Mineral Resources

MINERAL RESOURCE AVAILABILITY MINERAL RESOURCE AVAILABILITY

and the and the

FUTURE OF CIVILIZATIONFUTURE OF CIVILIZATION

John L. BerryJohn Berry Associates, Austin,TX

©John Berry Assoc.Slide 1 of 54


OUTLINE

Introduction and Manifesto Minerals and the Law of Supply and Demand

• “Ore is where you find it”• Deposit Types, Prices and Volumes• Mineral processing and Price• Implications of “Lumpy” Supply Curve• Ore grade and external (environmental) costs.

Strategic Minerals:

• List of Strategic Minerals• Uses of Strategic Minerals• Growth rates of strategic minerals use.• “Ore is where you find it” – haves and have-nots• “War and Peace”: Strategies for security of supply.

Conclusions: Problems and Opportunities.©John Berry Assoc.Slide 1 of 54


INTRODUCTION

BASIC HUMAN SUSTENANCE: Air, Water, Useful Plants, Useful Animals

SUSTENANCE OF CIVILIZATION: The above, plus minerals and fossil fuels.

Tools: Stone>> Bronze>> Iron >>Machines (Alloys)>> Semi-conductors (Exotics)

ALL are mineral resources: without them we are hunter gatherers using wooden sticks.

Fossil Energy is the basic enabler: (wood) > Charcoal -> Coal -> Oil -> Nat. Gas -> Nuclear >??

<------e l e c t r i c i t y------

WHERE ARE MINERAL RESOURCES USED??

Home: Steel (nails, rebar), Copper (wiring, plumbing), Plastics, Concrete (slab)Roads: Concrete, Steel, petroleum (black-top), sand and gravelCars: Steel, Copper, Fossil Fuels, Plastic, Lead, Sulfuric Acid, etc.Clothes: (Natural Fibre), Fossil Fuels (Fibre and Manuf), Steel etc (manuf),

IT: REE, Copper, Lithium, Germanium, Cesium, etc., etc.


Grime’s Graves ©Nic McPhee: 433 shafts, 96 ac.

MANIFESTO

ALL non-renewable resource extraction and use is harmful to the planet

Direct harm: Holes in the ground (Athabasca tar Sands) Waste tips (Aberfan disaster, Wales) Air pollution (Nkana smelter) Water/groundwater disturbance and pollution “Destructive “ use of water – can’t be returned.

Indirect Harm: Massive transport arteries (Land destruction) Litter, junk, wastage (land & water destruction) Megacities (land, esp. agric. land, destruction) Air pollution, CO2 and Methane. Climate Change (probably)

Don’t blame ONLY the extraction companies: we are ALL responsible: DEMAND is the driver.

We do not know where lie the thresholds of permanent, irreversible, runaway harm to Earth.

Thus, sooner or later, we have to completely REVAMP our CIVILIZATION to survive.

MINERAL RESOURCE AVAILABILITYMINERAL RESOURCE AVAILABILITY


350-ton Truck

Athabasca Tar Sands, Ft.McMurray, Canada


IMPORTANT TERMSMINERAL RESOURCE: any naturally occurring non-living substance that is, has been, or may be useful to human beings

RESOURCE BASE: The volume of rock in a given area that contains more than the Clarke, or average concentration of that mineral in the Earth’s crust.

INFERRED RESOURCES: volumes of mineralization above some mini mum grade that are known to exist, or are hypothes-ized on geological grounds to exist, in a given area, but have not been measured. May be orders

of magnitude less than resource base and greater than the quantities of known ore.

INDICATED RESOURCES: mineral occurrences that have been sampled to a point where an estimate has been made, at a reasonable level of confidence, of their contained metal, grade, tonnage, shape, densities,

physical characteristics. Generally orders of magnitude less than inferred resources in same area.

LEAD: an area in which there are specific indications of valuable mineralization.

PROSPECT: an area in which there are sufficient indications of the presence of ore to carry out a serious evaluation campaign (drilling, test mining). (It takes 10 – 100 LEADS to find 1 PROSPECT)

DEPOSIT: a defined or partially defined body of mineralization, which may or may not be ore, depending on economic conditions. (It takes 10 -100 PROSPECTS to develop 1 DEPOSIT)

GRADE: the percentage of the rock composed of valuable material. E.g. 62% Fe, 1% Cu,

ORE: rock that can be mined for its mineral content at a profit.

ORE GRADE: any grade above the lowest grade that can be mined at a profit. Varies with time and deposit.

RESERVES: thoroughly explored and characterized volumes of ore (rarely amounts to more than a few years’ extraction, because it costs a lot of money to convert resources to reserves). “Peak” people and many economists do not understand the difference between Resources and Reserves.



ORE GRADE for SELECTED ELEMENTS

Metal Clarke

(in percent)

Ore Grade

(in percent)

Clarke of Concentration

for Ore Grade

Aluminum 5.13 30 4

Iron - Fe 5.00 60 12

Titanium 0.66 15 23

Copper 0.0055 0.25 45

Rare Earths 0.019 1.6 84

Nickel 0.0075 1.5 200

Gold - Au 0.0000005 0.00023 460

Manganese 0.10 35 350

Uranium 0.0002 0.1 500

Zinc 0.007 4.0 600

Lead – Pb 0.0013 4.0 3000

Chromium 0.01 30 3000

Tin – Sn 0.0002 1.0 5000

Silver – Ag 0.00001 0.05 5000

Clarke: the average abundance of an element in the earth’s crust

Clarke of Concentration: the concentration of an element in a rock compared with its average concentration in the earth’s crust.

