofminedgold becomesjewellery(Kumah,2006),sotheindividualcanhaveasubstantialinfluenceoverits production(Sarin,2006).However,althoughthesocialdimensionsofminingareincreasingly influencingthemineralsindustry,itisstilltheleastwellunderstoodaspectofsustainable development(Solomonetal.,2008). Box3. BaiaMare:fromGlobaltoLocalimpacts OnJanuary30,2000around100,000cubicmetresofwatercontaining50100tonnesof cyanide,aswellascooperandotherheavymetalsspilledintotheDanubecatchmentaftera tailingsdamofavatleachinggoldminingoperationbrokeinnorthwesternRomania. Nohumanlifewaslostasadirectresultofthedisaster,butitdestroyedthelivelihoodsofmany peopleengagedinthefishingandagriculturesectorsinRomania,Hungary,Yugoslaviaand Bulgaria.Regionalwatersupplieswerecontaminatedandsignificantbiodiversitylosswas recordedthroughouttheaffectedareaoftheDanubecatchmentalistedWorldHeritageand RAMSARsite. Whilethedisasterhadsubstantiallocalandregional/nationalenvironmentalandsocialimpacts, italsohadinternationalpoliticalramificationsandresultedintheresignationofthemining companysCEO,andthedelistingofEsmeraldaExploration(anAustraliancompanyholdinga 50%shareintheminer)fromtheAustralianStockExchange.(Csagoly,2000;Cunningham, 2005).

7.2.1. Local issues


Thehighspatialconcentrationofminingorprocessingoperationsmeanssocialimpactsona localscalearenothomogeneous.Indeed,manycommunitiesbecomeestablishedaround mines,coalescinginresponsetoemployment,serviceorsupportrequirementsassociated withthemine(Rollwagen,2007;Sharma,2009).Inothercases,establishedcommunitiesare fundamentallychangedasaresultoftheestablishmentofaminingoperationnearby (Whitmore,2006).Eitherway,theminingoperationbecomesakeyelementinthecommunity, whichisinturndirectly,orslowlyboundtotheoperationsfate(BreretonandForbes,2004). Recognisingthesocialimplicationsofminingoperations,internationalandregionalmining industryrepresentativegroupsareincreasinglyadvocatingwaystominimiseoravoidthe socialimpactsfromminingatthelocalscale(ICMM,2008;MCA,2005).Theseorganisations areprimarilypromotinggreaterindustryengagementwithaffectedandinterested stakeholders,becausemoresignificantengagementisviewedasthebestwayofidentifying andaddressingthediversityofsocialimpactsminingprecipitatesatthelocallevel.Whilethe socialimpactsofminingareconsideredthemostdifficulttoaddressinsustainable development(Solomonetal.,2008;Esteves,2008),engagementisperceivedtodemonstrate thattheindustryisactivelyattemptingtomanageandmitigatetheseimpacts(Ivanovaetal., 2005;BreretonandForbes,2004;Kapelus,2002).

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Inrelationtostagesthroughtimerelatedtopeakminerals,theimpactschangeasrepresented conceptuallyinFigure30.

Local socialconsiderations

Annuallocalproduction(t)

Sociallicence tooperate HumanCapital Development Landuseconflict


highergrades lowercosts

Managingnearest neighbourimpacts Postmining Socialimpacts


lowergrades highercosts

time
Figure30:Illustrativesocialimpactsofpeakmineralsatthelocalscale Localimpactsassociatedwiththemineralsindustrycanbelooselygroupedintofour categories:thoseassociatedwithlanduseconflicts;impactsonsocialcapital;nearest neighbourimpacts;andmineclosureandpostminingimpacts.Identifyingandaddressing thesesocialimpactshasaddedimportancewhenconsideringthattheindustryislargelyself regulatedfromasocialperspective(Brereton,2003;WarhurstandMitchell,2000;Hamann, 2003),andfewmandatoryarrangementsexisttomonitororevaluatethenatureofthesocial impactsfrommining(Lockieetal.,2009). Landuseconflicts

Landuseconflicthasbeenaconsistentissuefortheminingsector,butwastraditionally overlookedbecausetheeconomicbenefitsofminingovershadowedthesocialandlandtenure consequences(Hilson,2002;O'Faircheallaigh,2005).Manyofthelandtenurerelatedconflicts arisingfrommininghaveresultedfromthehistoricexclusionofindigenouspeoplesand traditionalownersfromdiscussionsregardingmineexploration,planningandproduction (ClarkandCookClark,1999;Mudd,2008;Garvinetal.,2009).Moremeaningfulengagement betweencorporationsandlocalcommunitiesinthelastdecadehasbeguntoaddressthese tenureandconflictissues.Thisissuewasalsodiscussedinsection4.4.3. SocialandHumanCapital Theprevioussectionassumesthatthedevelopmentofminingwithincommunitiesbrings benefits,andthatwithouteffectiveplanning,theremovalofthosebenefitshasadetrimental impactonthesustainabilityofthosecommunities.Indeed,communitydependenceonmining (Stedmanetal.,2004)alsoraisesparticularissuesinthecontextoftheculturalandsocialwell beingofthosecommunities.Thelevelofdependencecanvarydramaticallybetween communities,inrelationtotheminedcommodities(Stedmanetal.,2004),andasaresultof thewayminingcompaniesoperateindifferentlocalities(Solomonetal.,2008;Stedmanetal., 2004;WarhurstandMitchell,2000).Understandingthedynamicsofsocialandhumancapital inrelationtothedynamicsandexploitationofnaturalcapitalmustbeakeyconsiderationin

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exploringthelocalisedimpactsofpeakmineralproductiononminingcommunities.Manyof theseimpactscannotbeaddressedbythedevelopmentofinfrastructure,schools,health centres,orothercontributionsthatarecommonlyassociatedwithprogressivesocioeconomic development(Bury,2004;Esteves,2008). SocialCapital Socialcapitaldescribestheabilityofmembersinacommunitytosecurebenefitsfromthat membership(Portes,1998).Asatheoryitconceptualisesthewayindividualsinteracttoform communities(Putnam,2000;ForrestandKearns,2001)andcapturestheideathatsocial bondsandnormsarecriticalforsustainability(Pretty,2003,p1912).Followingfromthis,a sustainablelocalminingindustryisreliantontheexistenceofsocialcapitalwithinthe community,andbetweenthecommunityandmineoperator(Bell,2009;Bury,2004).Social capitalisrecognisedtolowerthetransactioncostsbetweenindividuals,facilitating cooperationbygivingindividuals(andcommunitypartnersinminingoperations)the confidencetotrusteachother(Pretty,2003).Thereisafurtherdifferentiationbetween bonding(withinthegroup)andbridgingcapital(linkingtoothergroups).Theformer withoutthelattercaninhibitcommunitydevelopment,particularlyinmodernsociety. HumanCapital Themineoperatorcanplayasignificantroleinthedevelopmentandmaintenanceofsocial capitalbyinvestinginhumancapital,butalsointhedegradationofhumancapital(Bell,2009). Thisisparticularlyimportantwhereanegativerelationshipbetweencommunityresource dependenceandhumancapitalexists(Stedmanetal.,2004).Buildinghumancapitalis importantgiventhesignificantimpactmineoperationscanhaveonneworestablished communities(Azapagic,2004).Companiescaninvestinhumancapitalbyensuringtheir employeeshaveaccesstoeducation,trainingcareerdevelopmentopportunitieswhichalso increasethecompetitivenessofthecompany(Ayresetal.,1996;Azapagic,2004),aswellas supportingeducationandhealthinitiativesinthewidercommunity.Theseopportunities providecommunitymemberswithavaluablelegacyfromthecompany,andcontributeto stronglabourmanagementrelationships(Azapagic,2004),whichinturnbuildsocialcapital withinthecommunityandbetweenthecommunityandthecompany.Thissocialcapitalis basedontrust,reciprocityandconnectedness(Bell,2009;ForrestandKearns,2001;Portes, 1998;Pretty,2003;Putnam,2000). However,thepositiverelationshipbetweenincreasinghumanandsocialcapitalisnotalways clear(Bell,2009;Bury,2004).Actionsbyminingcompaniesthaterodetrust,reciprocityand connectednessdetrimentallyinfluencewithincommunityandcommunitycompanysocial capital.Fruedenburg(Freudenburg,1992)demonstratesthatnegativesocialcapitalisoften associatedwithcommoditypricevolatilityandthecompanyscostpricesqueeze.Thisis importantinthecontextofpeakminerals,whereincreasingdifficultyandexpenseinmine productionwillsurelycontributetodecliningeconomicviabilityinmineralandmetal production. Specifically,thereareavarietyofsocialissuesthatcanbebroughttocommunitieswhere miningcompaniesoperate,whicharelistedinTable7.Manyoftheseissuesinteractto produceconsiderablecumulativeimpactsoncommunitiesandcommunitymembers,butall canbeaddressedormitigatedbyeffectiveandcollaborativemineplanningandoperation (ICMM,2008;MMSD,2002;QueenslandGovernment,2007).Ofparticularinterestwith respecttoAustralia,istheprevalenceofFlyInFlyOut(FIFO)operations.

