John Berry: Mineral Resource Availability and Our Future

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an outline and then underneath that is a section that says important terms and
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those are those are going to be uh critical and then there's the conclu
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conclusion page which I'll go through anyway so I hope you've had time to look
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at some of those terms because that'll save me doing a lot is there a pop queen
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this no no but this is mining engineering 101 it gets pretty heavy so this is the outline after the
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uh introduction and so forth uh first I'm going to talk about some of the history of the real
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prices um and production volumes of minerals in
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general uh then there's a page of definitions which is the one in the
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handout and it's kind of tuent so that's why I wanted you to look at that
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first and then I'll talk about um or grades and resources versus reserves and
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life expectancies of various minerals and then go on to this which is the
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heart of the presentation the log normal distribution of deposit sizes and grades
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and locations I'll then discuss a couple of views that e e economists have put
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forward and and then these the rest of the talk basically is is uh going
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through some of the conditions that the economists have um put on their theories
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and then I will talk a little bit about um some of the
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um disruptions in the law of supply and demand that are implied by this log normal distribution and by the huge
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scale of mining operations today and then I'll give a bit of a rundown on
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technology and some conclusions and that's it
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so the difference between us and our Paleolithic ancestors is basically that
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we mine we started with stone we started mining stone this is a 5,000 year old
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Flint mine near where I grew up it's has 433 shafts with passages running off
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them like this and it covers 96 Acres so it's not that small uh we went on to
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bronze which is copper and Tin then we Advanced iron and then a few hundred
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years ago we started in with the Industrial Revolution and various machines and that needs to be turned
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off and this involved making Alloys with some more
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sophisticated uh elements and so forth at this point at the beginning of the Industrial Revolution the human race was
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using about 14 Mineral species mineral commodities ities we're now up to that
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we're now here with semiconductors and very very specific uses for very abstruse and rare elements
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and very um very carefully devised Alloys we're up to using um 85 of the
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elements now almost all of them this is another case of early mining this is
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pre-european contact copper mining in Zambia noticed that they they didn't
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have any um fossil energy so they went in and very carefully mined only the
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rich copper bearing vein in here and they were very good at doing that what stopped them was um that they they
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didn't have any pumps they didn't have any energy so they didn't have any pumps and they were stopped by the water table
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so one of the fundamental points I'm going to make is that the that since the
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Industrial Revolution began the key enabler for everything else that's happened is fossil
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energy and right now we're at the peak plateau of petroleum production
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petroleum production has not increased since 2003 which has the interesting Cory that if the Chinese are using more
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and more all the time and the Indians are using more and more all the time somebody's using less and that seems to
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be us at the moment um and petroleum worse than that from from the point of
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view of most of the people of the world petroleum usage per person peaked in 1979 so there's been for most of the
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poor people in the poorer nations of the world there's been less energy available since
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1979 so I'm going to be talking about minerals availability which is the inverse of the
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opportunity cost of using minerals the opportunity cost is what other Goods
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must be given up to obtain a given Comm commodity so when real prices go up
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opportunity cost goes up and availability goes down in the real in the past dur since the Industrial
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Revolution the the Dogma Is that real prices of most mineral Commodities have gone
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down um that's not actually really true
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uh there's been a lot of fluctuation and it also depends on which
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deflator you use to get your real prices some deflators will let will show that
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real prices have been flat or even increased slightly but the most common deflators used like um
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National um producers index or or um or
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GDP show a slight decrease in real prices and in my in my opinion the main
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reason for this decrease in real prices if it exists has been
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that when the Industrial Revolution started 200 years ago the year
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1800 the European powers had just finished a huge
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expansion and um exploration of the world uh North America South America
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large chunks of Asia had not been known to them before uh all of Africa
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and so none of that area had been really explored for any minerals there had been
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a little gold mining in Peru they'd been a little iron mining in Africa to make
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steel and they were ahead of aat uh the Indians had even mined a little zinc but
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basically what mining there was was in Germany it was in North Wales it was in
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England it was um in Poland and so as we came to need more
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and more stuff we just went out to more and more unknown parts of the world and found some more uh the second big big factor is
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this increased use of fossil energy to replace human labor and the third one of
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course is the continually advancing technology of mining Transportation refining and everything else so in the
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future we have no New Frontiers left to explore we're facing a future of continually increasing real energy pric
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prices we have a a demand for expon exponentially increasing production of
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nearly everything uh or grades are declining
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ever declining there's the land use by Mining and the extractive industries in general
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is going up exponentially it's a multiple of several different exponents and we have equally
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exponentially increasing external costs so John I want to just challenge you a little bit that on your first point
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there no new fron left you know really is that true
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because I'm not sure that I really believe that because if we look at um uh
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you know all of the world's oceans right and minerals available
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under water now granted it's more complex but that's really not been touched on secondarily let me just you
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know space exploration and the availability of minerals in other on other
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planets well there's basically a two-part answer to that one is
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um one is as far as the ocean goes and I and I talk about the ocean in my ocean mining in my last
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slide um but I don't want to wait till there no okay but but
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basically are the external costs of mining toxic substances from very wide
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areas on the ocean floor because this is a very thin layer are they
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acceptable that's number one and number two is can we afford the the energy cost
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because that's going to be the other big big issue and as far as outer space goes I I mean we were just talking about
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mining asteroids and that maybe is a remote possibility but again the the energy cost and the resource cost to get
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to anywhere significant in outer space is just I think going to be beyond the human race shortly well but with
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continually advancing Technologies which is one of your other there I think that yeah but it's a perspective right but
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there I think energy is going to defeat us I mean we use these continually advancing Technologies are using more
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and more energy and that's going to be a real issue that we have to deal so
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anyway um we can those that's a hugely valid point a very good question and
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people can really have very honest differences on that one it really depends I think it depends on whether you're a pessimist or an
