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Draft: December 17, 2002

CREATING WEALTH AND COMPETITIVENESS IN MINING
by John E. Tilton1

The ability of companies and countries to mine copper and other mineral commodities competitively and in the process to generate new wealth depends on their mineral endowment. Chile, for example, produces and exports copper because it is well endowed with high-quality, low-cost deposits. This production creates wealth that benefits mining companies and their stockholders, the government, local communities, as well as copper consumers around the world. The widespread perception that mineral endowment must largely determine competitiveness, or what economists call comparative advantage, must be true at any particularly moment. Countries with abundant reserves must be competitive. This follows from the definition of reserves—the quantity of a mineral commodity found in discovered deposits that are profitable to exploit under current conditions. As a result, it is a tautology and not particularly interesting. The important question is what causes reserves to change over time, producing in the process new wealth and shifts in competitiveness?

William J. Coulter Professor of Mineral Economics at the Colorado School of Mines and at the time some of the research for this article was conducted, Visiting Scholar at the Centro de Mineria of the Pontificia Universidad Catolica in Chile. I am grateful to Rio Tinto plc for kindly providing access to its Mine Information System. This paper is an updated and expanded version of Tilton (2000) and Tilton (2001b). It was prepared for the CRU World Copper Conference: Costs and Capital—Improving Performance in the Copper Industry, held March 19-21, 2002, in Santiago, Chile.

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Draft: December 17, 2002

Three possible answers come readily to mind. First, as mining occurs and the best (lowest cost) deposits are depleted, mineral commodity prices may rise, permitting the profitable exploitation of the next best set of deposits. Second, the discovery of previously unknown deposits may augment reserves. Third, innovation and new technology may create reserves by allowing previously known but uneconomic deposits to be exploited profitably. The prevailing or traditional view of competitiveness and wealth creation focuses on the first two possible explanations and for the most part ignores the third. What we can call the alternative view, on the other hand, focuses on the third explanation, and claims it is as important or more important than the first two, especially over the longer term. We know that the first explanation at least in recent years is of little relevance, because real production costs and prices for copper as well as many other mineral commodities have fallen, not risen. While exploration and the discovery of previously unknown deposits are important, are they as important as the innovation and new technologies that permit the profitable mining of previously known but uneconomic resources? Studies that several colleagues and I have conducted over the past few years on the causes and consequences of labor productivity growth in the copper mining industries of the United States and Chile spotlight the importance of innovation and new technology.2 They provide considerable support for the alternative view of competitiveness and wealth in mining.

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See Tilton and Landsberg (1999), Aydin and Tilton (2000), Tilton (2000), Garcia and others (2000), Tilton (2001a), Tilton (2001b), and Garcia and others (2001).

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2002 For many closely associated with the mining industry. 3 . In the world. for examples. This view is intuitively quite appealing. and over time has accumulated quite a large following. it suggests that other determinants of competitiveness and wealth creation are insignificant compared to geologic endowment. First. are of little or no importance. It also has a number of important implications. as they see it. as well as for a few observers outside the industry. the overriding determinant of competitiveness and wealth creation in mining is the geological legacy a country enjoys along with the exploration efforts undertaken to uncover that legacy. then the evidence from the United States and Chile regarding innovation and new technology. countries that discover new deposits to replace those being depleted maintain their competitiveness. Countries that fail to do so lose their competitiveness and the wealth flowing from mining. Important and quite different policy implications flow from the traditional and alternative views for both mining companies and mineral producing countries.3 the importance of innovation and new technology has long been recognized. Adelman (1970) and Trocki (1990). government officials and the general public consider mining to be a mature industry with relatively stagnant technology. For the most part. 3 See.Draft: December 17. The Traditional View According to the traditional view. and finally the implications of the alternative view. in particular. The implications of the traditional view are considered next. however. The generation and diffusion of new technology along with other innovations.

