Is there really a minerals crisis?

by Carolyn Gramling
Thursday, January 5, 2012

China sent the high-tech industry and markets reeling last September when it blocked exports of raw rare earth minerals to Japan. In mid-October of that year, China imposed a similar ban on rare earth exports to the United States and Europe. The sudden severing of rare earths supply was a frightening prospect: Rare earths are a hot commodity in the modern world, because they are the key ingredients in a broad range of high-tech products, from smartphones to wind turbines to hybrid cars. Although China lifted the ban on exports of rare earths to the United States and Europe by late October, the ban on exports to Japan — although unofficial — remained in place for months.

It was an expression of “resource nationalism”: China imposed the ban because it could. The country has a near monopoly on rare earths, currently producing about 96 percent of the world’s supply. Governments around the world saw the ban as a kind of wake-up call: The United States began considering the reopening of the Molycorp rare earths mine in Mountain Pass, Calif., while other governments — particularly those of Australia, Canada and India — began more heavily investing in rare earths exploration. In Europe, the almost-crisis sparked a different kind of concern. Europe, scientists observed, imports about 97 percent of its metals — not just rare earth elements, but even basic industry metals like copper and zinc. There is also concern over a shortage in the supply of critical metals, such as gallium and indium, which are used in semiconductors that can power solar cells and high-speed electronics, and lithium, an essential ingredient in rechargeable batteries for portable electronics.

“Right now we are talking about rare earths often,” says Lluís Fontboté, an economic geologist at the University of Geneva in Switzerland and the president- elect of the Society of Economic Geologists. “But the business of rare earth elements is quite small.” The greater concern is metals like iron, nickel and copper — the “commodities essential for life as we know it,” says Patrick Redmond, a geologist at the Canadabased mineral exploration company Teck Resources Limited.

The rare earths scare, in fact, has prompted scientists from academia, government and industry alike to reconsider the question of the world’s supply of minerals in general — and how governments should, going forward, invest in new exploration. At issue, economic geologists like Fontboté argue, is not whether the geological reserves of these minerals exist. If there is a shortage crisis looming, Fontboté says, it will have far more to do with ongoing sociological and political impediments to minerals exploration and mining. And those issues may prove considerably more difficult to surmount.

What Does the Geology Say?

Reports on the world’s remaining supply of raw natural materials such as copper and zinc ores have, at various times, suggested that there is a worldwide crisis looming, Fontboté says. For example, he says, a July 2008 editorial in Mining Environmental Management, a publication of Aspermont UK, suggested that the world’s resources for zinc would be exhausted within 17 years, and those for copper within 32 years.

But it’s clear that the report was wrong, Fontboté says. In fact, he adds, the 2008 article echoed an argument made decades earlier by a 1972 report by the Club of Rome, a global think tank made up of industrialists, scientists and diplomats. In that report, called “Limits to Growth,” the Club of Rome suggested that several metals such as iron and gold would be exhausted by 2000, and others by 2050. This too was wrong, Fontboté says.

The issue, Fontboté says, is really one of investment in exploration. “Companies only make the necessary investment to ensure their operation,” he says — in other words, once the market is saturated with a particular mineral, exploration stalls for new sources of that mineral. As a result, many published estimates of world mineral reserves actually reflect fluctuations in the market for a mineral — and thus in a country’s or company’s eagerness to invest in exploration for that mineral — rather than geological realities. For example, estimates of the world’s copper reserves in 1969 suggested that there remained a 51-year supply. By 1981 — following a period of increased government funding for exploration, as a result of fears of shortages (partially sparked by the 1972 report) — this estimate of the reserves lifetime for copper had increased to 72 years. For zinc, those numbers went from 16 years in 1969 to 40 years in 1981.

But in 1981, exploration for many minerals stopped as prices collapsed, and the reserves lifetimes for these metals dropped once again. The fluctuations continued over the next decades: In 1994, estimates suggested that copper reserves would last 33 years; in 2001, it was down to 27 years; in 2010, it was up to 39 years.