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optimist so this is ex ex a couple of things on external cost in a real sense
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any non-renewable resource extraction is harmful to the planet at
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some level those little Flint mines 5,000 years ago destroyed 96 acres and probably quite a bit around that
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um and nowadays it's huge this is the aabas tsams of Fort McMurray which is
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hydrocarbons rather than minerals but there's the there's the Athabasca river which is a huge River there's a tailings
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pond and that's a huge area of disturbance and everything on that slide
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is being deforested and this is the typical kind of truck that is used in operations like
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that that truck holds 350 tons of rock so there are people there by the
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tires AR there are that's a person's head right there not even
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the T the tires are about 14 ft in diameter yeah so and with this
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increasing this exponentially increasing damage to the Earth the trouble is that we don't know where are the thresholds
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for permanent irreversible irreversible and runaway damage to the earth I mean
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you know we some we have some ideas but nobody really knows where the Tipping points are but we know there are tipping
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points we know that that the there are many forward feedbacks built into the
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Earth atmosphere and Earth ocean systems and if we pass them we're going to be in
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trouble um so and and that's the point I just
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made three or four exponential functions mult multiply give together give you the
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environmental consequences so what I believe is that sometime within the next
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100 Years starting from now within the next 100 years we need to make
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do with an order or orders of magnitude
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lower um resource consumption per person population is Will population is still
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going up and still will go up probably for another 30 or 40 years um we have to
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learn to live better with less material things I don't know how you do that I mean I have no idea how to do that to to
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make that transition but I think we have to do good at that are you talking about all mineral resources or
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even some the oil and natural gas well we we're going to be forced to do with
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less oil and natural gas um but I think it applies to all everything extracted
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from the earth is is the real cost is going to force us to use less but we need to we need to foresee that and be
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proactive about it well but but I think it actually goes beyond that because we
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we need to reduce our consumption at all levels for for everything because
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because where where does that stuff come from you know the base materials the raw
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materials are extracted from some some natural deposit resource in
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large part yep actually many years ago when I talk to this group I discussed
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this in terms of closed Cycle Systems
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mhm so and the other thing I want to say while we're looking at this slide showing this huge equipment and this
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real damage is we shouldn't we shouldn't blame only the extraction companies for
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the damage we see the real driver is the demand that we make for these materials
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the only real thing we can blame the extraction companies for is if they don't follow best practices if they do
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things that that um well but how do you overcome the rare minimals that are
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needed for I don't know you know so many computers I don't know we'll get to that
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we'll get skip the slide shall we just should we take just a a moment yeah this is
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actually a good this is actually a good place because that's what the end of the prologue so it's a good place to
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startop but this top slide shows um the current
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price of oil decreasing then really going up during the OPEC Crisis coming back down
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and then and going up again after 2003 I chose the production to where we were Rising on an exponential
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curve uh we economized during the OPEC crisis the exponential rise started
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again this is grossly oversimplified and now we've reached this plateau at about 30 um 30 billion
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barrels of oil per year um the real price is you almost
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can't see it for oil is way down here comes sharply up back down and now it's
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reaching levels that it's never even attempted to reach before but it was it
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was Dirt Cheap in real toes up until 1977 the copper
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price is much different though I mean people talk about an overall decreasing
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Trend but what's really happening here is there's some sort of cyclicity with about a an 80-year period and I'm going
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to talk about the reasons for some of that you can also see price spikes uh in
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in Wars here at the End of the World War II period and I'll especially talk about
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this long decline from the early' 70s onward these yellow bars are
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uh periods when there was some sort of control of the market through regulation or through Monopoly pressure you mean
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worldwide Market yep these are all worldwide everything's worldwide on this um now these are different this one
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here is um iron or and there's a faint blue graph I'll
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trace it out here it goes like this it's exponentially increasing and you can see how in the last both for
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copper and iron oil we have this really steep rise when we get into the 21st
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century it's really taken off but it's exponential all way and then this almost
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constant real price with some sort of bumps on it but not really
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decreasing again um the other one here is is borite now borite is different
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because aluminum was not used by the human race until about 19 1900 my my
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mother got a set of aluminum toss and pans for her wedding present in 1939 and
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she got them because aluminum was sort of the latest thing it was like giving somebody pure copper cooking vessels um
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in those days so here's aluminum not even visible down here in terms of
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production and then there very very very sharp rise and again in this case it's a
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more obviously discernable decreasing price because when something is rare and
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very expensive to produce of course the price is high and as we've gone through the 20th century we got more and more
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efficient Mining and processing aluminum this is another thing we think
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of cement you know as the thing that's around us all the time nothing glamorous
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about cement but in fact cement's like aluminum the Romans knew about cement and they used it but we didn't really
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use much cement until 1900 and then we started surfacing roads
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with cement building houses and skyscrapers with cement using cement for
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slabs before that cement was an on I mean building before that was Timber
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stone brick not cement so cement has had
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a rise very similar to that of uh bite
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production and the price if not if not showing a slight decrease is
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really constant in real terms with with Cycles which are related very much in this case related to these economic
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events so you talk about limestone Limestone yes Limestone Mining
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and and burning to make cement so I'm going to I'm going to leave those um I'm
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not going to talk about the last one the last one is platinum and I put it up for contrast but I know I'll be short of
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time so here are the terms you've got and the only ones I want the only thing I want to say about this is resource
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base is the total quantity of an element present in the whole entire Earth's
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crust 40 Mi deep on average and everything above zero PPM or PPT in some
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cases so when we talk about how long the resource base will last which we're
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going to it's meaningless because we're never going to recover the last one PPM
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2 PPM those are pots per million by PPM um from the rocks that it's a it's it's
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a it's a an idea a concept but it's meaningless in real ton but you see it
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thrown around all the time um inferred resources are resources
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above some grade some content of the element that we think on geological
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grounds exist but we've never gone out and measured them so this is the kind of number that the US Geological Survey
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puts out for say oil in the Bon or copper in the Andes or something like
