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Resources Policy 26 (2000) 61–67


Book reviews

Inside Mining: The Economics of the Supply and The chapter on supply is in many respects well
Demand of Minerals and Metals organized, with major sections on resources and
Phillip Crowson; Mining Journal Books, London, 1998, reserves, capacity to supply and influences on output,
hardcover, ISBN 0-900117-86-9 together with shorter sections on the role of inventories,
secondary supply and barriers to entry. The section on
After a quarter of a century working as economist for resources and reserves provides an engaging introduc-
a major mining company, the author has contributed this tion to the economic and technical issues which influ-
volume with his insights into the way that mineral mar- ence the exploitation of minerals. Focusing initially on
kets (apart from those in the oil and gas sector) work. the ‘McKelvy Box’, Crowson considers the issues of
Though a group of his readers including this reviewer geological certainty, feasibility of economic recovery
would have wished it, the author advises in the first para- and accessibility of prospective areas as keys to delin-
graph of the brief introductory chapter that, “this is not eation. This should be appreciated alike by science or
a textbook” but rather a more general introduction to business professionals, who want a more complete
this complex and dynamic field. Its organization is quite appreciation of the finite nature of mineral supply. The
standard, reflecting the typical structure of a microeco- ‘Capacity to Supply’ section has a similarly useful dis-
nomics text. Four chapters follow the brief introduction. cussion of the technical and economic factors influenc-
The first two, respectively on demand and supply, make ing the supply of minerals from mines and mills. The
up nearly sixty percent of the book. A short chapter on author importantly stresses how the nature of the mining
costs—almost a “theory of the firm” chapter relating to cycle and previous short-term business survival stra-
the mining sector—follows on from this. After reflecting tegies often perversely affect short-run new mineral sup-
briefly on market forms, most of the long final chapter ply when prices begin to rise. He then proceeds to con-
is devoted to a discussion of the evolution and recent sider the more complex area of by-products and co-
operations of metal and related mineral markets. products, noting how this status brings greater inelas-
While it is based on well-developed economic theory, ticity of supply. The evolution of supply sub-section pro-
the discussion uses the familiar technical framework of vides an appropriate completion to the capacity to supply
microeconomics texts in only a very limited way. Rather discussion, highlighting how the dynamic nature of sup-
the discourse is descriptive and industry-focused, placed ply is influenced by a variety of negative influences such
where appropriate in a historical context. In certain as closures, temporary shutdowns, and erosion of a
respects this adds to the merit of the volume. In others mine’s capacity to produce, as well as positive factors
its detracts, particularly in its failure to utilize the such as reopenings, expansions and new mines. The bal-
demand and supply curve framework consistently as a ance between the seven components varies during the
way of explaining important influences on supply. course of the business cycle. In the ‘Influences on Out-
Because the volume’s organization differs in part from put’ section, Crowson finally provides a reasonably stan-
the standard paradigm, this means its requires close read- dard economics textbook type exposition of the variables
ing to appreciate the range of insights which the which influence mineral supply. They include the price
author offers. of a mineral, the cost of inputs, the rate of inflation and
This comment applies clearly to the chapter on exchange rates, investment and innovation (technology),
demand. In his shorter standard reference on the eco- economies and diseconomies of scale, environmental
nomics of metal markets, Tilton (1992) uses a familiar considerations, government regulations and temporary
classification of variables when he identifies income, the disruptions (including strikes, natural disasters and civil
price of a mineral, the prices of substitutes and comp- disturbances). The short sections on secondary supply
lements, technology, consumer preferences (fashion) and and barriers to entry provide an appropriate complement
government policy as key determinants of mineral to this discussion.
demand. Crowson’s longer discussion covers each of The exposition moves smoothly from supply to costs
these variables (except perhaps government policy) but in Chapter Four, which has two major sections. The first
adds some more. They are population structure, inertia, is on the definition of cost. The detailed consideration
the effects of available supply and increasing environ- of cash costs (the basis for the familiar cash cost—a
mental awareness. form of the short-run supply curve) is informative and
62 Book reviews / Resources Policy 26 (2000) 61–67