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Table7:Issuesandimpactsassociatedwithminingonthelocalscale(attheminesite)
Issue Failuretodelivereconomic benefitstocommunity Incomedisparity Landtenure Healthandwelfare Impact Lackofanticipatedcommunitydevelopment Lossoftrustinminingcompany,andcommunitygroupsadvocatingmining Inabilitytoweathermineclosureandpostclosureimpacts Greaterdividebetweenmineworkersandthosefromothersectors Skilledlabourshortagesinothersectors Disruptionofsocialandculturestructureswithinthecommunity Traditionallymaledominated Lessopportunityforwomen,Indigenousandotherminorityemployees Nonminerelatedservicesectorssufferfromanemployeedrain Noncommunitycontractorsfillingjobsoflocalpeople Noinvestmentinhumancapitalwithinthecommunityimplicationsfor employmentpostmineclosure Lossofsenseofcommunityandcommunityacquaintanceship Maledominatedcommunitiesantisocialbehaviourattachedtosingle male,highincomelifestyles Overtaking/destructionofarableland Increasedland/dwellingprice Healthconcernsduringproductionorprocessingoperations,andfollowing closureduetolocalpollution Socialdistressassociatedwithexposuretodust,landscapechanges, vibrations,lossoffloraandfauna,andbuildingdamage Disintegrationoftheconnectionbetweenhumanhealthandecosystem health Preventableaccidentsandinjuriesreduceproductivity Lossoftrustindecisionmakingprocesses Noparticipationindecisionmakingakeyobjectiveinsustainable development Inabilityforcommunitymemberstoexpresscommunityvisions/goals Lossofsocialpsyche Lossofsenseofcommunity Lossofidentityconnectedtolossofemployment,orrelocation/closureof miningactivities Author (Artobolevskiy,2003;FreudenburgandWilson, 2002;Garvinetal.,2009;Lockieetal.,2009; Stedmanetal.,2004) (Artobolevskiy,2003;Azapagic,2004;Bury,2004; FreudenburgandWilson,2002;Stedmanetal., 2004) (Azapagic,2004;Bell,2009;Bury,2004;Lockieet al.,2009;Jonesetal.,2007) (Azapagic,2004;Beachetal.,2003;Ivanovaetal., 2005;Lockieetal.,2009;Storey,2001)

Inequalityinemployment

Flyin/flyoutandcontractual employment

(Bury,2004;Garvinetal.,2009) (AronandPatz,2001;Averyetal.,1998;Conneret al.,2004;Higginbothametal.,2007;Laurence, 2005)

Engagementindecisionmaking

Psychosocialissues

(Azapagic,2004;Bell,2009;ClarkandCookClark, 1999;Esteves,2008;Garvinetal.,2009;Hamann, 2003;ICMM,2009;Ivanovaetal.,2005;MCA,2005; MMSD,2002) (Bell,2009;Lockieetal.,2009;Smithetal.,2008; Sharma,2009;Averyetal.,1998)

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Lastly,protectionofhumanrightsisanextremelyimportantsocialconcernthatmustbe consideredinthesustainabilityofthemineralsindustry(Azapagic,2004).Ofallcommunity groups,indigenouspeoplehaveperhapssufferedmostsignificantlyfromminingoperations becausetheirsocialandculturalstructuresandlifestylesaresodifferentfromthoseperceived todemonstratewealthandwellbeinginnonindigenoussociety(ClarkandCookClark,1999; Hilson,2002;O'Faircheallaigh,2005).Thisisparticularlytrueinthecontextoflandtenureand unequalemployment(Bury,2004;ClarkandCookClark,1999;Smithetal.,2008;Hilson, 2002).However,indigenousparticipationintheenvironmentalmanagementofmining projectsontheirtraditionallandsisincreasinglyconsideredanimperativeingovernance arrangements(CentreforAboriginalEconomicPolicyResearch,2008;ICMM,2008;MCA, 2005;MMSD,2002;Mudd,2008;O'Faircheallaigh,2005;Brereton,2003). NearestNeighbourImpacts Theresourcerichnatureofsomelocalitiesmeanstheyarelikelytoexperiencethecumulative impactsofseveralminingoperations(Franksetal.,2009;Brereton,2003).Whilstimpactsto nearestneighboursofminingoperationsusuallyrefertothosenearthefenceline,impacts arealsofeltbynearbycommunities.Howthecommunitiessubjecttothesecumulative,near neighbourimpactsreacthasimplicationsrelatingtotheabilityoftheminingcompanyto obtaintheirsociallicensetooperate(Stehlik,2008). Nearestneighbourimpactsvarywiththeminingoperation.Ininterviewsandworkshopswith communitymembersinahighdensitymininglocality,BreretonandForbes(Breretonand Forbes,2004)demonstratedthatnoisepollution,dust,watersourcepollutionorconflictover wateruse,visualpollution(particularlyinopencutmininglocations),andconflictoverland usewerethemostimportantnearneighbourimpacts(Franks,2007).Whilethecommunity membersrecognisedtheirdependenceonminingasafoundationinthelocaleconomy,the cumulativeimpactoftheseminingsideeffectsweresourcesofconcern.Theprospectof multiplemineclosureswouldalsocauseconsiderablesocialandculturalupheavalinhigh densityminingareas(Franksetal.,2009). Recognisingtheimportanceofcumulativenearneighbourimpactsonchangesincommunity attitudesandpublicperceptiontowardsminingoperationsisadvantageousformining companies(Franksetal.,2009).Byunderstandingandassessingtheseimpactsinthecontext oftheinteractionsbetweentheenvironmentandsocietyandallofthehumangenerated stresses(Franksetal.,2009,p351),miningcompaniescanensuretheimpactsremainwithin acceptablelevels.Wheretheminingindustrydoesnottakeappropriateactiontomanageor mitigatetheseimpacts,obtainingregulatoryorcommunityapprovalformineexpansionwill bemoredifficult(BreretonandForbes,2004). Mineorfacilityclosure Minescloseforeconomic,geologic,geotechnical,andregulatoryreasons,butalsobecauseof mechanicalorinfrastructurefailure,orevencommunityopposition(Laurence,2006).As productionmovesfrombeingcheapandeasytomoreexpensiveanddifficultbecauseof fallingoregradesandreservesofminerals,economicreasonsforclosurewillbecomemore apparent.Thenegativeconsequencesofmineclosurewillbefeltfirst,andmostsignificantly bythosecommunities(ofplaceandofinterest)thathavedevelopedaroundthem(Laurence, 2006;Rollwagen,2007).Australiaislitteredwithminingtownsthathavebeenabandoned followingmineclosure:Farina(SouthAustralia),Cassilis(Victoria),Newnes(NewSouthWales), andGwalia,Goldsworthy,CossackandWittenoom(WesternAustralia).However,thisoutcome neednotbeinevitable(forexample,NewcastlefollowingtheclosureofBHPssteelplants).

