MINERALS POLICY a Reality

Making a

POLICY

a Reality

National Mining Association 1130 17th St., N.W., Washington, D.C. 20036 (202) 463-2621 • www.nma.org Last Updated: March 12, 2002

Making a NATIONAL MINERALS POLICY a Reality

-- Contents --

1 Overview

Mining is Vital for America

The Mining & Minerals Policy Act Passed by Congress in 1970 Recognizes the Importance of Mining and Minerals.

4 Yet . . . U.S. Mining Activity in Recent Years has Declined Rather than Increased.

5 Exploration for New Resources, an Investment Toward Future Mineral Production and Supplies, is being Increasingly Directed Away from the United States.

6 Mine Development is Being Impacted.

7 There are Fewer Operating U.S. Hardrock Mines.

8 Meanwhile, Foreign Governments have Encouraged Mine Exploration and Development.

U.S. Policy, in Contrast, has Discouraged, Not Encouraged, its Mining Industry.

Repeating the Energy Mistake -- Increased U.S. Reliance on Imported Minerals.

11 Increased Dependency on Imports is not in the National Interest.

12 Minerals/Metals Provide Essential Products.

13 How a National Minerals Policy can Help.

2 Overview

A 1970 federal law -- the Mining and Minerals Policy Act --

formally recognized the importance of mining and domestic minerals production as a policy of the United States.

Yet, the domestic mining industry has declined. While various factors (including market conditions, more favorable operating

possibilities and higher grade ore prospects overseas) have played a role in this trend, several analyses of America's hardrock mining industry have reached the same conclusion:

. . . the complexities, uncertainties and time delays associated with permitting of operations on public lands have resulted in significant reductions in investment in the U.S. and greater reliance on foreign sources of minerals vital to our nation's economic well-being.

Unless reaffirmation of a National Minerals Policy becomes a reality, the U.S. will continue to lose its mining industry to other nations who actively recruit and desire this important economic asset.

The net result: A growing need for mineral imports, loss of highly skilled and high wage jobs, deepening economic consequences.

1 3 Mining is Vital for America

t provides nearly a half- I trillion dollars ($491.8 billion) annually in direct and indirect economic impact --

nearly 5 percent of the U.S. (Source: "Mining and the American Economy," using 1998 data, prepared by the Western Economic Analysis Center for the National Mining Gross Domestic Product. Association, published in 2000.)

very American uses an Eaverage of 48,000 pounds of newly mined minerals each year

(Source: NMA extrapolation based on U.S. Geological Survey (minerals) and -- and about 7,600 pounds of Energy Information Administration (coal) data.) coal annually.

ne out of 43 Americans is Oemployed in a job that depends -- directly or indirectly -- on mining. (Source: NMA calculation based on data from Western Economic Analysis Center, U.S. Bureau of Labor Statistics and U.S. Department of Agriculture.) 2 4 The Mining & Minerals Policy Act Passed by Congress in 1970 recognizes the importance of mining and minerals.

"The Congress declares that it is the continuing policy of the Federal Government in the national interest to foster and encourage private enterprise in the development of economically sound and stable domestic mining . . . (and) the orderly and economic development of domestic mineral resources . . . . "

Mining & Minerals Policy Act of 1970 U.S. Code Title 30, Chapter 2, Section 21A

3 5 Yet . . . U.S. mining activity in recent years has declined rather than increased.

1. Expenditures for exploration, an activity essential for developing new mines, have steadily decreased in the U.S., and increased in Latin America and the Pacific.

2. U.S. mine development expenditures and metals/nonmetal "plans of operation" on federally owned land dropped drastically over the past decade.

3. The number of U.S. metal/nonmetal mines has declined 61 percent since 1980.

4. U.S. reliance on mineral imports has risen nearly sevenfold in terms of value since 1993.

A Key Reason:

An increasingly difficult, unbalanced federal regulatory policy has achieved an effect opposite the intent of the Mining & Minerals Policy Act -- discouraging, rather than U.S. Explorationencouraging, the Activity U.S. mining is industry. Decreasing.

4 6 Exploration for new resources, an investment toward future mineral production and supplies, is being increasingly directed away from the United States.

