Future of Commodities

While speculation on economic impacts, pricing fluctuations, supply and demand and hedging occurs daily with commodities, this article will delve into the bigger concern: Will commodities be around in the future and at what cost? As a simple primer, there are two basic types of commodities, hard and soft. Wikipedia looks at a commodity as a marketplace item provided to satisfy wants or needs. The easiest differentiator is hard commodities are mined, while soft commodities are farmed. Some examples of hard commodities include metals, oil, coal, copper, zinc and mercury. Examples of soft commodities are corn, wheat, sugar and cocoa beans. Sometimes, soft commodities are referred to as the 3 F’s: food, fuel and fiber.

Why pose a question on the future of commodities when mining activities have increased, farmers markets are springing up everywhere and the shelves in the supermarket are fully stocked? Global population is expected to increase 11 percent by 2020 and 20 percent growth by 2030. Two hundred years ago, global population hit one billion. According to US Census Bureau data, it took another 118 years to double, hitting two billion in 1922. It took just 37 years to hit three billion, 15 years to hit four billion, 13 years to hit five billion and just 12 years to hit six billion. The dramatic increase in population sprawl reduces new farmland and drives up demand. The strain on natural resources is beginning to manifest itself in different ways.

China and India are increasing their consumption of commodities at a rate three times higher than that of the United States. Population is just one factor impacting commodities. Hedging and speculation within the economic sector is putting an intense demand on certain commodities. Soft commodities are prone to numerous factors outside of human control factors – weather, climate and spoilage to name a few. Soft commodities are at the mercy of marketplace pricing, with little to no ability to hold onto product and wait for more favorable pricing. As our climate continues to regulate, floods, typhoons, droughts and hurricanes ravage crops and supplies driving up prices, reducing already scarce resources.

On the hard side, commodities like coal and others have faced increased political pressures and have been under attack. Communities have put certain commodities squarely in their crosshairs and have worked to limit production through ballot measures or increased regulations. The EPA has been targeting carbon emissions, water and air quality standards among others. Millions are being targeted on a war against coal and energy production.

With population increasing and commodities become more and more scare, we are faced with the question of how to protect valuable resources and continue to produce essential commodities so necessary for day-to-day life. Crucial advancements and improvements in yield to offset less land available to farm and higher demand are essential. While the picture painted is bleak and has many in despair, there is good news out there.

Equipment advances and improvements in techniques have had a positive impact on yield. Creativity and experimentation within the commodities sector has led to innovation and new best practices. Science has created higher yield and more durable strands of soft commodities. Good ecological and social standards efficiently applied at scale are driving large-scale changes in production. Hybrid stains are proving to be resilient and withstanding some of the climate challenges.

The recent demand and consumption for healthy food, moving away from sugary snacks and treats is changing the landscape as well. It has certainly changed the demand and availability related to certain soft commodities.

Murder by Smartphone?

We rarely think about the origin of the valuable components inside the items we use every day. Our smart phones, computers and tablets are made up of tin, gold, and other minerals that come from a parts of the world where conflict affects the mining and trading of those materials.To put it bluntly, in some areas, like the Congo, workers are hired at gun-point, and forced to work in extreme conditions.

Like other commodities, in which goods are extracted through questionable means, (diamonds, chocolate, even cotton) the industry is called to obtain their materials in the best possible circumstances, with as little risk to human life as possible.

The U.S. Securities and Exchange Commission, for the first time, imposed a requirement for manufacturers to file conflict minerals reports. The deadline was June 2nd, and the reports varied greatly in detail and clarity. As The Guardian reports, "Some tech giants that have taken a lead on this issue - such as Intel, HP and Apple - filed in-depth reports last week. Meanwhile others, including Herman Miller, Soda Stream, and Oracle, can best be described as vague."

As part of the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act, U.S. companies are required to report whether they use conflict minerals - raw materials like gold, tungsten, tantalum and tin - from the Democratic Republic of the Congo (DRC) and neighboring war-torn countries.  It calls for transparency from consumer electronics companies, who must now examine and reveal their global supply chain.

Apple was one of the first to reveal their conflict mineral information in a Supplier Responsibility Report earlier this year. Their new filing, goes into more detail.

From a Slate.com report;

In 2013, Apple used 205 smelters, 21 of which got metals from the Democratic Republic of Congo—a country whose economy has been complicated and obscured by civil war. Four of the 21 DRC smelters have not yet been verified by third-party auditors as conflict-free.