Ore Grade, or the Clarke of Concentration changes over time and is affected by:

1. The availability of minerals with high concentrations if the element (e.g. Cu2S, PbS, etc. REEs, for example, lack such minerals)

2. The difficulty and expense of recovering the metal from its ore (e.g. Aluminum, Titanium)

3. Advances in mining and refining technology

4. Changes in the value that society places upon the metal (e.g. Gold, REE, Lead, Tin).


In general, the larger the Clarke of Concentration, the smaller the typical orebody becomes



LIFE EXPECTANCIES OF WORLD RESERVES

FOR SELECTED COMMODITIES

Source: Tilton, 2001

MINERAL RESOURCE AVAILABILITYMINERAL RESOURCE AVAILABILITY ©John Berry Assoc.Slide 1 of 54

SOURCE: Tilton, 2001, who used Brobst & Pratt, 1973; Lee & Yao, 1970 for the Clarke)

LIFE EXPECTANCIES OF RESOURCE BASE for SELECTED COMMODITIES

Notes: (1) estimates of the resource base for coal, oil and gas are meaningless: the USGS estimates “ultimate recoverable resources” instead, but these estimates can change with technology.

(2) the life expectancies are meaninglessly large, since we will never recover (many) commodities from “average rock”.The energy costs alone would be too high!


THE CLASSICAL ECONOMISTS’ VIEWTwo approaches to analyzing the exhaustion and depletion

Physical Economic

Physical Approach: Mineral resources are thought of as a set of deposits in the earth that were formed in geologic time and that

cannot be duplicated in human time. Removal of ore from this set of deposits reduces the remaining ore and depletes the resource.

The Pure Theory of Exhaustion (the Gray-Hotelling Theory), has been developed to fit this physical view. (p.457)

Economic Approach:

Mineral and materials … have not limited society’s welfare in the past. Nor do they have the potential for limiting the welfare of mankind in the future, so long as certain conditions are maintained .

Internalization of external environmental damages, Access to the earth’s crust for exploration, Worldwide trade access to raw materials and, Prevention of market control by either sellers or buyers.

If these rules … are followed, markets will provide supplies and ration use so that minerals and materials will be available to meet society’s needs without significantly increasing costs for a very long time, probably for ever. (p.457)

… (this) has become the mainstream of economic thought, even though those who engage in resource assessments using an engineering or physical view of resources and reserves disagree. (p.460)

VOGELY, William A., Nonfuel Minerals and the World Economy.

Chapter 15 in REPETTO, Robert, ed., 1985: The Global Possible.

Resources, Development, and the New Century. Yale UP, New Haven.


PROBLEMS WITH THE PHYSICAL AND ECONOMIC VIEWS

• The Gray-Hotelling Theory is nonsense because it ignores new discovery, technology, and substitution (e.g. Tin, Lead).

• The Economic Approach has severe limitations, stemming from:

• Internalization of external environmental damages:We have not found a good way to internalize external costs.Taxation vs regulation vs markets in “credits”

2. Access to the earth’s crust for exploration The Earth is not infinite, AND Cities, farms, Wilderness Areas & Parks put a lot of it out of reach

3. Worldwide trade access to raw materials and, Deposit distribution is “lumpy” – haves and have nots.Some people don’t play by our rules (e.g. China, Zimbabwe, Congo)

4. Prevention of market control by either sellers or buyers.Mineral deposits are log-normally distributed

There are many more low-grade deposits than high gradeThere are many more small deposits than large ones

Log-normal distribution and capital intensive operations give opportunities for market control by companies (DeBeers) & countries (China)


MORE PROBLEMS WITH THE “ECONOMIC VIEW” OF MINERAL SUPPLY

Log-normal distribution curve and high capital requirements also mean that the supply curve gets increasingly “lumpy”, causing major price troughs and spikes.

3. Technology sometimes creates more problems than it solvesMany more elements used for very

specific propertiesHuge capital investments required for

low-grade depositsExploration “bubbles”.

4. Substitution is not always possible (e.g. Copper vs Silver)

soil

orebody

overburden


ENVIRONMENTAL ISSUES - MINING

Grade and amount of earth moved:

• If the grade is halved, size of the mine is doubled, etc. • All of the rock is ground up, and the tailings (fine waste) have

to be disposed of (in general they can’t go back in the hole as they can liquify and contain noxious chemicals).

Overburden:

• Can be more than ten times the volume of the ore (see Right)

Dewatering: • In general, mine workings must be kept free of water. • Means lowering the water table to the level of the

bottom of the mine by pumping, up to 100s of millions of gals/day (see sketch at right)

• Lots of problems for surface owners, potential pollution problems (e.g. Bastrop Co. lignite.)

Dust:• Dust from tailings is the worst.

Ore body

Stripping Ratio = vol. overburden/vol. ore = 12:1 in this case

Dewatering well

Cone of dewatering

Bingham Canyon, UT



Commodities Ranked by Worldwide Area of Land Disturbed per Year

0 2,000 4,000 6,000 8,000 10,000 12,000 14,000 16,000 18,000

Peat

Zirconium

Feldspar

Nickel

Lead

Molybdenum

Industrial sand

Manganese

Vanadium*

Kaolin

Fluorspar

Zinc

Gypsum

Lime

Gold

Clays

Petroleum

Bauxite

Boron

Lignite

Iron Ore

Chromites

Crushed rock

Copper

Cement

Phosphates

Diamonds

Coal

Sand/grav

Co

mm

od

ity

Square Kilometers

800 1600 2400 3200 4000 4800 5600 6400 sq.mi.

COMPETITION FOR LAND



“ORE IS WHERE YOU FIND IT” “If it isn’t there you won’t find it”

• Ore deposits are rare

• If you make a mineral deposit inaccessible (e.g.ANWR), you can’t replace it.

