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CREATING WEALTH
AND COMPETITIVENESS IN MINING
by
John E. Tilton1
The ability of companies and countries to mine copper and other mineral
commodities competitively and in the process to generate new wealth depends on their
mineral endowment. Chile, for example, produces and exports copper because it is well
endowed with high-quality, low-cost deposits. This production creates wealth that
benefits mining companies and their stockholders, the government, local communities, as
well as copper consumers around the world.
The widespread perception that mineral endowment must largely determine
competitiveness, or what economists call comparative advantage, must be true at any
particularly moment. Countries with abundant reserves must be competitive. This follows
from the definition of reservesthe quantity of a mineral commodity found in discovered
deposits that are profitable to exploit under current conditions. As a result, it is a
tautology and not particularly interesting. The important question is what causes reserves
to change over time, producing in the process new wealth and shifts in competitiveness?
1William J. Coulter Professor of Mineral Economics at the Colorado School of Mines and at the time someof the research for this article was conducted, Visiting Scholar at the Centro de Mineria of the PontificiaUniversidad Catolica in Chile. I am grateful to Rio Tinto plc for kindly providing access to its MineInformation System. This paper is an updated and expanded version of Tilton (2000) and Tilton (2001b). Itwas prepared for the CRU World Copper Conference: Costs and CapitalImproving Performance in theCopper Industry, held March 19-21, 2002, in Santiago, Chile.
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Three possible answers come readily to mind. First, as mining occurs and the best
(lowest cost) deposits are depleted, mineral commodity prices may rise, permitting the
profitable exploitation of the next best set of deposits. Second, the discovery of
previously unknown deposits may augment reserves. Third, innovation and new
technology may create reserves by allowing previously known but uneconomic deposits
to be exploited profitably.
The prevailing or traditional view of competitiveness and wealth creation focuses
on the first two possible explanations and for the most part ignores the third. What we
can call the alternative view, on the other hand, focuses on the third explanation, and
claims it is as important or more important than the first two, especially over the longer
term.
We know that the first explanation at least in recent years is of little relevance,
because real production costs and prices for copper as well as many other mineral
commodities have fallen, not risen. While exploration and the discovery of previously
unknown deposits are important, are they as important as the innovation and new
technologies that permit the profitable mining of previously known but uneconomic
resources?
Studies that several colleagues and I have conducted over the past few years on
the causes and consequences of labor productivity growth in the copper mining industries
of the United States and Chile spotlight the importance of innovation and new
technology.2 They provide considerable support for the alternative view of
competitiveness and wealth in mining.
2 See Tilton and Landsberg (1999), Aydin and Tilton (2000), Tilton (2000), Garcia and others (2000),Tilton (2001a), Tilton (2001b), and Garcia and others (2001).
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For many closely associated with the mining industry, as well as for a few
observers outside the industry,3 the importance of innovation and new technology has
long been recognized. For the most part, however, government officials and the general
public consider mining to be a mature industry with relatively stagnant technology. In the
world, as they see it, countries that discover new deposits to replace those being depleted
maintain their competitiveness. Countries that fail to do so lose their competitiveness and
the wealth flowing from mining.
Important and quite different policy implications flow from the traditional and
alternative views for both mining companies and mineral producing countries. The
implications of the traditional view are considered next, then the evidence from the
United States and Chile regarding innovation and new technology, and finally the
implications of the alternative view.
The Traditional View
According to the traditional view, the overriding determinant of competitiveness
and wealth creation in mining is the geological legacy a country enjoys along with the
exploration efforts undertaken to uncover that legacy. This view is intuitively quite
appealing, and over time has accumulated quite a large following. It also has a number of
important implications.
First, it suggests that other determinants of competitiveness and wealth creation
are insignificant compared to geologic endowment. The generation and diffusion of new
technology along with other innovations, in particular, are of little or no importance.
3 See, for examples, Adelman (1970) and Trocki (1990).
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There are two, quite different rationales for this position. The first contends that the
technology of mining is mature and stagnant, and that the few changes that do take place
do not greatly affected costs. The second recognizes that advances in technology occur,
but argues they diffuse quickly around the world providing particular mines, companies,
and countries with few opportunities to acquire a cost advantage over other producers.
