U.S. Mining Industry in Decline

An abandoned ore processing facility in Gold Hill, Nevada.

The U.S. mining industry has been in decline for decades. A number of factors have contributed to this trend making the world’s most powerful nation ever dependent on the supply of foreign resources.

A number of factors are attributed to the decline. First, restrictive environmental regulations make mining and processing more difficult and costly and has increased lead times for new mine development – the U.S. minerals industry is impeded by 80 different laws administered by 20 different agencies.

Second, approximately three-fourths of the 750 million acres of public land has been closed to exploitation, and closure continues. And third, the U.S. share of investment in mining is at an all-time low dropping from 21 percent of the world’s mining investment in the early 1990’s to 10 percent in 2000 and 8 percent today.

Several major and uncontrollable factors have also led to a decline in America’s mineral processing industry:

  • Sharply higher energy costs.
  • Most of the world’s mineral wealth is not located in the U.S.
  • Foreign ore deposits are usually richer than those found in the U.S.
  • Foreign mines are usually located close to cheap energy sources and low-cost labor.

Many minerals were recognized as critical and strategic to the United States over 20 years ago. The 1988 article “United States Dependence On Imports Of Four Strategic And Critical Minerals: Implications And Policy Alternatives” by G. Kevin Jones identified the most critical minerals upon which the United States is dependent for foreign sources of supply – chromium, cobalt, manganese and the platinum group metals (PGMs).  In 2001, these metals were labelled the “metallurgical Achilles’ heel” of United States strategic mineral supply because their role in the economy is pervasive and they are vulnerable to supply interruption.

Today, the Rare Earth Elements (REE) and most recently graphite, have caught investors attention and rightly so as the United States becomes ever dependent on foreign minerals. In the future, it’s expected many minerals will become ever more critical and supplier countries even more unreliable.

According to Dr. Mathis Wackernagel, President of the Global Footprint Network, “As resource constraints tighten globally, countries that depend heavily on ecological services from other nations may find that their resource supply becomes insecure and unreliable. This has economic implications – in particular for countries that depend upon large amounts of ecological assets to power their key industries or to support their consumption patterns and lifestyles.”

It’s expected many minerals will become ever more critical and supplier countries even more unreliable. Accessing a sustainable and secure supply of raw materials is becoming a major priority for all countries. Many nations, including the United States, are becoming increasingly dependent on foreign supply and are looking for privileged access from other countries. But this may prove to be challenging as more and more countries are expected to ensure their own industries have “first rights” to internally produced commodities.

By Rick Mills

Richard Mills, author and host of Ahead of the Herd, is an active investor and commentator in the junior resource sector. Rick’s work covers the spectrum of company analysis and macroeconomics.

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