• There has to be favorable geology A porphyry copper deposit will never be found in the Permian Basin You can’t move a deposit from where you don’t want it to somewhere else.

(e.g. Crested Butte, Green River Oil Shale, ANWR, etc.) Some countries have it all, some have none (Strategic Minerals)

• Exploration requires access to lots of land Rule of thumb: 100 leads > 10 prospects >1 mine (This also implies a need for large companies) It usually takes 5 exploration campaigns

to delineate a mineable deposit.

• Mines are Ugly and Destroy Lots of Land Thus, conflicts are inevitable (NIMBY).

DiaVik Diamond Mines, NWT, Canada


ACCESS TO MINERAL DEPOSITS



STRATEGIC MINERALS

Data: USGS, Mineral Commodity Summaries, 2011.

Definition: Minerals essential to the national defense for which during war we are wholly or partly dependent upon sources outside the continental limits of the United States

Most critical: Platinum Group Metals(PGM), NAS (2007) Rare Earths (REE) (La>Nd>Dy>Tb)

Indium, Manganese

Niobium (Columbium) (ColTan)also Beryllium http://www.helium.com/items/

Uranium 1949042-what-are-strategic-minerals Chromium Cobalt Tungsten

(pers. knowl.) Helium

Stockpiles:PGM Platinum: 4.704 mt

Palladium: 16.715 mt Iridium: 0.784 mt

Manganese 1,700,000 metric ton Tantalum 635 mtBauxite (Aluminum ore) 10,500,000 mtChromium 1,400,000 mtTin 59,993 mt Cobalt 189 mt

Petroleum

http://www.helium.com/items/


STRATEGIC MINERALS (cont)

• “Ore is where you find it”: Mineral Distribution is SPATIALLY “LUMPY”

• Thus, different mineral commodities are Strategic for different countries(e.g. China and copper, chromium, platinum)

• Strategic Mineral Endowment and War:

• In 1925 the American economic geologist C.K.Leith predicted WWII and the line-upbecause the USA, the USSR, The British and French Empires were virtually self-sufficient in mineral resources, but Germany, Italy, and Japan were lacking in all but a few. These countries were lacking, in particular, strategic minerals – the fossil fuels, copper, manganese, nickel, etc.

(C.K.Leith. Political Control of mineral resources, Foreign Affairs, July 1925.)

• Strategic Mineral Crises and Consequences:

Threatened US Embargo of Petroleum to Japan - Pearl Harbor (Butts, et al) USA/EU Sanctions against Iran, 2011 - Blockade of Hormuz Straits?? Tungsten, Tin - scarce after Japan conquered Malaya, WWII (Arab Petroleum Embargo, 1973-4 – Runaway inflation in western countries) Dem Rep Congo civil wars - Cobalt, ColTan supply interruptions Soviet embargo of Mn, Cr during Berlin & Korea – Threat of war by USA



CHINA

“Because China’s economy and resource import dependence continue to grow at a high rate ( 13% in 2010) it has adopted a geopolitical strategy to secure strategic resources. China’s resulting role in the mineral trade has increased Western security community concern over strategic minerals to its highest point since the end of the Cold War.”

“The uneven distribution of strategic mineral reserves and their concentration in a handful of politically unstable or potentially hostile countries makes it necessary that U.S. policymakers recognize the security of resource supply as a top national security issue.”

“In 1973 Leonid Brezhnev said: “Our aim is to gain control of the two great treasure houses on which the West depends, the energy treasure house of the Persian Gulf and the mineral treasure house of Central and Southern Africa”(Nixon 1980). “

"China has made the assured access of strategic mineral imports a critical component of its geopolitical strategy and is moving aggressively to purchase control of mineral concessions and mining companies."

Butts K H, B Bankus & A Norris, 2011. Strategic Minerals: Is China’s Consumption a threat to United States Security? US Army War College, CSL Issue Paper, v. 7-11.



CHINA (cont.)• High growth rates essential for Communists to retain legitimacy • The Chinese people are seeking affluence on par with the industrial West.

• Chinese consumption patterns are driving world commodity markets. In 2009, 35 % (37.7Mt) of world’s primary Aluminum production (#1 in world) consumer of primary aluminum.(Halpern 2010).

• China’s supplies of minerals such as Cr, Pt and Cu are inadequate (i.e. strategic for China), Between 2002 and 2010 the price of copper rose from $0.70/lb to over $4.00/lb (Blas, 2010).

• China has high quality reserves of, and exports, tungsten, REEs, tin, antimony and zinc 47% of the 19 minerals on which the USA is 100% import dependent come from China In 2002 mineral imports and exports accounted for nearly 20% of China’s total trade (CIMG 2003).

• China views the world financial and trade systems as creations of the West and does not trust them to supply its needs.

• China’s “Go Out Strategy” to reduce its geopolitical vulnerability to mineral and energy import cut off: Pursuing equity ownership of fuel and mineral producing companies & deposits worldwideApprox. $3 trillion in foreign exchange reserves to support this strategy. In 2008 China offered $18.5 bn for UNOCAL (which owned the Mountain Pass, CA, REE mine)

$19.5 bn for a stake in the 2nd largest minerals company, Rio Tinto.In 2009 China’s National Oil Companies established approximately $50 billion in energy agreements with Brazil, Russia, Venezuela and Kazakhstan (Jiang 2009).

• China’s growing control of some important mineral resources will enable it to deny mineral imports to the United States or other countries for political reasons.

• China demonstrated that it will do that when it embargoed REE exports to Japan in 2010 (Bradsheur 2010).