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that the ultimate uh recoverable resource indicated resources are on the
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other hand are something usually with a higher grade that somebody's gone out and drilled and measured and
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sampled and what this these resources are probably
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orders of magnitude always orders of magnitude less than the resource base these are probably an order of magnitude
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or two orders of magnitude less than inferred resources from indicated Resources by thorough drilling based on
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a very scientific sampling plan plan uh you can get to reserves reserves are
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defined as rock that is valuable enough to be mined at a profit now and it's
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very expensive to turn resources into reserves because you have to drill
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many many thousands of feet of core and you have to analyze it and log it and drilling core costs around $100 a foot
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these days so mining companies don't usually drill reserves out more than for more
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than 15 years ahead of their production then these other things are not so important except this concept
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that going from a lead to a prospect if you have 10 leads 10 indications of
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mineralization going to a prospect we get it'll give one prospect that you that is worth drilling or or sampling in
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detail and if you drill or sample 10 Prospects you might get one deposit the definable accumulation of minerals 10
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deposits might give you one mine or something that's now minable in economics so you need a th leads to end
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up with one m so you need a lot of land you need a lot of resources grade is the percent of the
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rock uh composed of the mineral you're interested in an or grade is the percent
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of the rock that is the percentage which when it's in a rock makes that rock
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economic to mind so or is rock that can be mined in a profit right now and those are critical Concepts to bear in mind
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because you'll see people throwing reserves resources around and they don't they're not careful about what they mean
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and they come up with very funny conclusions so here's or grade for selected elements the clock is the
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average abundance of an element in the Earth's crust average
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remember that the uh resource base though is not what's above the clock
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it's about above what is zero so and the clock of concentration
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is the ratio between or grade something as profitable to mine and the
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average and so org grade varies if there's a depression or grade goes down
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if if there's a an increase in wages real wages or grade will go down if the the economy is
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booming and mineral prices go up or grade goes down um so it changes all the time so we
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look at these things aluminum is one of the most common common elements in the Earth's crust to get or grade it's only
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four times the average actually it looks more like six I must have the guy that made this
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table must have uh miscalculated but um so but the trouble
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with aluminum is it's highly energy intensive to to to get from The Ore iron
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is much less energy intensitive but or grade is 12 times the average abundance
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titanium which we'll be talking about is 23 times titanium again is relatively abundant but very expensive to get out
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of its uh minerals and then we get down we can run through all these These are the
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tradition traditional elements that we've used since the beginning of the Industrial Revolution then we get down to lead chromium tin and silver
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thousands of times uh they need to be enriched before they can be
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mined and um one a sort of rule of thumb would be
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that the larger this this number here the larger the Clark of concentration the smaller the typical or body that you
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can mine would be if you don't have to have because basically to make an or
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body the Earth has to put in energy or bodies come from circulation of hot
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water driven by volcanic eruptions and all sorts of other things but basically to concentrate something in the earth
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it's going against the law of law of entropy um so it requires a big energy
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input and the more that Clark of concentration is the bigger the energy energy input and therefore the smaller
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the likely uh deposit now this is life expectancies of world reserves and you
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can see that for most of the except for the very common ones like coal is very
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easy to map out where it is um aluminum is very easy also to map out where it is
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it basically forms in soil in the tropics uh but these ones that have to be explored
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for and copper see there's at 0% gr growth there somewhere from 17 to 40
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Years of reserves in the ground and at 2% it's 30 to 15 and at 5% 22 to to uh
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13 so as I said mining companies don't bother to go to the expense of drilling out the ore unless they unless they
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about to use it notice here I've highlighted um aluminum because of the
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growth rate 2.9% that's pretty you know that's in between these two but it's getting up
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there and I've highlighted lead and I would have highlighted tint too because they have negative growth rates lead
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because it's poisonous and we have replaced lead in lead paint with titanium the case of
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substitution economists love that and Tin We have replaced tin cans with aluminum
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cans but in both cases we the energy input to get those two substituted
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minerals is much larger than the original so this is life expectancies of
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the resort spase this is everything about zero in the Earth's crust for
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these same minerals and what you can see is you know there's for aluminum um the
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resource by the 10 to the 18 times uh as much aluminum in the Earth's crust as
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we're producing every year so theoretically last forever um same with iron some of these are lower
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but and here's this is how long they would actually this is the actual production and this is how long they
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would last at that production so we got a million years 100 million years there all of them are in the millions of years
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except for aluminum which is in the billions but when you start putting a growth rate on that of 2% all of a
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sudden you've gone from 89 billion years 265 with carpet you've gone down to
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736 with nickel this one you put 5% growth rate and nickel has come down to
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229 years that's the length of the American Republic right copper is the longest one of them
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now aluminum 444 that's less than the time since Columbus discovered the Americans that's about the time since
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the King James Bible was first printed um but what are the actual
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growth rates well they're not 5% thank goodness but they a few of them are above
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two uh so they're above this number aluminum copper natural gas I'm not
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don't want to talk too much about that silver notice the ones that are above 2% are the ones that conduct electricity
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real well silver is the best conductor of all so we're using things in the
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electronics Industry here that's what's driving there now I want to come to a really critical point and that is or
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deposit almost everything in geology is distributed log normally so this is a
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log normal distribution here and what you can see is this this is the two
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standard deviation point and that 2.3% of all
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occurrences on that high tail is the threshold there is four times the me uh
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the the mean of the deposit of the of the of the
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distribution so if you had a if you had a normal
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distribution that had um the upper tail starting at four times the the mean an
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awful lot of the values in that normal distribution would be negative right and so this to convert a
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log normal distribution into a normal looking distribution you you use a log scale on the bottom here and then
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everything comes uh looks looks the way it usually does but it doesn't alter the fact that
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this is logarithm of 2.5 here and this is logarithm of two so sorry it's the
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logarithm it's yes the logarithm is two um the implication of this is that most
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of the world's mineral supply for whichever mineral you want to talk about except for maybe iron and
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aluminum is um the the major part of the minable
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the economic part is in a very few very large deposits and what makes it even
