This review talks about understanding why people mine, investing ethically in mining, and illegal mining activities. Some issues discussed include successful community relations, what is considered an ethical mining company, and religion vs. mining.
Let us take a step back and talk about the philosophy of mining. Sit back and enjoy the following which is intended to be informative, amusing, and serious, for I truly believe that understanding why we mine will make you a more successful investor. This session can help you be a mining investor with integrity and honor.
Mention of philosophy is generally enough to put one to sleep, but as I shall show here, if you have a deeper understanding of why people mine and what motivates societies to mine, then maybe you can be a smarter investor. At least your investment decision will not be clouded by the sentiment, emotion, and prejudice that get in the way of smart investing. Moreover, if you have some idea of the philosophy of investing, you can decide on whether or not to be an "ethical investor".
I advise you that what follows is a personal perspective of the philosophy of mining. I have found nobody else who has had the folly to tackle the subject. Some people say philosophy is all about the process of thinking and logic; about shadows on the walls of caves that prevent us seeing reality. To me philosophy is trying to understand why - in this case why we mine.
It is obvious why we need to mine, but it is not obvious not why we do it with such gusto. So let us proceed to examine some of the facts, ideas, and games that give insight into why we mine with gusto and invest with greater gusto.
WHAT I REJECT
I have read and rejected volumes on sustainable mining. Here, however, you will not read about sustainable mining, which I consider verbal puffery and no more than journalistic myth.
I have been almost persuaded by the tomes on responsible mining. You will, however, read nothing here about responsible mining. It is a good idea, but it is really a case of waving the wrong end of the stick with too much gusto.
I acknowledge that some would have it that you should invest only in sustainable mining and operations that undertake to mine only in a responsible way. Well and good as far as it goes, but that is more an issue of ethics than philosophy, so nothing here on that type of investing.
We mine because we must. We mine because we need the materials produced by mines. We mine so that we can build structures in which to live, and to conceive and raise offspring. That is about as sexy as mining gets.
We mine so that we can provide ourselves and our offspring with material goods and the ability to survive to beget grandchildren. As simple as Darwin 101.
We mine because it provides jobs and jobs bring money with which we can purchase the good and services that we need to survive and procreate.
The problems arise when we mine in such a way that others are deprived of the ability to continue to live and have children and grandchildren. In short, when we pollute forests, fields, and waters.
As always when there is a clash for resources, people formulate reasons that elevate into philosophies, that justify what people do, need to do, and perceive as necessary to do to justify depriving others.
Hence there arises the clash of ideas, cultures, and armies. If there are sufficient resources to go around, laws, committees, and politicians can agree on the division of the resources. If there are insufficient resources to go around, there is war, genocide, and disaster.
Amidst all this is the ordinary investor. It is the investor who provides the money to find, start, and operate mines. The motivation is profit, money to continue the cycle of impress the opposite sex, have kids, bring them up, and get them married to produce grandkids. And along the way possible get a trip to a nice island, its beaches, and a few quiet drinks.
MINING COMPANIES AND UNIONS
In 2008 strikes were threatened at a mine in Sudbury, Ontario. The threat of strikes reminds us that there is no such thing as "the mining industry." This frequently used term is just a label that groups together a disparate set of agents seeking resources.
Consider the situation in Ontario. One report read: "Negotiations between Xstrata PLC and the Mine Mill & Smelter Workers union at the former Falconbridge nickel operations in Sudbury, Ont., are back at square one. The union said Friday that its bargaining committee rejected a company offer; the company spurned a counteroffer Thursday night, and 'as of today everything is off the table.' "
Behind all the offering and rejection is the fact that Xstrata, which took over Falconbridge Ltd. with a Can$18-billion hostile bid, and Companhia Vale do Rio Doce (Vale), which won control of Inco Ltd. with an unsolicited $19.4-billion offer, are seeking to share resources and facilities in order to cut costs.