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Economicimplications Theestablishmentofminingactivitiesgenerallybringsmanypositiveopportunitiestoatown infrastructure,investment,jobsandpopulationexpansion(Laurence,2006).However,these localisedbenefitsarelargelywithdrawnwhenaminecloses(JenkinsandYakovleva,2006; PeckandSinding,2009;WarhurstandMitchell,2000;Rollwagen,2007).Laurence(Laurence, 2006)identifiesarangeofsocialissues(fortheindividual,communityandcompany) associatedwithmineclosureincluding:joblosses,lossofcommunitysupportandcompany credibility,discordamongcommunitymembers,mediaheadlines(publicperceptionsshift), lossofshareholderinterest/investment,anddelistingofthecompanyfromthesharemarket. Addressingissuesassociatedwithmineclosurehasnottraditionallybeenahighpriorityfor companiesthereislittlefinancialincentive.Butwithsociallycognisantoperationsthat addresscorporatesocialresponsibilityandfulfilthesociallicensetooperate,theclosure phaseisbecomingmoreimportant(PeckandSinding,2009).Planningformineclosurehas beenincreasinglyincorporatedintoinitialmineplanning(Azapagic,2004),butalthoughthese plansoftenaddresstheenvironmentalconsequencesofclosure,fewerhaveconsideredthe socioeconomicimpacts(PWC,2001;PeckandSinding,2009).Theincentivetoadequately managethemineclosurephasecomesintheformofpositivepublicperception. PlanningforClosure Meaningfulplanningfortheenvironmentalandsocialconsequencesofmineclosurecanlower closureandpostclosurecosts(Azapagic,2004;PeckandSinding,2009).Companiesthat considertheecologicalrehabilitationandongoingsocialimplicationsofclosureinthemines establishmentandplanningarebetterplacedtocopewiththefinancialburdenthese measuresbringattheendoftheiroperations(WrightandVleggaar,2006;Azapagic,2004). Carefullyplannedandwellmanagedclosureprocessesalsodemonstratetosurrounding communitymembersthatminingcompaniesareoperatingasresponsiblecorporatepartners (CesareandMaxwell,2003). Closureofminingorprocessingoperations,atthelocallevel,neednotbeentirelynegative (Otchereetal.,2004;WarhurstandMitchell,2000).Inparticular,wherepossiblesocial, economicorenvironmentalvalueisidentifiedandaddedduringthemineclosurephase,the wellbeingofthecommunitycanbesustainablymanaged(Otchereetal.,2004).However,this requiresacorporatestrategythatisbothanticipativeandproactive(WarhurstandMitchell, 2000).Otchereandcolleagues(2004)notethatwhiledirectinvestmentfrommining companiesinthecommunitieswheretheyoperatemaybelimited,institutingmechanismsfor localeconomicdevelopmentduringmineplanningcanallowthelocalcommunitytobenefit fromnewinvestmentandgrowth. Inordertomeetsustainabledevelopmentgoalsminingcompaniesareincreasinglyintegrating socialandeconomicaspectsintomineclosureplans(ICMM,2009;MCA,2005;MMSD,2002). Thisisconsideredtobeakeystepintransform[ing]mininginvestmentintosustainable development(MMSD,2002,pxxi).Stakeholderinvolvementintheseplanningprocessesis seenanimperative,helpingtoidentifyandcapturetherequirementsofthecommunity (ANZMECandMCA,2000;Laurence,2006;Otchereetal.,2004;PeckandSinding,2009; WarhurstandMitchell,2000;Azapagic,2004).Italsohelpstocounteractthehistorically strainedrelationshipsbetweenstakeholdersandminingcompaniesthathavebeen characteristicofthe(different,butslowlychanging)past(WarhurstandMitchell,2000).

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7.2.2. National issues


ThecontributionofthemineralsindustrytoAustraliaseconomicperformance(measured usingGrossDomesticProduct)issignificant,andournationalmineraldependenceextends beyondthemonetary.Ourpoliticalsystemsarecloselytiedtominingsuccess(Pearse,2009; Birrelletal.,1982),possiblybecausetheminingindustryprovidesourmostsignificantforeign tradeopportunities(ABARE,2009a;AccessEconomics,2008;Willett,2002).Australiasability toexploititsvastmineralendowmenthasensuredstronggrowthinaneoclassicaleconomic modelsense(AusIMM,2006).Butwhilesomeconsidertheexploitationofnaturalcapitalto ensurethefoundationsofathrivingeconomy(Walker,2001),othersconsiderthisdependence dangerous(FreudenburgandWilson,2002;Daly,1996)particularlyfromawellbeing perspective(CostanzaandDaly,1992;Jackson,2005;Sharma,2009). IllustrativesocialissuesforpeakmineralsatthenationalscaleareshowninFigure31.

Annualnationalproduction(t)

National socialconsiderations

Wealth distribution Governance structures


highergrades lowercosts

Avoiding resourcecurse Structural adjustment


lowergrades highercosts

time
Figure31:Illustrativesocialimpactsofpeakmineralsatthenationalscale Governancestructures,permitsandtaxes ThestablegovernancestructuresinplaceinAustraliareducetheuncertaintyassociatedwith developingnewminingoperations,relativetolessstableoverseaslocations.Thepresent situationAustraliaishowever,complicationbydifferentlawsandtaxationarrangementsin eachstate(AusIMM,2006).Taxesinparticulararethesubjectofcurrentreview(Henry Review). Wealthdistributionhowdoregionsbenefitfrommining? Increasingly,societyisquestioningwhetheruncheckedresourceextractionisinthenational interest(ClarkandCookClark,1999;Hamann,2003;JenkinsandYakovleva,2006;Littleboy andBoughen,2007;Sharma,2009;Stedmanetal.,2004).Ifregionsareexperiencingfewer benefits,atatimewhentheminingindustryisevermoredominatedbylargemultinational corporations(Brereton,2003),withlessdirectconnectionswithinoursociety(throughlocal investmentorownership),willthepubliccontinuetosupportminingexpansion?Peakmining productionislikelytointensifytheseissues,particularlyifinadequatemineclosureandpost closureplanningmeansthesecostsaretransferredtothewidersociety(Jenkinsand Yakovleva,2006;Laurence,2006).Moredifficultandexpensiveproduction(becauseof regulation,environmentalorsocialconstraints)willlikelyresultinincreasedeconomic

