Applied mineral economics: an analysis on depletion, taxation and exploration

Abstract

This dissertation focuses on the empirical analysis of mineral economics and policy. The economic analysis and discussion around minerals mostly rely on theoretical models and normative principles. Empirical evidence is not as abundant as theoretical models, creating a gap in the discipline. This study contributes to the literature of mineral economics in three different areas that are relevant to support a data-driven policy debate - mineral depletion, taxation and the exploration of new deposits. First, mineral depletion broadly involves two diverging positions. These positions are reconciled through a methodology to assess future availability, which is applied to copper resources. Second, the expected impact of mineral royalties on exploration decisions has been addressed in theoretical models. However, an analysis of the impact of the Chilean profit-based royalties on early-stage mineral exploration indicates that the tax changes did not greatly affect average exploration decisions. Smaller companies, though, are more susceptible than major companies to changes in mineral taxation. Third, understanding what drives mineral discoveries is a major issue for future resource availability. The analysis on copper and gold discoveries indicates that increasing grassroots exploration budgets do not appear to be associated with more discoveries. Nevertheless, institutions do play a role in discoveries as more and larger discoveries are more likely to occur in countries with stronger protection of property rights.