Summary: Among the fear barrages of the past 50 years, “running out of resources” has been the most persistent. Here is why we won’t run out of minerals. As for other kinds of resources, that is a more complex story for another day.
The history of America since WWII has been a succession fear barrages rained on us by the Left, the Right, and the government. Many of these were sold to the public despite their contradiction by science. Today we have the doomster narratives of climate change, exaggerations of the findings of the IPCC. People casually talk about our certain doom from the weather, just as ten years ago people talked about civilization’s certain collapse when the “oil ran out.” Since these fears are clearer in retrospect, let’s see why peak oil was clearly bogus.
Why we don’t “run out” of minerals
The short version, the key fact about mineral resources: there is an inverse relationship between the quantity and the quality of reserves. Low quality deposits are more common than high quality. That is just common sense. Also common sense is that the march of technology lowers the cost of extracting and refining deposits. These two competing factors determine the price-supply curve for every mineral.
The first factor, geology, pushes up the the cost (capital expenditures plus operations) of extracting a marginal barrel of new oil. The first wells in the great Texas and Saudi fields could be tapped almost by sticking a straw into the ground. Slowly wells went deeper, then to offshore, then to deep offshore — such as the fantastically deep and geologically complex wells that were seen as Brazil’s future (with oil over $100/barrel). High quality light oil was tapped, then heavy and sulfur-rich oils requiring extensive refining. Eventually we tapped bitumen (aka oil sands), than can be processed into petroleum products. Eventually we might tap deposits that are only somewhat like oil, such as kerogen (aka oil shale) or converting coal to oil.
Once we have explored the world for a mineral resource, rising prices drives this evolution to lower quality deposits. The high quality deposits become insufficient to meet growing demand, so prices rise to economically justify tapping lower quality deposits.
Technology, the second factor, reduces the cost of extracting a marginal barrel of new oil.
The constant tug-of-war between these two complex factors — plus swings of capital investment, supply, and demand — make reliable predictions of commodity prices impossible over all but the shortest time horizons. All this has been known since the 1970s, as shown in this classic text about mining by the famous Ronald Prain.
Read this and it will change forever how you read about commodities, and especially stories about our certain doom from limited mineral resources. Images and red emphasis added.
Sir Ronald Prain (1975).
Excerpt from chapter ten: The Future.
Meditating on the nature of time in the first of his Four Quartets, T. S. Eliot wrote:
“Time present and time past
Are both perhaps present in time future,
And time future contained in time past.”
If this be so, it should not be too difficult to give some preview of the next 25 years as they will affect the copper industry and certainly it is possible to outline some of the factors which will be of importance between now and the end of the century, for so many of them have their origins in the past.
However, whilst encouraged by Eliot, I am cautioned against trying to peer too far by his distinguished contemporary, the philosopher-poet Santayana who reminds us that:
“Our knowledge is a torch of smoky pine
That lights our pathway but one step ahead.”
…Future copper supply will obviously depend on the volume of the world’s physical resources of the metal and man’s ability to exploit these resources, both technically and economically.
Deposits.
It has become abundantly clear over the past few years that the march of material progress which began with the Industrial Revolution cannot continue at its present rate unless the world’s reserves of minerals, fuel and food are similarly expanded. Nor, incidentally, can the damaging changes to the landscape and the pollution of air and water, which have followed in the wake, be allowed to continue if the human race is not to destroy all natural beauty and ultimately poison itself.
In regard to minerals, few matters have generated more controversy than the various attempts which have been made to quantify the resources, both in the earth and beneath the sea, which will be available for exploitation by future generations. This is a field in which neither computers nor the best human brains — nor a combination of both — can be relied upon to come up with the right answer. One has only to consider some of the forecasts which have been made over the past 50 years or so to see how totally wrong such predictions can be.
In 1931, for example, Professor C. K. Leith, of the University of Wisconsin, and later an adviser to the United States Government in the Second World War, wrote that “the best and most available of the world’s minerals …are being rapidly depleted, and yet more than 40 years later the world’s known resources are very much greater than they were then.
In 1952 the Materials Policy Commission of the United States President — popularly known as the Paley Commission, after its chairman — produced a very pessimistic report in which it foresaw the end of certain metal supplies within a generation.
More recently a great deal of world attention has been attracted to a report by that group of international scientists, savants and industrialists known as the Club of Rome, which throws much gloom on the prospects of the world being able to continue its present growth rate because of the exhaustibility of resources. In the case of copper the report indicates that on the basis of known reserves and current usage, supplies of new material will dry up in 36 years and will last 21 years at the present rate of growth; even if reserves were five times as great as they are now known to be, supplies would run out in 50 years.
