| The mineral supply process comprises three sequential phases: exploration, development, and production. The economic theory of mineral supply focuses on the economic production phase and, to a lesser extent, the development phase of this process. Since mineral deposits have to be found and delineated before they can be developed and mined, integrating the exploration phase into the mineral supply process is critical to the formulation of a cohesive long-term theory of mineral supply.;The objective of this thesis is to formulate and empirically test the relationship which exists between the cost of discovering mineral deposits (in the exploration phase) and the economic rent generated by those discoveries (in the development and production phases). The hypothesis is advanced that, in the long term, economic rent from the development and production of economic mineral deposits, tends to be balanced by the cost of finding and delineating those deposits. This implies zero long-term rent at the industry level.;Empirical assessments are made on the basis of more than 600 deposits and US;While the empirical results are not conclusive, there is compelling evidence that, for anticipated future conditions, medium-term differential rents and long-term discovery costs tend to balance. In other words, evidence supports the hypothesis of zero long-term rent at the industry level.;The tendency to long-term zero rent at the industry-wide level has important implications for both strategic corporate planning and government policy formulation. From the corporate viewpoint, zero long-term rent implies a breakeven average experience for all companies. Thus, an essential message is that survival and growth depend on performing better than average in the long term. From the government viewpoint, the long-term breakeven finding indicates more than adequate levels of exploration expenditure. Therefore, policies that tend to encourage exploration for its own sake are counterproductive. Rather, the emphasis should be on improving the efficiency and effectiveness of exploration, particularly through R&D. (Abstract shortened by UMI.). |