Specifically, Xstrata and Vale want to share operations in the Northern Ontario city where many of the two companies' mines sit side by side. Each company hopes to lower transportation costs by processing the other's ore at facilities closer to their own mines. Xstrata estimated benefits related to a Sudbury joint venture could be worth $80 million. Vale chief executive officer Roger Agnelli said a deal to share resources could produce savings of as much as $200 million.
The union is worried about possible dislocation, including layoffs, of workers caused by a joint venture. Then there is the issue of wages and benefits.
In a word, this story reminds us that mining is just about access to resources, jobs, and profit.
ILLEGAL "SIDE-BAR" MINING
We read of illegal miners in South Africa slipping down the shaft to rework the old workings. Then hundreds die when things go wrong. We read of Zimbabwe police killing illegal diamond miners to get control of the workings for Mugabe. Now we read that the shootings at Freeport-McMoRan's Grasberg Mine (July 2009) are motivated by a fight for control of access to the illegal mining of mine tailings.
Can we explain these events by reference to the standard theories of responsible mining, sustainable mining, and successful community relations? I suggest that these three events demonstrate the hollowness of these concepts and the limited scope they offer as an intellectual basis of understanding and explaining mining.
We need much more than the philosophy of responsible/sustainable mining to explain these events that all amount to nominal illegal mining. First let us focus on the mining part. What these people are doing is mining in its purest and most essential form: they are extracting resources where they find them in order to get the means to barter. And they need to get the resources to survive (at least until they die attempting to do so).
Now to the illegal part. Law is ultimately a social construct. What is lawful is ultimately what those with the power to impose their wills say it is. The fellows in the South African mines, or on the Zimbabwe diamond fields, or sniping in Grasberg, see no illegality in what they are doing. Or if they do, they have no respect for a system that denies them access to resources waiting to be mined.
Thus if we adopt the philosophy that there is a biological-imperative-based instinct to mine, (whether it be defined as legal or illegal is not relevant,) you must ask, how does the corporate mining industry address these instances of what I like to call "side-bar mining"? The most obvious is to brand it illegal and throw the miners in jail. The second is to funnel more funds to local communities so the energy expended on side-bar mining is instead put to more productive use in creating jobs and opportunities. Or, particularly when metal prices are high, and jobs in short supply, find a way to enable the otherwise unemployed to do side-bar mining. Much like occurs at landfills in third-world countries where whole populations make a living scavenging the waste dumps for "valuable" throw-away stuff, so too maybe the mining industry should find a way to let these desperate folk get access to the mining wastes that still constitute a resource to the side-bar miner.
Are you an "ethical" investor? Do you consider the ethical dimensions of your decisions when you choose to buy or sell mining-related stock? Do you direct your dollars to companies that enhance local benefit by mining?
Here are some points to keep in mind if you want to invest ethically.
WHAT'S ETHICAL AND WHAT'S NOT
At one level we may argue that as long as the mining company is acting legally, they are a valid investment, regardless of what the NGOs may say. At another level you may argue that an investment in a mining company that does not follow the highest levels of responsibility and sustainability is simply a bad investment, both unethical and a bad income generator.
To help you decide how to proceed in this knotty area of morality and investment, I recommend that you download and read a superb essay by Kathryn McPhail of the International Council for Mining & Metals (ICMM). Her essay is titled Sustainable Development in the Mining and Minerals Sector: The case for Partnership at the Local, National, and Global Levels.
In this insightful essay, she looks at what makes for good mining versus bad mining with regard to some thirty-three countries, and the claims of NGOs that mining in poor countries generally leads to corruption, misdirection of resources, poor development, and exploitation of the already poor. She concludes that not always do such countries suffer from what she calls the Dutch disease of mining investment and development.
Seems it generally boils down to the presence or absence of effective government, and the responsible interaction of international organizations and mining companies. She concludes: "Local based non-governmental organizations can work with local communities and indigenous peoples' organization and help build consensus on how to share the benefit [of mining] equitably."