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protectionforastrugglingexportindustrycompetingontheworldmarket.Thecostsof protectinganindustry,whichmaynolongerholdacomparativeadvantage,arealsolikelyto beborneindirectlybysociety(ProductivityCommission,1991). Moffatandcolleagues(2009)showedthatenvironmentalandeconomicissueswereperceived tobethekeyfuturedriversofthemineralsindustrythroughasurveyofminingindustry representatives.Giventheconnectionbetweenenvironmentalconcernsandincreasingsocial pressureasaresultofincreasednegativeperceptionsoftheindustry(Brereton,2003),itis likelythatpublicsupportfor(perceived)unsustainableextractionactivitiesislikelytofade. Avoidingtheresourcecurse Avoidingthesocietalpitfallsthatmayfollowresourcedependencerequirescarefulplanning andmacroeconomicmanagementonthepartofnationalgovernments(Larsen,2006).The questionofwhetherAustraliamaybesufferingfromdutchdiseaseortheresourcecurseis thesubjectofsomedebate(GoodmanandWorth,2008;Hajkowiczetal.,2009;Stevens, 2003).Thepotentialthreatthattheresourcecurseposestooureconomy,andsociety,makes itworthoffurtherinvestigationandstudy.However,proposedremediesmustbecarefully considered:(Sachs&Warner,1999)askwhichisworse:thenaturalresourcecurse,orthe policyerrorsmadeascountriesattempttoavoidthecurse? PerhapstheclearestexampleofasinglecountryavoidingtheresourcecurseisthatofNorway (Larsen,2006;Stevens,2003;StevensandDietsche,2008;WrightandCzelusta,2007).Larsen (Larsen,2006)arguesthatNorwayeffectivelyavoidedtheresourcecursethroughgovernment regulation(wagecentralisation,fiscaldisciplineandforeigninvestment,efficientindustrial policy,transparentdemocracyandadequatemonitoring)thateffectivelyminimisedrent seekingactivitieswhereresourcerelatedinterestsattempttorealisebenefit(legitimateand otherwise)fromaresourceendowment.Theforethoughtthatsawtheestablishmentofthese mechanismshasensuredNorwaysnationalwealthfromitsoilproductionhasbeenwell managed. UnlikeNorway,Australiangovernmentshaveconsistentlyrefrainedfromestablishing mechanismstoavoidtheresourcecurse.Indeed,governmentshavehistoricallyoperatedina rentseekingcapacitybysupportingthenationalmineralsindustry,oftenattheexpenseof otherlesscompetitiveindustries(ProductivityCommission,1991).Importantly,theremaybe evidencetosuggestthatAustraliashistoricalescapefromtheresourcecursemayonlybe temporary,apatternalsoobservedinNorway(Larsen,2006).Suchpatternssuggestaneedto implementmoresignificantorlongertermstrategiesthatimproveourchancesofavoidingthe economicandsocialconsequencesofresourcedependence. Structuraladjustmentandtransition Oncemineralresourcesareexhausted,thenationaleconomymustfindotherincomesources. Whenlookingtofuturetransitions,Australiashouldconsiderthatconsumersarenolonger willingtosimplychoosetheleastexpensiveoption,wheregreaterexpense(fromapublic perceptionpointofview)isattributedtounethicalorunjustcorporatebehaviour(Earthworks andOxfamAmerica,2004;Sarin,2006).Whileconsumerstraditionallychoseonthebasisof obtaininggoodsandservicesthatprovideutilityatthebestprice(Jackson,2005),theyare increasinglyturningtoproductstheyknowtobeofethicalprovenance(Pearce,2002) regardlessofcost.Australiahastheopportunitytopositionitself,notonlywithexisting technologybutforembracingnewtechnologiestounlockthenextpeakasacountry operatingwithhighstandardstomeetthedemandsofamorediscerningmarketbybecoming moresociallyandenvironmentallyresponsible.

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7.2.3. Global issues


Historically,theglobalmineralindustryscapacitytoproducemineralswaslargelybasedon economiccapacity.Manyofthemostimportantdecisionsconcerningexploration,production andmineclosureweremadethroughnegotiationsbetweengovernmentsandmining corporations,andcentredaroundthekeyeconomictradeoffsthatdeterminedtheviability ofanoperation(ClarkandCookClark,1999).However,increasingsocialawarenessofthe importanceofenvironmentalandhumanrightsissuesisinfluencingglobalmineralsoperations andmarkets. IncontrasttoAustralianwork(Moffatetal.,2009),studieswithintheinternationalmining industryhaveidentifiedtenureandsocialissuesasthetwomostimportantglobaldrivers facingtheindustryatpresent(ClarkandCookClark,1999).Manyoftheissuesoccurringatthe localorregional/nationalscaleshaveimplicationsontheglobalscale.Asalreadynoted, environmentaldisastersasaresultofminingoperationscreateinternationalpoliticalincidents (Csagoly,2000;Cunningham,2005);poorlabourrelationsbetweenmineworkersandtheir employerscausestrikesandcanhaltproduction(Bell,2009;Jonesetal.,2007);questionable corporatebehaviourthatresultinhumanrightsorsocialjusticeviolationsmayinfluencethe abilityofamineoperatorobtainingasociallicensetooperate(ClarkandCookClark,1999; Hilson,2002;Mudd,2008;O'Faircheallaigh,2005).Attheglobalscaletheseimpactscanresult innegativepublicperceptionaboutmininganditsproducts(Sarin,2006). Globalsocialissuesassociatedwithdifferingstagesofpeakmineralsareillustrated conceptuallyinFigure32.

Annualglobalproduction(t)

Global socialconsiderations

FinalUses,MarketShare SustainableProduction andConsumption Human rights


highergrades lowercosts

Governance: IndustryConsumer Governmentroles Substitution


lowergrades highercosts

time
Figure32:Illustrativesocialimpactsofpeakmineralsattheglobalscale Humanrights Whilemanyauthorsassociateeconomicdevelopmentwithmineestablishmentandoperation, therearemanyexampleswheretheoppositehasbeenthecase(FreudenburgandWilson, 2002;Bridge,2008).Particularlyindevelopingcountries(EarthworksandOxfamAmerica, 2004;Hilson,2002),butalsoindevelopedcountries(Mudd,2008),theminingsectorliveswith ahistorythathaslargelyoverlookedtheculturesandvaluesofthepeoplesitsactivitieshas soughttodevelop.Indigenousandnonindigenouscommunitiesoftenhavelittlerecourseto challengethemantraofeconomicdevelopmentwhenitcontradictsthoseculturesandvalues (EarthworksandOxfamAmerica,2004).

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Inmanypartsoftheworldindigenouscommunitiesoftendonotholdlegaltitletothelands theyliveon.Thesepeoplearevulnerabletoevictionwhenminingispermittedbyacentral government:evictionmaybeimposedwithoutpriorconsultation,meaningfulcompensation, ortheofferofequivalentlandselsewhere(EarthworksandOxfamAmerica,2004,p18).Land tenureconflictandviolencecanbeexaggeratedincountrieswherenationalwealthistiedto resourcedependence,andwherethewealthyminorityexcludethepoorermajorityfrom gainingbenefitfromaresourceexistinginlandswithcontestedownership(Earthworksand OxfamAmerica,2004;PapyrakisandGerlagh,2003;Shaxson,2007;Stevens,2003;Stevens andDietsche,2008). Nationalandinternationalinitiatives,likeEnduringValue:TheAustralianMineralsIndustry FrameworkforSustainableDevelopment(MCA,2005),seektoaddressthesepastinjusticesby advocatingstrongerandmoremeaningfulengagementwithcommunitiesimpactedbymining operations.InAustralia,onebenefitofgreaterengagementisthepropensitytodevelopmine plansthatbenefitcommunitiesandcorporations.WhilelegislativepathwaysliketheNative TitleAct(1993)provideameansbywhichindigenousTraditionalOwnerscanclaimtitleto theirtraditionallands,andregulatelanduse,theseoutcomesarenotguaranteed,andare oftennotmutuallybeneficial. Sustainableproductionandconsumption Globally,thereareinitiativesaimedatfosteringmoresustainablepatternsofproductionand consumption.Forexample,importregulationsliketheEuropeanCommissionsRegistration, Evaluation,AuthorisationandRestrictionofChemicals(REACH)regulationmeansminerals exportersmustincreasinglymeetimportersrequirements,orfindalternativemarketsfortheir goods.Theabilityofthemineralsindustrytoanticipateandpositivelyaddressthesechanging marketrequirementswilldeterminetheirabilitytoremaincompetitiveinternationally. Finaluses,marketshare Thechangesinwhatmetalsareultimatelyusedforgloballyanditslinktotechnological productdevelopmentinisalsoimportant.Wheretwocompetingmetalscanbeusedforthe sameapplication(e.g.copperoraluminiumforcarryingelectricity),industryandindustry associationscompetetomaintainmarketshare. Industryconsumergovernmentroles Consumeractivismandincreasedpublicscrutinyoftheminingindustryisbeginningto influencethewaythepublicpurchasestheirTVs,mobilephonesorcars(WalkerandHoward, 2002;Esteves,2008).Traditionallyithasbeenverydifficultforcitizens(particularlyfromthe developedcountries)toconnectmineralsproductionwiththeproductsthatmaketheirlives possibleandeasy.Inmanyways,anawarenessoftheprovenanceofthemineralscontainedin theirpossessionshasbeenthrustonthemthroughthemedialargelyaresultof environmentalNGOactivism(Hamann,2003;EarthworksandOxfamAmerica,2004;IUCN, 2003)andactivecommunitydissent(MAC,2001). Theglobalmineralsindustryisbynomeansastationarybystanderwatchingaspublic perceptions,marketsandregulationmovearoundthem.Industryinitiatives(ICMM,2008; MCA,2005;NMA,1998;TheChamberofMineralsandEnergyofWesternAustralia,2009; WAIAC,2000)andcorporateselfregulation(Brereton,2003;Hamann,2003;Hilsonand Murck,2000;JenkinsandYakovleva,2006;Welker,2009)attesttotheirdynamicresponsesto globalsupplyanddemandofminerals. Theroleofcorporationsinthedevelopmentofactivitieslikecorporatesustainability reporting,andconceptslikecorporatesocialresponsibilityoverthelasttwentyyearshas

