Only those who know their history have a future.
A mining industry that cannot meet its energy needs has no long-term future.
1. The inexhaustible ore deposits will eventually run out.
More and more capital has to be invested in opencast mining. This is done in order to get to deposits of ores and metals. But the quality of the ore has been decreasing gradually, year to year. This is a natural development. It means that the resources near the earth’s surface are exhausted first. Less suitable resources are only touched later, when easily accessible ore deposits are no longer available. At this stage new but less profitable deposits are found. So the mining company is looking further. As part of this process, new mines are being developed, which are becoming increasingly capital-intensive. These new mines have diminishing ore quality and are of lower value.
The quality of the ore decreases until it is no longer profitable to develop a new vein. At that point, it is no longer worthwhile to exploit the resources in this environment. In this way, countries such as Great Britain and Germany have found that it is no longer profitable to mine hard coal and lignite in regions such as Wales and the Ruhr area. These coal mining areas are no longer profitable for mining. Western European coal deposits can no longer compete on world markets with China, Kazakhstan and Australia, which have richer, higher quality and more accessible coal seams. Australia benefits from economies of scale in coal mining, which is proof that the law of diminishing returns also works in the mining sector.
2. The importance of the energy industry to mining
It is important for investors to keep an eye on the energy costs of mining operations. The energy costs have an significant impact on the success of a mining project. The bigger the mine, the deeper you dig, the higher the costs. Opencast mining, for example, requires enormous amounts of energy to extract the raw materials from the earth. The simple reason for this is that most mines are located far away from power plants. At the same time, mining companies often need huge amounts of oil to operate the mines. At the moment, oil prices are significantly lower than at the beginning of the first quarter of 2020. This can change quickly. The drop in prices on the oil market partly explains why mining companies have recovered economically and are becoming more profitable.
The fuel often has to be transported to the mine over enormous distances. And every kilometer increases the costs. The long supply chains cause additional costs. For this very reason, the mining project must be economically viable. If it turns out that the vein does not contain enough metals, a project can quickly fail. Since energy costs are a major component of operating costs, solutions must be found to supply the opencast mine with electricity. This electricity may have to be produced locally. This requires sophisticated energy supply processes. This is a costly process.
3. Nuclear energy could satisfy our the hunger for energy. This is especially true for small nuclear power plants near the mine. The use of nuclear power plants could lead to a snowball system. More and more energy is needed to develop ore deposits of ever lower quality.
One idea is therefore to commission small nuclear power plants directly on site. This secures the energy supply. That in itself is not a bad proposal, because nuclear power can actually make an important contribution to mining. Nuclear power can be used decentrally and it is independent of the connection to the power grid. But many mining areas are not earthquake-proof. Many mining areas are located in tectonically active regions, for example the Chilean Alps. Especially in these regions valuable veins of raw materials are often found. It remains unclear how the nuclear waste is to be disposed of. One problem is therefore replaced by another. The whole thing also has similarities with a snowball system.
4. Africa is a very good example of how important logistics is.
Many of the world’s mineral resources come from Africa. Africa is a good example of the difficulties of mining. In Africa, mining is often carried out in remote regions that are not integrated into the regional infrastructure networks. The distances between the mining sites and the commercial centers are enormous. Energy costs continue to rise with every kilometer travelled.
Furthermore, Africa is one of the world’s most important producers of hydrocarbon resources. Africa is a major hub for the mining industry, and a major player in the global oil and gas business.
Many thanks for the shared interest in the energy world!