Government-Sponsored Research and Development in Mining Technology
Mining is important to the United States because the country is both a major consumer and a major producer of mineral commodities. This section first discusses the benefits of research and development on new technologies in exploration, mining, and mineral processing for consumers and producers. This is followed by a discussion of the role of government in supporting and fostering research and development in this sector.
BENEFITS OF RESEARCH AND DEVELOPMENT
Allocating Federal Funds for Science and Technology (NRC, 1995c) made a strong case for federally funded research and development. Among other things the study committee noted:
The federal government has played a pivotal role in developing the world’s most successful system of research and development. Over the past five decades the U.S. scientific and technical enterprise has expanded dramatically, and the federal investments in it have produced enormous benefits for the nation’s economy, national defense, health and social well being.
Successful research and development produces new technologies that reduce production costs; enhance the quality of existing mineral commodities; reduce adverse environmental, health, and safety impacts; and create or make available entirely new mineral commodities. The resulting benefits may accrue to consumers or producers and communities near the mine operation. Most often, however, both consumers and producers benefit, with consumers enjoying most of the benefits over the long run.
Clearly, producers can and do benefit from new technologies. However, some companies enjoy reductions in costs and increases in profits at the expense of other firms that benefit less or not at all from the new technology. The latter firms may even lose competitiveness and profits. Nevertheless, most of the benefits generated by a new technology normally flows to consumers. This is particularly true in the long run because, as technologies become more widely available, commodity prices drop, and therefore companies and countries can only maintain a technology gap by continually generating innovations that provide new benefits.
ROLE OF GOVERNMENT
Even if the nation as a whole and private firms reap the benefits of new technologies, the appropriate role of industry and government in research and development for exploration, mining, and mineral processing is still an open question. Mining companies that benefit from research and development presumably have an incentive to pay some of the costs. In economic theory one would expect a particular company to be willing to increase its research and development outlays until the value of expected benefits equals the dollars spent. The expected benefits, of course, are not necessarily the same as the actual benefits. Some successful research and development projects produce benefits far beyond expectations; many others fail to reach expectations. The incentive for firms to expand research and development will end when the expected benefits are less than the expected cost. Risk is a major consideration because most of the research and development projects proposed can be expected to fail.
In determining the value of research and development, private firms consider only the benefits they expect to capture. Therefore, the welfare of society as a whole is best served when research and development expand to the point at which the expected benefits of additional expenditures just equal the costs, appropriately discounted for time and risk. The expected benefits include internal benefits to the firm carrying out the research and development, as well as external benefits that consumers and other producers will realize. Because the external benefits in exploration, mining, and mineral processing often constitute a large portion of the total benefits, the market will not support the optimal amount of research and development, possibly by a wide margin, without government support.
SIDEBAR 7-1 Benefits of SXEW to Producers and Consumers
Solvent-extraction/electrowinning (SXEW) is partly responsible for the decline in the real price of copper in the past 30 years. Millions of people who use copper-containing products have benefited. The United States, the world’s largest copper-consuming country, has benefited greatly.
SXEW has also improved the competitiveness and profitability of many companies by reducing production costs and enabling them to exploit copper minerals that might otherwise be wasted. The technology was developed and first used by smaller copper mining companies in the United States. Later, SXEW was adapted by foreign producers and major U.S. copper companies.
With globalization and the rapid diffusion of new technologies around the world, conventional wisdom suggests that innovating firms will only be able to maintain short-term competitive advantages. This argument rests on two critical assumptions. First, the innovation is a one-time event, rather than a series of associated innovations over an extended period of time. Second, the new development is neutral in that it affects all producers equally. More often than not, one or both of these assumptions is incorrect.
Today, for example, the SXEW process is the result of first a single innovation in chemical reagents that was followed by literally hundreds of innovations in equipment, instrumentation, and operations over a period of 40 years. These innovations by vendors, operators, and researchers have reduced costs and greatly extended the range of applications of SXEW. As a result, firms and countries can benefit from lower costs for as long as they remain technological leaders.
In addition, SXEW is not a neutral technology. It has particularly helped countries with a history of copper mining that has left many large oxide waste dumps; countries with an existing copper mining industry that must reduce or capture sulfur emissions from its smelters (SXEW requires large quantities of sulfuric acid); countries with arid climates because heavy precipitation can make leaching difficult; and countries with copper mines that produce few valuable by-products because SXEW cannot yet recover valuable by-products economically. In short, SXEW helps the United States and a few other copper-producing countries more than it helps others. This is not entirely surprising because U.S. producers and suppliers have played an important role in the development of the technology.
