Mineral Resource Development

Geopolitics, Economics, And Policy

Harley E Johansen

• Publisher: Routledge
• Year: 2019
• ISBN:
  9780429712500
• Edition: 1
• Topic: Política y relaciones internacionales
• Subtopic: Política

One of the most significant resource-development and industrial-policy issues facing the United States today is the continued decline of domestic production and processing of metallic minerals and the associated dependence on foreign supplies for our needs. Domestic mining and processing industries have suffered from various economic problems and i

Part One
International Development of Mineral Resources

1
The Economic, Geopolitical, and Business Roots of a Global Minerals Industry: An Analysis of a National Economic and Industrial Debate

Jock G. Peterson

In August 1983 the Congressional Budget Office (C.B.O.) of the U.S. Congress published a study titled Strategic and Critical Non-Fuel Minerals: Problems and Policy Alternatives. The C.B.O. analysis concluded that "dependence on foreign minerals creates risks for the U.S. economy and for national preparedness in the event of war" and that "while there are risks inherent in U.S. dependence on imported minerals there are significant benefits as well." This study is the most recent and most reasoned of several that have been published during the last ten years--all pointing to national critical and strategic minerals and materials vulnerability if the United States becomes engaged in the major geopolitical conflict commonly referred to as World War III.

The 1972-73 Middle East oil embargo, subsequent fivefold energy price increases, and global economic shocks were the events that triggered both the heightened level of concern and virtually all of the government studies about domestic minerals vulnerability. The realization in 1973 that the United States was dependent upon Middle East and other O.P.E.C. sources (Nigeria and Venezuela) for some 45 percent of energy demand alarmed not only the executive branch and the Congress but also the American public, which was lined up for gasoline from Boston to Los Angeles. The subsequent attempts by a fledgling cabinet-level Department of Energy (D.O.E.) to formulate a national energy policy focusing on "national energy independence" ultimately caused the now-alarmed Congress and an embarrassed administration to examine critical and strategic materials other than petroleum.

The studies concluded with strong recommendations calling for comprehensive national mineral and materials planning and substantially increased stockpiles of critical materials. However, the objective of the analyses, particularly their biases toward nearly total independence, left most of the studies somewhat flawed. I am the first to admit that it is hard to be objective when a nation's energy sources are suddenly and substantially reduced as in 1972-73 or when a nation's domestic minerals industry is staggering and exhausted from nearly four years of severe recession as in 1981-85. But sound national policy requires, indeed demands, more objective analysis.

The strategic materials studies--whether conducted by the Department of Defense, Department of Interior, Domestic Non-Fuel Minerals Policy Committee of the White House, Department of State, Department of Commerce, Central Intelligence Agency, Department of Energy, Senate Energy and National Resources Committee, or House Interior Committee—generally have analyzed these two groups of materials: cobalt, chromium, manganese, and platinum-group metals because of import dependence? and copper, lead, zinc, and aluminum because of economic pressure brought by foreign producers. Most of the studies have concluded that maintaining substantial national strategic stockpiles of certain minerals continues to be necessary to bridge the supply gap that would be caused by a prolonged interruption or interdiction. Most of the studies from 1973 to 1984 also concluded that formalized national minerals planning is essential to overcome contingencies that would result from supply interruptions. Then in mid-1985 the Office of Management and Budget, U.S. Department of Commerce, Department of Treasury, and Federal Energy Management Agency concluded that most stockpiles were not needed and that the materials should be sold to balance the federal budget. So much for national materials planning.

What should a sound policy analysis include in order to objectively examine all facets of the current debate over international mineral development and its implications?

1. The characteristics and behavior of international resource markets must be examined.
2. Analysis should illuminate the chance occurrence of mineral deposits around the globe from a geological perspective rather than from a geopolitical perspective. I would propose that democracies, dictatorships, and totalitarian and tribal states overlie good ore bodies.
3. Historical international trade relationships must be carefully considered.
4. The rapid post-World War II development of former Third World nations must be analyized, particularly their heavy manufacturing and basic industrial capacities in iron, steel, copper, aluminum, and other base metals (especially the development of countries such as Brazil, Mexico, the Philippines, South Korea, India, and Indonesia).
5. Evaluations should consider the redistribution of national financial reserves and reorganization of international financial markets resulting from the 1972-73 O.P.E.C. actions and their impact on world resources development and allocation.
6. Other rational business and economic factors should be considered, including costs for labor, energy, and transportation in the United States and Western Europe vis a vis similar costs in recently and newly developing nations.
7. The technical obsolescence of the U.S. domestic steel, minerals and machine tools industries should be realistically considered.

