Minerals, Wealth and Progress - Mining and the Environment: From Ore to Metal - page 17

most nations for a more equitable division of resource rents, theoretically a valid request,
but one that is difficult to implement in practice.
The economic rents derived from mining may be quite high, accrue on a yearly basis
(normally for the life of the development and in some cases beyond), but unfortunately too
often are shared by a very small number of people.

National Economic Benefits
Host governments clearly recognize that the people and nation they represent can ben-
efit from mining. It can contribute to the attainment of national development goals, even
though it may be accompanied by ecological and social costs. Development goals include
increasing gross national product, creating employment, increasing export earnings that
can be redirected to national development, promoting import substitution, and facilitat-
ing administrative reforms. Mine support facilities such as seaports, airports or roads can
complement existing transportation infrastructure, and contribute significantly to link-
ing remote areas with the metropolis. MMSD (2002) argues that mining is important in
51 developing countries, accounting for 15 to 50% of exports in 30 countries, 5 to 15% of
exports in a further 18, and being important domestically in three others.
It is argued, whether rightly or wrongly, that local communities too can profit from
mining, even though a mining project may be a one-off opportunity for prosperity, and the
mineral resource will be exhausted after exploitation. However, given the massive invest-
ment required, and the long time-span of implementation and exploitation cycles, the
long-term social and environmental costs may appear insignificant and easily discounted.
The ecological and social costs typically associated with mining are not adequately reg-
ulated by market mechanisms alone. Developing countries correctly perceive the need to
protect their long-term interests through extra-market controls, which are incorporated in
mining policies and law, as well as contractual agreements with mine investors. Even the
calculation of an optimal mine production rate is not always driven solely by economic fac-
tors, but may entail a complex mix of uncertainties.
Except during times of price depressions in the metal market, investors aim for high
production rates in order to transform passive natural capital into financial capital at a
maximum rate. Host country governments, however, may want to extend mine life by cap-
ping production rates, allowing time to realize regional development, while turning pas-
sive natural capital into human capital in the form of, say, a trained and skilled workforce.
Thus contractual agreements may aim not only to protect a reasonable return on invest-
ment for mine investors, but also maximize the mine's contribution to regional develop-
ment. According to Carman (1979) and various economists since then, however, a more
rapid exploitation of an ore deposit is better for the investor as well as the host government.
There is little dispute that mining can produce wealth. Unfortunately, natural resource
extraction has not always led to economic and social development. In well-established
mining economies such as Spain, Australia, Canada, US, and South Africa, mining has
been of undoubted and significant benefit, although not without some long-term costs, as
in the infamous Butte, Montana super-Pit ( Case 13.7 ). However, many countries, among
them some of the world's poorest, have failed to convert major mining projects into sus-
tained development. The mining industry is often blamed, but where does the responsibil-
ity of the industry end and the duty of government begin in ensuring favourable national
outcomes from mining?

The ecological and social costs
typically associated with mining
are not adequately regulated by
market mechanisms alone.

Mining can produce wealth.

Incorporating Environment Costs into Economic Models
In a simplified linear model of the economy ( Figure 1.5 ) , the production process of min-
ing and mineral processing results in both raw metals and built capital as outputs (Pearce