The first of these explanations flies in the face of considerable empirical evidence, and
yet in many circles is still widely accepted.
Second, the traditional view sees competitiveness and wealth creation in mining
as largely a transitory gift of nature. Companies and countries with the best deposits are
the most competitive and generate the most wealth. Once their deposits are exhausted,
however, competitiveness will shift to those companies and countries with the next best
set of deposits. New discoveries can also from time to time cause a change in the
distribution of reserves.
Third, there is little managers and workers can do to sustain or improve the
competitiveness of any particular mine. A mine can produce only so long as it has
reserves. Once these are gone, it will close. To remain competitive over the longer run,
companies must replace their depleting reserves by new discoveries or by acquiring new
deposits in other ways.
Fourth, the ability of governments to promote the competitiveness of their mining
industries is similarly limited. While policies that encourage domestic exploration may
delay the inevitable, the depletion of the best deposits and the exploitation of the best
exploration sites will eventually encourage mining companies to search abroad for new
reserves. Through taxation and other means, governments can acquire some of the wealth
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created from their domestic mineral resources and invest it, thereby ensuring that future
generations too benefit from the countrys mineral wealth even after it is gone. What they
cannot do is prevent the depletion of their mineral deposits and the loss of
competitiveness that follows.
The United States
Throughout much of the 20th
century the United States mined more copper than
any other country. By the late 1970s and early 1980s, however, its industry was in
trouble. Between 1970 and 1985, output declined by nearly a third, and its share of
Western world production fell from 30 to 17 percent. Employment dropped by 70
percent. Cash costs declined but not enough to keep pace with the drop in market price.
As a result, very few mines were earning a profit, and many were not even covering their
variable or cash costs.
U.S. copper producers petitioned the government for protection from imports in
1978 and 1984, claiming their survival was at stake. On both occasions, their request was
denied. The media as well lamented the industrys fortunes.Business Weekin the mid-
1980s ran a cover story declaring the death of mining in the United States.
Amoco Minerals, Arco/Anaconda, Cities Service, Louisiana Land and
Exploration, and other companies left the industry. They sold their mines to other
companies, spun them off as independent companies, or simply shut them down. Of the
24 significant copper mines operating in the United States in 1975, six had closed by
1990 and another five had sharply cut back production.
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Yet the industry did survive, staging one of the most spectacular turnarounds in
modern industrial history. By 1995 output was 72 percent above its 1985 level, and even
21 percent above its 1970 level. Western world market share recovered to 23 percent.
Imports were down, and profits up as costs continued to fall while prices recovered.
Innovation, Mineral Endowment, and Competitiveness
Many factors contributed to the recovery of the U.S. copper mining industry,
including a decline in real wages, an increase in by-product revenues, a rise in copper
prices, and the depreciation of the dollar. Among these, however, a dramatic
improvement in labor productivity was more equal than others. As Figure 1 shows, labor
productivity more than doubled between 1980 and 1986. So where two workers were
needed in 1980, one would do six years later. Labor productivity continued to rise after
1986, though at a more modest pace, and by 2001 was three times its 1980 level.
Part of this surge in labor productivity can be attributed to an increase in the
amount of capital, energy, and other factors available per worker. During the 1980s, for
example, Bingham Canyon undertook a $400 million modernization program that helped
the mine quadrupled its labor productivity. Even more important, however, was the
introduction of new technologies and other innovations.
One particularly important development was the increasing use of the solvent
extraction electrowinning (SX-EW) process, which greatly reduced both the operating
and capital costs of producing copper. A better understanding of rock mechanics allowed
new mine plans that reduced stripping ratios and so diminished the amount of waste
generated per ton of ore. Innovative agreements with labor increased the flexibility in
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work rules and manning assignments. Better ore handling systems, larger trucks and
shovels, bigger drills, in-pit mobile crushers with conveyor belts, more cost-effective
explosives, and the computerization of truck schedules and real time process controls in
mills are examples of other new technologies and innovations that the U.S. industry
introduced in its revival efforts.
Relying on the traditional view of competitiveness and wealth creation in mining,
we would expect to find behind the revival of the U.S. copper mining industry an
improvement in the mineral endowment being exploitedeither from raising the cutoff
grade at existing mines or from shifting production from high cost to low cost mines. One
looks in vain, however, for much evidence of either.