Development of Global Mineral Projects

In the post-World War II/post-Korean War period, especially since 1950, several major Third World nations emerged as rapidly developing nations, including Brazil, Mexico, Venezuela, Argentina, Peru, Chile, Taiwan, South Korean, the Philippines, Indonesia, India, and the O.P.E.C. nations of the Middle East. Japan, Western Europe, and Eastern Europe recovered rapidly after World War II with entirely new industrial sectors based on advanced technology and with new high levels of demand--and affluence.

Post-colonial independence and nationalism since the 1950s has changed Africa's economic aspirations and political structure. The emergence of O.P.E.C. as a world financial and energy broker after the 1972-73 embargo dramatically destabilized the Western world's trade and financial system and forced its restructuring. During the 1970s and 1980s, the World War II and pre-World War II vintage U.S. industrial base became rapidly obsolete, and the U.S. economy rapidly shifted to increased dependence on the service sector and information management.

Since 1950 the family of resource-rich developing nations discovered that it had access to both low-cost technical assistance and low-interest financial capital. These factors might satisfy these nations' burgeoning populations' quest for increased income and the pressure for economic development. To many, the key to rapid development was the sale of rich reserves of natural resources including metallic and nonmetallic minerals. Many of these projects were given the green light based on internal social and economic needs and the ability to borrow.

After 1950 and again after 1980, massive technical assistance and direct investment flowed to resource-rich Third World borrowers from an international partnership consisting of the World Bank, Interamerican Development Bank, Asian Development Bank, International Monetary Fund (I.M.F.), United Nations O.P.E.C.'s members, and U.S.-based international banks. Private U.S.-based international banking syndicates also entered the arena in the 1970s and 1980s, making what they thought would be very profitable, low-risk loans to emerging nations with rich raw materials including energy and mineral resources. In addition, the United States provided the headquarters for several of the principal international development institutions--the World Bank, Interamerican Development Bank, International Monetary Fund, and United Nations.

During the mid to late 1970s and 1980s U.S.-based financial institutions also provided the know-how to "recirculate" O.P.E.C. earnings and investments to the rest of the world--especially the Third World. With the injection of recirculated oil earnings the capital-intensive dimension of the development process accelerated. Third World nations were ready borrowers because they desperately needed recirculated O.P.E.C. dollars to develop and market raw materials in order to raise the foreign exchange to pay for OPEC's energy bills. They were caught in a vicious circle. Their debt spiraled upward, interest rates mounted and they overborrowed--then commodity prices plummeted. National social and economic policies forced the developing countries to continue to produce at a loss to repay their interest and to prevent internal social and political unrest.

During the period of accelerated development from the 1950s to 1970s, the corporate logos of U.S. banking, construction, energy, and minerals companies appeared alongside their European and Japanese counterparts on the streets of major cities in the Third World such as Rio de Janeiro, Sao Paulo, Santiago, Lima, Mexico City, Taipei, Seoul, Manila, Managua, Jakarta, Bangkok, New Delhi, Bombay, Sydney, Perth, and Brazzaville. New joint-venture agreements were linked by U.S.-based companies with a new generation of emerging Third World leaders, including Pinochet, Mobutu, Echeverria, Khadafi, Yamani, Marcos, and others.

U.S.-based international construction companies raced to compete for new joint-venture projects, led by U.S.-based multinational mineral-energy companies. U.S.-based investment banking houses joined with the I.M.F. and World Bank to organize international syndicates to raise project monies for a multitude of mineral development projects in the Third World. As a result of the foregoing events a significant part of this nation's and Western Europe's engineering, technical, financial, and management talent related to mineral resources was focused abroad in an amazing worldwide array of mineral development projects. As we have awakened to the aftermath of the most severe recession to impact the U.S. mineral industry in this century, we have found ourselves facing profound long-term, structural changes--much of the domestic mineral industry, both mining and mineral processing has moved offshore. The following analyses (which draw on the statistical information contained in Engineering and Mining Journal's 1983 Survey of Mine and Plant Expansion, the federal government, and international sources) illuminate this dramatic shift to offshore mining and processing.

In 1983, 233 major base and precious metallic mineral projects, valued at $66 billion, were underway worldwide. This included mines, mills, smelters, and refineries that extract, process, or convert the following major metals: aluminum, copper, iron, lead/zinc, silver, gold, and uranium. Of the 233 projects, 40 are located in Australia; 18 on the Pacific Rim including Japan, the Philippines, Taiwan, Indonesia, South Korea, Papua New Guinea; 37 in Africa; 26 in Europe; 38 in South America and the Caribbean; 16 in Mexico ...