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encouragedincreasinglycomprehensivedisclosureoftheintegratedenvironmental,social andhealthimpactsofmining(Giurcoetal.,2009,p20).Thegrowingneedtosatisfythe corporationssociallicensetooperatehasencouragedbothmandatoryandvoluntary regulationandreportingthatisopenandtransparent(JenkinsandYakovleva,2006;Sampat andCardiff,2009). Substitution Theideathatglobally,wemayrunoutofspecificmineralandmetalswithparticularuses whicharemoreorlesseasilysubstitutableisframedaroundcriticalmaterials(forexample tantaluminmobiletelephones)(Graedel,2009).TheimplicationsforAustraliaaretwofold: whereAustraliahassignificantresourcesofgloballycriticalmaterial(e.gtantalumfor whichweaccountforhalftheworldsproduction) o o inwhatwaysdowemanagethisresourcedifferentlyfromotherswhichare noncritical? howdogeopoliticalfactorsbalanceeconomicandotherfactors

whereAustraliademandscriticalornonsubstitutableminerals(suchasphosphatefor foodproduction(Cordelletal.,2009)toassistourlowphosphorussoils) o o inwhatwaysdoweseektomanagethisresourcefromotherswhicharenon critical again,howdogeopoliticalfactorsbalanceeconomicandotherfactorslinked tolongtermnationalbenefit.

SECTIONSEVEN:SUMMARY
Thesociallandscapeinwhichthepresentdaymineralsindustryexistsischanging.Past environmentalincidents,humanrightsabusesandlandtenureconflictshavemeantthat communitiesinAustraliaarebecomingmoreconcernedaboutamenityissuesandlesslikely toacceptatfacevalueclaimsaboutthebenefitsofmining. Moresignificantsocialscrutinyalsocomesatatimewhenthemineralindustrymust managetheimpactsoffallingoregrades,increasedwaste,andthecostpricesqueezethese pressureselicit.Althoughconsideredtobeamongthemostcomplicatedissuesfacingthe sectoratpresent,miningcompaniesarerespondingthroughgreatercorporate responsibility,moretransparentsustainabilityreporting,andselfregulation.Maintaininga sociallicensetooperatewhileaddressingtheseenvironmental,socialandproductionissues willremainapersistentdriverfortheindustryintothefuture.

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8. UNDERSTANDING AUSTRALIAS LONG-TERM MINERAL WEALTH


ThisdocumenthasexploredtheconceptofpeakmineralsinrelationtoAustralias dependenceonitsmineralendowment.Indoingthisithasexaminedtheeconomic, technological,environmentalandsocialimplicationsandopportunitiesthatwillincreasinglybe presentedtotheminingindustryinAustralia.Ultimately,mineralswillremainakeysourceof nationalwealthintothefuture.However,itwillbecomemoredifficulttotiethemineral endowmenttoournationalwealthwithoutasignificantreconceptualisationofthewaysin whichwecost,value,sustainandmanageresourcesthatcouldconceivablyensureourwealth andprosperityintothefuture.

8.1.

LINKING NATIONAL WEALTH TO MINERAL ENDOWMENT

Australiasfuturewealthfrommineralscanbeunderstoodwithintheframeworkprovidedin Figure33.Ourabilitytorealisepersistentnationalwealthfrommineralshingesonourability torecognisethatthefuturedriversoftheindustryarechanging,andwillpresentnew constraintsandopportunitiesforthoseorganisationsthatplanfortheconsequencesofpeak minerals.Adequateplanningcanensurethebenefitsfromresourcedependenceare maximised,whiletheimpactsareminimised.


Peakminerals
Production(t/yr)

Future drivers (global & local)

lowercosts*

highercosts*

*costs social economic environmental time

New constraints & opportunities

Australian context Benefits


Monetary: - Monetary benefit - reflect true costs -maximise genuine gains - use for long term benefit -Metals Providing Minerals & Metals: - increasing in-use stocks - services from end-uses

Impacts
Impact profile: - Monetary benefit - social - environmental - economic -Metals Cross scale impacts: - better characterise opportunities and constraints

Sustainability Technology Policy

Maximise long term national benefit from Australias mineral wealth

Figure33:MaximisinglongtermbenefitfromAustralia'smineralendowmentbyrecognising thebenefitsandimpactsassociatedwithunmanagedresourcedependence.

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8.1.1. Benefits for the national economy


Truecostandeconomicvalue Realisingmonetarybenefitsfromourmineralendowmentintothefuturerequiresare appraisalofwhatresourcevaluemeans,andhowcostischaracterisedwithinthismeaning. Revaluedresourcesmustreflectthetruecostsofproduction.Forexample,earlystagesinthe mineralproductionchain(extractionandprocessing)havesignificantlyhigherenvironmental andsocialcoststhanlaterstages.Addressingthisdisparitythroughtechnological,operational ormanagerialadvancementtominimisethesecostswillyieldbothenvironmentalandsocial benefits,butwillalsocreateeconomicvaluefromthesehithertoundervaluedstages. Genuinegainsforlongtermbenefit Properlycharacterisingthetruecostsofproductionwillensureanunderstandingofhowthese costsarise,andwhatimpacttheyhaveontheeconomicviabilityofthemineralsindustry. Maximisinggenuinegainsfrommineralswillbecomeakeyindicatoroftheindustrys economicperformance.Declinesinnationalstocksofmineraloresmustalsobeaccounted formorethoroughly.Whereprofitlossstatementsandhealthydividendshavetraditionally demonstratedwealthfromminerals,futurereturnsmustalsocovertheexpensesincurred whilecreatingthisformofwealth.Internalisingthenoneconomiccostsofmineralproduction attributesnewvaluetotheseresources,andincreasesthelikelihoodthattheseresourcesare utilisedforlongtermnationalbenefit. ValuingInusestocksandenduseservices Understandingthetruecostsofmineralproduction,andrevaluingourmineralwealth ultimatelyinfluencesourcapacitytoprovidemineralsandmetalstomarket.Astheeconomic, environmentalandsocialcostsoftraditionalmineralsandmetalproductionincreasewith peakminerals,inusestockswillbecomemorevaluable.Ourabilitytorealisethisvalue throughinvestmentinrecyclingandreprocessingtechnologiesforexistingproductswillyield significantnationalbenefit:bothinthecontextsofethicalconsumptionandinternational competitionfromcountriesalreadyactingtorealisethevalueofinusestocks.Revaluing theseproductboundresourceswillalsopromotethenecessitytorealiseenduseservicesfor providinglongtermaccesstomineralsandnationalwealthwithoutrelyingsolelyon traditionalresourceextraction.