Percent 30 Trend in Exploration Spending Favoring New Mining Areas, 1993-98 (Traditional: Includes the U.S., Canada, Australia and Europe; New: Includes Latin America, the Pacific, Asia and Africa). 20

Taken from U.S. Metal Mining: Recent Trends and Uncertainty Discourage Domestic Exploration and Investment, page 3. Original source 10 based on Metals Economics Group estimates, reported in Mining Engineering, May 2000.

0 1993 1994 1995 1996 1997 1998

Traditio nal New

North American Precious Metals Precious metal producers, an important Producers' U.S. Exploration segment of the hardrock mining industry, Expenditures, 1996-99 decreased U.S. exploration expenditures 66 1996: $113,304,000 percent between 1996-99. 1997: $153,046,000 Down 1998: $ 89,160,000 66% 1999: $ 39,143,000 Worldwide Exploration Budgets, 2001 (Million $) Source: 1998 Gold Institute Survey conducted by Dr. John Dobra, University of Nevada-Reno. 1. Latin America $575.8 2. Australia $349.4 3. Canada $332.9 Although currently a major producer 4. Africa $276.9 5. Other Nations Combined $175.0 of some 78 important mined minerals, 6. United States $158.2 the U.S. ranks only sixth (according 7. Pacific/SE Asia $133.0 to a recent survey of 679 companies'

budgets) in 2001 allocations for Total $2.001.2 commercial precious and nonferrous

metals exploration -- since 1998, the (Source: Survey by Metals Economics Group, as reported in December 2001 Mining Engineering). U.S. figure has declined nearly $85 million, or 35 percent.

7 MineMine Develo Developmentpment is is BeinBeingg Impacted. Impacted.

Lands administered by the Bureau of Land Management (BLM) and the U.S. Forest Service (USFS) comprise 38 percent of the combined land area of western states, where most hardrock mining occurs. National policy affecting the availability and use of these lands has significant implications for the mineral extraction industry as a whole.

Federal Lands in the United States

In a 1999 study, Hardrock Mining on Federal Lands, the National Plans of Research Council reported to Congress that total "plans of operations" Operations on federally owned land in the United States declined by 50 percent down between 1992-99. Under current law, "plans of operation" must be 50% submitted to BLM by mining exploration that is over 5 acres or near critical environmental areas, and operations that disturb any acreage.

6 8 There are fewer operating U.S. Hardrock Mines.

2500 1980 = 2,305

2000

1500

2000 = 893 1000 Total Metal, Non-Metal Mines The total number of U.S. metal/nonmetal 500 mines has declined 61 percent since 1980.

(SOURCE: Mine Safety & Health Administration data; NMA website, www.nma.org) 0 1980 1985 1990 1995 2000

(Factors impacting this trend include exhaustion of resources; closing of less profitable, more inefficient operations; commodity price fluctuations; and the impact of an increasingly strict and costly federal regulatory regime.)

Between 1996 and 1999, a nearly 88 percent drop occurred in

U.S. development expenditures by precious metals producers, an important segment of the hardrock mining industry. This

coincided with a nearly 452 percent rise in such expenditures by these companies in South America.

North American Precious Metals Producers' Development Expenditures, 1996-99 (000 Dollars)

Country 1996 1997 1998 1999 %Change 1996-99 United States 239,772 211,375 162,129 29,200 - 87.8

Australia 490 717 13,757 800 + 63.3

South America 109,527 234,128 420,721 604,000 + 451.5

Other 95,300 76,531 63,206 170,000 + 78.4

Total 445,089 519,781 659,813 804,000 + 80.6

Source: 1998 Gold Institute Survey conducted by Dr. John Dobra, University of Nevada-Reno.

The Bottom Line:

Areas of the world once considered too risky politically and economically for mine exploration and development are now viewed as

more attractive than the unpredictable, overly restrictive regulatory climate in the U.S. -- where permitting a mine can take 4 to 8 years. 9 7 Meanwhile . . . foreign governments have encouraged mine exploration and development.

In contrast to decreasing activity in the U.S., many governments in areas currently experiencing robust mining activity have instituted policies and procedures with the specific aim of encouraging exploration and development.

Since 1985, more than 95 countries have instituted reforms of their laws to attract new mines by either amending existing statutes and regulations or adopting new regulatory frameworks entirely.

(Source: James M. Otto, "Global Changes in Mining Laws, agreements and Tax Systems," Resources Policy, Vol. 24, No. 2, 1998, pp. 79-86, as reported in U.S. Metal Mining: Recent Trends and Uncertainty Discourage Domestic Exploration and Development, by Yvette Alt and David Lundy, Industry Trade and Technology Review, January 2001). Minera Yanacocha in Peru, the largest gold prodcer in Latin America.