Clearly she believes and promotes the idea that ICMM and its member mining companies can help avoid the Dutch curse. And she promotes implementation of many of the fine publications put out by ICMM to provide guidance in how to do this.
So if ethical investing is your cup of tea, I can do no better than recommend you read this essay, look up the mining companies that are members of ICMM, check on their implementation of the ICMM guidelines, and invest in those mining companies rather than the less honourable players. If you make money let me know.
SELECT YOUR COMMODITY FOR ETHICAL INVESTING
Some people won't invest in mining stocks, period. They oppose mining for one or many reasons including perceived exploitation of indigenous peoples or concern for negative environmental impact. They prefer to invest in manufacturers of windmills and solar panels, leaving others to profit from the procurement of the metals used by these manufacturers.
Assuming, however, you do choose to invest in mining, here are some of the ethical issues associated with specific mined commodities. Keep in mind that public perceptions of what is and what is not ethical changes as the news and movies change. So as an investor, be ready to move with the tides of ethical perceptions in the investing community.
: Many believe in the reality of blood diamonds and espouse the notion that the legitimate diamond mining industry cannot ensure the absence of blood diamonds from the supply chain. Hence these folk will buy neither diamond mine related stock nor diamonds themselves. They prefer glass beads made from silica mined in a local quarry.
Uranium: Some buy uranium mine stocks, convinced that only uranium and nuclear power offer a future where clean power does not contribute to global warming. I am one of these. Others, however, believe uranium is the ultimate "poison" and its mining and use is a precursor to nuclear holocaust. They prefer to invest their retirement account in coal mine stocks.
Gold: Most people like gold and believe it is the ultimate hedge against economic collapse. Some would have us eschew paper money and reserve banks and return to the gold standard. Others think that most gold mining is utter folly: digging something up only to bury it deep again in a vault. At worst some gold is diverted to trashy jewellery sold at Wal-Mart.
Oil Sands: Clearly if you are an American, you support oil sands mining as a secure and politically safe source of gas - unless you support renewable energy sources. If you are an Albertan First Nation, you probably decry oil sands mining as a ghastly scar on the landscape of your ancestors and a terrible waste of the limited waters of the Athabasca River. Unless of course you too could get your hands on some of the big companies' shares.
The point is that these contrasting perspectives could be generated for almost any substance mined, from clay for hand-formed pottery to molybdenum which most people have never seen and have no idea what it is used for.
If you are a savvy investor, you won't succumb to any of these silly prejudices, but you will do well to understand them. Understand how they influence the risk that a new mine for a specific substance will be rejected by the local populace. Understand how these and similar prejudices affect the market price of mined products and hence share prices.
CONSIDER THE RELIGION OF THE LOCALS
Be careful about investing in proposed mines that may impact beautiful bodies of water potentially considered sacred by both the religious and the secular humanist.
A coalition of West Virginia churches on an idle Thursday in late 2008 sharply criticized a Bush administration-backed proposal to relax restrictions preventing mining activity near waterways, on the grounds it would be an affront to God's creation.
The West Virginia Council of Churches said it objected to exempting valley fills - in which rubble from mountaintop removal mining is dumped in nearby valleys - from the 20-year-old rule restricting mining activity near streams.
"This is a deeply moral position, and one based on scripture," retired United Methodist Bishop William Boyd Grove, a council leader, told reporters outside the Capitol.
Current policy says land within 100 feet of a stream cannot be disturbed by mining unless a company can prove it will not affect the water's quality and quantity. The new regulation would allow mining that would alter a stream's flow as long as any damage to the environment is repaired later.
This is the first time I have read of a Christian Church group raising the sacred nature of a water body to halt or limit mining. We all know of many bodies of water that are sacred to Aboriginal groups. The lake that figures prominently in the Kemess Mine debacle is considered sacred by two of the three local peoples. One look at a picture of the lake and you can see why-although I suspect there are many beautiful lakes that would inspire similar emotions if properly photographed.