Second. Companies and countries with the best deposits are the most competitive and generate the most wealth. Fourth. companies. quite different rationales for this position. Once these are gone. the depletion of the best deposits and the exploitation of the best exploration sites will eventually encourage mining companies to search abroad for new reserves. Third. companies must replace their depleting reserves by new discoveries or by acquiring new deposits in other ways. however. there is little managers and workers can do to sustain or improve the competitiveness of any particular mine. The first of these explanations flies in the face of considerable empirical evidence. the ability of governments to promote the competitiveness of their mining industries is similarly limited. and countries with few opportunities to acquire a cost advantage over other producers. the traditional view sees competitiveness and wealth creation in mining as largely a transitory gift of nature. 2002 There are two. and that the few changes that do take place do not greatly affected costs. The second recognizes that advances in technology occur. Through taxation and other means. Once their deposits are exhausted. New discoveries can also from time to time cause a change in the distribution of reserves. To remain competitive over the longer run. and yet in many circles is still widely accepted. but argues they diffuse quickly around the world providing particular mines. competitiveness will shift to those companies and countries with the next best set of deposits. it will close. A mine can produce only so long as it has reserves. governments can acquire some of the wealth 4 . The first contends that the technology of mining is mature and stagnant. While policies that encourage domestic exploration may delay the inevitable.Draft: December 17.

The media as well lamented the industry’s fortunes. 5 . output declined by nearly a third. What they cannot do is prevent the depletion of their mineral deposits and the loss of competitiveness that follows. thereby ensuring that future generations too benefit from the country’s mineral wealth even after it is gone. and other companies left the industry.Draft: December 17. 2002 created from their domestic mineral resources and invest it. their request was denied. Between 1970 and 1985. By the late 1970s and early 1980s. claiming their survival was at stake. very few mines were earning a profit. Business Week in the mid1980s ran a cover story declaring the death of mining in the United States. Arco/Anaconda. and its share of Western world production fell from 30 to 17 percent. They sold their mines to other companies. or simply shut them down. U. Louisiana Land and Exploration. spun them off as independent companies. however. Cities Service. and many were not even covering their variable or cash costs. its industry was in trouble. On both occasions. six had closed by 1990 and another five had sharply cut back production. As a result. copper producers petitioned the government for protection from imports in 1978 and 1984. Cash costs declined but not enough to keep pace with the drop in market price. Amoco Minerals. Employment dropped by 70 percent. Of the 24 significant copper mines operating in the United States in 1975.S. The United States Throughout much of the 20th century the United States mined more copper than any other country.

Innovative agreements with labor increased the flexibility in 6 .S. Bingham Canyon undertook a $400 million modernization program that helped the mine quadrupled its labor productivity. and the depreciation of the dollar. Imports were down. By 1995 output was 72 percent above its 1985 level. one would do six years later. however. Labor productivity continued to rise after 1986. though at a more modest pace. One particularly important development was the increasing use of the solvent extraction electrowinning (SX-EW) process. and profits up as costs continued to fall while prices recovered. As Figure 1 shows. During the 1980s. Western world market share recovered to 23 percent. an increase in by-product revenues. a rise in copper prices. staging one of the most spectacular turnarounds in modern industrial history. energy. and even 21 percent above its 1970 level. which greatly reduced both the operating and capital costs of producing copper. labor productivity more than doubled between 1980 and 1986.Draft: December 17. A better understanding of rock mechanics allowed new mine plans that reduced stripping ratios and so diminished the amount of waste generated per ton of ore. and other factors available per worker. Even more important. and Competitiveness Many factors contributed to the recovery of the U. Mineral Endowment. including a decline in real wages. for example. copper mining industry. was the introduction of new technologies and other innovations. So where two workers were needed in 1980. 2002 Yet the industry did survive. Part of this surge in labor productivity can be attributed to an increase in the amount of capital. Among these. Innovation. however. and by 2001 was three times its 1980 level. a dramatic improvement in labor productivity was more equal than others.

