John E. Tilton

Mining royalties : a global study of their impact on investors, government, and civil society

Mineral sector regulatory and fiscal systems have been undergoing major reforms across the globe. This book focuses on information and analysis relating to mineral royalties. It provides a general discussion of the concepts behind mining taxation, a guide to royalties, examples of royalty calculations and the ways in which these interact with other forms of taxation, as well as financial effects on investments under varying conditions. Primary information includes royalty legislation from over forty nations. The book discusses implications for investors and governments of various tax regimes and provides specific country case examples. A chapter is included on transparency, governance, and management of revenue streams. The appendices, in the second volume, contain brief summaries and selected statutes relating to royalties in a broad cross-section of nations around the world; sample spreadsheets of the results of mine models that were analyzed; and examples of administrative and distributional approaches to collecting royalties.

Exhaustible resources and sustainable development: Two different paradigms

Abstract Though sustainable development is a relatively recent addition to the public lexicon, concern that resource depletion may threaten the welfare of future generations dates back at least to Thomas Malthus and other classical economists writing nearly two centuries ago. Today the debate over this threat not only continues, but seems more polarized than ever. In one school are the concerned, often ecologists and other scientists and engineers, who contend the earth cannot for long continue to support current and anticipated levels of demand for oil and other exhaustible resources. In the opposing school are the unconcerned, often economists, who claim with equal conviction that the earth with the help of market incentives, appropriate public policies, and new technology can amply provide for societys needs for the indefinite future. That intelligent and informed individuals remain so divided on such an important issue for the future of humanity after years of debate is surprising. The explanation, at least in part, appears to lie with the very different paradigms adopted by the two different groups coupled with quite contrasting views on the beneficence of technology, public policy and the marketplace. The two competing paradigms lead to quite different outlooks on the human condition and in turn on recommendations for public policy.

Labor productivity and comparative advantage in mining:: the copper industry in Chile

Abstract Over the past two decades, the copper industry has enjoyed dramatic increases in labor productivity in both Chile and the United States. Recent research attributes most of the increase in the United States to innovation and technological change, rather than the exploitation of higher quality copper deposits due to the development of new mines and a shift in output from low to high productivity mines. This article assesses the sources of productivity growth in Chile, where well over half of the copper now produced comes from new mines. While better copper deposits are more important in Chile than the United States, innovation and technological change have contributed substantially to the growth in labor productivity in Chile as well. These findings are important for companies and countries striving to maintain a comparative advantage in mining.

The future of recycling

Abstract Recycling in general and metal recycling in particular, many believe, enjoy a very bright future. As resource depletion, environmental concerns, and other factors drive primary production costs up, the relative importance of recycling in supplying the material needs of society will grow. This optimistic view, however, may paint an overly rosy and misleading picture. A large portion of secondary metal production is based on the recycling of new scrap, which is constrained far more by the available supply of new scrap than by metal prices or recycling costs. Secondary production from old scrap is more sensitive to costs and prices, and so would benefit from a rise in metal prices. History, however, indicates that the cost-reducing effects of new technology have over the past century more than offset the cost-increasing effects of depletion, causing real metal prices to fall. In recent decades, this decline in prices has continued despite government policies that are increasingly forcing firms to cover their environmental costs. While this favorable trend may not continue forever, it does suggest that secondary producers will have to pursue aggressively new technologies and other innovations that reduce their costs as fast or faster than primary producers if they hope to expand their future share of total metal production.

Consumer preferences, technological change, and the short-run income elasticity of metal demand

Abstract Metal demand over the short run is widely thought to be elastic with respect to income (GDP), since metals are largely consumed in construction and other economic sectors whose output fluctuates greatly over the business cycle. Yet efforts to estimate metal demand functions typically find that the short-run income elasticity of metal demand is less than one. This article examines a possible explanation for this inconsistency. In particular, it suggests the empirical analyses are deficient in that they fail to take account of changing technology and consumer preferences. This omission, it argues, causes the estimates for the income elasticity of metal demand for the developed countries, which account for most of the worlds metal consumption, to be severely underestimated. For the developing countries, the resulting omitted variable bias, if negative, is expected to be less severe, and may even be positive. When time is used in a partial adjustment model as a proxy for changes in consumer preferences and in technology, the findings for six metals over the 1963–92 period are consistent with these expectations.

Mineral endowment, labor productivity, and comparative advantage in mining

Labor productivity in the U.S. copper mining industry tripled between 1975 and 1995, allowing the industry to recover its comparative advantage. Mine level data on output and labor input indicate that over three-quarters of this increase came from labor productivity growth at individual mines, and less than a quarter from shifts in output from low- to high-productivity mines. This finding supports the hypothesis that new technology and innovation are as important or more important than mineral endowment in shaping labor productivity trends and comparative advantage in mining.

Assessing the Threat of Mineral Depletion

The debate over the long-run availability of mineral commodities remains today as polarized as it was 30 years ago. This partly reflects the two very different paradigms often used to assess this threat, which can lead to sharply contrasting conclusions. In addition, the uncertainties regarding future developments in mineral supply and demand, which will govern the course of real mineral prices, are great. The geological unknowns are particularly a problem in this regard. Finally, mineral commodity prices reflect only those social costs that producers pay. Just how much greater prices would be - and how their trends over time would be altered - if prices reflected the full social costs of production and use is unknown. The available estimates vary greatly, and often reflect the values of individuals and groups rather than those of society as a whole. In light of the last two uncertainties, we simply do not know whether mineral commodities will become more or less available in the long run. The optimists c...

Mineral endowment, public policy and competitiveness: A survey of issues

Abstract The traditional view of competitiveness in exploration, mining and mineral processing stresses the importance of quality mineral endowments. In recent years this view has come increasingly under attack by executives in the mineral industries and economists emphasizing the important role government policies play, both in enhancing and undermining the competitiveness of their domestic producers. This article, after examining the nature of competitiveness, surveys these two opposing schools of thought, examining in the process some of the interesting and important issues encountered in the on-going debate.

Material Substitution: The Role of New Technology

Material substitution has for centuries reduced the costs and enhanced the quality of the tools, weapons, shelter, and other material objects of use to society. It has pushed back the cost-increasing effects of resource depletion while expanding man’s horizon of opportunities. In recent years, the pace of material substitution has quickened. Many new materials have been introduced, and old ones improved.

Economic growth and the demand for construction materials

Abstract Despite the widespread research on metal demand in recent years, there is little in the professional literature on the demand for construction materials and other non-fuel, non-metallic minerals. A recent and interesting exception is Humphreys (1994), which finds that intersectoral shifts in the UK economy favouring the service sector at the expense of the manufacturing sector have had a negative influence on the intensity of metal use but a positive influence on the intensity of use of construction materials. As a result, the latter has changed very little in the UK over the past 30 years while the former has declined dramatically. In an attempt to determine if Humphreyss findings apply to other countries as well, this study extends his analysis to the USA. The results are quite different. The intensity of use for construction materials has declined dramatically over the past 30 years, more so than the intensity of metal use. Moreover, intersectoral shifts—the decline of manufacturing and the rise of services—appear to influence intensity of use trends for both metals and construction materials less than resource saving technology, material substitution and intrasectoral shifts within the manufacturing sector.