These lifetimes, Fontboté says, were not so much tied to changes in worldwide consumption of these materials as to fluctuations in worldwide investment in exploration for economic minerals, which in turn are driven by market prices and, in a sense, by panicked response to perceptions of dwindling supplies. “It has nothing to do with geological reserves.”

The Example of Europe

Nowhere is the cognitive dissonance between geologic reality and perception more striking than in Europe. At present, the European Union imports almost all of its metals. A 2008 U.S. Geological Survey (USGS) report on the European minerals industry noted that the EU was 70 to 90 percent dependent on imports for most metallic ores. The EU is 100 percent dependent on certain rarer but particularly useful ores such as cobalt, molybdenum and vanadium (all used in alloys to improve the strength, temperature resistance and corrosion resistance of steel), as well as platinum group metals and rare earth elements. In a 2008 report, the European Commission said that this import dependence is a key concern for the EU’s mineral industry.

But Europe does have minerals of its own — and there are likely more deposits not yet discovered. “Europe is not over-explored,” notes a 2005 article in Ore Geology Reviews co-authored by Nicholas Arndt, an economic geologist at the Université Joseph Fourier in France.

“Europe is well-endowed with natural resources,” Redmond says. “But European production of metals is small, in global terms — and it’s declining.” Redmond heads Teck Resources' zinc and lead exploration program in Ireland. Currently, he says, only 7.6 percent of the world’s zinc — used largely to galvanize steel — is produced in the European Union; of that, about 44 percent comes from Ireland, and production is declining. But the potential is much greater: Ireland’s Lower Carboniferous carbonates contain world-class zinclead deposits.

And there are plenty of other deposits in EU countries, many of which have long histories stretching back hundreds to even thousands of years: Sweden’s copper, Spain’s pyrite, Turkey’s gold, for example.

Sweden, which has been producing abundant copper and iron as far back as the 10th century, remains one of the EU’s leading producers of ores and metals, according to USGS, producing copper, iron, zinc, silver, gold and platinum group metals. The Fennoscandian Shield, a segment of craton that stretches across northern Norway, Sweden and Finland and into northwest Russia, is made up of Archean and Proterozoic gneisses and greenstones that have undergone numerous deformation episodes. These rocks are host to Sweden’s iron ore deposits and Finland’s platinum group metal deposits. The rocks may also contain significant gold — comparable to gold deposits in similarly aged greenstones of Australia, North America and Africa.

The Iberian pyrite belt, which extends from Portugal to Spain, has been mined for thousands of years, as far back as the eighth century B.C. The belt formed 350 million years ago, when hydrothermal fluids associated with volcanic activity produced massive sulfide ore deposits, including ores of pyrite used to produce sulfur dioxide and sulfuric acid. Despite its long history, the northern part of the pyrite belt, in Portugal, has been the least explored and may contain significant amounts of copper, tin and zinc. In 1994, a giant copper deposit at Las Cruces, Spain, was discovered; a mine came online in 2010 after delays over permitting.

Turkey’s gold veins, found snaking through hydrothermally altered rocks, have been mined for centuries. There has been limited investment in mining in the region in the last century, but, in the last decade, exploration companies have begun to explore the possibility that Turkey’s gold deposits could produce significantly more. And in 2006, an exploration company discovered a large shallow hydrothermal gold deposit in eastern Anatolia.

NIMBYism and Political Paralysis

The minerals are there, but European production is still declining for several reasons, Redmond says. “Over the last couple of decades it has become unfashionable to fund mineral exploration projects,” he says. “[These] low levels of mineral exploration, NIMBY [not-in-my-backyard] attitudes and the perception that the permitting process is onerous … these all feed into the perception of Europe as not a good place to do business.”

Indeed, the limitations in Europe are not geological but sociological and political, says Patrice Christmann, the Secretary General of EuroGeoSurveys, a nonprofit association representing 32 European geological surveys. Poor governments, resource nationalism and unstable regulatory frameworks in many countries, for example, limit development. Even more subtle is the influence of public perception, he adds. Particularly in European countries, there is a lack of social license to operate, due to a combination of strongly negative public perceptions of the mining industry and a pervasive, persistent NIMBY mindset. These issues are all powerful deterrents to the investments needed to unlock mineral resources, Christmann says.