In Creation by E. O. Wilson, a secular humanist calls on religious leaders to downplay the differences between a secular and a religious perspective and work to head off a species extermination that will make the ones that started and ended the Mesozoic, the age of dinosaurs, small by comparison. I suspect this call from West Virginia is not a considered response to Wilson's pleas. I suspect that this call is based on its own origins in local populations and their churches and a local opposition to destruction of places they know and grew up in. I am not even sure that cessation of mountaintop mining will have any impact in the effort to halt species extermination. If that were a real danger, the law dealing with endangered species should surely come into play and be the basis of deliberation.
Political correctness constrains cynical comment on anti-mining demonstrations founded on religion. This is particularly so when the religious are Indians, First Nations, or Aboriginals - whatever term is used locally. We WASPs (White Anglo-Saxon Protestants) are conditioned to avoid negative aspersions about religion, its origins, and its judgments, particularly if such judgments are potentially wrapped up with racial and ethnic overtones. So I now find myself wondering if reliance on religion as the basis of opposition to mining by a group of Christians provides an opening for a debate that we have thus far assiduously avoided?
Maybe I go too far in characterizing the West Virginia Council of Churches as opposition to mining. Maybe all they are opposing is destruction of beautiful waterways. Maybe they support mining that does not result in covering of streams and creeks? The report does not tell.
I wonder if the Kemess North Mine would have found support amongst the native populations if it had not involved filling a lake. In fact, if one reads the Kemess North Copper-Gold Mine Project Report in detail, one gets the impression they would have preferred an on-land tailings disposal facility and would have supported mining if there had been a cost-effective solution.
There are many secular humanists who say that our origin in the plains of Africa still dominates our view of what is beautiful and desirable. No doubt, if we were evolving in the drier parts of Africa, we would have viewed any body of water as a source of water and food. Maybe there is deep in our souls an instinct to protect such bodies of water.
And if you reject evolution, the same conclusion - protect bodies of water - seems to arise from purely religious considerations. Is this a concordance of the perspectives Wilson pleads for?
PLAY COMPUTER GAMES TO HONE YOUR INVESTING SKILLS
You can enhance you insight into what makes mining happen in the real world by playing any one of the many other computer games that rely on mining to populate the visual world with goods and money. The young people in the office assure me that playing these computer games that simulate mining issues in an e-world, makes them more skillful. Some of the kids even claim to be growing rich in the e-world mining asteroids.
A remarkable site is Musée de la Civilisation in Quebec. Then there is Rock 'n Metal. Log on, get a score card, visit the various halls, and play the games to get the highest possible score. You have to manage and operate a computer mine, including getting the exploration, development, ore extraction and processing, and final closure and rehabilitation right to get a decent score.
If you are like me, incompetent with video games, just bypass the game feature and amble in admiration around the site for an update on all aspects of mining. Here is another Canadian tax-payer supported game: Start a Mine, from Natural Resources Canada.
Second Life has a Mining Guild with 16 members. I could find no way to join, but that, I suppose, is the essence of a guild-you have to be invited to join. I did establish that it costs $9.95 per month to play, but after that you can get rich by dabbling in real estate. No indication anybody has yet opened a mine and gotten rich. The 30-something-year olds who told me about these sites swear they (the sites) are good for the brain, for the brawn, and, if you are smart, the pocket.
I suspect that Spore is the computer game that will change the mining industry. I challenge somebody in the mining industry to support a group playing Spore to evolve creatures that can deal with acid mine drainage, undertake remote mining, succeed at marine mining, enhance heap leaching, and more than I can imagine. Here is the future using simply, old Darwinian principles. It's time for the mining industry to get on board.
Another game is Sugarscape. At its simplest, this is a set of squares on your computer screen. In some of the squares are piles of sugar. The game starts when you populate the remaining squares with agents that can move, get to the sugar, consume the sugar, and store up energy. Some of the agents fail to get to the sugar and die from expenditure of energy they cannot replenish.