• Rare Earth Sources Mines: Bayan Obo REE-Fe-Nb deposit, Inner Mongolia

Bayan_Obo type: lenses in metamorphic rocks –NOT a CarbonatiteDiscovered as an iron deposit in 1927. REE minerals were discovered in 1936Nb-bearing ores in the late 1950s. Reserves > 40 million tons of REE minerals grading 3-5.4% REE, 1 million tons of Nb2O5 and

470 million tons of iron. The deposit also contains 130 million tons of Fluorite, making it the world's largest fluorite deposit.

Contains 70% of world's known REE reserves.

• Export Quota Reductions began 2006

• Used punitively against Japan 2010.

• Therefore, REE consumers are relocating to China to ensure supply security.(Causing destruction of supply chain and multiplication of job losses in west)



CHINA AND REE

From Butts et al.



Because of their similar chemical properties, the rare earths tend to clump together in rocks, often along with radioactive thorium or uranium. That makes extracting, separating and refining them difficult. A lot of water, acid and electricity has to be used in the ion-exchange, fractional crystallisation and liquid-liquid extraction processes used to manufacture them. Handling the radioactive and chemical waste produced in the process adds significantly to the cost. Lax environmental standards, along with low wages, has allowed Chinese producers to undercut competitors abroad and corner the market. (The Economist, 9/17/2010)

Mining more rare earths in the West is just the beginning. Developing a downstream supply chain for them is equally important.

More emphasis needs to be put on downstream operations, such as creating highly pure versions of the metals, fabricating them into alloys, and turning them into permanent magnets, advanced batteries etc

That is what the far-sighted Chinese are doing.

Slashing Chinese exports of REE has little to do with dwindling supplies or environmental concerns. It is about moving Chinese manufacturers up the supply chain, so they can sell valuable finished goods to the world rather than raw materials.

CHINA AND REE ELEMENTS (Cont)

From Butts et al.


EFFECT OF TECHNOLOGY

RAW MATERIALS PYRAMID, 2002(Ranked by Weight)

Notes:World-wide consumption Scale is only relative

(1 bn cu.yd. = 1 sq.mi.by 1000 feet)

Sand/Gravel: 18 billion tonnes/year (approx 7 bn cu.yd).

Iron Ore: 2.4 billion tonnes/yr(2010)(approx 1 bn cu.yd/yr ore)

Copper 17 million tonnes (2010)(approx 3.5 bn cu. yd. ore)

Gold: 3.1 tonnes(approx 2 million cu yd ore)


Pre-industriaL minerals


Worldwide Commodity Production by Value, 2010$0 $100 $200 $300 $400 $500 $600 $700 $800 $900 $1,000

GoldBauxiteCement

ChromitesIron OrePt-group

Sand/gravSilver

CopperZirconiumMagnesite

Crushed rockNickel

ZincPotash

Silicon MetalClays

Rock SaltPhosphates

LeadREE

MolybdenumUranium

KaolinTin

Cobalt*Industrial sand

BoronSulphur*

Niobium/TantaLime

GraphiteTungstenAsbestosFeldspar

DiamondsMica

AntimonyGypsum

Talc/PyrophyllVanadium*

Co

mm

od

itie

sBillions of Dollars



CAPITAL REQUIREMENTS for NEW PRODUCTION

SOURCE: EMJ 2011 Annual Survey, March 2012

COMMODITY ANNUAL NEW

PRODUCTION

REQUIRED, 2012

NEW PROJECT INVESTMENT, 2010 ($BN)

SOURCE

Oil 1 million BOD $100 Bishop, SIPES talk

Iron 84 million tons $28 http://www.wpgresources.com.au/pdf/Iron%20Ore%20Outlook%20UBS%2010%20Nov%202010.pdf

Gold ? $7 E&MJ

Copper 400,000 tons $6 Economist

REE ? $3 Excluding China

Total Mining $562 bn 6% of total world funds available for investment, or 4% US GDP

Notes:58 projects more than $1billion in Latin America alone



IRON ORECompany

BaseCapacitymt/yr

%

1 Vale Group Brazil 417.1 19

2 Rio Tinto Group UK 273.7 13

3 BHP Billiton Group Australia 188.5 9

4 ArcelorMittal Group UK 78.9 4

5 Fortescue Metals Group Australia 55.0 3

6 Evrazholding Group Russia 50.4 2

7 Metalloinvest Group Russia 44.7 2

8 AnBen Group China 44.7 2

9 Metinvest Holding Group Ukraine 42.8 2

10 Anglo American Group South Africa 41.1 2

11 LKAB Group Sweden 38.5 2

12 CVG Group Venezuela 37.9 2

13 Cliffs Natural Resources USA 34.6 2

14 NMDC Group India 32.6 1

15 Imidro Group Iran 29.8 1

16 CSN Group Brazil 28.0 1

17 Shougang Beijing Group China 26.5 1

18 US Steel Group USA 23.5 1

19ENRC - Eurasian Natural Resources

Kazakhstan 19.7 1

20 Wuhan Iron & Steel Group China 18.6 1

Total capacity 2177.3

World’s Largest Iron Ore & Copper

Producers, 2010http://www.steelonthenet.com/plant.html

COPPERCompany

Produc’n1000mt/y

% ofWorld

1 Codelco 1,757 11

2 Freeport-McMoRan Copper & Gold Inc

1,441 9

3 BHP Billiton Ltd 1,135 7

4 Xstrata Plc 907 6

5 Rio Tinto Group 701 4

6 Anglo American Plc 645 4

7 Grupo Mexico 598 4

8 Glencore International 542 3

9 KGHM Polska Miedz 426 3

NOTE:The Iron Ore mining industry is more concentrated than the Copper mIning industry, with the top 3 companies having 27% and 41% of the market, respectively


“BREAKDOWNS” OF THE STANDARD MODEL OF THE LAW OF SUPPLY AND DEMAND

“If demand increases and supply remains unchanged, then it leads to higher equilibrium price and quantity, etc.“

• The graph shows a smooth response, which seems to be what every economist envisions (the Marshallian Model), too, BUT the Price vs Quantity curve for minerals tends to be stepped, or “lumpy” (my term).