HP reports that of 201 smelters it could identify in its supply chain, 60 are accredited. HP took steps to evaluate the other smelters and encourage them to improve their compliance, but in 2014 they will be continuing to "further mitigate risk and improve due diligence."

Meanwhile, as Bloomberg reports, Intel has a five-person team working with smelters and tracing the money that goes through them. Intel reported an 83 percent response rate on surveys it sent to smelters. The company can find 158 smelters associated with its supply chain, 71 of which are certified conflict-free. As the initiative has gained recognition it has begun to spread to other companies.

It all goes too deep to expect consumers to research where these materials come from. But reporting requirements may eventually set all our minds at ease. According to the reports filed, we still have a long way to go to be confident that the phone in the palm of our hand, didn't come from the result of innocent deaths.

To understand more about conflict minerals, Source Intelligence offers this infographic:

For the full articles quoted in this story go to Slate.com and TheGuardian.com http://www.slate.com/blogs/future_tense/2014/05/30/apple_hp_and_intel_have_reported_their_sources_for_conflict_minerals_to.html

http://www.theguardian.com/sustainable-business/2014/jun/02/sec-conflict-mineral-deadline-reports-mixed-apple-intel-hp

The Importance of Metals And Minerals

The Global Environment and the World’s Energy Needs

The earth’s crust is rich with minerals and transforming these ores into - metal tools, machines and equipment of all sorts, motor vehicles, solar cells, wind turbines, computers, the internet, communications satellites and the rockets that put them in orbit, medical equipment and innumerable other products - allow us to live a quality of life much different from that of our parents and grandparents. Stop and think about it. Even the most basic things we take for granted, from the roads and highways we drive on to flat screen television panels, are products of mining. Society not only relies on, but demands it receives the manufactured products it wants and has become accustomed.

Besides allowing us our standard of living and products, raw mineral products are the necessary ingredients of the world’s global economy. There is a saying that “raw materials are the basis of every modern industrial economy.” It is from raw, natural resources that nations treat, manufacture and produce value-added products. If a country does not have or cannot acquire raw minerals or initially beneficiated products like concentrates through international trade, it cannot produce and export manufactured goods or employ its citizens in good, long-term high-paying jobs. The choice for a country is to develop an industrialized economy or remain an agrarian one with all the age-old shortcomings of being at the bottom of the global economic ladder. It should be safe to assume that most of the world’s farmers would like their children and future generations to obtain an education or skills to enable them to move up that ladder.

Competition between developed and developing countries for the world’s finite production of metals will become more and more acute.

And recently there has been growing concern over man’s emissions of greenhouse gases and a renewed interest and acceptance of electricity produced from clean nuclear power. Not only is nuclear power clean and does not emit greenhouse gasses, but the U.S. and France have designed new and improved safe nuclear reactors. Much of the world, especially the Asian countries of China, Japan, Korea, Taiwan and India have chosen to emphasize the development of nuclear power rather than rely on problematic fossil fuels.

So it is clear that we benefit immensely in a material way from the metals we remove from the ground. But there is more to this story than just the transformation of metals to products. Most people are not aware of origin or the obvious existence of the metals in their vehicles, metal beams in their bridges, overpasses, household appliances, wiring in their houses and work place. While in ancient times the ability to work with metals and manufactured things was extremely valued, people in modern times have become used to the benefits of refined, machined metals and manufactured products and take them for granted. To have these products people must be employed, and this is an important point. Mines are not usually in urban, developed areas. They are usually not close to large metropolitan areas. They are often “off the beaten track,” and in the U.S. are primarily in the Western states. But the people who work at mines, refine and produce the metals used in the manufacture of the products have one thing in common. They all enjoy high-paying sustainable jobs, jobs that allow them to obtain auto and home loans, purchase products and put money that multiplies its beneficial effect as it circulates through the economy. Indeed, the huge, U.S. economy was built on its domestic metal resources. From those metals, we built our railroads, ships, airplanes, engines of all sorts, and motor vehicles. And from those industries, we created millions of high-paying jobs and trained and hired workers to fill those jobs. And those workers bought things, built our strong economy and supported its continued growth. Currently, it is jobs, spending and jumpstarting the nation’s economy that President Obama is trying to create with his economic development program. As far as the world is concerned, economic growth resulted in the increased consumption of raw materials throughout the twentieth century. Between 1960 and 1995, world mineral use expanded by 2.5 times and metals use more than doubled (2.1 times). This growth outpaced the increase of the world’s population and occurred even though the world’s economy shifted to become more service oriented, and non-materials intensive manufacturing industries such as telecommunication and finance developed. Interestingly, metals use doubled even though metals became less important because of the increased use of plastics and other manufactured materials in the manufacturing industries.