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worse and I've only found this in one place a paper series of papers by Brian Skinner who who was a very um
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a very intelligent man at he used to edit Sigma zai if anybody knows what
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that is at Yale um and he talked about bodal
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distributions of minerals there's the one the the distribution of the O bodies and then there's the distribution of the
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rest of the Rocks so I've extended that here and I'm talking about a trimodal distribution you have the distribution
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of the rest of the rocks with the clock coming in here then you have the some
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very large lowgrade or bodies with a distribution like this but still L normal and then you have the ones that
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were used to mine 100 years ago the rich highgrade veins still with a lot of normal distribution but a much smaller
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amount of metal and so it's critical and what we've been doing through the last
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through the the Industrial Revolution is progressing this way with our minerals
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extraction progressing from right to
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left and this is just further details on that um
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and here is for for for copper here are some of these big mines the one single mine of Escondida La Escondida in Chile
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produces 8% of the world's production of Cara the chuki kamata which is another
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huge mine in Chile 6% uh the grassbur mine in Indonesia owned by our favorite
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person we love to heat hate Freeport MC morean is uh is % of world production so
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the top three mines are nearly a fifth of the total O's production and in countries Chile alone
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is a third of the world's production and the top five countries are nearly 2/3 of the world's production so it's a highly
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concentrated market and that follows from the nature of the distribution of ore and it applies to all minerals and
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then here is an example this is a cumulative probability curve log with a log scale for copper
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and the 90th now this is the 90th percentile and the 10th percentile look at all these deposits down here below
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the 10th percentile very low grade but these are the ones the high grade ones
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because this is uh not high grade sorry High tonnage this is tonnage here so these are very small deposits the large
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ones the top 10% are way out here and this threshold is 6.3 times the medium
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size so there a lot lot bigger and the really big ones are much much bigger so
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that's that this is a hard graph to understand but it's it's very instructed 45% of the deposits of this type these
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These are gold deposits I do believe yep gold deposits uh so in the conto EP
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epithermal vein that's the stuff at Virginia City Nevada very similar to the stuff in the motherload in California
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those things 45% of them fall between this grade and this grade raade which is
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like 30 Oz a ton down to 3.2 Oz a ton on the uh metric tons of war between those
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limits between .1 million and 10 million but the
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elephants the com stock itself is way outside that way outside the grade is
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kind of average but the actual tonnage is up at at nearly 10 million tons so we
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mined those all out in the 19th century the gold rushes 18 to around 1920 gold
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was held price of gold was $24 an ounce and then we kind of ran out of those but fortunately in
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1897 the v v rant in South Africa had been discovered and these are truly huge
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deposits on these every one of these lines represents an order of magnitude
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increase in the amount of gold in the deposit so this is one ton of gold if a deposits along that line is one ton of
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gold 10 100,000 10,000 tons of gold the v v run deposits are right up there
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three orders of magnitude larger than the con stock ones huge wonderful excellent for mechanized underground
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mining um the the elephants the the distribution is much tighter the
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elephant is just on the edge of the Ring of the 45% there so what
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happens when what happened then was we M these things down until we were underground 12,000 ft Underground 2 and
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a half miles deep we're getting Rock bursts it's getting very very dangerous it's getting too hot for humans to work
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the cost are going going up the human costs are going up so the price of gold uh eventually the United States
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government had to stop holding the price of gold at $35 an ounce and let it rise because there was no gold at $35 an
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ounce so the price rose up almost immediately to around $300 an ounce and
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that caused a gold rush in Nevada and people these two types of deposit which are very similar scores of them were
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found in the data and opened up but notice it takes
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if you take that elephant and those elephants it takes nearly a hundred of these to make one of those if you take
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the normalized ones not the elephants it takes nearly a thousand of them to make
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an average fit B run deposit so we got gold mines all over
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Nevada Nevada is now the biggest gold producing area on the planet but it's not increasing the supply of gold
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tremendously significant and where do we go from here there are no more
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on the other thing I wanted to say is the grade here is about 1/8 of the grade of these two types so to mine these you
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have to shift eight times as much do for every ton of gold so where do we go from there well we don't have any more gold
35:42
deposits um we we're now going to have to move to the gold we get as a byproduct from mining copper and the
35:49
grade is gain about an eighth or tenth of what it is in a in a gold deposit um
35:56
there are some huge py coppers this is Escondida and chuki kamata out here um
36:02
but um but the supply of gold then becomes dependent on the supply of copper unless the price of gold gets so
36:08
high that the price of copper uh that copper becomes the
36:13
byproduct so uhoh I touched something I shouldn't have touched maybe it'll go
36:23
away um just hit enter hit
36:30
enter okay so there are two classical
36:35
economics views of these sort of things there are people like me who this particular e Economist bely calls the
36:42
physicist the physics view um where mining engineers and geologists and we
36:48
keep worrying about whether we're going to run out of stuff right and we calculate reserves and we calculate
36:53
resources and we say how long it's going to last and a guy these two guys gray and hoteling were economists and they
37:01
said forget about all that let's just assume deposits are a fixed size we're not going to find any we're not going to do any exploration um what's the metal
37:08
worth and they calculated a very neat Theory which is irrelevant so I won't talk about it anymore and but then the
37:15
the majority of economists take this Viewpoint minerals have limited have not
37:20
limited society's welfare in the past nor do they have the potential for limiting the welfare of mankind in the
37:25
future so long as certain conditions are maintained so they ignore everything
37:31
that I've said so far and they and we'll say and the conditions are the
37:37
internalization of external environmental damages what does that really mean what that means is pricing
37:44
into the product all the damage to third parties in the earth that it will that
37:51
will be caused by getting it out we're not doing that we're not doing that no right access to of the Earth's cross for
37:58
exploration un free unfitted access to the Earth's cross for exploration
38:03
well lot of limitations on that worldwide trade access to raw materials prevention of Market control
38:10
by either sellers or buyers and I just right yeah that's okay if these rules
38:16
are followed markets will provide supplies and ration use so that minerals and materials will be available to meet
38:22
society's needs without significantly without significantly increasing costs for academic forever right and that's the
38:30
accepted Dogma that's what you hear from economists that's what you read in
38:36
economic journals and and in some politicians statements it's all there all we have to do is go drill it go dig
38:42
it whatever um so these are the limitations
38:47
we you've already come to the conclusion we're not doing any internalization of
38:52
external cost how can we do it we can tax we can
38:58
regulate and we can have camp and trade systems and we not only did the
39:04
companies complain like heck about taxation what not the public complains we don't want to pay more for our
39:10
whatever regulation oh big government camping trade
39:16
heresy you know so we're not going to in this country at least we're not going to go anywh with some any of those things
39:22
for a long time access to the cross for exploration the next slide goes into
39:28
this a bit but cities are expanding Farms are maximizing the
39:34
amount of land they use Wilderness areas and parks are being created all over the place um up in the Northern areas per
39:42
Frost and Ice prevent us from accessing stuff so we don't have access to the O cross worldwide trade access to raw
39:49
materials well there are Haves and Have knots uh because the the distribution
39:56
tion in space of deposits is what I call Lumpy uneven none here lots there and
40:02
some people don't play by our rules particularly China so we don't have access to big chunks of the Earth where
40:10
people don't want us to go and either explore or own mines or whatever I mean
40:15
we've had expropriation of mines in Chile 30 or 40 years ago we've had
40:21
expropriations in Brazil and so forth and so on and then prevention of Market control
40:27
well we got this logn normal distribution with very few very high grade very large
40:32
deposits um it's very Capital intensive which makes it even worse with $25 billion needed to open some new mines
40:40