• The volume of mineral supply is price inelastic over the short term (up to several years) once current production capacity is reached (red curve – vertical sections). (e.g. oil since 2003, copper 1953-7 and 1961-1971))

• This is because it may require a huge investment of time and money (up to $20billion and 25 years, see sidebar) to bring in a new deposit. • The reverse is true: if overcapacity develops, production can not easily be shut-in. Therefore there are long periods (up to 20 years) when mineral prices are unsustainably low (oil from 1986-2002; copper 1975-2004 (PoCu “bubble”, next slide)).

The Economist, 1/24/2112: Oyu Tolgoi Cu/Au Mine, MongoliaDiscovery: 2001Explo Drilling: 2003Cost to 1st production (2013): $6bnExpenditure to 2020: $10bnFull Prod.Rate (2018): 450,000t Cu/yr

(3% of global total)Mine represents 30% Mongolian GDP


Marshallian model of smoothly varying supply and demand. In the case of minerals, once capacity is reached a large price increase is required before additional supply comes on-line.

Mineral Supply Curve

D3Sm


MORE PROBLEMS WITH THE MARSHALLIAN MODEL

1. The largest or richest deposits may not be discovered or developed first. This can cause long periods during which demand is increasing but prices are decreasing: it is often more expensive to shut down a less-efficient mine or refinery than it is to operate it at a loss.

2. The supply of some minerals is completely independent of the demand for that mineral, since it is produced as a by-product of the production of another mineral

Sulfur : by-product of smelting and oil refining Gallium: by-product of zinc mining

Cobalt: by-product of Copper mining in Congo/ZambiaGold: by-product of mining Porphyry Copper deposits

3. Some minerals cannot be produced without the use of other minerals, which may

themselves be rare or in tight supply:Aluminum: requires cryolite, available only from one deposit in GreenlandTitanium: requires magnesium. The major source is China.Oil & Gas: requires Helium3, whose supply is in turn dependent on the manufacture of

hydrogen bombs. refining requires Platinum, available only from Russia, South Africa.


The “LUMPY” SUPPLY CURVE Deposit Types, Prices and Volumes

• Almost all mineral commodities are found in a variety of different types of deposit

• Each type of deposit is characterized by its own average size and grade, etc.• In general, deposit types characterized by high grades are much smaller than

deposit types characterized by low grades• High grade deposits require little capital and

lots of labor, and have low output

• Large, low grade deposits require lots of capital, energy, other resources, and land, but

have low labor costs and low cost in $/ton.

• Low grade deposits are much more environmentally unfriendly than high-grade deposits (amount of land disturbance, permanence of damage, damage to waterways, carbon footprint).

• However, industrial civilization would die if we lost our high-volume low-grade mines.


Output

Grade

Cap

ital

– u

nd

erg

rou

nd

min

es

Capital – Opencast m

ines

Deposit Size

Energy

Energy/ton

Cost/Ton

U/G Mechn

Opencast

MINERAL RESOURCE MINERAL RESOURCE

AVAILABILITYAVAILABILITY

• If a deposit type becomes ex- hausted, then it may require a HUGE & PERMANENT JUMP in price to bring on stream the next, lower-grade, type. • The price may then decline slightly over time as more deposits of the same type are found and efficiencies increase.

• Or, if there is an “exploration rush” and a “mine development bubble”, then prices may decline steeply and for a long time.

• If a mineral’s supply comes from 2 or 3 countries or a few very large deposits, and one country or deposit goes off-line there may be a large but temporary (decade) jump in price until new supplies are found and developed.

“LUMPY” SUPPLY CURVE (cont.)

Source: Singer

Metals Economics Group (December 15, 2011) ”Copper will almost certainly go into surplus for the first time in many years but the lack of significant discoveries and the challenges faced by today’s developers mean that a brief period (3 yrs) of over-supply will be followed by another prolonged period of deficit.”©John Berry Assoc.

Slide 1 of 54

GRADES AND SIZES OF COPPER DEPOSIT TYPES

Time

Transition to Open-Cast Mining

Ore-Grade

$8

5%

4%

3%

1%

2%

0%

0.5%

Ore

-Gra

de

Veins

Skarns

Sedimentary Copper

$3

$4

$5

$6

$7

$0

$1

$2

Pri

ce

in

19

98

$

La

nd

Are

a D

istu

rbe

d/y

r (k

m2

)

1000

0

400

800

Production (106tons/yr)

Price (1998$)

Land Disturbance (km2/yr

COPPER SUPPLY 1900-2030: PRICES, VOLUMES & LAND DISTURBANCE

INVERSE SUPPLY_DEMAND CURVEMANY PORPHYRY COPPERS DISCOVERED


2050

Massive Sulfides

Porphyries

2000

PRICE SHOCK: SED CU DEPOSITS IN FULL PRO-DUCTION, NO NEW DISCOVERIES

FEW NEW PoCu DISCOVERIESINCREASING ENVIRONMENTALISSUES

= Marshallian Model of supply and demand breaks down temporarily


Grade (%, oz/ton, etc.)

Ton

s of

Ore

“Clarke”

101

103

102

106

1012

109

10-210-3 102 (100%)10110-1

Native Cu in Volcanics (1800s)

Veins (to 1920)

Porphyry Coppers(1960-2100?)