Trends in copper head grades do show a rise in the early 1980sfrom 0.59
percent in 1980 to 0.68 percent in 1984as presumably some mines with poorer deposits
closed and other mines turned to higher-grade ores to reduce their costs during this
particularly difficult period. However, the rise in head grades was short lived, and over
the entire 1971-1993 period that Tilton and Landsberg (1999, Fig. 4.5) examine grades
drop considerably, from 0.78 percent to 0.60 percent.
We also know that shifts in mine location did not play a dominant role. The new
mines brought on stream during the 1975-1990 period, including Flambeau and Cyprus
Tohono, contributed very little to the countrys total output, under five percent. So the
revival of the U.S. industry came about because existing mines recovered their
competitiveness. In particular, Bagdad, Chino, Morenci, Ray, and Tyrone more than
doubled their output, while Bingham Canyon increased its production by 50 percent.
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These substantial increases raise the possibility that the revival of the U.S.
industry was largely the result of productivity improvements and cost reductions flowing
from a shift in output away from poor high-cost deposits to the good deposits at these
mines. However, when we measure how much of the rise in labor productivity for the
industry as a whole was the result of shifts in output from low to high productivity mines
and how much was the result of individual mines increasing their productivity, we find
that the shift in mine location accounted for only a quarter of the rise in industry
productivity (Aydin and Tilton, 2000). This means that three-quarters of the total increase
came about as a result of improvements in labor productivity at individual mines, where
mineral endowments presumably changed little. These findings suggest that changes in
mineral endowment were of secondary importance compared to innovative activity in the
recovery of the U.S. industry.
Technology Diffusion and Competitiveness
Our research on the U.S. copper mining industry challenges the traditional view
of competitiveness and wealth creation in yet another way. Earlier we noted that
proponents of the traditional view claim that innovation and new technology have little or
no influence on competitiveness because new technology in the global economy diffuses
rapidly around the world. For example, it is argued, there is little or no difference in the
time at which a new and more efficient shovel or explosive is available to mines in the
United States, Chile, Zambia, or elsewhere. So a cost advantage based on new technology
either will not arise at all or will be extremely short lived.
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This conclusion, however, is based on two implicit assumptions. The first is that a
new process or technique is the result of but one innovation. The second is that the effects
on all producers are neutral in the sense the impact on costs is the same. As the solvent
extraction electrowinning (SX-EW) process illustrates, neither of these assumptions may
hold.
Ranchers Exploration and Development Company undertook the first commercial
production of copper using the SX-EW process in 1968 at its Bluebird Mine in Arizona.
Since that time literally hundreds of innovations have improved the processenhancing
the quality of the copper produced, reducing costs, increasing the range of treatable
copper bearing minerals, and extending the weather and other conditions for successful
operation. Moreover, these developments will certainly continue into the future. This
means that companies and countries that stay at the forefront of these efforts can
indefinitely enjoy a cost advantage over their rivals thanks to technology.
In addition, the SX-EW process reduces the costs of some producers much more
than others. Specifically, it favors:
Companies and countries that historically have been important copper
producers, as these producers over the years have accumulated substantial
waste piles of oxide copper minerals. The SX-EW process is particularly
suited to recover the copper from such low-grade ores.
Companies and countries where stringent environmental regulations are
enforced. The sulfur emission recovered from smelting copper provides a low
cost source for the diluted sulfuric acid used in leaching step of SX-EW
processing.
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Companies and countries possessing copper deposits in arid regions. The
leaching step of the SX-EW process is difficult to control where precipitation
is heavy.
Companies and countries with substantial copper reserves that contain few by-
products of value. So far the SX-EW process has not been able to recover
economically gold, silver, molybdenum, and other valuable by-products often
found in copper ores.
These conditions exist particularly in the United States and Chile. This explains
why these two countries account for such a large share of the worlds total SX-EW
copper production, and why in turn the SX-EW process accounts for such a large share of
their total copper output.
The SX-EW process is a particularly dramatic example of the impact on
competitiveness and wealth creation that innovation and new technology can have. At the
other end of the spectrum, there are thousand of small innovations that can improve the
performance of individual mines. As every mine is unique, it has its own innovative
opportunities. Although small innovations may individually have little influence on
competitiveness and wealth creation, when aggregated they can be of great importance.