new pfree coppers and things so this is wonderful opportunities for Market controls by companies de riotinto
40:48
rioo Val do and by countries so the conditions aren't met
40:56
and I I had another slide with other things that weren't meant but I decided to leave that out um so
41:02
here's the one fundamental rule which we've already sort of beaten the bush
41:09
around here is if you have the grade the grade of ore you have to double the
41:14
amount of rock you dig out to get the same amount of stuff you also for almost
41:19
all Commodities if not all you grind it up into 300 mesh slurry that you can
41:25
then run through a Flo plan plan and you have to get rid of that stuff and generally speaking you can't put it back
41:30
in the ground and you can't put it anywhere um we you have disasters like araban in Wales which was cold slurry
41:37
you have um disasters like the Hungarian bite thing in
41:43
2011 uh the stuff is unstable nasty you don't want it around um when you get a
41:49
sedimentary oil body or a tabular oil body of any kind that the deeper you go the more overburden you have to take out
41:56
in relation to the size of the O so you this one I've shown we're taking out 12 12 times as much white stuff there as
42:03
you're taking out or so that's another multiple that's on top of the DI diminishing or grade you've got an
42:09
increasing generally increasing stripping ratio everywhere this is called stripping ratio Furthermore with
42:16
an open pit mine or an underground mine you generally have to dewater the whole area otherwise you run the risk of being
42:22
flooded out all of a sudden which can cost cost a lot of life um so you make a big dewatering cone and
42:29
you end up with all kinds of problems for the surface owners like the bass people around Bastrop because of the
42:35
lignite mines and then finally the mining itself the trucks the grinding of the rock uh
42:43
and and the tailings particularly is a lot of toxic dust blowing around causing
42:49
you know lung cancer and other health issues and not finally there's also acid
42:54
mine drainage which you can't void if you're mining a sind or how do how do
43:00
you do the water how do you do that how out yes yep water table yep you pump it
43:07
out until the water table's below the mine one mine I worked at in Zambia back in the 1960s was pumping 90 million
43:13
gallons a day where were they it where were they
43:19
putting in the nearest Big River in the cury river yeah the puming fresh water
43:28
mhm mhm well there no no way of using it so but and that's probably not the
43:35
maximum being pumped out this in in Western Australia some guy has tabulated um all of these environmental costs for
43:41
their Min it's about the only place that I can find that they've done it and this is kind of a compound graph but this is
43:47
the amount of rock amount of ore Mill mined taken to the mill and ground up
43:54
and while they were mining these highgrade things this is the grade while they were mining these highgrade things
43:59
it was a very small number and then all of a sudden in the 1980s it went up when they technology H
44:08
technology technology increased demand for gold remember gold went from $35 an ounce to 3800 eventually um and the
44:16
amount of waste rock they M this is the waste rock that he can trank this is the
44:22
percent this yellow thing you can hardly see was the percentage of Minds rep 14 so to get the total amount of waste rock
44:28
you have to multiply that by the inverse of this which is 30% so this is three
44:34
times as should be three times as high as up on the ceiling the waste rock went astronomically
44:40
High um where is it now H where is it piled around the mines inside the mines
44:47
no all around them sometimes some kinds of Mines some kinds of environments you can push it back into the hole for open
44:54
pit mining sometimes a 100 years later because you're mining that mine maybe for a 100 years and eventually you push
45:01
it back in for underground mines you can never get it back in because after youve ground it up it's bigger than it was when you took it
45:07
out so it won't go back in smelting and refining I don't have as
45:13
much experience with this as I do with the actual mining but but some famous cases of water pollution uh this is sea
45:19
water pollution uh cadmium from the from the Imperial uh smelter in uh in Bristol
45:27
that nobody could eat the shellfish for few decades mercury poisoning at Minami Bay in Japan killed a lot of people same
45:34
reason that was um soil pollution I've actually worked in some
45:40
cases like this Ducktown Tennessee was a copper smelter the area around it was
45:45
duck was completely deforested no tree would grow for 100 years uh in a radius
45:52
of about 10 mil of around the whole thing and they put in an enormous amount amount of money and they've succeeded in reforesting it now um the kaita forest
46:01
research research station is 80 Mi downwind of duct town and I did a soil study there and I found 1% sulfate ion
46:08
in a narrow layer of the soil which corresponded with the distance that that iron would travel um in the time that
46:16
smelter had been operated um when I worked at in coner in Zambia we had one of the one of the biggest and one of the
46:22
most efficient carbon smelters in the world but that smelter was putting out
46:28
550 tons of copper sulfate a month it was producing 300,000 tons of copper a
46:36
year and it the losses were 2% and if you work that out it comes to about 550
46:41
tons a month the result was that downwind where I was working we had 0.5%
46:47
CU all everywhere in the soil and the trees were beginning to die off cu no no
46:53
tree Will Survive that Rockdale Texas we have the same sort of thing I think it's rock tail that I've actually read about
46:58
cases of fosis from the aluminum smelter so and solutions well we went
47:05
through the solutions taxation regulation C trade we apart from the Phil philosophical
47:13
difficulties we don't know the total environmental cost we have not come up with accurate ways of calculating any of
47:19
that stuff it depends on value judgments which are different for everybody there any kind of scheme that involves
47:26
taxation or regulation or is it's subject to political influences and and
47:32
Corruption especially if it's taxation um so you know we're not getting anywhere this is the this is the
47:38
molten slag coming out of that huge smelter at night gorgeous scene at night
47:44
but um so so here's a model that I made made up
47:52
I don't know other people may have made it up but I work this house um for the growth of total external
48:00
costs and what I the first line here I kind of broken it up into the
48:05
fundamental units the the rate of increase of environmental of external
48:11
damage or environmental damage per year is equal to the rate of increase in the
48:16
population the rate of increase of GDP indicated across everybody in the world
48:22
times the um rate of uh increase in the
48:27
intensity of use so that would be a negative number for 10 and uh 10 and
48:33
U um what was it anyway and then coer no
48:40
it wasn't Copper 10 lead lead of course lead and and then that's multiplied by
48:47
the the increase in the average stripping ratio per year and divided by the decrease in the
48:54
grade because that's going to be number less than one um now I mean I wanted to do it this
49:01
way because I wanted to point out the things that influence it population growth right uh that's as long as that's
49:07
growing we have difficulty cutting back as long as GDP is growing even if it's negative in large chunks of the world we
49:13
have trouble cutting back um this uh the intensity of use means that these rare
49:20
metals that we're relying on more and more for electronics are going to be more and more important in this
49:27
equation and of course that just goes up so I but but in fact you can lump these
49:33
first three terms together and call it just increase in production because that's tabulated that's easy to get a
49:39
hold of going up somewhere 3 to 10% a year depending on the uh depending on
49:44
the element but it hides these things times the increase in the uh stripping ratio over the decrease in grade so then
49:52
I went and I looked where p that P that's we're looking at the rate of increase of is total o production of a
49:59
given commodity so then I went and looked at various Commodities to see what some of these things were and for
50:05
some of the big ones like bite for aluminum for aluminum and and copper and
50:12
iron over the last few years before the recession started were 10% a
50:17
year and I'm guessing that the increase in stripping ratio is about 5% the year
50:24
overall because it's it's going to be much bigger for individual mines but some of those will be being faced out in
50:29
new mines starting with lower stripping ratios um and then the grade decrease I
50:35
actually looked at numbers which were which are available for that and it's about seven it's about uh 1.5% per year
50:44
for many Commodities so if you if you work that out you're getting a rate of increase of environmental
50:51
damage it's really a rate of increase of the amount of rock moved but but I I'm treating that as the determinant of all
50:58
the other damage right more Rocky move the worse everything is 177% a year doubling time of 3.3 years last year in
51:06
the world we completely M destroyed by mining an area the size of West
51:11
Virginia if you go if we go 35 years into 33 years into the Future No 35
51:18
years into the future we'll multiply that by two to the um to the power 11 or
51:26
so 2 to the power 11 is 2,000 if you multiply it by that it's
51:32
more than half the land area of the world being mined out every year at that point so that's the size of the problem
51:39
we're facing and you know it's like the old environmental textbook thing of the duckweed on the pond and the duckweed is
51:45
covering doubling the area of the pond that covers every year and if you go for 100 years and there's really no visible
51:51
difference and then the next year it looks a bit bigger and the next year is dly bigger and the next year after that
51:57
is half the pond and the next year after that the Pawn's gone and that's what we're facing because of multiplying
52:03
these Environ these exponential Trends together and of course I left out the
52:08
recession so that maybe exaggerates it a bit um because you know I well there
52:16
wasn't a long enough timeone scale to to to use to to include the depression and that would have given a really serious
52:23
negative so this is what case is what I'm saying this is worst case but but
52:31
um and this just summarizes that oh only
52:36
15% historical land disturbance has been restored in Western Australia which has fairly stri strict laws uh only onethird
52:44
of the disturbed land we talking about um is the mine itself and the other
52:50
another third is tailing downs and another third is these dumps we've been talking about um and currently in
52:56
Western Australia they are reh rehabilitating about 70% of the land
53:02
that is M every year or the equivalent of 70% and this is the ranking of
53:08
Commodities by the amount of land they disturb every year and look at number
53:13
one sand and gravel so I know that's probably hard to
53:19
read from the back but sand and gravel is by far the biggest culprit and you
53:24
see that you drive to Houston everywhere you get anywhere near the Colorado River it's being dug up and the gravel taken
53:30
out anywhere anywhere there's uh and then you get down to the brones river
53:35
and it's the same thing every available source of sand and gravel in Central Texas is being used and that's worldwide
53:41
and it's increasing and it's getting to be a significant factor in building cost because as cities grow and as nearby
53:49
sources and Sand and Gravel are used up we have to go further and further away and sometimes we're going 100 150 miles
53:54
away to get sand ground is that the same sand that is used for for oil exraction
54:01
no this is regular sand that goes into cement goes into driveways concrete this
54:07
is uh all these uses the really cheap stuff but but it's but if you uh you
54:15
know if you read around a bit you'll find that it's a very serious concern for cities is where they're going to be
54:20
able to find enough sand and grel to keep building the city um coal is the next one you know
54:26