Sedimentary Copper (1936-1980)

GRADE & SIZE OF COPPER DEPOSIT TYPESFuture Types

Sea-bed nodules??Mn 27-30 %, Fe 6 %, Ni1.25-1.5 %, Si 5%,

Cu 1-1.4 %, Al 3%), Co 0.2-0.25 %

IOCG??Olympic DamCu 589mt @1.81%U 589mt @ 590g/tAu 589mt @ 3.36gtAg 589mt @ 0.66g/t


Chuqui Pit: 4.3 x 3 x 1 km ©Till Niermann


THE LOG-NORMAL DISTRIBUTION“A continuous probability distribution of a random variable whose logarithm is normally distributed

In a log-normal distribution X, the parameters denoted μ (or x*) and σ, are the mean and standard deviation, respectively, of the variable’s natural logarithm (by definition, the variable’s logarithm is normally distributed), which means X = eμ+σZ with Z a standard normal variable. (from http://en.wikipedia.org/wiki/Log-normal_distribution) Limpert, E., W A Stahel, & M Abbt, Log-normal Distributions across the Sciences: Keys and Clues. Bioscience, 51 (5) 341-352. May 2001

The geometric mean of a log-normal distribution is equal to its median.

VIRTUALLY ALL GEOLOGICAL PHENOMENA ARE LOG-NORMALLY DISTRIBUTED, including SIZES AND GRADES OFMINERAL DEPOSITS. Thus MOST OF THE SUPPLY IS IN A FEW VERY LARGE or VERY HIGH-GRADE OREBODIES.

Most of the World’s Mineral Supply is in A FEW BIG MINESFor the distribution at left, the threshold for the top 2.3% of the deposits is 4 times the Median. This is equivalent to a normal distribution with ¯x=100, σ=150

A log-normal distribution with original scale (a) and with logarithmicscale (b). Areas under the curve, from the median to both sides, correspond to one and two standard deviation ranges of the normal distribution. (from http://stat.ethz.ch/~stahel/lognormal/bioscience.pdf)

http://en.wikipedia.org/wiki/Log-normal_distribution


Laws of Deposit Distribution, Size and Grade:

• Ore grade and tonnage statistical distributions are lognormal, both within deposits and across deposits:

• Most ore is thus in a few very large deposits.

• For Copper - Mines #1: Escondida, Chile: 8% 1.3 Mt 2008 #2: Chuquicamata, Chile: 6% 0.9 Mt 2006 #3: Grasberg, Indon: 4% 0.6 Mt 2006 Bingham Canyon, UT: 265,600 t 2006 Highland Valley, BC: 119,300 t 2008 The top 3 mines produce around 18% of the

world’s copper

• For Copper – Production by country, 2009Chile: 5,941,000 Mt 34% 34%Peru: 1,407,000 Mt 8%USA: 1,302,000 Mt 7%China: 1,171,000 Mt 7%Indonesia: 1,098,000 Mt 6% 62%Australia: 941,000 Mt 5%Russia: 745,000 Mt 4%Zambia: 614,000 Mt 4%Canada: 540,000 Mt 3% Poland: 484,000 Mt 3%______ 81%

Example: Porphyry Copper Deposits. Lognormal Distribution of Ore Deposit Tonnage. These are the largest class of copper deposits, and also contain Au, Ag, and Mo. The vertical lines indicatethe 10th, 50th and 90th percentile of deposits.

©John Berry Assoc.Slide 1 of 54 http://www.copper.org/resources/market_data/pdfs/annual_data.pdf

P90/median = 6.3


SOURCE:Singer, D A. , V I. Berger, and B C. Moring, Porphyry Copper Deposits of the World: Database And Grade and Tonnage Models, 2008. USGS Open-File Report 2008-1155 2008 http://pubs.usgs.gov/of/2008/1155/of2008-1155.pdf

NOTES:• Little Correlation between size of deposit and grade within class• Very small number of deposits with grade > 1% Cu.(~0.3%)• 56 new copper discoveries have been made during the past three decades.• World discoveries of copper peaked in 1996. (http://en.wikipedia.org/wiki/Peak_copper)

DEPOSIT STATISTICS - Porphyry Coppers (cont).


P90/med=1.7


Source: Singer©John Berry Assoc.Slide 1 of 54

DEPOSIT TYPES, GRADES AND TONNAGE: GOLD

1850-1920Viable at $24/oz

1890-1990Viable at $35/oz

1980-PresentViable at $300/oz

Gold is a by-productPrice barely matters

NOTES:

Not shown: Placer Gold 1800-1900. Lowest capital requirement, lowest grades. “Gold Rushes” Since 1980 there has been a modern gold rush for SH/HS Gold in Nevada, but it

takes ~500 of these deposits to replace the output from 1 Witwatersrand deposit, Their average grade is 1/5 that of the Witwatersrand, which is a “Paleoplacer”.


Source: Singer, Donald A, Grade and Tonnage Models for the ANALYSIS OF Nevada’s Mineral Resources. Chapter 11 in ???)


WORLD AND NEVADA GOLD DEPOSIT STATISTICS

Grades: P90/median =2 Tonnage: P90/median = 7


DISTRIBUTION: • Ancient Shields – therefore

Africa, Australia, Brazil, Canada, Baltic Shield

• Very few in USA, Russia, India Euro zone.

• Several in China, Mongolia.

US IMPORTS 2009: $ 113 M.2010: $ 161 M

RARE EARTH ELEMENTS

Unstable Places:•Congo•Gabon•Angola•Mozambique •Mauretania•Tanzania•Namibia •South Africa

Stable Places

USES (2009) - total 1,400 mt.

