42 SMe Mining engineering handbook
and strongly influences the nature and degree of processing
at the mine site. Those products with high value-to-volume
ratios, such as gemstones and precious metals, can be trans-
ported long distances easily and will have global markets. At
the other extreme, products with high volume-to-value ratios,
such as sand and gravel and construction materials, will secure
only local markets. Marked reductions in the costs of deep-sea
shipping since World War II have widened the geographical
markets for bulk products, such as iron ore and coal, from the
national to the regional and even to the global.
Where mineral deposits are located deeply inland, remote
from major markets for their products, they can only compete
if their products are upgraded locally in order to minimize
transport costs. Such upgrading will, in turn, rely on the prox-
imity of sufficient competitive sources of energy. Whereas
Chile’s copper mines are fortunate in being close to the sea,
which can be used to profitably ship concentrates, those of
central Africa depend on local smelting and refining to mini-
mize the volumes being transported to ports.
Competitive influences
A mine’s ability to compete mainly depends not on relative
transport costs, important though those are, but on the char-
acteristics of its mineral deposit, on the mining method used,
and on the nature of its processing plant. These inherent influ-
ences will inevitably be modified by the political, social, and
economic conditions of the host countries, including such
factors as wage inflation, energy costs, and exchange rates,
which are outside the mining company’s control. Such factors
tend to be relatively more important for manufacturing indus-
tries, including mineral processing plants such as smelters and
refineries, than for mines.
The nature of each ore deposit normally dominates the
inherent influences on relative costs. Since few mineral depos-
its are identical in all respects, their costs, and hence their
profitability, will tend to vary. Some will be close to ample
supplies of water and energy, and easily accessible, while oth-
ers will be more remote. Some may outcrop at or near the
surface and be amenable to surface mining through open-cast
methods, whereas others may be so deep as to require extrac-
tion through shafts or adits. The nature of the host rocks and
of the minerals themselves will vary from the easily worked
to the physically demanding. In some instances, the commer-
cially valuable components may be easily liberated, whereas
in others, complex physical and chemical processing may be
needed. Perhaps the major factor is the grade of a deposit—
the proportion of salable materials it contains. Other things
being equal, which they seldom are, the higher the grade of a
mineral deposit, the lower its relative costs compared with a
similar but lower-grade deposit.
For many raw minerals, the average grade is less impor-
tant than the extent to which a mine can maximize its output of
the higher-priced types of the basic product without expensive
processing. Typically the higher-value uses offer sizable pre-
miums over the more common uses. Metallic ores are seldom
pure, but they contain a variety of different elements and com-
pounds. Obviously, the higher the content of the main metal,
the more attractive the deposit, but the nature and importance
of co- and by-products are also relevant. Some are highly
desirable and raise the potential value of the ore, whereas oth-
ers are toxic and reduce the marketability of the mine’s prod-
ucts. Sometimes the costs of their removal and safe storage
outweigh any mining benefits. Where mines yield a range of
by-products, their production decisions can become complex,
especially where, as is usually the case, the grades of the con-
stituent elements vary throughout the ore body. Sometimes
those decisions may appear perverse, as when maximizing
profitability may involve concentrating on by-product recov-
ery at the expense of the main product’s output, irrespective
of shifts in its demand and prices. This merely emphasizes
that the underlying objective of mine managements is usually
creating value for shareholders rather than ensuring supplies
of raw materials.
ore grades and exploration
The relative grades of ore of different deposits, even allowing
for the contributions of all the salable products, are not nec-
essarily reflected in the relative costs per unit of product. The
higher the grade, the more a deposit is able to support deep
underground mining, which usually costs far more per ton of
ore than open-pit mining. Also higher grades may be able to
offset the additional costs of complex treatment and processing.
In theory, the higher-grade, more easily processed, and
more accessible deposits are mined first. Certainly, the aver-
age grades mined of some metallic ores such as copper have
tended to decline over time, being substantially lower today
than in the 19th century. The tendency toward declining
grades has in many cases been countered by falling transport
costs and by improvements in the technology both of extrac-
tion and processing and of exploration. The average iron con-
tent of ores mined in Western Australia and Brazil today is
much higher than the typical grades of iron minerals earlier
processed in most of Western Europe. The uranium deposits of
Ontario exploited in the 1950s had much lower average grades
than the latest generation of Canadian mines.
ore Depletion and Technological Change
In essence, each generation will tend to exploit the best depos-
its of which they are aware with the technologies at their
disposal. As geological knowledge increases, both through
a better understanding of the nature and genesis of mineral
deposits and through continued exploration with ever more
sophisticated techniques, the number of known mineral
deposits also rises. Some may have higher ore grades than the
deposits already being worked but in many cases will suffer
from offsetting disadvantages, such as remoteness from mar-
kets or poor accessibility. Simultaneously, the technology of
ore extraction and processing is continuously changing and
enabling the economic development of previously sterile min-
eral deposits. Such technological changes can be driven both
by end-use requirements and by a need to remove existing
constraints and bottlenecks in supply.
Over time, changes in the costs of producing mineral
products result from a continuing tug of war between the cost-
raising effects of ore depletion and the cost-reducing impact
of technological change and rising productivity. That leaves
aside such general economic influences as movements in
general price levels, wage rates, energy costs, and exchange
rates. The result is never a foregone conclusion. There have
been periods where the forces of depletion have prevailed and
inflation-adjusted costs of production have tended to rise, as
in the 1950s and 1960s. There have also been lengthy peri-
ods, as in the 1980s and 1990s, where those forces have been
outweighed by productivity improvements and real costs have
tended to fall. That the real prices of most mineral products
have not shown any marked trends over long periods suggests