In some cases, this may be reasonable. Plans to construct a giant open-pit gold mine in the ancient settlement of Rosia Montana, Romania, for example, have been halted by outcry from local communities concerned not only about the displacement of the settlement but also about the environmental and human impacts that could ensue from the creation of a storage pond for cyanide waste from the mine. These fears are directly related to a disaster that occurred in January 2000 at Romania’s Baia Mare gold mine, when a tailings dam containing cyanide collapsed and contaminated the Tisza and Danube rivers.

There is also the question of data. The drop in metals prices up until about 2002, when the rapid growth of the Chinese economy drove demand back up, also had the effect of reducing funding for geological surveys in Europe — which in turn has made it difficult to get good geological data, Christmann says. But those data are key: Many aspects of ore genesis — the complex factors that go into the formation and localization of ore deposits in particular regions — remain obscure, and studies of these factors in a patchwork region such as Europe “tend to be constrained by geopolitical and language barriers,” notes the 2005 article in Ore Geology Reviews.

Meanwhile, exploration dollars are now flowing into other parts of the world instead, where companies think they not only can make discoveries but also ultimately can bring them to production. These locations include developing countries as well as other developed countries, particularly Australia and Canada, which have atmospheres more favorable to exploration than Europe’s — not only because of tax and other financial incentives, but also because of provisions for sharing state-of-the-art data and support for industry-academic partnerships.

Moving Past the Paralysis

Fontboté, Christmann and other Europe-based economic geologists are strong advocates for ramping up exploration — not only abroad but also at home. A more pressing question than whether mineral resources exist, they say, is how quickly the resources can be discovered and exploited. The world’s appetite for raw materials is growing exponentially, driven in part by population growth — predicted to reach 9 billion by 2050 — but also by global economic growth.

Right now, iron ore accounts for about 80 percent of the demand for produced metallic minerals globally. Iron is produced all over the world, but vast reserves are in China, Australia, Brazil and India. According to USGS, 98 percent of iron ore is used to make steel, which is used at all scales of infrastructure and construction, from skyscrapers and bridges to nuts and bolts. (China currently produces about one-third of the world’s steel.) If current demand trends for iron ore continue, the world will need to produce more iron ore in the five years between 2010 and 2015 than it did in the entire span of human history up to 2010. “There is no word to describe the challenge,” Christmann says.

Similar trends loom for copper and aluminum — both of which are heavily relied on for the construction of buildings, electronics, cars and a broad variety of other products. Recycling, reuse and the reduction of minerals consumption might alleviate those issues, but will not solve the problem.

After many years of disinterest in mining and exploration by European governments, “we are deep in the crisis,” Christmann says. “All of a sudden, the fire is in the house and everybody looks for the fire brigade.”

In 2008, the European Union launched the Raw Materials Initiative, a plan that identified some of the most critical raw materials that Europe needs and began to outline policy for ensuring their supply. A significant part of the policy includes developing new strategic partnerships with other countries, particularly emerging resource-rich countries such as China and Russia.

But the European Union moves slowly, Arndt says. What’s required for future exploration, he says, is a strong partnership among state and public authorities and private investors to promote exploration.

“Mining is a very complex industry,” he says. “It needs responsible companies to address social issues, as well as wellorganized government agencies to make it possible to develop [these resources] in a sustainable way. The state needs to provide a stable, reliable and foreseeable regulatory framework, and reliable geologic information.” But most of the reserves of critical minerals are located in developing economies, he adds. And there just isn’t the infrastructure in those countries to support mineral exploration and production — at least not yet. So the real question for Europe is: Do countries find a way around the political and social issues and invest locally, or do they look to invest abroad so that even if they are importing minerals, at least they won’t be relying on foreign governments?

Interest in exploration in Europe may be on the rise. In 2009, according to USGS, about 100 exploration companies were operating in Sweden, taking a new look at the country’s ore prospects, such as its giant underground iron mine at Kiruna, with fresh eyes and fresh technology. But whether these projects and others on local soil will come to fruition is anybody’s guess.