Chemical catalysts 22%; Cerium, Metallurgical alloys, Jet engines 21%; YttriumPetroleum refining catalysts 14%; Cerium, LanthanumAutomotive catalytic converters 13%; CeriumGlass polishing and ceramics 9%; CeriumREE phosphors for displays, lasers 8%; Yttrium, EuropiumPermanent magnets 7%; Gd, Pr, NeodymiumElectronics 3%; Tm, Gd, PmBatteries: 25 lbs La, Nd, Dy, Tb per Prius Other (Fiber Optics (Er), Radar systems) 3%.


RARE EARTH ELEMENTS

aka “LANTHANIDES”, plus Scandium & Yttrium

GEOLOGY:

REE are found in mineable concentrations mainly in fascinating rocks called Carbonatites.• These are intrusive or, rarely, extrusive igneous rocks consisting of >50 percent carbonate (e.g. calcite)• Carbonatites usually occur as small plugs within zoned alkalic intrusive complexes, or as breccias. • They occur in continental rift-related tectonic settings. • Only one carbonatite volcano is known to have erupted in historical time, Ol Doinyo Lengai volcano in Tanzania. It erupts with the lowest temperature lava in the world, at 500-600 °C. • Nb; Nb–rutile and Nb–ilmenite occur in some deposits. • Monazite (Ce,La,Di)PO4, Bastnaesite (CeF)CO3, and synchysite are the most important source of REE elements. • Much of China’s production is a by-product of iron mining in Inner Mongolia (The Economist, 9/17/2010)

WHAT THEY ARE:

Elements in Group 3 of the Atomic Table, in the 7th Period

LanthanumCeriumPrasodymium Neodymium PromethiumSamarium Europium GadoliniumTerbium Dysprosium Holmium ErbiumThulium Ytterbium Lutetium

MINERALOGY Bastnäsite: US, China Monazite: Rest of world Phosphorites: Florida

REE can also be found in clays and in placer deposits derived from carbonatites



Source: Wagner, M., and F W Wellmer, Global Mineral Resources, Occurrence & Distribution, in Environ. & Engineering Geology, vol. III

The “Electronic Metals” form the very top of the Raw Materials Pyramid (2002 Annual Con-sumption in Tonnes). Data from BGR – databank.(Emphasize highly compressed horizontal scale)

2010: 130,000t

REE Source and Supply

Av. growth rate, 2002-2010 = 6%

RARE EARTH ELEMENTS

=0.000004 x Cu usage

=1/200th Cu usage

MINERAL RESOURCE AVAILABILITY MINERAL RESOURCE AVAILABILITY ©John Berry Assoc.Slide 1 of 54

RARE EARTH ELEMENTSUS Import Sources (2006–09): Rare-earth metals, compounds, etc.:

China, 92%; France, 3%; Japan, 2%; Austria, 1%; Other, 2%.

US Mine ProductionNone, Stockpiled concentrates from Mountain Pass mine, CA, were processed.

The break (red lines) in the cumulative frequency curves suggests the existence of twopopulations (i.e. deposit types).



REE EXPLORATION & DEVELOPMENT “RUSH”

Mining Companies are trying to reopen old mines and develop new supplies:

Hoidas Lake, Canada: could supply about 10% of the $1 billion market for REE in N. America.

Mountain Pass Mine: Molycorp has raised $500 million. Projected to reopen in 2011.

SE Nebraska: Quantum Rare Earth Devel., of Canada, conducting test drilling.

Alaska: Ucore Rare Metals, of Canada, has started drilling for REE.

Kvanefjeld, Greenland:large, recent discovery. Drilling at this site has confirmed significantquantities of black lujavrite, which contains ~1% rare earth oxides (REO).

Vietnam: agreed in 2010 to supply Japan with rare earths from Lai Châu Province.

Mt. Weld, Australia: Ore to be refined at Kuantan, Malaya. Designed to supply 1/3 of world’s demand, exclusive of China. $730 million already spent on it. The Lanthanide concentrate from Mount Weld is “slightly radioactive”: this has caused permitting and political problems.(At Bukit Merah in Perak, a rare-earth mine operated by Mitsubishi, closed in 1992 and left continuing environmental and health concerns).

Estonia (Alum Shale): Tailings from 50 years of uranium, shale and loparite mining at Sillamäe are now ore, and yield 3000 mt, or 2% of world REE production.

Nuclear reprocessing: Nuclear fission produces a full range of elements. Due to the radioactivity hazard, it is unlikely that refining can be done safely and economically.


TITANIUM

PROCESSING:

The Kroll process used to extract titanium from its various ores is laborious and costly: it sacrifices another expensive metal, Magnesium.

Chlorine gas is passed over red-hot rutile or ilmenite in the presence of carbon to make Titanium tetrachloride TiCl4. This is condensed and purified by fractional distillation and then reduced with 800 °C molten magnesium in an argon atmosphere.

Highlighted: other minerals required to produce Titanium.

USES:

• About 95% of titanium ore is refined into titanium dioxide, an intensely white pigment used in paints, paper, toothpaste, and plastics.

• 70% of all titanium metal produced is used in aircraft engines and framesThe SR-71 “Blackbird” pioneered its use in modern military and commercial aircraft.

An estimated 59 tons are used in the Boeing 777, 45 tons in the Boeing 747 • As a strengthening agent in graphite composite fishing rods and golf clubs and bicycles.• Also in STEEL (Ferro-titanium) to reduce grain size and as a deoxidizer

and in aluminium (to refine grain size) and Copper (to harden) alloys, & in Iron, Manganese, Molybdenum, and Vanadium alloys

• Titanium mill products used in industrial, aerospace, recreational, and emerging markets. • Powdered titanium is used in pyrotechnics as a source of bright-burning particles .

http://en.wikipedia.org/wiki/File:Titanium(IV)_oxide.jpg


TITANIUM: MAGNESIUM SUPPLY

In the United States, magnesium is principally obtained by electrolysis of fused magnesium chloride from brines, wells, and sea water.