External benefits, of course, are not unique to advances in the mining industry. Over the research and development cycle, the ratio of external to total benefits tends to fall. For this reason, government funding supports a higher proportion of basic research than development. Activities other than research and development can also create external benefits. Governments around the world, for example, fund education on the grounds that the social benefits of education will far exceed the private benefits.
External benefits are the most important but not the only, rationale for government support for research and development. Without detailing the full litany of possible reasons for market failure, we note that the discount rates firms use to assess investment projects, including research and development projects, may exceed the appropriate rates for society as a whole. Therefore, without government support, the private sector tends to underfund research and development, particularly projects that are highly risky and projects that are expected to produce benefits in the distant future. For this reason, the government may have a strong interest in supporting so-called high-risk, “far-out,” “off-the-path,” “blue-sky” research.
RESEARCH AND DEVELOPMENT IN MINING TECHNOLOGY
Minerals are basic to our way of living. Essentially everything we use is a product of the mining, agriculture, or oil and gas industries, including the things that comprise and operate the tools of the so-called computer-information and communications age. Basic industries (i.e., mining, agriculture, and energy) play a crucial role in our economy.
Because of high capital requirements, small profit margins, the cyclic nature of commodity prices, long lead times for the development of new properties, and environmental constraints, the mining industry historically has been very conservative in initiating and adopting new technologies. Nevertheless, the industry has made significant advances in productivity, environmental control, and worker health and safety.
The development of the SXEW process, for example, has led to the low-cost production of copper from waste and rawore dumps of copper minerals (primarily oxides and silicates) found at many copper mines. SXEW is a hydrometallurgical process that differs radically from the traditional method of producing copper by milling, smelting, and refining. Currently SXEW accounts for about a third of U.S. copper production (Sidebar 7-1)
For more than a century, the federal government has been involved in research and development to meet the basic needs of society—food and other agricultural products, energy, and minerals. The role of the government has been largely to foster research that improves efficiency, and therefore reduces costs to the consumers, and lessens the environmental consequences of agricultural, energy,
and mineral production. Agriculture research by the U.S. Department of Agriculture and others has contributed greatly to the productivity of farms, the quality of food, and the safety of agricultural products. Energy research and development by DOE and its predecessors has provided better ways to produce and use scarce, clean fuels and has improved our energy security.
The USBM was the focal point for federal research in mineral technology from its inception in 1910 to its demise in 1996. Its accomplishments and contributions to the U.S. economy were significant. For example, the bureau developed fundamental technology for extracting refractory gold, which helped to establish Nevada’s modern gold industry. Early work in taconite extraction and processing was very helpful to Minnesota’s iron industry. The USBM was also the developer and publisher of thermodynamic data on important mineral-processing systems.
During World War II the USBM developed zirconium and titanium metallurgy. Bureau experts were world leaders in mine health and safety technology. Technology developed by the bureau and its funded research clients in explosives, combustion, and ventilation not only improved mine health and safety but is also widely used in other industrial, civil, and military applications. In addition, the federal government’s research and development programs have traditionally funded work in mining schools and other centers of excellence, thereby contributing to the education of engineers and technologists needed by industry and federal and state government agencies.
In the 1980s most facets of the mining industry suffered a major recession. Almost every major mining industry research and development facility was closed, and most companies curtailed their formal research and development programs. In the 1980s and 1990s the equipment companies picked up some of the slack, and the USBM continued to provide a modest funding base for mining schools.
The federal government’s current efforts in mineral technology are very small and unfocused. The mining industry continues to progress technologically, but many universities are finding it difficult to obtain funding for mining-specific research. Unless more federally funded research and development programs, such as the IOF Program, are forthcoming, the technological progress of the industry may slow down and eventually affect the education of trained technical people for industry and government. Technology transfer to mining from other industries (e.g., medical, manufacturing, chemical, telecommunications) must also be improved.
DOE’s stated objective of energy conservation is achievable in the mining industry, which is a major energy user. Increases in productivity in mining, a reduction in the number and complexity of process steps, and improvements in comminution are all examples of advances that could reduce energy consumption. Improvements in efficiency could further optimize by-product and emission management and supplement the ongoing health and safety research and development done by NIOSH. In addition, more federal participation in mining technology research would meet one of the criteria for government support of research and development: “development of new enabling, or broadly applicable, technologies for which government is the only funder available” (NRC, 1995c).