68 percent in 1984—as presumably some mines with poorer deposits closed and other mines turned to higher-grade ores to reduce their costs during this particularly difficult period. while Bingham Canyon increased its production by 50 percent. industry came about because existing mines recovered their competitiveness. and over the entire 1971-1993 period that Tilton and Landsberg (1999.78 percent to 0. under five percent. however.S. We also know that shifts in mine location did not play a dominant role.S. Trends in copper head grades do show a rise in the early 1980s—from 0. 4. including Flambeau and Cyprus Tohono. In particular. in-pit mobile crushers with conveyor belts. The new mines brought on stream during the 1975-1990 period.60 percent. One looks in vain. larger trucks and shovels. Ray. 7 . bigger drills.59 percent in 1980 to 0. 2002 work rules and manning assignments.S. Better ore handling systems. we would expect to find behind the revival of the U. for much evidence of either. Morenci. So the revival of the U. Relying on the traditional view of competitiveness and wealth creation in mining.5) examine grades drop considerably. Chino. and Tyrone more than doubled their output. contributed very little to the country’s total output. the rise in head grades was short lived.Draft: December 17. from 0. and the computerization of truck schedules and real time process controls in mills are examples of other new technologies and innovations that the U. more cost-effective explosives. industry introduced in its revival efforts. However. copper mining industry an improvement in the mineral endowment being exploited—either from raising the cutoff grade at existing mines or from shifting production from high cost to low cost mines. Bagdad. Fig.

industry was largely the result of productivity improvements and cost reductions flowing from a shift in output away from poor high-cost deposits to the good deposits at these mines. we find that the shift in mine location accounted for only a quarter of the rise in industry productivity (Aydin and Tilton.Draft: December 17. 2000).S. industry. Earlier we noted that proponents of the traditional view claim that innovation and new technology have little or no influence on competitiveness because new technology in the global economy diffuses rapidly around the world. there is little or no difference in the time at which a new and more efficient shovel or explosive is available to mines in the United States. or elsewhere. This means that three-quarters of the total increase came about as a result of improvements in labor productivity at individual mines. Technology Diffusion and Competitiveness Our research on the U. For example. it is argued.S. Chile. So a cost advantage based on new technology either will not arise at all or will be extremely short lived. when we measure how much of the rise in labor productivity for the industry as a whole was the result of shifts in output from low to high productivity mines and how much was the result of individual mines increasing their productivity. copper mining industry challenges the traditional view of competitiveness and wealth creation in yet another way. where mineral endowments presumably changed little. 2002 These substantial increases raise the possibility that the revival of the U. However. Zambia. These findings suggest that changes in mineral endowment were of secondary importance compared to innovative activity in the recovery of the U.S. 8 .

As the solvent extraction electrowinning (SX-EW) process illustrates. reducing costs. is based on two implicit assumptions. these developments will certainly continue into the future. Since that time literally hundreds of innovations have improved the process—enhancing the quality of the copper produced. and extending the weather and other conditions for successful operation. The sulfur emission recovered from smelting copper provides a low cost source for the diluted sulfuric acid used in leaching step of SX-EW processing. however. increasing the range of treatable copper bearing minerals. Moreover. the SX-EW process reduces the costs of some producers much more than others. Ranchers Exploration and Development Company undertook the first commercial production of copper using the SX-EW process in 1968 at its Bluebird Mine in Arizona. neither of these assumptions may hold. The second is that the effects on all producers are neutral in the sense the impact on costs is the same. Specifically. 9 . In addition. The SX-EW process is particularly suited to recover the copper from such low-grade ores. This means that companies and countries that stay at the forefront of these efforts can indefinitely enjoy a cost advantage over their rivals thanks to technology. • Companies and countries where stringent environmental regulations are enforced. The first is that a new process or technique is the result of but one innovation.Draft: December 17. as these producers over the years have accumulated substantial waste piles of oxide copper minerals. it favors: • Companies and countries that historically have been important copper producers. 2002 This conclusion.

there are thousand of small innovations that can improve the performance of individual mines. it has its own innovative opportunities. Although small innovations may individually have little influence on competitiveness and wealth creation. silver. While some of these opportunities extend over several or even many mines. 10 . • Companies and countries with substantial copper reserves that contain few byproducts of value.Draft: December 17. So far the SX-EW process has not been able to recover economically gold. This explains why these two countries account for such a large share of the world’s total SX-EW copper production. and why in turn the SX-EW process accounts for such a large share of their total copper output. many are useful only for a given mine with its unique situation. These conditions exist particularly in the United States and Chile. when aggregated they can be of great importance. As every mine is unique. These innovations do not diffuse rapidly around the world. and other valuable by-products often found in copper ores. molybdenum. 2002 • Companies and countries possessing copper deposits in arid regions. The SX-EW process is a particularly dramatic example of the impact on competitiveness and wealth creation that innovation and new technology can have. The leaching step of the SX-EW process is difficult to control where precipitation is heavy. At the other end of the spectrum.