The United States has traditionally been the major world supplier of this metal, supplying 45% of world production even as recently as 1995. Today, the US market share is at 7%, with a single domestic producer left, US Magnesium, in Utah

As of 2005, China has taken over as the dominant supplier, pegged at 60% world market share, which increased from 4% in 1995. China is almost completely reliant on a different method of obtaining the metal from its ores, the silicothermic Pidgeon process (the reduction of the oxide at high temperatures with silicon). http://en.wikipedia.org/wiki/Magnesium

Note: Both the manufacture of Magnesium and the subsequent manufacture of Titanium require large quantities of energy (electrolysis at high temperatures).

http://en.wikipedia.org/wiki/Magnesium


TITANIUM GEOLOGY AND EXPLORATION

Titanium is mainly mined from beach sands and dunes. There is one such mine in Florida.The continent of Africa accounts for half the world’s supply.

Richards Bay Mines in South Africa: largest single producer of titanium products in the world

25% of world output of titanium feedstocks, (titania slag and rutile)33% of world zircon output, and 25% of high purity pig iron.

Mines dunes along the northern Kwazulu-Natal coast, Extracts heavy mineral concentrates from the sands and rehabilites the dunes.Four mining plants Two lease areas; 17km x 2km “Tisand”, and (i,e. 10.5 miles long and 1 mile deep)

20km x 2km “Zulti North” (i.e. 12.5 miles long and 1 mile deep)

Paraquay Discovery:

Announced by David Lowell, famous porphyry Copper geologist.Indicated and inferred resources are 5.3 billion tons at an ore grade of 78 percentRequires a $500 million investment to get 5 million metric tons a year of ore, says LowellOre concentrate is quoted at $90 to $110 a metric ton depending on the grade, according to Reg Adams, a titanium dioxide researcher at Artikol N.L. in London.

NOTE: With an Ore-grade of 78% this cannot be a fossil beach sand – it is a massive Ilmenite (FeTiO3) deposit .


CHROMIUM

PRODUCTION, 2000: ~4.4 million mt of chromite ore, converted into ~3.3 million tons of ferro-chrome

MARKET VALUE: $2.5 billion

PRODUCTION BY COUNTRY: South Africa 44%India 18% Kazakhstan 16% Zimbabwe 5% Finland 4%Iran 4%BrazIl 2%

GEOLOGY: Found in peridotite from the Earth's mantle, and serpentinite,its metamorphosed equivalent.

It also occurs in layered ultramafic intrusive rocks, of whichthe Bushveld Complex in South Africa and the Great Dyke of Zimbabwe are the largestThe Stillwater igneous complex in Montana also contains significant chromite.

Chromite layers occur as early precipitates from the molten rock:The Merensky Reef of the Bushveld Complex is very thin (<1m) but consists of 90% chromite.



COBALT

SOURCE: http://www.technologyreview.com/energy/38458/

PRODUCTION by country, 2009:

DRCongo: 44,000 mt 50% – processed in ChinaZambia: 11,400 mt 13%China: 6,200 mt 7%

Russia: 6,200 mt 7%Norway: Canada:

World 88,000 mt

Recycling – 20% of US supply

PRODUCTION by Company, 2009:

Glencore Ltd., Switzerland: 33%

Note: DR Congo and Zambia supply is a by-product or co-product(depending on the ratio of Copper price to Cobalt price) of Copper Mining.


CONCLUSIONS - 1

1. The Supply Curve for Mineral Commodities is “Lumpy” because

• Mineral Deposit Distribution is Log-Normal – a few large deposits control supply• Capital Requirements are huge (billions to tens of billions)• Time required to bring in new capacity is measured in decades• Exploration and development are subject to “Bubbles” (PoCu, EpiGold, REE)

2. Population and economic growth is causing the exploitation of larger and larger deposits of lower and lower grade, causing

• increased “lumpiness” of supply (capital, time, societal constraints)• increased political risk (“Lumpy” distribution of deposits)• exponentially increasing environmental damage

3. Technology is leading to the use of more and more exotic minerals, which causes:

• increased refining cost (refining is generally complex)• increased co-dependence between minerals (rare minerals required)• increased environmental costs (low grades, noxious effluents) • increased political risk

4. Technology has also led to decreasing mineral costs in general, but has done little or nothing to lower environmental costs.


There is no immediate threat of exhaustion of any important commodity

There is no (adequate?) economic theory of the relationship between price, demand and supply in a situation of “Lumpy Supply”, therefore companies, customers and countries are unable to make good plans for mineral resource investment and development.

Therefore, there will be temporary price spikes, which could cause wars, due to:• Political supply interruptions• Natural disasters destroying capacity• Exhaustion of deposit types and the switch to a lower grade type.

In the long-term, prices are dependant on a race between mining technology and resource depletion. Since 1800 technology has been winning the race, but as resource grades approach the Clarke, this becomes more difficult, and raw material prices may rise significantly in comparison to other economic inputs (wages, capital).

Environmental consequencies per year, dD/dt, are a multiplicative product of the growth in world population (dP/dt) and the growth in in average living standards (gross world

product/person – dW/dt), divided by the change in average ore grades, which is <1.

dD/dt = dP/dt * dW/dt * (dG/dt)-1

All of these are exponential functions, so the environmental impacts of mining are spiralling upward with time. This causes more and more antagonism to mining, and this could be a serious problem for civilization if not addressed.

The solutions: radically fewer people; lowered per person usage; recycle, recycle, recycle.

CONCLUSIONS - 2

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Mineral Resources