{Ed.note: The above paragraph does not accurately represent the conclusions of the Club of Rome (see Limits to Growth
This, and so many other prophesies of doom about the exhaustion of mineral resources, appear to be based on the mistaken assumption that ore reserves are somehow fixed by geology. These “fixed” tonnages are calculated, then divided by current demand, suitably adjusted by a growth factor, and the answer is expressed as so many years to Doomsday.
But tonnages of ore reserves of copper and other metals are not fixed in this way. They are not static. …Ore reserves are dynamic, and their quantum depends on a number of factors which are themselves subject to constant change. These factors include the intensity of exploration and the discovery rate of new orebodies; the effect of price, which at certain levels can increase reserves dramatically; the price/cost relationship; and future technology. …
Costs and sale prices.
The second factor mentioned among those which determine future ore reserves is price and the price/cost relationship. As already indicated, higher costs and higher prices seem inevitable over the years to come and the relationship between these two increases will have an enormous influence on future reserves, as resources for growth are a function more of economic than geological factors in the period which we are discussing.
The higher the price at any given cost, or at any given technology, the more “mineral resources” will become “economic ore”. It has been said that if the copper price should double and provided that costs remain relatively stable, the copper reserves of the world might increase five-fold. …
Technology.
And now to technology, the third of the 3 keys which can unlock the doors to the world’s treasure chest of mineral resources.
To state categorically that suitable technology will be available to meet every stage of future market development would be as foolhardy as joining the prophets of doom and declaring that mankind will not survive the next 50 or 100 years because in that time the world’s resources will be exhausted. Just because technology has been found to surmount the obstacles of the past does not necessarily mean that it will continue to do so. However, the chances seem to be set fair …it is frequently observed that the sum of human knowledge is doubling every 10 years and that 90% of all the scientists who have ever lived are alive today. So even if the world is indeed facing its biggest problem of resources since civilization began, it is far better equipped than ever it was to find a solution.
In the world of copper, new technology will certainly be needed if the expected demands of developing society are to be met. …We may have to accept that the advances in technology required to bring this about will not be spectacular. They will not be achieved “at a stroke”; rather will these solutions be the product of the combined efforts of many people working in many different fields. The big “break-through” when it comes will be the sum of whatever human knowledge is available at that time and the ingenuity of those who apply it. And when it comes it may not be immediately recognized; its effects are far more likely to be gradual than dramatic. …
The ultimate constraint in the future production of copper is, strictly speaking, outside the control of the industry, but it is a matter which is of vital concern to us all the availability and cost of future supplies of energy. …
Copper’s requirement of future energy supplies will have to be bigger than it is today if expected demand is to be met – and if, as I believe, its high rate of production will depend on the mining of ever-increasing tonnages of ore of ever-decreasing grade.
Here again, there is an element of “exponential growth”, for not only will more energy be needed because greater tonnages have to be mined, but proportionately more energy will be required in some of the metallurgical processes. For example, low grades of ore may contain copper in more minute particles than higher grade ores, and the grinding process to liberate these particles demands more and more energy per ton of ore as the grade decreases, and of course even more in terms of per ton of metal. (The alternative, if energy is scarce or too costly, is of course to sacrifice some recovery by maintaining a coarse grind.) Moreover, these crushing and grinding processes are of necessity performed in the same locality as the mining operations. In aluminium production, electric power is mainly required at the refining stage and the alumina can usually be transported to wherever power is chap and readily available.
By contrast, the major power requirement in copper production is for grinding the ore and thus the power must be brought to the mine. The whole question of power utilization in every phase of copper production is under constant examination for even if availability could be assured, the cost element is certain to increase.
These and other constraints tend to suggest that the Club of Rome might be right after all in concluding that there must be limits to the growth of mineral supplies. In the case of copper, they could well be right – but not for the reasons which they advanced in their report. In my view, if there are to be limits to growth they will be imposed not by a disappearance of physical resources, but because it may become uneconomic to develop these resources, and because there could be an ultimate constraint in the form of availability, cost and input of energy. …
Summary.
To sum up the question of future resources, I do not think that the world is in any danger for many years ahead of running out of copper reserves. The technology of production will change and the price will change, but in terms of availability there should be no limit to growth in the foreseeable future.
The three chief factors which will guarantee the availability of copper are, as I have mentioned, continued and intensified exploration with new scientific aids; new technology; and the maintenance of economic incentives to convert mineral resources into economic ore.
We have come a long way since man mined and smelted copper under the shadow of the towering hills of Timna. Many times he has stood at the crossroads and wondered what the future held for him and his endeavours. The way ahead has never been crystal-clear. The brightest day must fade to twilight; in twilight all things lose their colour but not their shape, and within the general shape of the present world-wide industry, which has been build up piece by piece over six thousand years, the future will evolve with new colour, new brilliance and new rewards.