While some of these opportunities extend over several or even many mines, many are
useful only for a given mine with its unique situation. These innovations do not diffuse
rapidly around the world.
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Labor Productivity, Costs, and Mine Survival
The collapse and revival of the U.S. copper mining industry over the 1970-1995
period raises yet another intriguing issue: Why did some mines manage to survive and
even to expand their output over this period, while others shut down?
Table 1 separates the 24 significant copper mines operating in the United States in
1975 into three groups. The 10 expanding mines managed not only to survive but to
increase their output over the following 15 difficult years. The three contracting mines
survived as significant producers, but suffered a loss in output. The 11 non-surviving
mines either stopped production completely or cut back to the point where they were no
longer significant producers.
Economic theory and common sense leads us to expect the expanding mines to
have the lowest cash costs and the highest labor productivity at the start of the period, and
just the opposite to hold for the non-surviving mines. Table 2 provides some support for
these expectations, though there are anomalies. The non-surviving mines, for example,
have lower cash costs in 1975 and higher labor productivity than the contracting mines.
Even more surprising, simple econometric models indicate that the ability of
mines to reduce their cash costs and to increase their labor productivity after 1975 is
actually more important in explaining survival than their starting position in 1975 (Tilton,
2001a). This again suggests that innovative activity played an important role in the
recovery of the U.S. copper industry.
Why were certain mines more successful than others in fostering productivity
growth and in reducing cash costs? While a host of factors were likely involved, Table 2
indicates that the expanding mines produced more and held substantially larger reserves
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than the contracting and non-surviving mines at the beginning of the period. Large mines
with many employees possess more human capital for innovative efforts. Given the
greater number of jobs at risk, they may also be more concerned about survival.
Similarly, mines with many years of reserves are likely to have greater incentives to
invest in new facilities embodying the latest technology since the expected returns can be
realized over a longer time horizon.
Chile
To what extent can we generalize the finding that innovative activity is as
important or more than mineral endowment in the creation of wealth and competitiveness
in mining? There are good reasons to suspect the U.S. situation may be an anomaly.
While the country is a major producer, the development of most new copper mines has in
recent years largely taken place abroad, particularly in Chile. One would expect
exploration and the development of new deposits to play a much more important role in
competitiveness and wealth creation in the latter countries.
Our research on Chile was largely motivated by the desire to see if copper mining
in that county enjoyed a similar jump in labor productivity during the 1980s as in the
United States. And if so, to what extent innovative activity as opposed to the
development of new mines drove the increase.
As Figure 2 shows, labor productivity increased in Chile during the 1980s, but at
a modest pace.4 Chile did experience a jump in productivity similar to that in the United
4It is important to note that labor productivity is measured differently in Figures 1 and 2. In Figure 1, laborproductivity is the copper contained in U.S. mine outputper thousand hours of work by copper companyemployees. In Figure 2, for the reasons indicated in footnote 5, labor productivity is the copper contained inChilean mine outputper copper company employee. So the levels of productivity shown in the two curvesshould not be directly compared. As the hours worked per copper company employee in Chile fell during
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States, but only in the 1990s, a decade after the jump in the United States.5
The 1990s was the decade during which many new mines came on stream in
Chile, suggesting that better deposits rather than innovative activity were largely behind
the surge in labor productivity in that country. Previously, the state mining company
Codelco contributed the lions share of the countrys copper output. In 1990, for example,
its mines accounted for three-quarters of all the copper mined in Chile. Over the decade
that followed, this figure fell to nearly one-third as Escondida, Candelaria, Cerro
Colorado, Zaldivar, El Albra, Collahuasi, and other new mines came on stream,
developed for the most part by private multinational mining corporations.