stripping down West Virginia and East Kentucky East Kentucky funnily enough diamonds is one
54:32
of the worst I don't know how it got in there and I have to check my numbers there but that next one again is a cheap mineral phosphates very cheap used for
54:41
fertilizer but use these days get this the Green Revolution we put off malus's
54:46
predictions by having the Green Revolution but what the Green Revolution depends on is phosphate and that is one
54:54
of the major C it's now in destroying the Earth surface why because it's so
55:00
huge it's so vast no why is it the it's fertilizer super phosphate the
55:07
land out you have to keep corn fertilizer and every time you extract all that mineral
55:14
through planting it over over planting it you have put it back in chem and then there's the Limestone for cement which
55:21
is so visible to us whenever we go to San Antonio or up to R Rock um and then then we get into the
55:28
traditional uh there's crushed rock too but we get into the traditional minerals then carer chromites ion or lignite
55:35
Boron boite petroleum um Clays these are
55:40
the traditional things but you know everything I've said has been focused on things on Metals but the real culprits
55:47
are not so much the metals it's the non-metallic minerals and the fuels coal
55:54
and and uh and uh sand gravel cement and all that stuff and we can we have much more
56:01
influence over those things than we do about coal and diamonds and gold and so forth because that's all around us
56:06
everywhere we can pressure our local governments to do something about that if we so feel in
56:12
Cent um I want to try and rush through this but this part of the talk is about
56:18
the lumpy supply curve or stepped supply curve all deposits are are and and also
56:25
about the restriction on land um if you make a mineral deposit inaccessible such
56:31
as the Arctic National wild rushes up you can't replace it you can find another one somewhere else if you're lucky but if you run through that and
56:38
you need something to gain you have no choice you know there has there also has
56:43
to be favorable favorable geology to have any kind of deposit you can't move it a deposit from somewhere like um you
56:52
know New Jersey where nobody wants it to to uh North Dakota um you lose it if if if you don't
57:00
use it in New Jersey you lose it and that's one of the reasons why some countries have lots of mineral deposits
57:05
and some have very few which leads to the Strategic minerals problem and then there's this whole business I went
57:10
through access to land 100 leads and Prospects and so on and this is um this
57:16
is a diamond mine North this mine is 2 or three years old look at the scale of that operation two or three years
57:23
Diamond what is it Diamond Mine in Northern Canada how deep
57:28
is uh looks to me to be about 400t deep I can count those benches
57:34
40800 no it's about 350 and here's the land here's some of
57:41
the restrictions on land this red Red Land here is land that's already intensively used by humans and can't
57:49
really be used for any kind of extractive industry the blue the dark blue is Forest land so and you know what
57:56
a howl there is anytime you put any kind of extractive thing into into tropical
58:01
forests or even temperate forest I'm surprised that on the east coast of the US it looks like that's mostly blue
58:07
instead of yeah I'm sure this was generated by doing a veget classification on satellite imagery on
58:13
the east coast is all uh forests have all regrown in the east coast in the
58:18
last 50 years since 19 yeah but it's popular yeah it's got lots of r red
58:25
there but what's showing up is excuse me as in New Englander Maine is the most heavily Forest state in and
58:32
Massachusetts is the third most heavy forest in I recognize that but but there's still heavy populations along
58:39
that coast and I'm asking why that's not showing up it's not showing up because I'm sure the way the data was DED so the
58:45
data is actually underestimating the scale of the problem right so and then this light blue is the Frozen lands that
58:51
you can't use so what's available for explo ation is green basically that's
58:57
going to be fixed though with global warming we'll be able to use all that don't drop and then this is Idaho which
59:04
is one of the major mining was one of the major mining states in the United States 100 years ago and the green is
59:11
available for use that's about 20% of the state the white is um useless land
59:17
mineralogically useless land it's this recent lava flows essentially and the
59:23
yellow is restricted are and the red is not available at all for mining so only
59:29
about um 20% of the land is open to Mining and
59:35
many about half of the old mining districts which are these darker red areas are about half of them are in the
59:42
restricted area so it means that land that we know half the land in Idaho that we know is mineralized we can't look at
59:48
because it's either a national forest Wilderness Area park or something so I'm not really complaining about that but
59:55
what I I mean you know it can sound V but what cons what is important is that
1:00:01
we've made a value de decision we've cut off our some of our access to futural minerals in favor of preserving the
1:00:08
environment and personally I support that we have to realize there are
1:00:14
consequences so on strategic minerals that's how
1:00:19
much these are percentages in this column from 0 to 100 we import about 60%
1:00:25
of our petroleum so that's a benchmark we know how much grief that causes us we
1:00:30
import 100% of all those minerals asbest cium fluis Spar graphite
1:00:37
manganese Rare Earth quartz niobium tantalum you know all those things 100%
1:00:44
these we import more than we do a higher perent percentage than we do petroleum
1:00:49
so titanium and Cobalt and potach which is another fertilizer mineral
1:00:55
um where's Uranium on the list uranium is no good point uranium I think I would
1:01:02
have thought it would have been higher than petroleum do does anybody see it it's
1:01:09
it's for sure on here I just don't see it on the left left
1:01:14
table yes yes it's a critical these are the ones that the US government regarded
1:01:20
in 19 2000 actually the National academ Academy is science regarded as most
1:01:26
critical if we lost access to these we'd be in deep doodo raros Indian manganes
1:01:31
niobian that's columbium brillian uranium calt I don't know how much is
1:01:36
imported those individual I just thought that most of the
1:01:42
uranium probably is because we pretty well shut down our Ur Uranian mining industry yeah the larg was
1:01:52
right and so different mineral Commodities are
1:01:57
going to be strategic for different countries for instance China is very short of Cara and has no chromium or platinum
1:02:06
Europe highly industrialized group of Nations has almost nothing uh in in
1:02:12
terms of its needs I mean mine's a little iron and a little coal and stuff but nothing is that focused most of them
1:02:19
Western Europe or Does it include Eastern Europe no that would include mainly mainly Western Europe thought
1:02:25
Eastern Europe would have a lot larger mineral deposits and availability from
1:02:30
Western Europe Poland and to some extent the Ukraine and that's about it copper and copper and coal in Poland I was
1:02:38
thinking Poland specific and one talking about strategic
1:02:43
minerals in 1925 a geologist called CK Le predicted uh that World War II was on
1:02:50
the horizon and he said that the lineup would be the USA the USSR the British
1:02:58
Empire and French Empire against Germany Italy and Japan and he said that because
1:03:04
those first four had access to nearly every mineral they needed and the other
1:03:10
three had access to only one or two they needed so his his prediction was that
1:03:16
they would go to war to get what they
1:03:21
needed and so right now we have a country that's sort of doing that China
1:03:28
has this go out Pol go outside policy uh which puts assured access to strategic
1:03:35
minerals as a centerpiece of its geopolitical strategy and they're moving
1:03:40
aggressively to get mining concessions all over the world and even to buy Mining and oil companies ocidental and
1:03:47
riotinto that was vetoed by the Australian and American governments um yeah but they're being
1:03:53
very aggressive in Africa oh yeah terribly aggressive in Africa um causing a lot of resentment in
1:04:01
Africa that this has increased the nervousness of our security Community
1:04:07
which remembers what Leonard greev said in 1973 that if we could if they could
1:04:13
control the Persian Gulf in central and southern Africa we'd be in deep trouble and so these these three
1:04:20
statements together are very very worrying one
1:04:26
country feels threatened and is taking steps to deal with it which is making other people feel threatened and they're
1:04:32
remembering real threats in the past and it was exactly this kind of thing a lot of people think that led to PO the
1:04:39
Japanese foresaw that America would cut off their oil supply and decided to act proactively so it's not you know I'm not
1:04:48
personally terribly worried about this but it's not very um not very encouraging scenario and again their
1:04:56
growing control of important mineral resources could enable China to deny
1:05:02
Imports to the United States and we know they will because they've already done it to Japan in in 2010 well they they've
1:05:09
actually already done it to the us as well that's part of a more General policy where they cut down their ex
1:05:16
quotas here that's part of the quota reduction but Japan they shut it off because Japanese impounded a Chinese
1:05:21
fishing boat or something these this is just a geological thing for anybody's interested about the type of
1:05:28
ores and because because they're getting it as B Rees as byproduct of iron mining
1:05:33
their costs are very low so they un undercut Mountain Pass m in California which was supplying over half the Rees
1:05:40
to the world and drove them out of business Rare Earth helmets they're
1:05:46
reing that they are reopening they've already started reprocessing Stock points yeah through through significant
1:05:52
concessions from right but the real the real issues
1:05:59
are um that customers consumers of rare Earth elements have moved to China in
1:06:05
droves to ensure that they have a secure Supply and that has caused the
1:06:11
destruction of the supply chain in all the countries of the West mining refining purification separation
1:06:19
fabrication all go and it'll take years to reestablish that and that's what Steve jobes basically
1:06:27
said to President Obama a year ago um in
1:06:33
the meantime of course we're getting a rare rare earth rush like just like a
1:06:39
gold rush and people are working on uh Advanced exploration projects in all of
1:06:45
these countries including uh some pretty weird ones like Greenland uh and Vietnam we're exploring
1:06:53
in Vietnam and Estonia where we're Repro where the estonians are beginning to reprocess the
1:06:59
waste from the Alum shell which is an oil shell that's full of uranium and
1:07:06
rare o so they already have a mess with all this uriniferous waste that's going
1:07:12
everywhere so now they're going to stop sprinting it around some more so this if
1:07:17
these exploration projects are successful we'll have a bubble uh in raros which will depress
1:07:24
the prices for many years but as I say the real issue though is who's going to
1:07:30
who's going to process them uh and uh fabricate them and then also this the
1:07:37
problem for these Ventures is uh lots of radioactive thorium and uranium uh very
1:07:43
high energy inputs very high um needs a lot of acid and lots of water so there's
1:07:51
a lot of environmental objections when you start they just opened a new processing plan in Malay over
1:07:56
everybody's dead body um and here's the production of Commodities by value remember the volume
1:08:04
one was sand and gravel was way ahead of everything else here's gold is ahead of
1:08:09
everything else and I think personally that is not because um we use that much
1:08:15
gold I it's nervousness about world affairs it's nervousness about the future people are buying gold um
1:08:24
and that's what's sustaining this huge run up in prices and Mining the next three are all 20th century minerals
1:08:32