In general, these mining law changes have embraced regulatory reform, free-markets and privatization. They also include stringent environmental safeguards similar to those in the U.S., including impact assessments and mitigation procedures. Efforts are made to balance sensible and effective environmental protection with mine development and production.

Permitting Ability (Based on Time Required to Get Permits) Even a 2001 study by mineral industry consultant Best Worst Behre Dolbear -- which generally ranked the Mexico United States Peru Costa Rica United States favorably among Western Chile Haiti Hemisphere nations in terms of political stability, Argentina Paraguay Colombia 15 Countries (Tie) economic system and other social issues affecting Jamaica mining investment -- said America ranked worst in Nicaragua Panama Source: Behre Dolbear terms of the time required for processing and receiving permits.

Why Overseas Locations are Increasingly Attractive: Combined with attractive natural resource potential, the overall package is one of balance -- incentive and encouragement for investment and development, while achieving environmental protection.

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U.S. policy, in contrast, has discouraged, not encouraged, its mining industry.

The entire process of finding and permitting a new mineral deposit in the U.S. can take from 4 to 8 years -- if it can be accomplished at all.

"The permitting process is cumbersome,

complex and unpredictable because it requires cooperation among many Federal regulatory compliance has become a moving target, stakeholders and compliance with dozens with unending deadlines, delays and excessive and/or of regulations for a single mine . . . . The frivolous legal challenges. These continually changing public, the land management agencies and requirements have, as recent history indicates, substantially the permit applicants would all benefit if the permitting process were conducted more reduced the willingness of companies to make new efficiently." exploration and mine development investments on U.S. public lands. ("Hardrock Mining on Federal Lands," National Research Council, 1999)

Federal & State Laws Applicable to a

Typical Mining Operation

(Source: Representative National Mining Association member company personnel responsible for compliance with laws and regulations.)

Federal Laws State Laws

State Environmental Policy Acts National Environmental Policy Act State Surface Water Discharge Permits to meet Clean Water Act state quality standards State Ground Water Protection Laws or Clean Air Act Regulations Storm Water Permits Safe Drinking Water Act Construction Permits for Dams or Impoundments Resource Conservation and Recovery Act Air Quality Permits Superfund and Toxic Release Inventory Solid Waste Disposal Water Appropriation Permits (water rights) Endangered Species Act Mine Operating Permit Reclamation Plan Approval or Permit National Historic Preservation Act Reclamation Bonding Environmental Performance Bonding Federal Land Management Policy Act Wildlife Reviews or Permits Plan of operations/reclamation plan approval Cultural Resources Review Local Use Permits or Building Approvals 11 9

Repeating the energy mistake -- increased U.S. reliance on imported minerals.

The domestic mining industry provides about 50 percent of the metal used by American manufacturing companies, and the U.S. is among the world's largest producers of many important metals and minerals -- particularly copper, gold, lead, molybdenum, silver and zinc.

But the U.S. Geological Survey recently reported that since 1993 (when mineral imports and exports were roughly equal), U.S. reliance on mineral imports has risen nearly sevenfold in terms of value.

By 2000, America had become reliant for some portion of its supply of a number of mineral commodities that it had previously exported, including aluminum, copper, lithium, magnesium metal, rare earths -- and even cement. The U.S. remained more than 50 percent import reliant for at least 29 mineral commodities, including bauxite and alumina, chromium, cobalt, iodine, manganese, nickel, platinum-group metals, potash, tantalum, tin, titanium metal, tungsten and zinc.

The U.S. is Becoming Increasingly Reliant on Imports to Supply Some Important Minerals

Tin 88% Dependent Zinc Major Sources: 60% Dependent China, Brazil, Major Sources: Peru, Bolivia Canada, Mexico, Peru

Nickel Bauxite & Alumina 56% Dependent 100% Dependent Major Sources: Major Sources: Canada, Norway, Australia, Guinea, Russia, Australia Jamaica, Brazil

(SOURCE: Platinum Potash Tungsten Minerals 66% Dependent 80% Dependent 59% Dependent Commodity Major Sources: Major Sources: Major Sources: Summary 2002, U.S. South Africa, U.K., Canada, Russia, China, Russia, Geological Survey) Russia, Germany Belarus Germany, Portugal

10 12 Increased dependency on imports is not in the national interest.