To add spice, the agents are assigned rules for cooperating or outwitting other agents. Watch what happens and see what rules lead to the development of groups of cooperating agents, hierarchies of wealth, and the emergence of strategies to maximize the wealth (control of the sugar piles) of individual agents.
Watching the action unfold on a Sugarscape network, leaves you wondering if the "mining industry" is no more than randomly scattered sugar piles to which are attracted explorers, investors, and workers each trying to maximize their benefits - the enjoyment of the sugar in the piles. Get the rules right and wealth emerges; get the rules wrong and the piles are consumed and all that is left behind is a barren landscape of wasted opportunity and a degraded environment.
And the agents move on to another landscape - from Ontario to Alberta and the oil sands.
If you are really brainy and have time, go to the ultimate computer mining game: EVE Online. This is one of those games where you can do on the computer everything you can do in real life, and a whole lot more. Its basic principles are the same as in real life: work hard, get smarter, start and grow businesses, and outwit or outgun the other guy. (Ninety-five percent of the players are male so I stick to the sexist guy appellation.)
The method used to keep the economy going is explained in this quote:
The economy in EVE is known as an open economy, that is there is no fixed amount of money or materials in the universe. CCP did attempt to implement a closed economy (that is an economy where there is a fixed amount of currency and therefore materials) early on in the game's existence; however, it proved too difficult to balance the effects of new players entering the game with the capabilities of older players able to earn more ISK or obtain more materials. The current Open economy is automatically balanced by introducing extra materials in under populated areas to encourage an even spread of players.
In short this universe is awash in undiscovered ore bodies just waiting to be mined. Mostly the mining is of asteroids. To find the mine, you must explore. To develop the mine, you probably will have to move lesser types out of the way. To operate you may have to hire the uneducated. To expand the mine, you will have to beg, borrow, or steal. And along the way you will have to outwit diverse opposition intent on shutting you down, blowing you up, or undermining everything. Sound familiar?
There is virtual crime in the empire: "One example is the corporate heist perpetrated by the in-game assassin's guild Guiding Hand Social Club (GHSC). They infiltrated a target corporation over the course of nearly a year before performing a virtual assassination on the target's CEO and stealing or destroying billions of credits worth of property which the CEO had entrusted to them."
But before you begin, consider the skills you need to mine in EVE world:
Industry, Refining, Mining, Drones, Mining Drone Operation, Refinery Management, Metallurgy, Electronics, Engineering and Survey Mining 5 Astrogeology 5 Drones: Heavy 4 and Mining 5 Drone Interfacing 3-4 (I say 5 takes way to long so wait on it.) Engineering 5 Electronics 5 Hull Upgrades 4 All skills that relate to Energy, Cpu and Capacitor Capacity and Recharge to at least level 3 - 4 depending on what ship you fly.
Beware-not everybody is nice. Here are some random thoughts from one new player: "So I've decided I'll use mining as a reasonably safe way to make some ISK [money] whilst I skill up accordingly for trade and pirating…I can imagine me flying through trade routes with stuff I buy and sell and have taken from unsuspecting miners!"
The best part of EVE that sets out the philosophy of mining is The Complete Miner's Guide. It is written to guide player as they undertake and perfect a career in e-mining. When I read The Complete Miner's Guide, a light goes on in my head about why people mine. I suddenly see why mining is so exciting and stimulating.
In the guide you will find every aspects of mining that make it exciting and so natural a thing to do: find the ore; mine the ore; process the materials; manage the people; sell the product; finance the operation; ward off thieves, competitors, regulators and detractors. It is all there in distilled form. True that it's all there in a world that is virtual and "perfect" - totally artificial. But the real-world challenges are there: you succeed or fail for the same reasons of skill and daring and aptitude, knowledge and experience that make you succeed or fail in the real-world of mining.
THE SEX OF MINING
By playing computer games you get into the guts of why we mine: it brings excitement, money, and power. At basics, mining provides an opportunity to gather the resources that bring money and power and the opportunity to demonstrate one's skills to the opposite sex.
