Editorial Mining will survive this recession, too

Old ideas die hard, and one that seems to be taking an inordinate amount of time on its way to the grave is the idea that mining is a dying industry. Remember the “Death of Mining” headlines in the early 1980s? They seem to get trotted out every time the economy goes into recession. Why not? Mining is an easy target for those who deal in pandering to people’s propensity for doom and gloom.

Mining is an old, old industry. So, if one draws the analogy between an industry’s vitality and human longevity, it makes sense to expect mining to drop dead at any minute.

Mining, however, survives because it is essential to our way of life. Mining has been so important for so long it seems peculiar that anyone should doubt that it will last a great deal longer. It is not running out of time and it is not running out of material. It is continuing, as it has for centuries, to be the backbone of civilization.

In the recession of the early 1980s the idea that mining was a “sunset industry” gained credence from those who spoke of substitution. Plastics, ceramics and superconductors would replace metals in the world of the 21st century, the theory went.

But the opposite is happening. As Asarco Inc. Chairman Richard de J. Osborne said in a speech late in 1990, “We are seeing the intensity of use of copper, as measured in pounds of copper consumed per person, increasing rather than declining, and we are seeing many old and historic applications of copper regaining popularity. I refer particularly to architectural, automotive, electronics and building wire applications for copper.”

An example is that of fibre optics. Substitution of fibre optics for copper wire has been a perceived threat to copper producers for years, but “more copper is now being consumed in devices at either end of the fibre optic communication link than is displaced by the cable itself,” says Osborne.

From the mining industry’s own ranks one sometimes hears the plaintiff call for help from a company slipping into receivership or from a whole segment of mining companies based on a single vulnerable commodity. Their plight reinforces the illusion that the industry is wasting away.

Uranium producers are an example. Canadian producers were sustained for years only through long-term contracts for uranium that assured prices for their product well over current market prices. In the U.S., uranium producers at the mercy of market forces were virtually wiped out by lower cost producers in Canada and elsewhere.

Now uranium may be facing a revival. Excess of demand over supply will see uranium stockpiles depleted in a few years and, if South Korea’s recent decision to construct more nuclear power facilities is any indication, a shortage of uranium could develop in the not-too-distant future.

A few years ago, U.S. copper producers were thought to be on the verge of extinction. From 1982 to 1985 the three major U.S. copper producers, Phelps Dodge, Asarco and Amax, lost nearly US$2.5 billion. But productivity improvements, new technology, plus changes in management and ownership have resurrected U.S. copper producers to the point where they now rank among the world’s lowest-cost producers.

Environment was another issue that led many to prematurely spread the news of mining’s death. The environmental issue, as it turns out, could prove to be a boon to mining. Uranium, again, is a prime example. Still facing stiff opposition from those who question how nuclear waste will be disposed of, uranium-generated power is seen as clean and efficient compared with other fuels used for large-scale power generation.

And, of course, metals are recyclable unlike many other materials.

The exploration sector, too, has to accept some responsibility for the public image that mining is a dying industry. Exploration faces unique problems, although they are something akin to research and development in the manufacturing sector: success is pursued down several avenues, but most are dead ends. Outsiders see those dead ends as failures when in fact they are simply part of the business. One could say that the more failures the better if they indicate a proportionate number of successes.

What’s more, there is no immediate payback from exploration. As those in the industry know, when times are tough, exploration expenditures are the first to be cut.

So what appears to be a segment of the industry chronically suffering from failure, layoffs and generally unpredictable results is actually a vital “breeding ground” for finding tomorrow’s minable deposits. Like a diverse gene pool from which the best and strongest biological species develop, so the exploration field is to mining — a strong brew of experience, theory, experiment and luck that ensures a steady stream of economic deposits ready to be mined as society requires them.

Today mining is strong and growing, supported by well-run companies that are investing in the future. That is the message that has to get through to regulators and legislators. If they, however incorrectly, see mining as weak and dwindling, they’ll see little advantage in supporting it. But if they recognize mining as a cornerstone of the economy that can create wealth and help drive our economy forward, they will be more likely to implement laws and regulations favorable to mining’s future.