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| Syllabus | |
| 1 History of Mining | |
| 2 Using Maps | |
| 3 Geological Exploration | |
| 4 Geophysical Exploration | |
| 5 Geochemical Exploration | |
| 6 Secondary Exploration | |
| 7 Open Pit Mining | |
| 8 *****Mid Term***** | |
| 9 Strip Mining & Placer Mining | |
| 10 Underground Mining | |
| 11 Permits and Laws | |
| 12 Environ/Health/Safety | |
| 13 Jobs and Tools | |
| 14 Mineral Economics | |
| 15 Reclamation | |
| 16**** Final Exam***** | |
| Resources | |
| Staff E-mail | |
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Lesson 14 Objectives:
Mineral commodities are normally separated into three generic classes- metals, nonmetals, and energy minerals including oil and gas - and encompass a large number of different substances. Some are extracted from large open pits, others are dug out of underground mines or pumped from deep well, and still others are processed for the sea. Extraction and processing can be relatively uncomplicated and inexpensive, though in most instances, modern sophisticated technology is required and costs are high. Some mineral commodities are produced mainly as by products of other commodities.Some are recovered in large quantities from new and old scrap. Some are found only in a few locations and traded world wide; others are produced in many different countries. Some are sold by numerous firms at fluctuating prices determined on competitive commodity exchanges, while others are produced by only a few firms and sold at a table producer prices. Demand on Minerals Minerals are in demand because they posses certain qualities or attributes, such as strength and resistance to corrosion. These are seldom final goods, but are essential to the manufacturing of final consumer and producer goods. Demand is set for the attributes of the minerals rather than the a mineral commodities market and therefore the minerals can be substituted for others. There are thousands of factors that affect mineral demand.- cold weather in the northeast of the United States, World Bank loan to Brazil to build a dam for hydroelectric power station.,etc. One can not determine all the factors but one needs to decide which features are of most importance. The answer about which factors to consider must look at time and purpose also. The determinants often considered in mineral demand studies are;
The Demand Curve The demand for mineral commodities is responsive to business cycle fluctuations changes. When the economy is healthy, dollars are spent on cars, homes, refrigerators, new machinery, and transportation, hence the mineral demand is greater. The mineral demand grows and declines in direct relation to the economy. In analyzing mineral markets, we at times focus on one particular variable and try to assess how it alone affects demand. For example, if theUS economy is expected to grow by 4% over the coming year, aluminum firms need to know how this will alter their demand. Another variable of special interest is price, particularly a commodity's own price. The demand curve shows how much of a commodity can be sold at various prices over a year or some other time interval, on the assumption that income, the prices of substitutes, and other determinants of demand remain fixed at certain designated prices.( SME Mining Engineering Handbook, Tilton, John.pg 48) Intuitively, one would expect demand to fall as the price rises. There can be exceptions, when the demand curve remains vertical implying that the consumers want a particular amount of the commodity, no more , and no more less, regardless of its price. The horizontal demand curve implies that above a particular price there is no demand and below that price the demand is insatiable. The upward slope on the demand curve implies that consumers increase their demand as price goes up. The demand curve does not indicate how the effect of price change varies with respect to time. Rather, it assumes, one specific adjustment period. Economists typically distinguish between (1) the short run, a period sufficient for firms to adjust output by altering their labor, raw material, and other variable inputs, and 2) the long run, a period long enough for firms to vary their fixed inputs, such as plant and equipment, as well as variable inputs. (SME Mining Engineering Handbook, Tilton, John.pg 49) In the mineral markets, it is useful at time to consider what we will call the very long run, which provides time not only for all inputs to change, but also for the development and introduction of any new technology induced by price changes. At the other end of the spectrum, the immediate run is needed in addressing certain mineral issues. It provides for adjustment that firms find it infeasible to alter their output.. Only changes in inventory are possible. There is no one answer to all situations. New capacities for some commodities can be built more quickly that others. The immediate run would normally last for more than several months and the short run for more than several years. The shift from long run to very long run is more difficult to pin down. Some new technology induced by a price change may occur very quickly but other developments may take decades.( SME Mining Engineering Handbook, Tilton, John.pg 50) Metal Supply Many mineral commodities, such as oil, coal, bauxite and iron, are typically extracted as single or individual products. Others are produced as joint products. For instance gold is often found in copper deposits and nickel sulfide mines may produce copper as well. Main products, coproducts, or byproducts may be recovered where joint production occurs. The main product is very important and economic success depends upon it . The byproduct does not influence the output of the mine. When the prices of two or more joint products affect the output they are coproducts. Once processed and consumed in the production of final goods, some mineral commodities, specifically metals, are often recovered and reused. Most of the gold ever produced is still in use. Recycling is called secondary production, or because they are inferior but because the scrap they are made from is not the original or primary source of the product. Individual Products The rise of the price of a mineral commodity normally increase its supply, while a fall in price reduces its supply. It takes time for mines to respond to the supply prices as new mines may need to be developed or build processing capacities. It can take up to 7 years to fully respond and be in production. Companies can operate as long as they are recovering their out of pocket expenses but as soon as the processing plants and big equipment have to be replaced the cease production. Cost of labor and other inputs used in extraction affect profitability and then in turn, supply. Advances in technology that reduce the costs of extraction or processing also affect the mineral supply. More powerful blasting techniques, bigger haul trucks and strong shovels have helped keep the commodities at an even or lower price. Strikes, mine accidents, and political uprisings can interrupt production or transportation of the supply. Environmental regulations can increase costs and reduce supply. Some international companies require nationals be the managers or that operational supplies need to be purchased within that country and this can reduce efficiency which increases costs. Government can subsidize mines and increase the supply also. When a few countries or firms control most of a minerals production, or in the case of oil, a cartel or producer's price is developed. This can alter the nature of the supply. Often state owned or government owned mining companies are less concerned with a profit and more concerned with maintaining employment and other public goals.