On-line mining may be viewed as pure entertainment. More likely it is an opportunity to collect goods and strut as a Darwinian peacock. At its best, it is an opportunity to hone skills that may be put to even more productive (reproductive) use in the real world.
The sex of mining is highlighted by the question how many diamonds do we need? Ask any gemologist selling in the Los Angeles area, and she will tell you: "As many as we can get. There is no limit to the desire of young women for a diamond as proof of her man's virility and ability to provide."
These young ladies care not a whit for the pontifications of those groups preaching fair trade, certification, and no-blood. They want diamonds and virility and copious profusion of material possessions.
Sort of like Grace Mugabe of Zimbabwe who claims ownership of the country's diamond fields and is behind killer squads massacring those forced to try to mine to find food to feed their families. Blood diamonds summarize the worst side of why we mine.
A BETTER WAY AND A BETTER REASON
In the The Prospector
, Kevin Barker makes a plea to bring sexy back into mining. He writes:
There are lots of fascinating angles to mining. There's exploration, geology, travel, geopolitics, risk and reward…..I happen to think a fully mineralized hanging wall is very sexy, all that glittering metal winking at you.
He goes even further with his analogies in this quote:
I've never understood why we stand idly by and let a few misguided people with green hair and an internet connection whip the tar out of us. So we're supposed to dismantle the mining industry? Fine. But isn't that a bit like telling kids they should abstain from sex to prevent unwanted pregnancies and the spread of STDs? Kids won't stop having sex and people won't stop mining.
I found a site that carries this over-the-top praise of the sexiness of mining:
A career in the mining industry can be a rewarding experience, with the opportunity to work in exotic locations with people from a range of backgrounds, and the thrill of being involved in the development of some of the world's essential resources.
Then there is the observation by the Economist on Generation Y:
Net Geners may be just the kind of employees that companies need to help them deal with the recession's hazards. For one thing, they are accomplished at juggling many tasks at once. For another, they are often eager to move to new roles or countries at the drop of a hat-which older workers with families and other commitments may find harder to do. Such flexibility can be a boon in difficult times. "In the economic downturn what we are really looking for is hungry 25- to 35-year-olds who are willing to travel," says Frank Meehan, the boss of a fast-growing mobile-phone applications business that is part of Hutchison Whampoa, a conglomerate based in Hong Kong.
I never though of mining as a place populated by "hungry 25- to 35-year-olds" travelling to exotic places to hang glittering posters of mercury in an attempt to re-order the world.
Maybe the time has come for mining industry proponents and philosophers to espouse the Darwin approach. Who can forget being young and reading his two great books, one on the origin of species and the other, far more fascinating to a sex-obsessed twenty-year-old, on the role of sexual selection. Again as the Economist puts it:
For a Darwinian, life is about two things: survival and reproduction. Of the two, the second is the more significant. To put it crudely, the only Darwinian point of survival is reproduction. As a consequence, much of daily existence is about showing off, subtly or starkly, in ways that attract members of the opposite sex and intimidate those of the same sex. In humans-unlike, say, peafowl, where only the cocks have the flashy tails, or deer, where only the stags have the chunky antlers-both sexes engage in this. Men do it more than women, but you need look no further than Ascot race course on Gold Cup day to see that women do it too. Status and hierarchy matter.
I am not advocating that mining companies breed peafowl on the tailings impoundment or run races on the waste rock dump. Just jumping in a plane to fly with a poster to a far away place should be sufficient for the fulfillment of the show-off instinct. And if mining provides sufficient opportunity for lusty 25- to 35-year-olds to show off, why then mining should be a prime candidate for them (and maybe us old folk) to work and preen.
The trick is create lots of status and hierarchy slots in mining for those lusty young. Give them lots of feed-back that promotes ego-development and which allows them to stand tall and proud, with chunky antlers aloft. Or with green hair carefully arranged in spikes.
At least mining companies that succeed in honestly making mining sexy will be good ones to invest in.
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