As America's failure to

Percent U.S. Import Reliance for Selected Metallic Minerals develop a compre-

Mineral 1975 1980 1985 1990 1995 2000 hensive national energy

Aluminum E E 16 E 23 33 policy based on domes- Antimony 49 48 W 51 75 94 Arsenic W W 90 100 100 100 tic resources has re- Barite 32 44 74 71 65 71 Bauxite/Alum. 91 94 96 98 99 100 vealed, import depen- Beryllium W W 20 E E 35 Bismuth W W W W W 95 dency holds a multitude Cadmium 41 55 57 46 E 6 Cement 4 6 16 10 12 20 of negative connota- Cesium 100 NA 100 100 100 100 Chromium 91 91 75 79 80 78 tions, including: Cobalt 98 93 94 84 82 74 Columbium 100 100 100 100 100 100 Copper E 14 28 3 7 37 Gallium W 56 NA NA NA NA Gold 52 18 46 NA E E • Aggravation of the U.S. Iodine W W W 41 90 69 balance of payments. Iron Ore 30 25 21 21 14 19 Lead 11 E 13 3 17 24 Manganese 98 98 100 100 100 100 • Vulnerability to possible supply Mercury 69 49 51 W W NA Nickel 72 73 72 72 59 58 disruptions from political or Palladium ------83 military activity. Phosphate E E E E E 1 Platinum Grp. 83 88 92 88 -- -- Platinum ------89 Potash 51 65 76 68 75 70 • Unpredictable price Rare Earths E NA E 21 6 72 fluctuations. Rubidium NA NA 100 100 100 100 Salt 4 7 14 9 14 15 Scandium 100 NA NA NA NA 100 Selenium 66 59 W 46 38 W Silicon 6 8 25 28 35 48 Silver 30 7 60 NA 13 52 "It is not hyperbole to call this Sodium Sul. 14 8 11 11 17 E a surge in net import reliance Sulfur E 14 3 15 21 22 Tantalum 81 90 89 86 80 80 that affects the underpinnings Thallium 69 W 100 100 100 100 of the U.S. economy on a scale Thorium NA NA NA NA 100 100 of about 20 percent of the Tin 84 79 72 71 84 86 nation's GDP. In the present Titanium Met. W W E E 36 62 economic situation, it would Tungsten 55 53 68 73 84 68 Vanadium 38 17 W W W 100 seem that the U.S.'s reliance on Yttrium NA W 100 NA 100 100 imported minerals may have to Zinc (refined) 61 60 70 51 71 71 Zinc (all) ------37 35 60 increase in order for the GDP to

Symbols: W=withheld to avoid disclosing proprietary data; NA=not available; be sustained." E=net exports. Source: Adapted from "International Update: The Globalization of Mining," by David B. Doan and W. David Menzie, Mining Engineering magazine, "International Update: the Globalization of Mining," published by the Society for Mining, Metallurgy & Exploration, July 2001. by David B. Doan and W. David Menzie, USGS, Mining Engineering Magazine, July 2001.

11 13 Minerals/Metals Provide Essential Products

(Some Important Uses for 40 Major Minerals/Metals)

ALUMINUM ANTIMONY BARIUM BAUXITE Packaging, Batteries, cable sheaths, Radiography, filler or The main transportation and solder, fireworks, semi- extender in cloth, ink and source of building. conductor technology. plastics products. aluminum.

BERYLLIUM CHROMITE COAL COBALT Aircraft alloys, Used mainly in the Provides more than half Superalloys for jet fluorescent lamps, X-ray chemical and of U.S. electricity engines, chemicals, tubes, nuclear industry. metallurgical industries. generation. permanent magnets, etc.

COLUMBITE- COPPER FELDSPAR FLUORITE TANTALITE GROUP Electric cables and wires, Glass and ceramics, patter (Fluorspar) pottery, Additive for steel making switches, plumbing, and enamelware, soaps, ceramics, optical & and in superalloys. heating, etc. bonding agent. plastics industries, etc.

GOLD GYPSUM HALITE (SALT) IRON ORE Dentistry, medicine, Prefabricated wallboard, Food seasoning and Steel manufacture, jewelry, coins, scientific, plaster, cement preservation, soda ash, metallurgy by-products, electronic instruments. manufacture, agriculture. soaps, highway de-icing. auto parts, medicine, etc.