this leads to the more complicated area of cash break- diagrams illustrate important arguments well, their pres-
even costs, where the effects of co-product and by-pro- entation is uneven. It also seems that the volume would
duct credits come into play. The discussion here begs have benefited from close critical academic review at the
the question of the need for a synthesis to make this later draft stages. The extent to which this occurred was
important area clearer. The sub-section on “Pitfalls in not clearly apparent to this reviewer.
Cost Comparisons” adds a practical analytical dimension
to the preceding discussion and discussion of full costs Philip Maxwell
provides a suitable conclusion to this section. The short Mineral Economics program, WA School of Mines,
second section—on changes in an industry’s costs over Curtin University of Technology,
time—complements the initial section well. GPO Box U1987,
As noted in the introduction, the final chapter on mar- Perth, WA 6845, Australia
kets and prices begins by considering the structure of
markets. The author notes that the markets for the non-
ferrous metals and precious metals exhibit many of the Reference
features of competitive markets, but that for other min-
eral products, oligopolistic markets are more common. Tilton, John, 1992. Economics of the Mineral Industries. In: Hartman,
He uses a discussion of commodities and specialties and Howard (Ed.), SME Mining Engineering Handbook pp. 47–62
of prices over the product life cycle to complement this
exposition. The section on producer pricing provides a PII: S 0 3 0 1 - 4 2 0 7 ( 0 0 ) 0 0 0 0 4 - 0
useful historic and practical introduction to the reality of
the development of mineral markets. It leads naturally
to a quite detailed discussion of terminal markets, parti-
cularly the London Metal Exchange. Notwithstanding Global Energy Perspectives
the existence of terminal markets as guides, most sales Nebojsa Nakicenovic, Arnulf Grubler, and Alan Mac-
occur under contracts between producers and fabricators. Donald (Eds); Cambridge University Press, 1998, 299
Crowson describes the general nature of such contracts. pp., US$27.95 paperback, ISBN 0-521-64569-7
The marketing situation is complicated by the nature of
production and processing which occurs and the extent This book is an exercise in scenario building.
of integrated operations. He notes that processing is Developing from the World Energy Council’s study of
more likely to occur near to mines but that tariff regimes 1993—Energy for Tomorrow’s World: the Realities, the
complicate this. New smelters and refineries often appear Real Options and the Agenda for Achievements—Kogan
about twenty years after a mining industry has been Page, London—six scenarios are built which examine
established in a new location. energy use in eleven regions up to 2020 with some
The issue of whether production should be integrated extensions to 2100. There are three basic cases: “High
is important for a project’s profitability. Where transport Growth” with three versions; “Middle Course”; and
costs are a key issue, as in the case of remote inland “Ecologically Driven” with two versions. After a brief
mines, integrated operations are more attractive. It is less description of these scenarios, the book presents an over-
of an issue when mines are close to deep water ports view of past and present energy needs together with an
(good applied location economics). After considering a extensive discussion of the determinants of future energy
series of standard arguments for and against integration, needs. The book then outlines the alternative energy sys-
the author reflects on the reasons that new entrants have tems in each of the scenarios together with the impli-
negotiated the high entry barriers to produce metals. He cations for financing, trade, supply costs, technology, the
notes as well the often favorable economics of expan- energy industries and finally the environment. The
sions to established smelters and refineries. The quite energy systems are then re-examined on the basis of 11
long section on sales contracts then provides an geographic regions.
important practical description of the reality of doing The book claims that it is considering the future of
business in mineral markets. The final three short sec- energy systems “... interwoven with broader issues of
tions reflect on price movements and the factors which human development and... the main driving forces of
influence them. change and their implications” (page 241). It also claims
Inside Mining is a worthy new contribution to the to contain a number of new features which differentiates
mineral economics literature. While it is not a textbook, it from other earlier blockbuster energy futures studies.
it will be used as one for specialist courses on mineral These include integrating changing perceptions about
markets. There are few if any other contributions which resources and the environment; technology treated
are so complete. Notwithstanding this strong recommen- dynamically; state of the art models describing individ-
dation, the organization, presentation and price of the ual dimensions of development integrated into one
book all leave something to be desired. Though many modeling framework; spatial and temporal dimensions