To further illustrate how important the main industrialized countries are when it comes to metals use, the United States, Canada, Australia, Japan and Western Europe represent 15% of the world’s population, but consumed 61% of the world’s aluminum, 60% of the lead, 59% of the copper and 49% of the steel. Use is high on a per capita basis as well. For example, the average American uses 22 kilograms (48.4 lbs.) of aluminum per annum, while the average Indian and African use 2 kilograms (4.4 lbs.) and 1 kilogram (2.2 lbs.), respectively. And the numbers are similar for China, but China is becoming a major consumer of metals to feed the development of its transportation sector, not only for roads and railroads, but for vehicles, ships and airplanes to be sold both domestically and on the world market. It is well known, and becoming more widely understood, that China is aggressively seeking to obtain long-term supplies of the metals, oil, gas and other natural resources that will be required for it to continue its march to become a fully developed country. On a broader scale, the countries known as the “BRIC” countries, Brazil, Russia, India and China, are the countries that will be increasing their percentage consumption of the world’s metals over the coming decades. As their economies develop, they will significantly influence the future price of metals.

So where is this global increase in the consumption of metals taking us? No one has a long-term crystal ball, but in the shorter term it is obvious.

Metals prices will increase and manufactured products containing them will become more expensive. Not only will metals resources be sought out in more and more remote locations, i.e., the Arctic, Antarctica, seabed mining, central Asia and of course continued expansion into the far recesses of South America and Africa, but ways will need to be developed to ensure these metals operations will be reliable from an environmental perspective.

Besides allowing these countries to grow their economies and better the livelihood of their people, a fallout of this sprint to acquire and develop metals resources has the potential for increased greenhouse gas emissions and other environmental consequences.

Mining metals requires the use of heavy equipment, equipment that not only run on diesel, but they cannot be manufactured without using a lot of energy. And what about environmental consequences that could result from mining metals in far off places? On one hand, developing nations recognize the importance of conducting mining operations and promoting economic development in a clean, environmentally responsible manner. However, it is not always easy for developing countries to closely monitor mining and other development activities, or to enforce its environmental laws and regulations. But since most major mining operations involve at least one international mining company who knows how to conduct operations that are sound from an environmental perspective, the operation may well have obtained financing that requires compliance with the Equator Principals.

So the U.S. and all developing countries in the world must face the challenges resulting from the fact that populations and economies continue to grow, which will result in the increased consumption of metals, including Uranium for nuclear power reactors.

The challenge for a country and the world as a whole is to obtain enough metals necessary to sustain its economic growth, all the while mining the needed metals in a safe, sustainable and environmentally conscientious manner.

This is of course a lot easier said than done, but the mining industry and the world’s large financial institutions who will provide much of the funds necessary for this growth, are committed to this goal.

But because the world’s metals resources are in a sense finite, recycling will continue to become more efficient and more significant in the metals sector. In this regard, recycling is a truly substantial and vital sector of the steel industry. Having a stable metals mining industry is a fundamental requirement if the world is to regain and then maintain a strong economy. And no economy can be strong without a good source of energy to power its industries making nuclear power part of a vigorous global economic development effort. The world must be realistic and reasonable if it is to achieve this goal. People will come to realize they cannot escape their need to consume metals. So their ultimate challenge is to figure out a balance between the obvious needs of any vibrant economy for metals and energy and the goal of living in a healthy pollution-free environment.

Mark T. Nesbitt is at Nesbitt & Associates LLC, Attorneys and Counselors at Law. You can contact Mr. Nesbitt at 1580 Lincoln Street, Suite 700, Denver, Colorado 80203-1557. Phone: (303) 302-3097 Fax: (303) 302-3088 Email: mtn@nesbittlaw.net.