8.1.2. The implications of mineral resource dependence


Thechangingimpactprofile Theneedtoacknowledgethetriplebottomlineparadigm(economic,environmentaland socialpressure)haslongdominateddiscussionsconcerningsustainabledevelopment. However,therelativeimportanceofthefactorsidentifiedwithinthisparadigmarechangingas weapproachpeakmineralproduction.Miningisbecomingmoreexpensiveaswemine deeper,lowergradeores,innew,sensitiveorremoteareas.Thesechangesareaccompanied bygrowingenvironmentalimpactsandthecostsassociatedwiththeseimpacts.More expensivemining,andmoreintenseenvironmentalimpactsresultinsignificantsocialflowon effects.Peakmineralsischangingtheenvironmentalandsocialimpactprofilesoftraditional mining,andthesechangeswilldriveproductioncostshigherstill. Characterisingcrossscaleimpacts TheAustralianminingindustryisdominatedbymultinationalorganisationstrading commoditiesoninternationalmarkets.Ourstategovernmentsadministertheoperationsof thesecompanies,andfederalmacroeconomicpolicieslargelypromotemineralexploitation.

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Yetallminingoperationsareconductedatthelocalscale.Ourmineralindustryisstrongly demarcatedinthecontextofscale.Acknowledgingandcharacterisingthecrossscaleimpacts ofminingprovidesanavenuetoidentifytheopportunitiesandconstraintspeakmineralswill poseateachofthesescales.Thisisextremelyimportantgiventhattheonsetofpeakminerals islikelytohaveadramaticinfluenceontheactualimpactsofminingatparticularscales,but alsoontheintensityoftheseimpacts.Characterisingtheseimpactswillultimatelycontribute toourabilitytomanageandmitigatetheirconsequences.

8.2.

MAXIMISING LONG-TERM NATIONAL BENEFIT FROM AUSTRALIAS MINERAL ENDOWMENT

TheconceptofPeakMineralsdescribesaparadigmthatparallelsmostofAustraliasmineral production:fromeasyandcheapintheindustrysinfancy,toharderandmoreexpensivenow andintothefuture.Theconcepthelpstoframeadiscussionconcerningthemanagementof Australiasmineralendowment,andthewealthitprovidestooursociety.Thisreviewpaper hasexploredtheconceptofpeakmineralsinthecontextofAustraliasmineralindustry.Ithas examinedtheimplicationsofpeakmineralproductionbyexploringitseconomic, technological,environmentalandsocialimplicationsfortheindustryandforAustraliaslong termwealth.Maximisinglongtermbenefitfrommineralwealthwillrequireathreepronged solution:resourcemanagementforsustainability;investmentinnewtechnology;and,new policydirection.

8.2.1. Seeking sustainability


Mineralproductioniscurrentlyunsustainable,notprimarilybecauseofresourcesbeingfinite, butbecauseofimpactsassociatedwithprocessinganduse.Theconceptofpeakminerals raisesthespectreofresourcedepletion,andthenecessitytobegintoplanfortransitioninthe wayweproduce(throughrecycling)anduseandreuse(sustainabledesignandextended producerresponsibility)mineralsinoursociety.Supplementingtraditionalproductionwith alternativemineralandmetalsourceswillcontributeourabilitytomaximiselongtermwealth frommineralsby: Reducingournationaleconomicdependenceoningroundmineralresourcesand boostingtheactivityandcompetitivenessofsecondary(andtertiary)sectorsthat establishtorealisevaluefrominusestocksandendusemineralservices. Avoidingorminimisingmanyoftheenvironmentalandsocialimplicationsof traditionalminingthatarereducingthenationsgenuinegainsfromexploitationof ourmineralendowment.

8.2.2. Diversifying technological solutions


Theconsequencesofpeakmineralswillintensifythesocial/environmentalcostpricesqueeze. Economicpressuredrivestechnologicaladvancement,sofindingtechnologicalsolutions (mechanicalandconceptual)tosocialandenvironmentalissueswillbecomeincreasingly importantinthecontextoflongtermnationalbenefitfromtheminingsector.Ratherthan beingconstrainedbysocial,environmentalandeconomicpressure,investmentintechnology thataddressesormitigatesthesocialorenvironmentalcostsofminingwillbegintoyield profitableoutcomesforminingcompanies.

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8.2.3. Establishing a renewed vision and appropriate policy


Australiasmineralendowmenthascontributedsignificantlytoournationalwealthand development,andshouldcontinuetodosointotheforeseeablefuture.However,heavy dependenceonnaturalresourcespresentsbenefitsandthreatsfornationalwealth. Inthiscontext,Australiamustrenewitsvisionforthemineralsindustryandassociated technologieswhichunderpinitsperformance. Effectivemacroeconomicpolicythatsimultaneouslyensureslongtermproductivityfromour mineralendowment,whileencouragingmineralexploitationfromalternativesourceswillbe necessarycontributetomaximisingAustraliaslongtermnationalbenefit. Thechallengeissummarisedina2009speechentitledTheShapeofThingstoCome:LongRun ForcesAffectingtheAustralianEconomyinComingDecades,bySecretarytotheTreasury, DrKenHenry.Hestated: ...thereemergenceofChinaandIndiawhich,becauseofitsimplicationsforglobal commoditiesdemand,hasconferredonAustraliaalargeboosttoitsrealwealth;but, atthesametime,setupasetofstructuraladjustmentsthatwillchallengepolicy makersfordecades.Andit,too,impliesaverysubstantialincreaseinourrateof investment. HadtheseforceshittheAustralianeconomyofthe1960s,1970sor1980s,the prospectsofourfindingasustainablegrowthpathwouldhavebeenremote.In particular,thecurrentaccountwouldquicklyhaveemergedasabindingconstrainton ourcapacitytoaccessthehigherlevelsofinvestmentcapitalneededtoadjust.But theseforcesarehittingnow;atatimewhenwehaveimplemented25yearsof economicreforms;whentheAustralianeconomyhasjustdemonstratedtotherestof theworldthat,forsometimenow,ithasquitepossiblybeenthebestgoverned,most flexible,mostresilientofallindustrialisedeconomies;whenthereisunprecedented globalinterestinus;andwhenthereis,domestically,astrongappetiteforfurther policychange. Yetallofthesechangeswilltestthelimitsofsustainability;economic,socialand environmental.Itwillonlybebyrecognisingthoselimitsandadjustingpolicy accordinglythatthisgenerationwillbeabletosaywithconfidencethatitwillhandto itschildrenandgrandchildrenanevenhigherlevelofwellbeing;anevengreater capabilitytochooselivesofvalue.

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GLOSSARY
Term AusIMM Balanceofpayments Byproduct Definition TheAustralasianInstituteofMiningandMetallurgy Thebalanceofanationsexports,imports,incomeandcapitalflowsina givenperiod. Aproductsounimportantthatitspricehasnoinfluenceonamines output(cf.coproduct).

