1. Thinking about the “Economics” of Mining: New Mexico Uranium Mining Thomas Michael Power Research Professor Department of Economics The University of Montana September 2008

3. Why Are Mining Towns Not Prosperous? Unstable Global Markets Labor-Displacing Technology Environmental Damage Undermines Amenity Supported Economic Development

5. The Folk Economics of Mining Economic Value of a Mining Proposal –Market Price X Quantity in the Ground $140 per pound X 500 million pounds = $70 billion $100 per pound X 315 million pounds = $32 billion –Employment: 250,000 jobs –Payroll:$14 billion –Taxes:$ 1.6 billion An Economic Bonanza!

6. What’s Missing? Past Economic Performance of Mining Labor-Displacing Technological Change Incorporating Costs –Economics looks at both costs and benefits! Costs of extracting and processing the mineral Public Costs –Clean up, environmental, health, public services –Costs of public services –Economic instability

9. Global Uranium Markets New Mexico is just one uranium producing region in the United States, with about 1/3 rd of the total reserves The United States has a small part (7%) of the world’s reserves; NM has about 2%. Australia (24%), Kazakhstan (17%), Canada (9%), South Africa (7%), Namibia (6%), and Brazil (6%) have about as much or more.

10. Unstable Mineral Market Dynamics Long period of low uranium prices –Mines and mills shut down and are abandoned –Usage is greater than production; stock piles decline. –Prices begin to rise A worldwide race: new mines and mills –Supply increases dramatically –New low cost technologies are deployed –Supply exceeds demand –Price falls: Boom leads to Bust

12. Rising Labor Productivity in Uranium Mining and Processing Fewer and fewer workers needed

13. Can There Be Prosperity without Mining? Adjustments to the Bust and Recovery

19. Why Was the Impact So Modest? Diversification away from Mining –Recreation, Gaming, Medical Services, Other Professional & Technical Services, Prisons Amenity-Supported Economic Vitality –Retirement and Investment Income Cibola and Valencia are retirement destination counties –In-migration of new residents Construction, local services, etc. supporting them

20. Export Base V. Amenity View The Economic or Export Base View –The more dependent an area is on export-oriented industries, the more prosperous it will be. –Instability, “company town” syndrome, powerless in the face of external forces The Amenity View –People and firms care where they live and act on those preferences, relocating economic activity –“Attractiveness” is part of local economic base

22. The Public Costs of Uranium Mining and Processing The High Legacy Costs –The health of miners, mill workers, and residents –The cost of cleaning up abandoned mines, polluted waters, waste deposits, etc. –Economic instability: boom and bust Future Costs –The long-lived nature of radioactive waste –Extensive waste from mining low grade ore –In Situ Leaching and Water Pollution –The next boom and bust

23. But We Are So Poor! We Don’t Really Have a Choice but to Embrace Mining. Size of Place and Pay Cost of Living, the Value of Amenities, and Pay Real Differences in Well Being Who will get the mining jobs? How many?

29. Making Careful Choices You are not desperate beggars who cannot afford to be good choosers Look at costs as well as benefits Be realistic about NM’s place in worldwide competition to supply cheap uranium Directly face the boom-bust and labor- displacing character of the industry Relatively short run gains. Near permanent losses.

30. Sacrificing the permanent, unique and irreplaceable for the common and temporary? Thank You! Questions? tom.power@mso.umt.edu