When the supply curve is upward, the prices increase with demand. When the supply curve is horizontal, it indicates the producers are willing to produce as much as they have at a particular price and nothing below that price. When the supply curve is horizontal it indicates that the producers are willing to supply a specified amount, no more, no less ,no matter the price. A downward slope implies the producer will offer more to the market the lower the price. State owned mines may continue to operate when they are at full capacity even if it would be more profitable to reduce output, rather than lay off employees. Some may even try to increase production when the price falls if they feel responsible for maintaining their country's foreign exchange earnings. ( SME Mining Engineering Handbook, Tilton, John.pg 52)
In the immediate run, the companies don't have the time to alter their rate of production. the supply cannot exceed the production, or inventories. If the demand is weak, they can build up their inventories for sale at as later time. Firms in the producer markets quote the price they are prepared to sell their product. These markets, dominated by a few major sellers, have relatively stable prices, though when the demand is weak, actual prices may fall below quoted prices as a result of discounting and other concessions. Steel, magnesium and aluminum are a few of the metals sold at producers markets. In competitive markets, price is determined by the interplay of supply and demand and is free to fluctuate as much as necessary to clear the marketplace. In the competitive market price is often set by the London Metal Exchange ( LME) or the New York Commodity Exchange ( Comex). tungsten, silver, andgold are metals sold in competitive markets. Make note: Producers are price takers and have no influence on the going market price. They can control their own supply though. In the competitive market curve, the very low prices indicate that no supply is forthcoming as production is withheld from the market in anticipation of higher prices in the future. At some point the price rises, supply begins to come onto the market. In the producer's market, the firms faithfully adhere to the producer price. If this is not the case, if some or all of the firms sell at a discount, the curve drops to lower quantities. In the short run, producers have a chance to change the output but not the capacity. In the long run, new mines can be developed, wells drilled, and processing facilities built. Firms can also expand the capacity of existing operations. In the very long run even the constraints imposed by the existing deposits no longer holds, as firms have time to conduct exploration and newer technologies can allow for new types of deposits to be explored. Byproducts and Coproducts Some metals such as silver, gold, and molybdenum are main products at some mines and coproducts at other mines, and byproducts at still other mines. The price of gold determines if the metal is to be the main product or the byproduct. It is sometimes assumed that byproducts are free goods. Coproducts Byproducts Secondary Production
Total Supply Individual products, main products, byproducts, and secondary from old and new scrap are all potential contributors to a mineral commodities total supply. Improving the efficiency of production lowers the amount of new scraps but does not lower the total supply potential. Market Instability Mineral markets are known for their feast -or-famine nature. The United Nations Conference on Trade and Development has pushed for an integrated Program for Commodities for the benefit of producers in developing countries and to stabilize the commodity markets. The program has had its difficulties but it reflects a concern on the part of producing and consuming countries over the instability that plagues mineral markets. A highly concentrated market structure where one or a few major producers dominate the market and set a producer price does not however, eliminate market instability . This is because the following three characteristics of short run metal supply and demand, which are responsible for the market instability, are present no matter how concentrated the market. First , in a producers market , the commoditity curve ends when they no longer have supply to meet the demand. Second, the demand also tends to be price inelastic in the short run. The slope of the curve will be very steep in this case. Third, the demand is highly elastic to changes in the national income over the business cycle. Construction , transportation, capital equipment and consumer durables are sensitive to the fluctuations in the business cycle. During a recession, these four sectors suffer far more than the economy as a whole. During a boom, their sales soar. In a producers market, the shift in demand causes quantity sold and the price move together on the same curve. When one is down so is the other, and this causes high revenues and profits to be highly volatile. In a producers market, if all firms adhere to one producer price, there is no price instability. In general, the price instability will be minimal. Commodities Of approximately 100 non fuel mineral commodities produced worldwide, 70 are mined in the United States. Domestic production represents many thousands of operators, ranging from small sand and gravel producers, to very large but few multinational