while others shut down? Table 1 separates the 24 significant copper mines operating in the United States in 1975 into three groups. simple econometric models indicate that the ability of mines to reduce their cash costs and to increase their labor productivity after 1975 is actually more important in explaining survival than their starting position in 1975 (Tilton.Draft: December 17. The three contracting mines survived as significant producers. The 11 non-surviving mines either stopped production completely or cut back to the point where they were no longer significant producers. This again suggests that innovative activity played an important role in the recovery of the U. have lower cash costs in 1975 and higher labor productivity than the contracting mines. The 10 expanding mines managed not only to survive but to increase their output over the following 15 difficult years. but suffered a loss in output. copper industry. 2002 Labor Productivity. The non-surviving mines. for example. Costs.S. Table 2 indicates that the expanding mines produced more and held substantially larger reserves 11 . though there are anomalies. Even more surprising. Table 2 provides some support for these expectations. and Mine Survival The collapse and revival of the U.S. 2001a). and just the opposite to hold for the non-surviving mines. copper mining industry over the 1970-1995 period raises yet another intriguing issue: Why did some mines manage to survive and even to expand their output over this period. Economic theory and common sense leads us to expect the expanding mines to have the lowest cash costs and the highest labor productivity at the start of the period. Why were certain mines more successful than others in fostering productivity growth and in reducing cash costs? While a host of factors were likely involved.

In Figure 2. While the country is a major producer. As the hours worked per copper company employee in Chile fell during 4 12 . Given the greater number of jobs at risk. labor productivity increased in Chile during the 1980s. One would expect exploration and the development of new deposits to play a much more important role in competitiveness and wealth creation in the latter countries. to what extent innovative activity as opposed to the development of new mines drove the increase. Similarly. And if so. As Figure 2 shows. the development of most new copper mines has in recent years largely taken place abroad. So the levels of productivity shown in the two curves should not be directly compared. 2002 than the contracting and non-surviving mines at the beginning of the period. mine output per thousand hours of work by copper company employees.S. but at a modest pace. particularly in Chile. labor productivity is the copper contained in U. labor productivity is the copper contained in Chilean mine output per copper company employee.S.Draft: December 17. they may also be more concerned about survival. situation may be an anomaly. for the reasons indicated in footnote 5. Large mines with many employees possess more human capital for innovative efforts. mines with many years of reserves are likely to have greater incentives to invest in new facilities embodying the latest technology since the expected returns can be realized over a longer time horizon.4 Chile did experience a jump in productivity similar to that in the United It is important to note that labor productivity is measured differently in Figures 1 and 2. Our research on Chile was largely motivated by the desire to see if copper mining in that county enjoyed a similar jump in labor productivity during the 1980s as in the United States. In Figure 1. Chile To what extent can we generalize the finding that innovative activity is as important or more than mineral endowment in the creation of wealth and competitiveness in mining? There are good reasons to suspect the U.

This still leaves a surprisingly large portion of the jump—nearly a third—attributable to increases in labor productivity at old mines. Over the decade that followed. Salvador. El Teniente. Candelaria. 5 The increasing tendency in recent years for copper producers in Chile to outsource to third parties many economic activities raises the possibility that the growth in labor productivity shown in Figure 2 is overestimated. Thus. Errors arising from the other two sources examined are small by comparison. suggesting that better deposits rather than innovative activity were largely behind the surge in labor productivity in that country. a decade after the jump in the United States.5 The 1990s was the decade during which many new mines came on stream in Chile. the 1970-1997 period from over 2000 to under 1500. In 1990. Previously. developed for the most part by private multinational mining corporations. To assess this possibility we corrected the productivity figures shown in the figure for four known shortcomings—the growing use of outsourcing and contract employees. El Albra. its mines accounted for three-quarters of all the copper mined in Chile. the decline in the average number of hours mining company employees work per year. and Andina—Codelco’s traditional mines—increased labor productivity by 37. particular toward new mines. the state mining company Codelco contributed the lion’s share of the country’s copper output. and other new mines came on stream. this figure fell to nearly one-third as Escondida. for example. Zaldivar.Draft: December 17. Chiquicamata. Cerro Colorado. The results show that the readily available measure of output per company employee closely tracks the corrected figures (Garcia and others 2000). Collahuasi. A host of different innovative efforts largely created these impressive improvements. 70. accounts for about two-thirds of the jump in labor productivity during the 1990s (Garcia and others 2001). and 84 percent respectively between 1990 and 1997. the almost four-fold increase in labor productivity in the copper mining industry in Chile over the 1978-1997 period is real. and not just an artifact of outsourcing or the way productivity is measured. Our research indicates that the shift in mine output. and changes in the extent to which ore is processed domestically. the labor productivity figures shown in Figure 2 for Chile would have to be reduced by 33 to 50 percent to reflect output per copper company employee. 70. While the errors introduced by outsourcing are significant. 2002 States. changes in the quantities of byproducts produced. 13 . they are for the most part cancelled out by the decline over time in the average number of hours that company employees work annually. but only in the 1990s.