Our research indicates that the shift in mine output, particular toward new mines,
accounts for about two-thirds of the jump in labor productivity during the 1990s (Garcia
and others 2001). This still leaves a surprisingly large portion of the jumpnearly a
thirdattributable to increases in labor productivity at old mines. Chiquicamata,
Salvador, El Teniente, and AndinaCodelcos traditional minesincreased labor
productivity by 37, 70, 70, and 84 percent respectively between 1990 and 1997. A host of
different innovative efforts largely created these impressive improvements.
the 1970-1997 period from over 2000 to under 1500, the labor productivity figures shown in Figure 2 forChile would have to be reduced by 33 to 50 percent to reflect output per copper company employee.5The increasing tendency in recent years for copper producers in Chile to outsource to third parties manyeconomic activities raises the possibility that the growth in labor productivity shown in Figure 2 is
overestimated. To assess this possibility we corrected the productivity figures shown in the figure for fourknown shortcomingsthe growing use of outsourcing and contract employees, the decline in the averagenumber of hours mining company employees work per year, changes in the quantities of byproductsproduced, and changes in the extent to which ore is processed domestically. The results show that thereadily available measure of output per company employee closely tracks the corrected figures (Garcia andothers 2000). While the errors introduced by outsourcing are significant, they are for the most partcancelled out by the decline over time in the average number of hours that company employees workannually. Errors arising from the other two sources examined are small by comparison. Thus, the almostfour-fold increase in labor productivity in the copper mining industry in Chile over the 1978-1997 period isreal, and not just an artifact of outsourcing or the way productivity is measured.
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Moreover, when we examine labor growth over a longer periodfrom 1978 to
1997we find innovative activities at the level of individual mines to be even more
important. Their contribution to the rise in labor productivity was 45 percent, compared
to 55 percent for the shift in output from low to high productivity mines.
We had expected the development of new mines to account for all or almost all of
the growth in labor productivity in Chile, and so were surprised by these figures. They
indicate that innovation and new technology as well as the discovery and development of
new deposits have played an important role in enhancing Chiles competitiveness in the
world copper industry. Without innovation, many of Chiles older mines would no longer
be producing, Codelco would not be the worlds largest copper producer, and copper
exports from Chile would be a third or so below their current levels.
The Alternative View
According to the traditional view, a countrys geologic legacy and exploration
determine its ability to compete and create wealth in mining. Aside from finding and
developing new high quality deposits, there is little government, management, and
workers can do to reduce the relative costs of their mining activities or to extend the
working lives of their operating mines. The pressing policy questions that emerge from
this view are:
How long will our mineral endowment last?
How should wealth (or what are commonly called rents) created by mining be
divided among workers, companies and their shareholders, the state as a
whole, and other interested parties?
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How much of the wealth or rents should the state invest in other forms of
capital, to ensure that future generations continue to benefit from the countrys
geologic legacy after the mines are shut?
These questions lead inevitably to concerns over sustainability, intergenerational equity,
and the intricacies of green accounting.
On the other hand, if the traditional view is wrong or incomplete, if innovation
and new technology are important sources of competitiveness and wealth creation in
mining as suggested by the alternative view, the set of important policy issues changes.
The whole process becomes much more internally driven. There is still wealth created
and rents to be captured, but they are not predetermined gifts of nature, fixed in size, that
producersfirms and countriescan effortlessly gather up. They are instead created by
the mining companies that succeed in the global competition to reduce production costs.
Mining becomes much more of a high tech industry than generally recognized,
where managers and workers are not helpless bystanders watching external forces
unravel their predetermined fate. Instead, they are crucial players who through their
innovative efforts influence their own destinies. While every mine eventually runs out of
reserves, innovation and new technology may extend the path to extinction by decades.
The role of government shifts from ensuring that society as a whole gets its fair
share of the wealth created by mining and that it is used in a manner that achieves
intergenerational equity, to creating an economic climate conducive to the innovative
activities of firms and individuals. In short, public policy focuses more on how to
increase the benefits flowing from mining, and less on how best to divide them.
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Now, human ingenuity can keep the real costs and therefore prices of copper and
other mineral commodities falling indefinitely. This in turn reduces concerns about
sustainability and intergenerational equity.
The copper industry in the United States provides considerable support for the
alternative view of the sources of competitiveness and wealth in mining. During its
dramatic turnaround in the 1980s, it greatly reduced its production costs, not by
discovering new and better deposits, but by a variety of innovative activities that
substantially reduced costs and more than doubled labor productivity.