Comparativeadvantage Aneconomictheory,firstdevelopedby19thcenturyEnglisheconomist DavidRicardo,thatattributedthecauseandbenefitsofinternational tradetothedifferencesamongcountriesintherelativeopportunitycosts ofproducingthesamecommodities. Consumption Corporatesocial responsibility Costpricesqueeze Cumulativeimpact Cutoffgrade Theprocessofindividuals,households,businessandgovernmentusingup goodsandservices. Acorporateobligationtosocietytoconducttheirminingoperationsina socially,environmentallyandeconomicallysustainableway. Thenarrowingofprofitmarginsasproductioncostsincreaserelativeto commodityprice. Thecombinedimpactsfromminingonsociety,andparticularlynear neighbours Thelowestgrade,orquality,ofmineralisedmaterialthatqualifiesas economicallymineableandavailableinagivendeposit.Maybedefinedon thebasisofeconomicevaluation,oronphysicalorchemicalattributes thatdefineanacceptableproductspecification. Theactofexhaustingaresourcesabundance Theeffectsarisingfromthecoexistenceofboomingandlaggingsectorsin aneconomy,whichoftenbringssignificantstructuraladjustment,typically followingthediscoveryandinitialexploitationofmajornewresources. Thegrowthintotalproductionoveragivenperiodorinpercapita productionoftheaveragecitizenoveragiventimeperiod. Asaresourcebecomesdepletedthecostsassociatedwithitsproduction increase.Whenthesecostbecometoohigh,theresourcecannolongerbe obtainedprofitably. Sustainingimprovementsinhumanlivingstandardsorhumanmaterial wellbeing. Aproductthatisproducedforitsfinaluserandnotasacomponentof anothergoodorservice. Thoseassetsofanorganisationthatexistinaformofcurrencythatcanbe ownedortraded,including(butnotlimitedto)shares,bondsand banknotes.Financialcapital(shares,bonds,notesandcoin)reflectsthe productivepoweroftheothertypesofcapital. Aworkingpatterninminingoperationsinvolvingworkingtravellinglong distancesfromtheirnormalresidencestoremotelocations,working severaldaysatthesitewherefoodandaccommodationareprovided,and thentravellinghomeforseveraldaysofleave. Anyphysicalorchemicalmeasurementofthecharacteristicsofthe Analysis(Value)materialofinterestinsamplesorproduct.Notethatthe termqualityhasspecialmeaningfordiamondsandothergemstones.The unitsofmeasurementshouldbestatedwhenfiguresarereported.

Depletion DutchDisease

Economicgrowth Economicscarcity

Economicsustainability Finalproduct Financialcapital

Flyin,flyout(FIFO)

Grade

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GregoryEffect

Occurswheninternationaldemandforacommoditycausesthevalueof thetraderscurrencytorise,whichultimatelymakesimportscheaper,but reducesthecompetitivenessofotherexportingsectors. Hotellingrentisdefinedastherentthatexistsonthemarginalquantityof anexhaustibleresource(priceminusmarginalcost)anditisconsidereda measureoftheintertemporalscarcityofthatresource.Itisinterpretedas theportionofprofitthataccruestoextractivefirmsbecausetheyare mininganexhaustibleresource. Humancapitalincorporatesthehealth,knowledge,skills,intellectual outputs,motivationandcapacityforrelationshipsoftheindividual. HumanCapitalisalsoaboutjoy,passion,empathyandspirituality. seeNettImputedValueinsitu Concernaboutwhetherdepletionofmineralresourcesleavesfuture generationswithouttheabilitytoearncomparablelevelsofincome becausetheassetstockinheritedbyfuturegenerationsisdiminished. Australasiancodeforstandardisedreportingofmineralresourcesandore reserveswhichispreparedbytheJointOreReservecommittee(JORC) Arockproductforminginresponsetoasetofphysiochemicalconditions, whichincludeamongotherthingsironcontainingparentrockandawell drainedterrain. Theperiodwithinwhichallthemarketconditionsfacingaminingfirmcan change). Aproductsoimportanttotheeconomicviabilityofaminethatitsprice alonedeterminesaminesoutput.(seealsobyproduct). Manufacturedcapitalismaterialgoodsandinfrastructureowned,leased orcontrolledbyanorganisationthatcontributetoproductionorservice provision,butdonotbecomepartofitsoutput. Obtainingandholdinganominatedpercentageofamineralmarket,a commoncorporateobjectiveofmanylargeandsmallmineralproducers. MineralsCouncilofAustralia Subsurfacemineraldepositsthatareknownandprofitabletoexploit, givenexistingtechnologiesandprices. Mineralreserves;togetherwithdepositsthatare:economicbutnotyet discovered;orexpectedtobecomeeconomicasaresultofnew technologyorotherdevelopmentswithintheforeseeablefuture. Thestockofenvironmentallyprovidedassetssuchasthesoil,minerals, theatmosphere,theforests,wildlifeandwater. Aresourcewitharateofnaturalreplenishmentthatissolowthatitdoes notprovideanyhopeofreplenishmentwithinareasonabletimeperiod. Productsthathavereachedtheendoftheusefullivesfromwhichmetal canberecovered. Ineconomicterms,theopportunitiesforgoneinthechoiceofone expenditureoverothers.Theconceptofopportunitycostallows economiststoexaminetherelativemonetaryvaluesofvariousgoodsand services. Anaturalaggregationofoneormoremineralsthatcanbemined, processed,andsoldataprofit. OreReservesispreferredundertheJORCCodebutMineral Reservesisincommonuseinothercountriesandisgenerallyaccepted.

HotellingRent

Humancapital

Insituprice Intergenerational equity JORCCode Laterite

Longrun Mainproduct Manufacturedcapital

Marketshare MCA MineralReserves MineralResources

Naturalcapital Nonrenewable resource Secondaryscrap Opportunitycost

Ore Orereserves

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Otherdescriptorscanbeusedtoclarifythemeaninge.g.coalreserves, diamondreservesetc. Peakminerals Aframeworkinwhichgeologicalandnongeologicalconstraintson mineralproductionareconsideredintermsoftheireffectoneconomic, socialandenvironmentalsystems. Theprocessofconvertingeconomicresourcestousefulfinalgoodsand services. Aswithmanyothereconomicterms,theuseofthewordrealindicates thattheeffectsofinflationhavebeenconsidered. Aresourcethatcanbereplenishednaturallywiththepassageoftime. Thesituationwherenaturalresourceabundanceisnegativelyrelatedto aneconomyseconomicperformance. Ataxthatseekstoidentifyeconomicrentsbyallowingthedeductionofall costsofproductionfromrevenue,includingnormalprofit,andthentaking ashareofanyresultingrents(seealsoresourcerenttax). Thepropensityofcorporationstoadoptinformalregulatoryactionsaside fromformalregulationsimposedbygovernment. Inmostcountries,theshareofeconomicactivityaccountedforbyservices rosesteadilyduringthe20thcenturyattheexpenseofagricultureand manufacturing.MorethantwothirdsofoutputinOECDcountries,andup tofourfifthsofemployment,isnowintheservicessector. Thetrueeconomicpriceofanactivity.Shadowpricescanbecalculatedfor thosegoodsandSERVICESthatdonothaveamarketprice,andareoften usedincostbenefitanalysis,wherethewholepurposeoftheanalysisisto captureallthevariablesinvolvedinadecision,notmerelythoseforwhich marketpricesexist.(seealsoopportunitycost) Fairnessinthedistributionofbenefitsandburdensassociatedwith economicactivitiestoallparticipatinginterestgroups. Theabilityofmembersinagrouptosecurebenefitsfromthat membership.Forexamplenetworks,communicationchannels,families, communities,businesses,tradeunions,schoolsandvoluntary organisationsaswellassocialnorms,valuesandtrust. Corporatelyresponsibleminersarepermittedtooperatethroughinformal socialregulation(bylocalcommunities,interestedcitizensand shareholders).Corporationsinvestinanoperationalreputationboundto theconceptofasociallicensetooperate. Agoodthatcanbeusedasanalternativetoanothergoodbecauseit possessesasimilarrangeofattributes. Anymemberofagroupofcompoundsofsulfurwithoneormoremetals. Mostsulfidesaresimplestructurally,exhibithighsymmetryintheir crystalforms,andhavemanyofthepropertiesofmetals,including metalliclustreandelectricalconductivity.Theyoftenarestrikingly colouredandhavealowhardnessandahighspecificgravity. Sulfidesare theoremineralsofmostmetalsusedbyindustry,asforexample antimony,bismuth,copper,lead,nickel,andzinc.Otherindustrially importantmetalssuchascadmiumandseleniumoccurintraceamounts innumerouscommonsulfidesandarerecoveredinrefiningprocesses. Theratioofthepricesofthegoodsandservicesthatanationexportsto thepriceofthegoodsandservicesthatitimports.