Harrison Western

Protecting Watersheds and Reclaiming Polluted Water

Worldwide demand for water is doubling every 21 years and the World Bank reports that 80 countries already have water shortages that threaten health and economies. Agriculture and other industries are all competing with a growing global population for limited fresh water resources.

Mining companies and oil and gas producers, in particular, are feeling the forces of tighter water supplies and tighter discharge regulations that are part of the growing watershed-management trend around the world. As a result of the growing pressures, significant progress has been made in technologies and best practices for conserving, purifying, recycling, and desalinating water in an effort to increase freshwater availability and quality.

HW Process Technologies (HWPT), for example, has been solving water pollution problems around the world for decades. The quiet giant from Colorado got into the water treatment business by helping many of the worlds largest mining companies to successfully treat mass quantities of mine water. Because of HWPT, these mining companies are able to reclaim millions of gallons of clean water, while reclaiming valuable metals and chemicals from wastewater.

HWPT also developed successful water treatment solutions for oil and gas production for both produced water and “frac” water. The custom-designed systems can improve various industrial processes that rely on fluid and chemical management.

HWPT was founded in 1988, determined to solve the environmental concerns associated with water management in the mining industry. Because mine water discharges are high-impact problems, HWPT sees responsible water management as part of their clients’ “social-license-to-operate.” The water treatment systems offered by HWPT have proven superior in performance and economy relative to traditional chemical precipitation systems.

HWPT’s powerful systems process more than 10,000 gallons of industrial-grade wastewater per minute at one installation. In the water-intensive mining industry, for example, high-volume and high-performance are critical because the potential impacts of mining on the water environment include:

Seepage of contaminated water from mine tailings and closed mine operations

De-watering of active mining operations

Recovery of valuable metals and solvents otherwise lost through wastewater discharge

HWPT has already installed numerous custom water treatment systems for mining companies, oil and gas developers, and government agencies around the world. Although the company is based in Colorado, all of its installations so far have been outside of the United States. Even though HWPTs clients are reclaiming millions of gallons of clean water every day, the systems also reclaim many thousands of dollars worth of valuable minerals and chemicals from the water treatment process. This protects the watershed and also protects the bottom line by allowing efficient and environmentally responsible operation.

As operational and environmental pressures on mining, oil, gas, and other industries continue to rise, HWPT’s proprietary EMS® water treatment systems are more important than ever. For example, one client was forced to shut down mining operations completely for several months due to water-discharge problems. HWPT’s engineers immediately installed one of its high-performance systems to replace a competitor’s failed reverse osmosis membrane system and the mine was producing again. Elsewhere in the world, a large mining company credits HWPT for tripling gold production by increasing the mine’s water treatment capability. That system is generating millions of dollars of returns by producing usable water, and capturing valuable metals and chemicals.

Although the company is continuously improving its systems and expanding their applications, one of HWPT’s first, large mining installations showed an immediate payback. When commissioned, the challenges that HWPT confronted at this open pit copper mine in Mexico included:

Dewatering the pit and reducing the volume of acid leach solution;

Increasing copper concentration in the leach solution for enhanced recovery;

Reducing acid costs by recovering acid and avoiding the cost of neutralization with lime; and

Recovering large volumes of clean water for mine use.

The breakthrough system recovered 2.5 million gallons of clean water and 28,000 pounds of copper each day. The system increased copper production 14 percent by recovering copper otherwise lost in the mine wastewater. With current copper prices and water prices factored in, the company realized a 200 percent return on its total investment each day. Capital investment in the EMS® system was recovered in 1.7 years. Some of HWPT’s clients have recovered their investment in just four months.

Specific water quality problems in mining that are addressed by HWPT systems include salinity and acidification. The mining process exposes heavy metals and sulfur compounds that were previously locked away in the earth. Rainwater leaches these compounds out of the exposed earth, resulting in acid mine drainage (AMD) and heavy metal pollution that can continue long after the mining operations have ceased. Similarly, rainwater on piles of mining waste (tailings) can transfer pollution to freshwater supplies. Plus, huge pools of mining waste are often stored in containment ponds. If a dam leaks or bursts, entire watersheds can be contaminated.

Industry, labor, government, and environmentalists agree AMD is the number one environmental problem facing the mining industry.

It is a common problem in all countries where mining started prior to environmental legislation. Many mines are reaching the end of their productive life and as a result, dewatering is terminated and re-watering results in the decant (overflow) of AMD. In addition, tailings dams and waste rock dumps are surface sources of AMD.