aluminum producers of copper, steel, aluminum, and other metals and chemicals. For some commodities, there is little or no US production. Stone was probably the first mineral used by man. From the stone, man was able to produce, tools, shelter and weapons. It has progressed on to using minerals in their natural form such as copper and gold. As we discussed in the history of mining Chapter 1, when man began the process of smelting, weapons and shelter began to change its value and form. Cartel action of certain world petroleum producers caused energy price increases that profoundly affected the world economy, including minerals productions and use. As the price of energy increased, the industrial economy underwent structure change to lower manufacturing costs and conserve energy. A good example is when the auto makers created compact cars to meet mandated fuel efficiency standards, making increased use of lighter minerals such as aluminum, magnesium and plastics. In the early 1970's, growth in the mineral industry contributed to the economy. (Hodel 1986). However in the mid 1970's the recession that followed the petroleum embargo and sharp energy price increases affected the mineral industry, especially in the the metals sector. Employment and productions in the mineral industry fell. Concern for the environment became a major factor of the minerals industry during this decade. The high cost of compliance, in addition to the increased cost of energy made some facilities obsolete and forced closures. (SME Mining Engineering Handbook, Cammarota Jr., Anthony .pg 63) In the 1980's, mineral production, prices, and employment fell, especially in the metals sector. In the economic rebound that followed, the minerals industry recovered better than the economy. Foreign competition in metal increased. In addition to the higher energy cost, rising environmental regulation costs, and the recession, the US minerals industry has been affected by high labor cost, declining ore grade and reserves of some minerals, and relative value of the US dollar vs. other world currencies and the trend of the developing countries to process their own ores into industrial products and finished goods. Commodities that are related to manufacturing and the steel industry or that have been impacted by the environmental constraints tend to show a decline in demand. The up trend in demand has been in commodities that have a wide variety of uses. Offshore exploration may augment the supply of minerals. The United States declared an Exclusive Economic Zone (EEZ) that extends 200 nautical miles offshore. Exploration has uncovered many mineral occurrences including sand and gravel which are low-value materials. These marine deposits may be in a good competitive position because of land restrictions that limit on shore development and the characteristics of marine sand. Base Metals- usually the source of a number of byproduct metals Copper Lead Zinc Tin Precious Metals- Silver and Gold were considered monetary metals and the prices were controlled or manipulated by the government. They represent wealth. Silver Gold Platinum-group Metals- platinum, palladium, rhodium, iridium, ruthenium, osmium Ferrous Metals - Iron and steel are the fundamental metals of every modern industrial country in the world Manganese Chromium Nickel Cobalt Molybdenum Columbium Tantalum Tungsten Vanadium Silicon Light Metals - In the age of energy conservation and aerospace, light metals have achieved a prominent place in our industrial society. These metals are relatively new in their industrial applications, having been isolated in elemental form less than 200 years ago. Titanium Aluminum Magnesium Beryllium Construction Materials- For the most part these are industrial minerals. They are high volume and low-unit-value materials that are usually mined and consumed locally. Sand and Gravel Stone Cement Gypsum Asbestos Agricultural Commodities- Agricultural minerals, or fertilizers, are bulk commodities with world wide trade patterns. No living organism can exist without phosphorus, potassium, or nitrogen. Phosphorous must be present in adequate amounts in living cells for cell division to take place. Phosphate Potash Nitrogen Byproduct Commodities-These metals are produced as a byproduct of major commodities and therefore their production and supply do not necessarily reflect demand. Gallium Selenium Germanium indium Advanced Materials-Those materials developed over the last thirty years or so, and being developed at present, that exhibit greater strength, higher strength, density ratios, greater hardness, and or one or more superior thermal, electrical, optical or chemical properties when compared to traditional properties. Heat resistant, wear resistant, or corrosion resistant
Low density- greater strength
Stronger lighter weight, more heat resistant
Electronic, optical, and magnetic materials
Resources Economic Overview of the Nevada Mining
Industry Glossary Main product-
The product that alone makes the mine viable. Byproduct- a product that is unimportant and has no influence on the viability of the mine. Producer's Market-Firms quote the price they are prepared to sell their their product. Competitive Market- The price is determined by the interplay of supply and demand and is free to fluctuate as much as necessary to clear the marketplace |
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