In Chile, we find, as we expected, that the discovery and development of new
mines contributed greatly to that countrys rising labor productivity, particularly during
the 1990s. More surprisingly, we find that innovation and new technology also played an
important role in sustaining that Chiles competitiveness and in contributing to the wealth
created by the industry.
While the stunning revival of the copper mining industry in the United States
during the 1980s may be exceptional, the experience of the successful copper mining
firms in that country and Chile is not all that unusual. New technologies have radically
affected competitiveness and wealth creation in the gold, nickel, and other metal
industries. Around the world, mining companies are continually searching for new
technologies and other innovations to reduce costs. The discovery and development of
new deposits is only one of many possible ways of enhancing competitiveness and wealth
creation by reducing costs, and often not the most important.
This, as we have seen, greatly alters the policy agenda for mining.
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References
Adelman, M. A. 1970. Economics of exploration for petroleum and other minerals,Geoexploration 8, pp. 131-150.
Aydin, H., and J. E. Tilton. 2000. Mineral endowment, labor productivity, andcomparative advantage in mining,Resource and Energy Economics 22, pp. 281-293.
Crowson, P. 2001. Mining and public policy: an alternative view: a comment,NaturalResources Forum 25, pp. 67-69.
Garcia, P., P. F. Knights, and J. E. Tilton. 2000. Measuring Labor Productivity in Mining,Minerals and Energy 15, pp. 31-39.
Garcia, P., P. F. Knights, and J. E. Tilton. 2001. Labor productivity and comparativeadvantage in mining: the copper industry in Chile,Resources Policy 27, pp. 97-105.
Tilton, J. E. 2000. Mining and public policy: an alternative view, Natural ResourcesForum 24, pp. 49-52.
Tilton, J. E. 2001a. Labor productivity, costs, and mine survival during a recession,Resources Policy 27, pp. 107-117.
Tilton, J. E. 2001b. Mining and public policy: an alternative view: reply,NaturalResources Forum 25, pp. 71-72
Tilton, J. E., and H. H. Landsberg. 1999. Innovation, productivity growth, and thesurvival of the U.S. copper industry, in R. D. Simpson (ed.)Productivity inNatural Resource Industries: Improvement through Innovation (Washington, DC:Resources for the Future).
Trocki, L. K. 1990. The role of exploration in iron and copper supply,Resources andEnergy 12, pp. 321-338.
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Figure 1. Labor Productivity in the U.S. Copper Industry, 1975-2001
(Tons of copper contained in mine output per thousand man-hours
by copper company employees)
0
15
30
45
60
75
90
Source: U.S. Geological Survey; U.S. Mine Safety and Health Administration.
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Figure 2. Labor Productivity in the Chilean Copper Industry, 1970 -2001
(Tons of copper contained in mine output per copper company employee)
0
20
40
60
80
100
120
140
Note: Figures for 1998-2001 are estimates.
Source: Comisin Chilena del Cobre, Servicio Nacional de Geologa yMinera, and Consejo Minero.
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Table 1. Output and Labor Productivity for 24 U.S. Copper Mines, 1975 and 1990a
Outputb
Productivityc
Mines _________________________ _______________________
1975 1990 Growth 1975 1990f
Growthf
Expanding Minesd
Bagdad 20 136 590 20 102 414Chino 53 145 172 60 91 51Morenci 125 324 158 53 95 78Ray 49 112 129 44 68 55Tyrone 75 155 106 51 95 87Bingham Canyon 247 371 50 31 153 394Pinto Valley 66 88 34 59 77 31San Manuel 109 142 30 22 36 63
Cyprus Miami 45 57 28 42 52 24Sierrita 132 137 4 35 57 61
Contracting Minesd
Butte 91 90 -2 43 123 184Missione 106 79 -26 28 62 122White Pine 71 51 -29 13 24 82
Non-Surviving Minesd,f
Silver Bell 19 4 -80 45 44 -1Mineral Park 27 2 -93 34 14 -59
Superior 44 3 -94 18 15 -18Yerlinton 31 2 -94 35 30 -14Bisbee 13 1 -96 44 35 -20Esperanza 24 0 -99 38 49 30Continental 16 0 -100 32 22 -32Ajo 33 0 -100 42 29 -31Battle Mountain 20 0 -100 30 21 -31Ruth McGill 31 0 -100 16 14 -12Sacaton 20 0 -100 39 45 16
All Other Minesh 75 98 30 g g g
Total Industryh
1542 1995 29
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Notes:
aAll U.S. copper mines whose 1975 output equaled or exceeded 10,000 tons or
more of contained copper equivalent in concentrates are included in this table withthe exception of Twin Buttes. Although Twin Buttes 1975 output was 13,800 tons ofcontained copper, it was excluded because its 1975 production was abnormally low,causing its productivity for that year to be unusually low as well.
