Mineral resource economics: uses,

stakes and public policies

Mastère IGE – Mines ParisTech
Florian Fizaine
Main parts of the lesson

Introduction

A/ Which resource? For which uses?

B/ Stakes related to mineral resources management
C/ Levers for action: main measures

Case study: lithium

Salar d’Atacama
Main parts of the lesson

Introduction

 Economics and natural ressources : an old story

 Key indicators of mining activity
Introduction : Economics and Resources

Why do we study both economics and natural ressources?

 These two topics are linked for a long time

 « First » economists address the issue of natural resources

 Renewed interest for environment and natural ressources since 1970’s

Introduction : Economics and Resources
Economists that study natural resources:
 Physiocracy (Quesnay – Turgot ) – middle of 18th century
Agriculture is the only sector that produces wealth
Economic table of nations – ancestor of national account system

 A. Smith (1776, the wealth of nations)

Countries should specialised themselves where they are the best – absolute advantage
The most efficient mine sets the market price of resource

 D. Ricardo (1817, Principles of Political Economy and Taxation)

Countries should specialised where they comparatively the most efficient – comparative advantage
Marginal mine sets the market price of resource
The productivity gap between different mines explains differential/Ricardian rents
Introduction : Economics and Resources
The ricardian rent
Introduction : Economics and Resources
 W. S. Jevons (The coal question, 1865)
A better natural resource use efficiency does not lead to a diminushing consumption of this resource.
Rebond effect

 J. S. Mill (1848), Gray (1914) et Hotelling (1931)

The depletion caracteristic of non renewable resources lead to scarcity rents
Even at zero extraction costs and competitive markets, these resources generate rents
Due to limited extractable quantities (hotelling rents)

 Do not confuse 3 type of rents:

Ricardian rents due to productivity gap between mines
Hotelling rents due to the depletable caracterist of one resource over time
Monopoly rents due to market power
Introduction : Key indicators
 Key indicators related to mining

 Mining sector carries 17 800 millions

cubic meters per year of rocks
 Half of natural erosion!

 10% of global electricty and 8% of primary

energy are devoted the mining sector

 15 millions jobs (of which 13 millions in

artisanal and small mining)

 Less than 1% of global land use

Source : Géosciences, 2005

Introduction : Key indicators
 Consumption dynamics of natural ressources 7 000 000
6 000 000

Kt of ressources
5 000 000
Ore and industrial minerals 4 000 000
3 000 000
210 millions tons in 1900
2 000 000
6.5 billions tons in 2009 1 000 000
0
1900 1920 1940 1960 1980 2000
Construction minerals
Ores and industrial minerals
600 millions tons in 1900
28 billions in 2009 30 000 000

25 000 000

Kt of ressources
20 000 000
Copper
15 000 000
400 tons in 2000 BC
10 000 000
15,000 tonnes en 50 BC
5 000 000
16,000 tonnes in 1800 0
18 millions tons in 2015 1900 1920 1940 1960 1980 2000

Construction minerals

Source : Data from Krausmann et al. (2009)

Introduction : Key indicators
 Minor metals versus
major metals (market size) 1000000
Platine
100000
Ex : tantalum $100 millions Or
10000
Aluminium $100 billions

Price per kg
Argent
1000
Pétrole : $2 000 billions Molybdène Nickel
100 Cuivre
10
Zinc Aluminium
 Main difference between 1 Manganèse
Fer

precious and base metals is

0,1
price
0,01

Production en tonnes
1000000
 Larger metal markets are 100000 Platine Or
comparatively smaller than 10000
other larger natural 1000 Argent
Price per kg

resources markets 100 Nickel Cuivre Pétrole

10 Aluminium Gaz
Zinc
1 Manganèse
riz
0,1 Fer ciment
0,01 Charbon
0,001
Eau
0,0001
Production in tons
Source : Fizaine (2015)
Introduction : Key indicators
Market structure

 Large gap between small

firms (juniors) and large
global mining firms

 Small firms are specialised

on specific sectors or
commodity

Source : IMCC (2012)

Introduction : Key indicators
Market structure

 Capitalisation of global mining firms is highly sensitive to evolution of mineral resource price
 12 firms of the top40 are Chinese, 19 from emerging countries

Source :
Source : Fizaine (2015)
Introduction : Key indicators
 Rents from natural ressources represent 2- 90% 7,00%
7% share of global GDP 80% 6,00%
70%
 Most of these rents come from fossil fuels 60%
5,00%

 Rents from metals represents less than 1% of 50% 4,00%

global GDP and 5-10% of natural resource 40% 3,00%

rents 30%
2,00%
20%
10% 1,00%

 ! 1% of GDP in 2008 => 500 billions dollars 0% 0,00%

1970
1972
1974
1976
1978
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
Pétrole
Oil
Gaz naturel gas
Natural
Coal
Charbon
All metals
Total métaux
Share
Part ofressources
rentes natural naturelles
resourcedans
rents
le PIBin GDP
Share
Part ofmétaux
rentes metal dans
rents in GDP
le PIB

Source : Fizaine (2014)

Introduction : Key indicators
 Trade in natural resources remains globally
dominated by the exchange of fossil fuels
 And world trade remains largely devoted to the
exchange of manufactured goods
 Mining products have stabilized their share in
international trade since 1980 (3-4%), which
means that they are increasing at about the same
rate as international trade.
 The globalization of resources has been driven by
population growth, colonization, industrialization
and the rise of developing countries, lower
transport costs and market liberalization.

Source : OMC (2010)

Introduction : Key indicators
Causes of the global trade increase:
 Trade policies and customs barriers
 Radical innovation (propeller,
steamboat, container, size effect)
 Economies of scale

The provision of natural resources for

development becomes optional

Source : Novy et al (2008)

Introduction : Key indicators
 The mining industry generates significant
material flows but occupies a variable
place according to the issues studied
 Mineral consumption generates significant
flows to be managed, particularly in the
recycling industry.
 Another major concern is the human
toxicity of non-ferrous metal flows
 Land use by mining or greenhouse gas
emissions is of secondary importance

Source : UNEP (2010)