these things were not significant before the beginning of the 20th century boite cement chromites then we get to some of
1:08:40
the traditional ones iron ore silver copper clay Rock so so this is really
1:08:46
interesting we got one which is a store of value but the next three are all
1:08:51
brand new is made for construction no no no well cement is but boite is used for
1:08:59
everything that's aluminum that's what you make aluminum from um and chromites
1:09:04
are used for specialty Steels and all kinds of Alloys chromite
1:09:09
is a very chromium is a very good alloy in material New Capital production required
1:09:15
I happened to hear a talk last month and the guy said to to find to bring into
1:09:23
production a million barrels a day of new oil at the present moment takes hundred
1:09:30
billion in capital and that's what's being plowed into the deep water in the Gulf of Mexico and offshore Brazil and
1:09:37
places like that by comparison the uh the investment in new
1:09:44
Green Fields iron projects in n in 20110 was 28
1:09:50
billion gold 7 billion copper 6 billion billion Rare Earth 3 billion and the
1:09:56
total invested in new mining projects in 2010 was 562 billion an enormous number
1:10:04
of billion dollar projects in in Latin America in particular and so uh and this
1:10:11
excludes China so this is 6% of the total World funds available
1:10:17
for investment and and that's not counting the oil and gas Investments and
1:10:22
it's 4% of US GDP and it's going up exponentially whereas GDP GDP isn't
1:10:30
so um so it's it's you know real costs are
1:10:36
probably slated to go up and this is just I think that's have I already shown that one um this is the concentration oh
1:10:44
no this is the not the countries this is the concentration in the industry where cadelo the Chilean nationalized copper
1:10:51
company produces 11% of the world copper and the top three companies produce 27%
1:10:57
iron ore is worse the top three companies which is a nationalized company in Brazil the Val group um
1:11:04
course I nationalized riotinto and BHP between them produce 41% so real real
1:11:11
prospects for SE monopolistic control if they can ever get away with it I'm just a word about titanium uh
1:11:20
because it's a classical example of this concentration 25% of the world's output
1:11:25
comes from one mine in near Durban in South Africa the the rest of the
1:11:31
continent of Africa enclosed it accounts for another
1:11:36
25% titanium occurs with Zer sorry zeron occurs with titanium that one mine
1:11:41
accounts for onethird of the world ziron Supply and also High Purity iron there's
1:11:47
one because of this concentration people have been looking for new titanium deposits and an announcement is being
1:11:54
made in South America and the use is for titanium this is the one replacing lead
1:12:00
with bright white pigment for paints paper toothpaste Plastics and the metal
1:12:06
which is only 5% of the to Total output is used for aircraft engines and fraes there's some numbers there and in
1:12:13
specialty Steels yeah what is that is that way is that that's Sil yes these
1:12:21
are silos this is there probably a huge conveyor belt Somewhere Out of Sight there but this they mine fossil Beach
1:12:28
Sands in huge volumes because the heavy minerals that contains titanium are only
1:12:34
about 5% of the sand so they're running all this sand through and then start piling the heavy minerals that's why
1:12:41
they're dark and then running the sand back to and fortunately that's a case
1:12:47
where you can do some restoration another
1:12:52
another almost whisk is is lithium and olivium I yes for lithium batteries it's
1:13:00
almost the whole Source yes one one SAR one plier in Bolivia's and I just very
1:13:06
quickly just run through this titanium metal uh is produced by sacrificing
1:13:12
magnesium first you produce magnesium and then you destroy the magnesium and get titanium in the complex chemical
1:13:18
process um the United States used to be the main supplier of uh
1:13:24
magnesium now it is China so China is basically in control
1:13:30
of our titanium production as well as 97% of our rare earth metals production so and I kept running into this all the
1:13:37
time I think I'm going to skip these since you want to take a break I think I've got about three or
1:13:43
four more slides left that's all
1:13:48
so this slide here shows us a standard Supply demand um diagram uh with the
1:13:57
with various levels of demand shown as these D curves and and the supply curve
1:14:04
here I've just shown one supply curve and what I'm showing is that the the usual economic Dogma is if you increase
1:14:11
the price at the margin the supply will go up and if you decrease the price at
1:14:17
the margin the supply will go down so here's this situation smoothly increasing price as uh as demand goes up
1:14:25
the supply smoothly increases and the price goes from P1 to P2 but the trouble is as we're seeing now in the oil
1:14:32
industry you get to a level here just above D2 where um industry is at Max
1:14:38
Capacity everything's maxed out and the supply cannot be increased any further
1:14:44
without a new mine and we're looking at as I say situations with mines
1:14:49
representing 10% of the O's uh Supply so and they require a huge investment so
1:14:56
the P Price is going to go up and up and up so it's demand goes up here to D3 the
1:15:03
price has just shut up but the supply is not increased at all get near
1:15:09
D4 and people are scrambling around maybe recycling is increased but there's a little more a little more um Supply
1:15:17
there for instance a good case of that would be stealing lead off Church roofs which is r at various and they're
1:15:23
stealing copper off Church roof right now um people and out of people's condition
1:15:31
systems that's right that's right so that's increasing the supply at the margin here so then um okay so so now
1:15:39
let's assume now that we go that that the price has gone up so much and stayed there long enough that we brought a big
1:15:45
new mine into capacity or more than one big new mine into production and so the supply is is now
1:15:54
increasing and the trouble is that even if the demand begins to increase we now have a
1:16:01
situation of over Supply so going from D4 to D5 which is an increase in demand
1:16:07
the because we can't shut down mines easily and that's something I haven't said before it's really hard to shut
1:16:14
down a mine if it's an underground mine it floods and if and also if it's a surface mine so so people try and keep
1:16:20
them going even when they're losing money so you have a decreasing price here and I turn call this a lumpy Supply
1:16:28
code another word for it would be a stepped Supply code and it comes from the fact priceing price the supply is in
1:16:36
elastic for a period of up to several years or decade and
1:16:44
um and it requires to to overcome that resistance it requires this huge
1:16:49
investment of 20 say 20 billion for a new copper money mining complex in the Andes and 25 years because even in the
1:16:57
Andes the local Indian tribes are now saying you can't do it you can't come in on our land with M comp um so it's
1:17:05
taking most of the 10 years is may be doing the engineering and the on the preliminary work the other 15 years is
1:17:12
getting pment the rever and as I say the reverse is true if over capacity develops and you can't shut it in and
1:17:18
you have to wait for demand to grow back to capacity and and I will talk about
1:17:23
the poery co pocu stands for poery copper short hand and this is a case
1:17:30
this is a small new mine this is U tooy copper gold in Mongolia discovered in
1:17:38
2001 um by 2020 the expiration the the amount of
1:17:44
capital expended will have been 10 billion for 3% of the world's copper
1:17:51
Supply um and the mine will represent 30% of the GDP of Mongolia that's the kind of thing
1:17:58
we're looking at and this is of course this makes it when you're 30% of the GDP
1:18:03
imagine the scarcity you're causing in other parts of the economy and this is a this is a low cast mine essentially
1:18:10
because it's uh right across the border from China and China's the market it doesn't have to have a railway up to
1:18:15
20,000 ft in the Andes and it doesn't have to have a port developed on the coast they just ship it into China um so
1:18:23
that's but that was an example that was in The Economist um last
1:18:29
month so this is a this is an illustration for for copper um this is
1:18:35
what we're going back to 1900 this is 2000 this is the new century here and
1:18:41
what the grade has done first we were mining high-grade veins then we learned started using mechanical equipment using
1:18:49
more energy inputs we went to scans which were lower grade and bigger then we went to these big sedimentary copper
1:18:55
deposits that I worked on in Zambia 2% copper and the car and the grade went
1:19:01
down uh and finally we started bringing in not finally finally massive sulfides
1:19:07
started being used which are another volcanic type of deposit and then finally pores these huge giant things in
1:19:13
Chile and in mountain ranges over the world um and the PRI and the the grade
1:19:20
now is flattened out at about uh 0 um 05% no 0.5% I'm sorry 0.5% meantime
1:19:30
production although it's kind of jagged has been going up exponentially except for an interval between
1:19:37
1968 and 1980 and that interval represents an interval of declining
1:19:43
production in the old sedimentary carpet deposits which were getting too deep to work and we hadn't yet brought in the
1:19:51
pories got the pories on full production meantime the price for
1:19:57
these low mechanical inputs much human input so wages very high very expensive
1:20:03
to produce from the small deposits then they reached uh around 1930 uh a low point in the depression
1:20:10
the prices began to climb and then the sedimentary Compass as I say were getting difficult to
1:20:16
work um so underground so then there was a transition to open cast m which
1:20:23
brought cost down again a bit and then the pories started to come in and they came in and drove the price really way
1:20:30
down because they're very cheap to to mine and now in 2000 the the commodity
1:20:38
markets began to realize we hadn't discovered many poy coppers recently and we were looking at a future
1:20:44
scarcity um so the price started to climb and that's where we are now meantime the land disturbances were
1:20:51
Rising this is schematic but I'm showing them Rising John explanation yeah so
1:20:57
what you're illustrating there where where the big price fight starts yep that's where uh out of 2000 is that the
1:21:05
point that the industry brought into the theory that there's definitely going to be a shortage I think more of the
1:21:12
commodity markets okay so they started bidding it up they start but it's real because because you
1:21:19
can see what mins there are in the world and it as I say it takes 20 5 years sometimes to develop a mine 10 years
1:21:25
minimum what did what was it for bonovo um so you can see what's coming down the
1:21:31
track and uh and they can see that the shortage is coming down the track way ahead of time and this is this inverse
1:21:39
Supply demand curve when people are still bringing on poies because they went out they what happened at this
1:21:45
point in 1970 is they figured out how po Frey deposits were formed and how to
1:21:52
find so everybody went looking for poor free coppers and all kinds of projects started and they were committed they
1:21:58
spent billions of dollars and they couldn't stop them so the price kept going down and down and
1:22:04
down and of course eventually they stopped them so um so now the price is
1:22:09
rising so it's um so this is the second from last slide uh what are we looking
1:22:16
at that might change some of these ideas well iron oxide copper gold deposits are
1:22:21
about the same GR as um as pories um this is for copper uh they
1:22:30
contain uranium and they can turn contain some RAR roads and they found this huge thing in Australia South
1:22:37
Australia and everybody in the world is now out there looking for ocgs um so far we don't understand them
1:22:46
so we haven't found I think there's two more real genuine oics being ocgs being
1:22:52
found one in Chile and perhaps one in Baja California um then the next thing down
1:22:59
the line would be seabed Mangan nodules and these are a laay a few inches thick