bOutput is measured in thousands of tons of copper equivalent contained inconcentrate production. Output growth is the percent change in output between 1975and 1990.
cProductivity is measured in tons of copper equivalent contained in concentrateproduced per thousand manhours of labor input. Productivity growth is the percentchange in productivity between 1975 and 1990.
dExpanding mines survived the recession in the copper market during the 1975-
90 period and even managed to increase their output. Contracting mines survived therecession but suffered a decline in output. Non-surviving mines ceased to besignificant producers in the sense that their output fell below 4,000 tons of copperequivalent.
eThe Mission mine also includes the Pima mine.
fLabor productivity reported for non-surviving mines for 1990 is actually for
their last normal year of operation: 1975 for Ruth McGill and Bisbee, 1976 for BattleMountain, 1977 for Yerington, 1980 for Mineral Park, 1981 for Silver Bell, Superior,Esperanza, and Continental, and 1983 for Ajo and Sacaton.
gProductivity data for All Other Mines are not available.hOutput for All Other Mines is the contained copper in concentrate production,
and does not include the copper equivalent of byproduct output. Productivity for AllOther Mines is measured in tons of copper contained in concentrate per thousandmanhours of labor input, and does not take into account the copper equivalence ofbyproduct output. Total Industry Output includes the copper equivalency ofbyproducts for all mines except those included under All Other Mines.
Sources: Brook Hunt and Associates; Rio Tinto Mine Information System; U.S. MineSafety and Health Administration.
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Table 2. Average Output, Labor Productivity, and Cost Performance for
Expanding, Contracting, and Non-Surviving U.S. Copper Mines, 1975-1990a
Performance Expanding Mines Contracting Mines Non-Survivorsd
__________________________________________________________________________
Output Growth 81 -18 -961975-90 (percent). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1975 Productivity 36 24 28(tons/1000 hours)
Productivity Growthd
125 124 -191975-90 (percent). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1975 Cash Costsb 154 165 160(cents per pound)
Cash Costs Growthb,d -42 -19 231975-90 (percent)
1975 Breakeven Costsc 116 146 116
(cents per pound)
Breakeven Costs Growthc,d -29 -26 -61975-90 (percent). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1975 Average Outputa 92 89 25(thousands of tons)
1975 Average Reserves 558 126 34(millions of tons)
1975 Average Reserve Life 47 10 9(years)e
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Notes:
aSee Table 1 for an explanation of how output and productivity are measured. Thistable also defines expanding, contracting, and non-surviving mines, and identifies themines in each of these groups.
b
Cash costs are in real (1997) U.S. cents per pound. As noted in the text, they coverall the expenses of mining and processing through to the refined metal stage minuscapital costs (specifically, depreciation, amortization, and interest on external debt). Cashcosts typically include expenditures for labor, materials, energy, and contract services ofthird parties.
cBreakeven costs are also in real (1997) U.S. cents per pound. They are actuallyadjusted breakeven costs, which are cash costs minus any revenues received forcoproducts and byproducts, minus the difference, if any, between a mines reportedrevenues per pound of copper and the world copper price.
dData for 1990 reported for labor productivity, cash costs, and breakeven costs for
non-surviving mines are actually for their last normal year of operation: 1975 for Ruth
McGill and Bisbee, 1976 for Battle Mountain, 1977 for Yerington, 1980 for MineralPark, 1981 for Silver Bell, Superior, Esperanza, and Continental, and 1983 for Ajo andSacaton.
eReserve life for each mine is calculated by dividing the product of its reserves andthe grade of its reserves by its 1975 output.
Sources:
Output and productivity data: Table 1 and the sources cited there.Cash costs, adjusted breakeven costs, reserves, and grade of reserves: Rio Tinto Mine
Information System.