AMD devastates fish and aquatic habitat, is difficult to reverse with existing technology, and once started, costs millions of dollars annually to treat

(continuing for centuries). The Iron Mountain mine in California, for example, has been closed since 1963 but continues to drain sulfuric acid and heavy metals into the Sacramento River. The mine’s effluent streams are void of life and have a pH range of 0.2 to 1.5. The Equity Silver mine north of Vancouver, British Columbia will require treatment for AMD for at least 500 years.

Many benefits result from AMD neutralization and precipitation. For mining operations in positive water-balance environments, where site discharges are required, the treatment system can reduce mercury, arsenic, thallium, selenium, antimony and molybdenum in water to the double-digit parts-per-billion level or less.

HWPT’s patented technology utilizes composite thin-film membranes with pore sizes different than the reverse osmosis membranes commonly used for seawater desalination. The pore size, membrane material, and operating conditions are all specifically engineered by HWPT to allow operation at lower pressures, maximizing the recovery of contaminants.

The feed stream is separated into a permeate solution and a concentrated solution. The permeate passes through the membrane, while the concentrate is held back with the thicker dissolved solids, organics and bacteria. A series of membranes can continue screening the permeate solution to remove various elements in a sequence that captures the smallest particles and chemicals last before releasing clean water.

EMS® systems can be designed to selectively screen ions such as aluminum, calcium, chloride, copper, gold, iron, magnesium, nickel, selenium, uranium, zinc, not to mention chemicals used in oil and gas exploration and production. The robust systems can be designed to reject sulfate, silica, organics, colloids and other contaminants as well.

For coal bed methane, the EMS® system can be used for the production of surface discharge-quality water under the most stringent environmental guidelines. In the oil and gas fields, the contaminated waters produced can be treated to recover potable water. As these wells age and become depleted, they typically produce more water.

HWPT is driven to succeed where other water treatment companies fail. After proving its technology in the toughest mining waters, the company is confident that its custom systems can clean up any water anywhere in the world.

HWPT already has a strong international presence, but countries such as China, India, and those throughout Southeast Asia, South America, and Africa present a number of opportunities to help numerous stakeholders. For example, HWPT systems can clean toxic waters from mines that are currently operating, and mines that are considered exhausted, but still discharging toxic waters. With proper treatment, these polluted mine waters can be cleaned up and safely used again.

Plus, industrial process waters around the world – previously considered too polluted to clean – can be treated and used for other purposes, while the reclaimed chemicals can be reused in the industrial process. Many countries also have highly polluted lakes due to policies that once allowed pollution in discharged waters. Now these countries must remove these pollutants to reclaim local water supplies and entire ecosystems.

International partners and suppliers will play a critical role as HWPT expands its network around the world. Emerging global alliances will help the company manufacture equipment and materials to exacting specifications at a lower cost. In fact, HWPT is exploring opportunities with two Chinese research institutes to keep its products on the cutting edge of treatment technology in industrial applications. HWPT has had a strong research relationship with the world-renowned Colorado School of Mines in Golden, Colorado for many years. These global alliances and others will help HWPT reclaim many millions of additional gallons of water around the world.

For more information about HW Process Technologies, visit www.harwest.com or call 1-800-638-8793.

Mining Asteroids for Fun and Profit

An intriguing new industry is taking shape - Asteroid Mining.   If you've seen the movie Avatar, you have already been introduced to the concept of mining in space.  Such an idea would seem to be a mere figment of science fiction.  Today, however, the concept is being treated with more respect by scientists and investors.

"It is a strategic interest of humanity to be able to go to space,"  says Eric Anderson, co-founder of Planetary Resources.  Last April, the company announced their plans to mine near-earth asteroids (NEAs) for materials ranging from water to precious metals. A single, small asteroid could contain more platinum than has ever been mined in the history on Earth.  As Dr. Peter Diamandis would say, scarcity is contextual.

In a sort of validation of Planetary Resources' venture, a new company is announcing today plans to create “the world’s first fleet of commercial asteroid-prospecting spacecraft”.  Deep Space Industries, Inc live streamed their press release, where they showed this video:

[youtube width="560" height="315" video_id="pIY_fmvFDhM"] 

Earlier this week, Planetary Resources released this tech update:

[youtube width="560" height="315" video_id="2xkM80kdXkg"]