Production RealPrice Renewableresource ResourceCurse ResourceRent

Selfregulation Services

Shadowprice

Socialandcultural sustainability Socialcapital

Sociallicenseto operate

Substitutegood Sulfides(orSulphides)

Termsoftrade

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APPENDIX A
TobeconsistentwiththeAustralianminingindustry,thisreportadoptsthespecificJointOre ReservesCommittee(orJORC)Codedefinitions.BasedontheJORCCode,theanalysisand reportingoforereservesandmineralresourcesfortheminingindustryhaveveryspecificand statutorymeanings: MineralResources AMineralResourceisaconcentrationoroccurrenceofmaterialofintrinsiceconomicinterest inorontheEarthscrustinsuchform,qualityandquantitythattherearereasonable prospectsforeventualeconomicextraction.Thelocation,quantity,grade,geological characteristicsandcontinuityofaMineralResourceareknown,estimatedorinterpretedfrom specificgeologicalevidenceandknowledge.MineralResourcesaresubdivided,inorderof increasinggeologicalconfidence,intoInferred,IndicatedandMeasuredcategories. InferredMineralResourcethatpartofaMineralResourceforwhichtonnage,grade andmineralcontentcanbeestimatedwithalowlevelofconfidence.Itisinferred fromgeologicalevidenceandassumedbutnotverifiedgeologicaland/orgrade continuity.Itisbasedoninformationgatheredthroughappropriatetechniquesfrom locationssuchasoutcrops,trenches,pits,workingsanddrillholeswhichmaybe limitedorofuncertainqualityandreliability. IndicatedMineralResourcethatpartofaMineralResourceforwhichtonnage, densities,shape,physicalcharacteristics,gradeandmineralcontentcanbeestimated withareasonablelevelofconfidence.Itisbasedonexploration,samplingandtesting informationgatheredthroughappropriatetechniquesfromlocationssuchasoutcrops, trenches,pits,workingsanddrillholes.Thelocationsaretoowidelyorinappropriately spacedtoconfirmgeologicaland/orgradecontinuitybutarespacedcloselyenough forcontinuitytobeassumed. MeasuredMineralResourcethatpartofaMineralResourceforwhichtonnage, densities,shape,physicalcharacteristics,gradeandmineralcontentcanbeestimated withahighlevelofconfidence.Itisbasedondetailedandreliableexploration, samplingandtestinginformationgatheredthroughappropriatetechniquesfrom locationssuchasoutcrops,trenches,pits,workingsanddrillholes.Thelocationsare spacedcloselyenoughtoconfirmgeologicalandgradecontinuity.

OreReserves AnOreReserveistheeconomicallymineablepartofaMeasuredand/orIndicatedMineral Resource.Itincludesdilutingmaterialsandallowancesforlosses,whichmayoccurwhenthe materialismined.Appropriateassessmentsandstudieshavebeencarriedout,andinclude considerationof,andmodificationby,realisticallyassumedmining,metallurgical,economic, marketing,legal,environmental,socialandgovernmentalfactors.Theseassessments demonstrateatthetimeofreporting,extractioncouldreasonablybejustified.OreReserves aresubdividedinorderofincreasingconfidenceintoProbableOreReservesandProvedOre Reserves. ProbableOreReservetheeconomicallymineablepartofanIndicated,andinsome circumstances,aMeasuredMineralResource.Itincludesdilutingmaterialsand allowancesforlosses,whichmayoccurwhenthematerialismined.Appropriate assessmentsandstudieshavebeencarriedout,andincludeconsiderationofand modificationbyrealisticallyassumedmining,metallurgical,economic,marketing,legal,

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environmental,socialandgovernmentalfactorsTheseassessmentsdemonstrateat thetimeofreportingthatextractioncouldreasonablybejustified. ProvedOreReservetheeconomicallymineablepartofaMeasuredMineral Resource.Itincludesdilutingmaterialsandallowancesforlossesthatmayoccurwhen thematerialismined.Appropriateassessmentsandstudieshavebeencarriedout,and includeconsiderationofandmodificationbyrealisticallyassumedmining, metallurgical,economic,marketing,legal,environmental,socialandgovernmental factors.Theseassessmentsdemonstrateatthetimeofreportingthatextractioncould reasonablybejustified.

Inconcept,therelationshipbetweenresourcesandreservesandthelevelofconfidenceinthe estimatesareshowninFigure34(seealsoarecentarticlebyLambertetal.,2009))

Exploration Results MINERAL RESOURCES Inferred


Increasing level of geological knowledge and confidence

ORE RESERVES

Indicated Measured

Probable Proved

Consideration of mining, metallurgical, economic, marketing, legal, environmental, social and governmental factors (the Modifying Factors").

Figure34:TherelationshipbetweenmineralresourcesandorereservesundertheJORC Code(AusIMMetal.,2004) TheUSGSMcKelveySystem TheUSGeologicalSurveyclassifiesmineralsbasedonaverybroadconceptofeconomic, marginalandsubeconomicresources.TheirsystemisbasedontheearlyworkofMcKelvey, andhasdifferentmeaningstothoseusedbytheJORCCode.TheUSGSsystemisexplainedin theirannualreports,suchastheMineralCommoditySummaries(USGS,var.a)orMinerals Yearbook(USGS,var.b).Themaincategoriesusedarereservesandreservesbase: Reservesthatpartofthereservebasethatcouldbeeconomicallyextractedor producedatthetimeofdetermination.Thetermreservesneednotsignifythat extractionfacilitiesareinplaceandoperative.Reservesincludeonlyrecoverable materials;thus,termssuchasextractablereservesandrecoverablereservesare redundantandarenotapartofthisclassificationsystem. ReservesBaseThatpartofanidentifiedresourcethatmeetsspecifiedminimum physicalandchemicalcriteriarelatedtocurrentminingandproductionpractices,

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PeakMineralsinAustralia

March2010

includingthoseforgrade,quality,thickness,anddepth.Thereservebaseisthein placedemonstrated(measuredplusindicated)resourcefromwhichreservesare estimated.Itmayencompassthosepartsoftheresourcesthathaveareasonable potentialforbecomingeconomicallyavailablewithinplanninghorizonsbeyondthose thatassumeproventechnologyandcurrenteconomics.Thereservebaseincludes thoseresourcesthatarecurrentlyeconomic(reserves),marginallyeconomic(marginal reserves),andsomeofthosethatarecurrentlysubeconomic(subeconomic resources).Thetermgeologicreservehasbeenappliedgenerallytothereservebase category,butitalsomayincludetheinferredreservebasecategory;itisnotapartof thisclassificationsystem. NoteonTerminologyforReserves&Resources Asstatedearlier,tobeconsistentwiththeAustralianminingindustry,thisreportadoptsJORC Codedefinitions.However,givenabroadaudienceforthisreportandthefundamentalroleof resourceswithrespecttoPeakMinerals,wenotethefollowing: specificreferencetoreservesarenotusedinthisreportasthisistoocloseto orereservesandcouldcreateconfusion.TheUSGSsystemisnoted,butonly discussedwithreferencetotheJORCsystem. allmentionsofresourcesareleftasagenericuseofthewordresources.When required,thespecifictermofmineralresourcesisusedwhendiscussing potentiallymineabledepositsandoresprovideditislinewiththeJORC definition.

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