Thinking about the

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Thinking about the Economics of Mining New
Mexico Uranium MiningThomas Michael
PowerResearch ProfessorDepartment of
EconomicsThe University of MontanaSeptember
2008
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Why Are Mining Towns Not Prosperous?

• Unstable Global Markets
• Labor-Displacing Technology
• Environmental Damage Undermines Amenity Supported
  Economic Development

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The Folk Economics of Mining

• Economic Value of a Mining Proposal
• Market Price X Quantity in the Ground
• 140 per pound X 500 million pounds 70 billion
• 100 per pound X 315 million pounds 32 billion
• Employment 250,000 jobs
• Payroll 14 billion
• Taxes 1.6 billion
• An Economic Bonanza!

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Whats Missing?

• Past Economic Performance of Mining
• Labor-Displacing Technological Change
• Incorporating Costs
• Economics looks at both costs and benefits!
• Costs of extracting and processing the mineral
• Public Costs
• Clean up, environmental, health, public services
• Costs of public services
• Economic instability

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Global Uranium Markets

• New Mexico is just one uranium producing region
  in the United States, with about 1/3rd of the
  total reserves
• The United States has a small part (7) of the
  worlds reserves NM has about 2.
• Australia (24), Kazakhstan (17), Canada (9),
  South Africa (7), Namibia (6), and Brazil (6)
  have about as much or more.

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Unstable Mineral Market Dynamics

• Long period of low uranium prices
• Mines and mills shut down and are abandoned
• Usage is greater than production stock piles
  decline.
• Prices begin to rise
• A worldwide race new mines and mills
• Supply increases dramatically
• New low cost technologies are deployed
• Supply exceeds demand
• Price falls Boom leads to Bust

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Rising Labor Productivity in Uranium Mining and
Processing

• Fewer and fewer workers needed

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Can There Be Prosperity without Mining?
Adjustments to the Bust and Recovery
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Why Was the Impact So Modest?

• Diversification away from Mining
• Recreation, Gaming, Medical Services, Other
  Professional Technical Services, Prisons
• Amenity-Supported Economic Vitality
• Retirement and Investment Income
• Cibola and Valencia are retirement destination
  counties
• In-migration of new residents
• Construction, local services, etc. supporting them

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Export Base V. Amenity View

• The Economic or Export Base View
• The more dependent an area is on export-oriented
  industries, the more prosperous it will be.
• Instability, company town syndrome, powerless
  in the face of external forces
• The Amenity View
• People and firms care where they live and act on
  those preferences, relocating economic activity
• Attractiveness is part of local economic base

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The Public Costs of Uranium Mining and Processing

• The High Legacy Costs
• The health of miners, mill workers, and residents
• The cost of cleaning up abandoned mines, polluted
  waters, waste deposits, etc.
• Economic instability boom and bust
• Future Costs
• The long-lived nature of radioactive waste
• Extensive waste from mining low grade ore
• In Situ Leaching and Water Pollution
• The next boom and bust

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But We Are So Poor!We Dont Really Have a Choice
but to Embrace Mining.

• Size of Place and Pay
• Cost of Living, the Value of Amenities, and Pay
• Real Differences in Well Being
• Who will get the mining jobs? How many?

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Making Careful Choices

• You are not desperate beggars who cannot afford
  to be good choosers
• Look at costs as well as benefits
• Be realistic about NMs place in worldwide
  competition to supply cheap uranium
• Directly face the boom-bust and labor-displacing
  character of the industry
• Relatively short run gains. Near permanent losses.

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Sacrificing the permanent, unique and
irreplaceable for the common and
temporary?Thank You!Questions?tom.power_at_mso.u
mt.edu