1:23:05
on the bottom of the ocean I knew that right and their grades are similar to
1:23:10
poy copper but they're much more inaccessible because they're in very deep water and what I wonder is whether
1:23:17
we'll ever um whether we'll ever have we might have some small
1:23:23
production from manganese nodules but I I don't think it's per environmentally permissible to go mining them everywhere
1:23:30
so compared to to deep sea um oil how much deeper how
1:23:39
deeper um these things essentially are in in the in the deep ocean so they be
1:23:46
sort 10,000 ft deeper than we drill forward deep yeah deeper than we drill
1:23:52
for for um new mining technology uh we we've got things like
1:23:59
solvent extraction and Electro winning which does away with these nasty dirty
1:24:05
smelters but unfortunately the energy costs are about twice what they what they are and they use um things like
1:24:11
sulfuric acid a lot so you've got and also cyanide so you've got potential
1:24:17
problems with with uh losses with with you know leaks um another thing that's
1:24:23
being done in in Canada in the Flyn flon nickel belt is there um everything's
1:24:29
being done by remote control from the surface no men underground just completely machine control that's very
1:24:35
Capital intensive of course and then also solution mining is being used for
1:24:41
Uranium it's being talked about for copper um but you have to control and and it's also used for things like
1:24:47
potach in England which is again the fertilizer mineral um but but it tends
1:24:52
to be very energy intensive because um you're pumping huge quantities of water
1:24:58
through the ground and you probably have to Frack the ground in most cases and you have to control you have to make
1:25:05
sure the the fractures and faults in the ground don't allow the solutions that
1:25:11
you're pumping through there to get outside your whole body you don't want them getting into anybody's Wells or anything so that's technically
1:25:18
complicated and and um and it can be very in energy intensive the the potach
1:25:23
mine in England that uses solution mining has a shaft and to make that shaft stable going through all the salt
1:25:29
deposits to reach the pach they had to freeze the the ground all around it for 4,000 ft and it keep it
1:25:37
Frozen um we're do substitution is ongoing and I didn't put um Titanium
1:25:45
construction materials on here because the energy cost of titanium is so high but we we are using carbon composits we
1:25:52
will use more of with the new airplanes are going to be luning carbon composits nanot tubes are in somay will reach
1:26:00
volume protection production and these Organo metals and things like that so so
1:26:05
oh and this is um this is a zinc solvent extraction plug big huge thing with Vats
1:26:11
full of full of acid so my conclusion I'm missing one
1:26:17
slide there I had one slide which actually compared the energy costs of um
1:26:23
I don't know what's happened to it but um use 800 KW for conventional smelting
1:26:30
for copper it takes 1,400 Kow for Electro winning so it's using the acid
1:26:35
and not having the smelter and it takes 2700 KW for to to refine titanium from
1:26:42
the oil so it's 3 and 1 half times more energy than so these are the conclusions
1:26:49
no immediate threat of exhaustion of any important commodity my guess and the guess of several papers I read was that
1:26:56
we'll start seeing seriously increasing real costs around
1:27:02
2050 that's when that's when things begin to look a bit um a bit strange um
1:27:10
most part of the reason that economists of such a Rosy attitude is they ignore this thing and I put it in there because
1:27:16
I haven't seen it anywhere else um this the lumpy supply curve which makes uh
1:27:22
puts these huge price fluctuations in that can be quite longterm um because of the the few large
1:27:29
deposits controlling Supply the capital requirements the time requirements and these exploration bubbles such as we saw
1:27:36
for po free Cara we're seeing now for rare Ur we saw it in the 80s for epithermal
1:27:42
gold um population and economic growth growth is exacerbating the problems mean
1:27:49
meaning that the deposits get larger and lower lower grades so more and more Capital more and more environmental
1:27:55
complaints and hearings and time and and people saying no not in my backyard um
1:28:02
more and more political risk because biggest deposits may not be in the most friendly countries um technology is
1:28:10
leading to the use of more and more exotic materials which causes increased refining cost increased energy usage and
1:28:19
increased environmental cost because these are gener low grade and they use some nasty things to process them and
1:28:26
then in the long term we've got we we still are dependent on this race between
1:28:32
technology and resource depletion and since 1800 technology has been winning but um
1:28:40
as as grades go down particularly in the frontier goes away uh I think and I'm
1:28:46
not alone in thinking this there's there's a school of Economics which also thinks that the long-term Curve will
1:28:52
will be decreasing real prices and then a gradual increase um and then but but more
1:29:00
important than all of that I think is the the are the environmental con constraints um land the external costs
1:29:08
that increase as multiple exponential function or exponential function functions multiplied together and the uh
1:29:16
issues of land availability I think this is going to be the major constraint long
1:29:22
before um the actual or grades and Things become
1:29:29
limiting um and so as I say 2050 we start to see serious limitations on them
1:29:37
available thanks that's
1:29:45
it for aluminum well not aluminum I know whatever else can be found
1:29:52
trash yeah you know we we might do that I mean we in some sense we already have
1:29:59
done a lot of that around mines when when they started up the big mines in
1:30:04
Zambia the uh efficiency of or recovery left 9% copper in the tailings and in
1:30:11
the uh '90s they went through all those tail all these tailing stamps that used to be part of my life have all gone uh
1:30:19
they went through and uh with more efficient uh processes and and got a lot of the copper out and that's so so where
1:30:27
there are concentrations like that we've been doing that and I think um definitely landfills will will will be
1:30:35
one of those places I mean the best thing of course is what Austin is doing is you keep it out of the landf in the
1:30:40
first place 100% recycling or whatever they call it total
1:30:46
recycling yeah and there's I mean I didn't talk about recycling at all because what I
1:30:53
was talking about was was uh the new mining and it's exponential increase there are some economists that say well
1:31:00
you know we we've got Recycling and all of this stuff about exponential growth
1:31:05
won't happen because we're recycled but it is happening and it hasn't shown any sign of slackening off so I decided it's
1:31:11
the interest of being able to give it all in one talk so I wouldn't talk about that so this is a little off topic but
1:31:19
um you know the theory that the um peak oil are
1:31:26
you what's your well we're there I showed that on that one one graph I mean
1:31:32
it's not a it's not a peak like a mountain peak um uh
1:31:39
oh but it's um so Peak isn't 2050 2050 is the
1:31:49
end in 2050 I I I just think that we'll start seeing increased real cost and I I
1:31:57
mean I should have been more explicit around that time somewhere around that time we'll see that our purchasing power
1:32:05
is being severely crimped because everything with any mineral content is
1:32:10
beginning to co cost a lot more than it did before so that's you know absent
1:32:16
revolutions and all the rest of it that's um what I think will be the real
1:32:21
there it is um what's what's happened in the N last nine
1:32:27
years is that we haven't increased oil production at all we reached this point
1:32:32
in 2003 and production is horizontal with a lot of little blips on but this
1:32:39
is Pink oil we're in it yeah now I mean you know if you go to
1:32:46
axon they'll say oh but we've got all kinds of unconventionals we'll go to oil shale mining and we'll go to fracking
1:32:53
and we'll go to this and we'll go to that and tans but in actual fact um we
1:32:59
can't we can't take advantage of a lot of those things number one one half of
1:33:04
the tand reserves in the world are in Venezuela and we don't talk to the vene um and and the other half is in Canada
1:33:11
and we've got a huge environmental Lobby which is determined not to have the pipeline that we need to bring the stuff
1:33:17
down here so that that will in fact shut down the Tas hands operation in Canada that the environmental Lobby ones H shut
1:33:24
down um they don't say that they focus on the pipeline but if the pipeline
1:33:29
isn't there either the stuff will be pipelined through the Rockies which is going to be even worse to the Chinese
1:33:34
market or mines the the uh oil sh mines will be toss hands mines will be shut
1:33:40
down and and the same with the the the franking although the complaints now are
1:33:47
mainly around gas franking in in New England but um you know there's a growing outcry about
1:33:54
about franking and that's our really our last hope in this country because those are the source rocks we're now attacking
1:34:01
the source rocks and if we um and and and the the the the situation with that
1:34:07
is you hear we could be self-sufficient but if we to be self-sufficient we'd have to put you know something like a
1:34:14
thousand drill rigs into the oil fracking thing and we'd reach
1:34:19
self-sufficiency self-sufficiency in the next week uh production would be going down and we'd lose it a better way is to
1:34:26
aim for some reasonable level of production that we can then keep at a
1:34:31
plateau for several decades that won't be self-sufficiency but it'll be a lot less oil imports than
1:34:37
we have now um and and and the guy that gave the talk about that that I heard
1:34:42
said suggested that it would be the bankers that would enforce that not the government Bankers would look at if if a
1:34:49
rig owner or um an oil field developer went to them and things were going up
1:34:55
too rapidly the bankers would say no I can't justify lending you the money so have enough money to finance it
1:35:04
themselves well that could happen but I don't know but I think energy is the real
1:35:13
constraint I think many of the many of the things that people talk about in terms of new wonderful Alloys and minor
1:35:19
metals and and tianium construction materials I think is one of them these
1:35:24
are are fundamentally going to be limited by the amount of energy required to move in that direction so and one
1:35:32
suggestion would be is we we develop the Technologies to use those things in a
1:35:37
way that we can use intermittent power supplies like the Sun or the wind um
1:35:44
whereas in the 20th century everything was aimed at making making continuous
1:35:50
processes my father was a metallurgist and worked a large part of his life in getting away from batch processing in
1:35:57
making non-ferrous Alloys in order to make one long continuous Billet of
1:36:02
copper that never stopped 24 hours a day 7 days a week that would require fossil
1:36:08
fuel in for most metals in huge abundance what we would be much better
1:36:13
would be go to go to a batch process when when it's sunny and you can generate power you melt up a batch you
1:36:19
make it you do whatever you're going to do and then when the Sun goes away you you know you shut it down but then you
1:36:26
still have to transport it h you still have to transport it yes yes well that's
1:36:32
a big issue but hope you know we have a lot more natural gas than oil and if we move our transport Fleet to Natural Gas
1:36:38
we won't necessarily be um hindered within the next 30 Years by
1:36:43
Transportation issues we just have to get the national will together to do that
1:36:50
so M okay any other questions any more
1:36:56
questions thank you John apprciate John thanks John thank you sorry
1:37:03
I that was fantastic um real quick before we I guess

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John Berry: Mineral Resource Availability and Our Future

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