LEAD LITHIUM MANGANESE MICA Batteries, solders, Batteries, ceramics & Essential for Electronic insulators, electrical & electronic glass, medicine, iron & paints, joint cement, applications, TVs. lubricants & greases. steel production. dusting agent.

MOLYBDENUM NICKEL PERLITE PLATINUM GROUP Alloy steels, tool steels, Alloy to stainless steel, Roof insulation boards, Catalytic converters, cast irons, super alloys, chemical & aerospace fillers, filter aids, jewelry, electrical chemicals & lubricants. industries. horticulture. contacts, dental alloys.

PHOSPHATE ROCK POTASH PYRITE QUARTZ Fertilizers, livestock feed Fertilizer, medicine, Sulfur, sulfuric acid and Semiprecious gem stone, additives, elemental chemical industry, color sulfur dioxide production, pressure gauges, phosphorus, etc. effects on brass, etc. jewelry. oscillators, resonators.

SILICA SILVER SODIUM STIBNITE Computer chips, glass & Photography, chemistry, CARBONATE A major source mineral refractory materials, jewelry, currency, Glass container for antimony. ceramics, abrasives, etc. electronics, dental. manufacture, fiberglass.

SULFUR TANTALUM TITANIUM TUNGSTEN Sulfuric acid, fertilizers, Electronic components, Jet engines, airframes, Metalworking, light bulb chemicals, explosives, weapon systems, high- space & missile filament, glass coloring, fungicides, dyestuff. speed tools, optical glass. applications. textile dyes, etc.

URANIUM VANADIUM ZEOLITES ZINC 20% of U.S. electricity Metal alloys, aerospace, Aquaculture, water Protective coating for generation, nuclear dyes, target material for softeners, catalysts, cat steel, die casting, as medicine, atomic dating. X-rays. litter, odor control. component of brass, etc. 14 12 How a National Minerals Policy Can Help.

Because of the importance of minerals to our way of life, a healthy U.S. mining industry is clearly in the national interest. Congress recognized this in passing the Mining and Minerals Policy Act of 1970 -- but federal legislative and regulatory policy in the time since has increasingly discouraged, rather than encouraged, domestic mining activity.

Much as America's recent energy dislocations emphasized the need for a cohesive National Energy Strategy, current trends strongly indicate the need for a national commitment to initiatives that will make the goals of an updated Mining and Minerals Policy Act a reality, and ensure a viable U.S. mining industry. Such initiatives should include:

• Basic recognition that the U.S. mining industry is modern and technologically advanced, and has a solid record of compliance with the world's most rigorous state, local and federal laws and regulations.

• An earnest attempt at balanced, meaningful and sensible reform of the General Mining Law, one of the major statutes directing the federal government's land management policy with regard to hardrock mining. The mining industry supported bi-partisan Mining Law reform legislation passed by Congress in 1995 (but subsequently vetoed) -- it contained reasonable provisions resolving most major areas of debate, including royalties plus fair market value for land, annual maintenance fees to hold claims for development, and an abandoned mine land program financed by royalties.

Why It's Important to Have a National • Return by the Interior Department to the Minerals Policy traditional and long-standing interpretation of

1. Mining provides $491.8 billion annually in the General Mining Law's "millsite" provision -- direct and indirect impact -- about 5 percent of and the statutory "multiple-use" mandate for the U.S. Gross Domestic Product. many public lands. 2. Every American uses an average of 48,000 pounds of newly mined minerals each year. 3. The products of mining are important in daily • Rationalization of permitting requirements with life -- copper for wiring; iron ore, bauxite, a focus on expediting the process and making a platinum and many other minerals and ores for determination in a timely manner. cars; phosphate, potash and sulfur for growing crops; gold for electronics, medicine and jewelry; coal for electricity; and many others. • A general philosophical approach to regulation 4. Mining takes place in all 50 U.S. states, and its of mining that places the importance of rational economic benefits are felt nationally. natural resource development, economic 5. The mining industry employs more than a half- million workers directly; one out of every 43 progress and environmental protection on the U.S. jobs depends, directly or indirectly on same level. All are important national goals that mining. deserve equal consideration in a balanced and 6. The mining industry has a solid record of fair manner. compliance with the world's toughest environmental laws and regulations.

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