companies and their shareholders. We had expected the development of new mines to account for all or almost all of the growth in labor productivity in Chile. a country’s geologic legacy and exploration determine its ability to compete and create wealth in mining. They indicate that innovation and new technology as well as the discovery and development of new deposits have played an important role in enhancing Chile’s competitiveness in the world copper industry. and copper exports from Chile would be a third or so below their current levels. 2002 Moreover. and other interested parties? 14 . many of Chile’s older mines would no longer be producing. The pressing policy questions that emerge from this view are: • • How long will our mineral endowment last? How should wealth (or what are commonly called rents) created by mining be divided among workers. Codelco would not be the world’s largest copper producer. The Alternative View According to the traditional view. when we examine labor growth over a longer period—from 1978 to 1997—we find innovative activities at the level of individual mines to be even more important. management. there is little government. compared to 55 percent for the shift in output from low to high productivity mines. and workers can do to reduce the relative costs of their mining activities or to extend the working lives of their operating mines. the state as a whole. Without innovation. and so were surprised by these figures. Their contribution to the rise in labor productivity was 45 percent. Aside from finding and developing new high quality deposits.Draft: December 17.

to ensure that future generations continue to benefit from the country’s geologic legacy after the mines are shut? These questions lead inevitably to concerns over sustainability. that producers—firms and countries—can effortlessly gather up. they are crucial players who through their innovative efforts influence their own destinies. 15 . if innovation and new technology are important sources of competitiveness and wealth creation in mining as suggested by the alternative view. The role of government shifts from ensuring that society as a whole gets its fair share of the wealth created by mining and that it is used in a manner that achieves intergenerational equity. innovation and new technology may extend the path to extinction by decades. public policy focuses more on how to increase the benefits flowing from mining. 2002 • How much of the wealth or rents should the state invest in other forms of capital. In short. and the intricacies of green accounting. While every mine eventually runs out of reserves. to creating an economic climate conducive to the innovative activities of firms and individuals. where managers and workers are not helpless bystanders watching external forces unravel their predetermined fate. Mining becomes much more of a high tech industry than generally recognized. Instead. the set of important policy issues changes. There is still wealth created and rents to be captured. The whole process becomes much more internally driven.Draft: December 17. and less on how best to divide them. but they are not predetermined gifts of nature. fixed in size. intergenerational equity. if the traditional view is wrong or incomplete. On the other hand. They are instead created by the mining companies that succeed in the global competition to reduce production costs.

that the discovery and development of new mines contributed greatly to that country’s rising labor productivity. During its dramatic turnaround in the 1980s. In Chile. particularly during the 1990s. it greatly reduced its production costs.Draft: December 17. 16 . New technologies have radically affected competitiveness and wealth creation in the gold. More surprisingly. the experience of the successful copper mining firms in that country and Chile is not all that unusual. Around the world. This. as we expected. and often not the most important. mining companies are continually searching for new technologies and other innovations to reduce costs. not by discovering new and better deposits. nickel. we find that innovation and new technology also played an important role in sustaining that Chile’s competitiveness and in contributing to the wealth created by the industry. and other metal industries. we find. While the stunning revival of the copper mining industry in the United States during the 1980s may be exceptional. but by a variety of innovative activities that substantially reduced costs and more than doubled labor productivity. The discovery and development of new deposits is only one of many possible ways of enhancing competitiveness and wealth creation by reducing costs. as we have seen. The copper industry in the United States provides considerable support for the alternative view of the sources of competitiveness and wealth in mining. 2002 Now. This in turn reduces concerns about sustainability and intergenerational equity. greatly alters the policy agenda for mining. human ingenuity can keep the real costs and therefore prices of copper and other mineral commodities falling indefinitely.

