Mining News

Are We Running out of Minerals?

Posted by Alana Wilson on 6/14/2013 11:40:02 AM

By John L. Dobra i

Back in the 1950’s and 60’s geologists started pointing out that projections for economic growth in the near future would require using more basic materials – copper, iron, lead, zinc, oil and natural gas, etc., – than have been used since the beginning of the Industrial Revolution in the late 17th century. This caused concern and governments in developed countries in Europe and North America and scientists from many disciplines began looking into the field of “mineral availability”. What they found, in short, was that we really don’t how much of these minerals are available, but all evidence suggests that there are enough known resources and reserves to sustain economic growth for a growing population for the foreseeable future.

Along the same lines, in 1972 the Club of Rome, an environmental group, published The Limits to Growth, [1] which painted a very grim picture of the world running out of resources in the near future. Among their predictions in the original report was that the world would run out of oil by 2002 and most significant minerals by 2032. Their report was a doomsday prediction in the mold of Malthus who predicted that overpopulation would lead the world to persistent starvation, plagues, and misery.

Since the 1960’s there have been many Malthusian imitators and they are still at it. Enter “peak oil”, “peak copper”, or “peak ______ (fill in the blank)” into a search engine and you will some variation on the theme of the Hubbert Curve (see below). The American geophysicist M. King Hubbert created a method of modeling the production curve for the recovery of oil in a single oil field. Others have extrapolated Hubbert’s curve to the world’s oil supply and then to virtually all natural resources in a stretch of both Hubbert and Malthus.

US Crude Oil Production image

In ongoing research I looked into the “peak copper” hypothesis and found no hint of a peak. World copper production has increased from around two million metric tonnes (MT) per year in 1930 when the U.S. Geological Survey first estimated world copper supply and demand to over 16 million MT in 2011, an eightfold increase. On the other hand, known reserves have increased from under 100 million MT in 1930 to just under 700 million MT in 2010. “Reserves” refers to copper that we know the location of and that can be extracted at a profit, which is different and much smaller than physical supply or “crustal abundance” which is the amount of copper contained in the earth’s crust.

During this seventy year period we have indeed produced and used more copper than in all of previous human history. But does that mean we are running out of copper? The answer is "no".

The key to understanding why is twofold. First, you have to look at production and consumption relative to reserves, or reserve life – how long we can produce copper at the current rate from currently known reserves. If we do that, we get the graph below.

World copper reserve life image

What the graph shows is that over the past 70 years reserve life has fluctuated with various world market conditions and industry developments. For example in the 1970’s a number of very large deposits were found in parts of the world such as Indonesia that had not been extensively explored so reserve life increased. And, in the 1980’s and 1990’s, copper prices were relatively low and there was little incentive to look for copper and reserve life decreased. In the 2000’s copper prices increased so exploration efforts increased with increased demand and higher prices because of economic development in the less developed world such as China and reserve life increased. But point is that after producing more copper in this 70 year period than was produced in all of human history, reserve life is still about the same as it was 70 years ago.

This fact is overlooked by Malthusians because it does not fit their story, but there is a very good economic reason to expect this result. Miners rationally respond to market forces and explore more when prices and demand are high and less when they are low. Miners also recognize the cost of finding reserves and the cost of holding reserves in inventories or mining claims. They have no incentive to go out and find all the copper that exists in the world – only enough to keep producing in the foreseeable future.

So, to answer our question – Are we running out of resources? The answer is no. The peak theorists are wrong, just like Malthus.


iDirector, Natural Resouce Industry Institute and
Associate Professor of Economics
University of Nevada
Senior Fellow, Fraser Institute
Reno, NV 89557
775.784.6859

jdobra@unr.edu


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References

[1] An abbreviated version can be found here




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