Minerals and Energy 15. E. Tilton. labor productivity. and J. L.. and comparative advantage in mining.. Aydin. Tilton. F. Knights. Tilton. 2002 References Adelman. J. P. Resource and Energy Economics 22. pp. 131-150. in R. E. 2001a. 2001b. and the survival of the U. productivity growth. Natural Resources Forum 24. and J. and mine survival during a recession. 281293. P. Garcia. Garcia. 1990. F. Crowson. Tilton. 2001. Labor productivity.) Productivity in Natural Resource Industries: Improvement through Innovation (Washington. P. E. P.Draft: December 17. D.. 107-117. Landsberg. P. Mineral endowment. Mining and public policy: an alternative view: a comment. 2000. and H. J. Natural Resources Forum 25. 49-52. H. K. pp. E. Innovation. pp. Mining and public policy: an alternative view. pp. copper industry. pp. Trocki. Geoexploration 8. 1999. pp. Tilton. DC: Resources for the Future). 67-69. Simpson (ed. The role of exploration in iron and copper supply. J. E. 97105. 2000. H. pp. 71-72 Tilton. 2000.. Measuring Labor Productivity in Mining. 31-39. A. E. Resources and Energy 12. 17 . Mining and public policy: an alternative view: reply.S. Knights. Resources Policy 27. 2001. 321-338. J. pp. E. Resources Policy 27. Natural Resources Forum 25. Tilton. Economics of exploration for petroleum and other minerals. 1970. pp. costs. Labor productivity and comparative advantage in mining: the copper industry in Chile. and J. M.

U. 2002 Figure 1.Draft: December 17. Geological Survey. Labor Productivity in the U.S. Mine Safety and Health Administration. Copper Industry.S. 18 .S. 1975-2001 (Tons of copper contained in mine output per thousand man-hours by copper company employees) 90 75 60 45 30 15 0 Source: U.

Servicio Nacional de Geología y Minería. 2002 Figure 2. 19 . Source: Comisión Chilena del Cobre. 1970 -2001 (Tons of copper contained in mine output per copper company employee) 140 120 100 80 60 40 20 0 Note: Figures for 1998-2001 are estimates.Draft: December 17. and Consejo Minero. Labor Productivity in the Chilean Copper Industry.

Draft: December 17. 2002 Table 1. Output and Labor Productivity for 24 U.S. Copper Mines.f Silver Bell Mineral Park Superior Yerlinton Bisbee Esperanza Continental Ajo Battle Mountain Ruth McGill Sacaton All Other Minesh Total Industryh 20 . 1975 and 1990a Outputb _________________________ 1975 1990 Growth Productivityc _______________________ 1975 1990f Growthf Mines Expanding Minesd Bagdad Chino Morenci Ray Tyrone Bingham Canyon Pinto Valley San Manuel Cyprus Miami Sierrita Contracting Minesd Butte Missione White Pine 20 53 125 49 75 247 66 109 45 132 91 106 71 19 27 44 31 13 24 16 33 20 31 20 75 1542 136 145 324 112 155 371 88 142 57 137 90 79 51 4 2 3 2 1 0 0 0 0 0 0 98 1995 590 172 158 129 106 50 34 30 28 4 -2 -26 -29 -80 -93 -94 -94 -96 -99 -100 -100 -100 -100 -100 30 29 20 60 53 44 51 31 59 22 42 35 43 28 13 45 34 18 35 44 38 32 42 30 16 39 g 102 91 95 68 95 153 77 36 52 57 123 62 24 44 14 15 30 35 49 22 29 21 14 45 g 414 51 78 55 87 394 31 63 24 61 184 122 82 -1 -59 -18 -14 -20 30 -32 -31 -31 -12 16 g Non-Surviving Minesd.

b Output is measured in thousands of tons of copper equivalent contained in concentrate production. 1976 for Battle Mountain. and 1983 for Ajo and Sacaton. Sources: Brook Hunt and Associates. Superior. 1977 for Yerington. and Continental. Total Industry Output includes the copper equivalency of byproducts for all mines except those included under All Other Mines. Mine Safety and Health Administration. h Output for All Other Mines is the contained copper in concentrate production.000 tons of copper equivalent. 2002 Notes: All U. and does not include the copper equivalent of byproduct output. it was excluded because its 1975 production was abnormally low. e The Mission mine also includes the Pima mine.800 tons of contained copper. Although Twin Buttes’ 1975 output was 13. Productivity for All Other Mines is measured in tons of copper contained in concentrate per thousand manhours of labor input. Contracting mines survived the recession but suffered a decline in output. Output growth is the percent change in output between 1975 and 1990. Rio Tinto Mine Information System. copper mines whose 1975 output equaled or exceeded 10.Draft: December 17. a 21 . f Labor productivity reported for non-surviving mines for 1990 is actually for their last normal year of operation: 1975 for Ruth McGill and Bisbee. causing its productivity for that year to be unusually low as well.S.000 tons or more of contained copper equivalent in concentrates are included in this table with the exception of Twin Buttes. and does not take into account the copper equivalence of byproduct output. Esperanza. 1981 for Silver Bell. c Productivity is measured in tons of copper equivalent contained in concentrate produced per thousand manhours of labor input. Non-surviving mines ceased to be significant producers in the sense that their output fell below 4. g Productivity data for All Other Mines are not available. Productivity growth is the percent change in productivity between 1975 and 1990. d Expanding mines survived the recession in the copper market during the 197590 period and even managed to increase their output.S. 1980 for Mineral Park. U.

. 2002 Table 2............................ and Non-Surviving U............ Average Output........ 1975 Productivity (tons/1000 hours) 36 24 28 Productivity Growthd 125 124 -19 1975-90 (percent) ........................ 1975 Average Outputa (thousands of tons) 1975 Average Reserves (millions of tons) 1975 Average Reserve Life (years)e 92 558 47 89 126 10 25 34 9 22 .......................... 1975 Cash Costsb (cents per pound) Cash Costs Growthb............ Labor Productivity..d -29 -26 -6 1975-90 (percent) ...S........ 1975-1990a Performance Expanding Mines Contracting Mines Non-Survivorsd __________________________________________________________________________ Output Growth 81 -18 -96 1975-90 (percent) ..... Copper Mines........................ and Cost Performance for Expanding........................................................Draft: December 17.................d 1975-90 (percent) 1975 Breakeven Costsc (cents per pound) 154 -42 116 165 -19 146 160 23 116 Breakeven Costs Growthc.... Contracting....

cents per pound. and interest on external debt). b Cash costs are in real (1997) U. between a mine’s reported revenues per pound of copper and the world copper price. energy. reserves. They are actually adjusted breakeven costs. 1977 for Yerington. Cash costs typically include expenditures for labor. This table also defines expanding. and 1983 for Ajo and Sacaton. a 23 . and identifies the mines in each of these groups. Esperanza. Superior. amortization. c Breakeven costs are also in real (1997) U. and Continental. cash costs. 2002 Notes: See Table 1 for an explanation of how output and productivity are measured.S. if any. contracting. which are cash costs minus any revenues received for coproducts and byproducts. e Reserve life for each mine is calculated by dividing the product of its reserves and the grade of its reserves by its 1975 output. adjusted breakeven costs. 1981 for Silver Bell. materials. Sources: Output and productivity data: Table 1 and the sources cited there. 1980 for Mineral Park. Cash costs.S. they cover all the expenses of mining and processing through to the refined metal stage minus capital costs (specifically. minus the difference. depreciation.Draft: December 17. and grade of reserves: Rio Tinto Mine Information System. d Data for 1990 reported for labor productivity. and breakeven costs for non-surviving mines are actually for their last normal year of operation: 1975 for Ruth McGill and Bisbee. and non-surviving mines. cents per pound. 1976 for Battle Mountain. As noted in the text. and contract services of third parties.