Reserves, stocks and depletion

By the end you will be able to

• Classify a deposit in the McKelvey box and explain why reserves are an economic category that grows with prices, technology and exploration.
• Calculate static and growth-adjusted reserve life for a tile and explain why both mislead, including the effects of concentration, reporting rules and joint production.
• Contrast the fixed-stock and opportunity-cost paradigms and use the Hotelling rule and the cumulative availability curve to assess a depletion claim.
• Distinguish new from old scrap and end-of-life recycling rates from recycled content, and show with numbers why growth in in-use stocks caps recycling's share.
• Explain how commercial, exchange and government inventories shape forward curves and supply security.
• Compute and interpret stocks-to-use ratios from WASDE data, including the effect of China's stocks, and relate them to the 2007-08 and 2010-11 food price spikes.

Contents

1. Part 1 What a reserves figure measures

   Every mineral tile quotes a reserves figure, and most readers take it as the amount left in the ground. It is something narrower. This part explains how deposits are classified, why reserves behave like an inventory that companies choose how far to fill, and why national figures follow different rules.

   • Reserves sit in one corner of a two-way classification
   • Reserves are a working inventory, so they grow while being mined
   • National reserve figures are built on different rules
2. Part 2 Reserve life and why it misleads

   The number most often derived from reserves is reserve life: reserves divided by a year's production. It reads like a countdown. This part works the arithmetic for four tiles, shows how growth, concentration and joint production change the picture, and uses oil to show how reserve figures are revised and sometimes declared for reasons unrelated to geology.

   • Static reserve life on four tiles, and how it has moved
   • Growth, concentration and joint production change the picture
   • Oil shows how reserve figures are revised and declared
3. Part 3 Depletion: fixed stock or rising cost

   If reserves are not a countdown, how should we think about running out? Tilton's answer is to change the question from how much is left to what the next tonne costs. This part sets out the two paradigms, the Hotelling rule, the cumulative availability curve, and the public argument from The Limits to Growth to the Simon-Ehrlich bet.

   • Two ways to frame depletion: a fixed stock or an opportunity cost
   • The Hotelling rule prices a finite stock, but its assumptions fail
   • The cumulative availability curve turns depletion into a race
   • From The Limits to Growth to the Simon-Ehrlich bet
4. Part 4 The stock above ground: materials in use and recycling

   Mining moves material from one stock to another. Most metal that is dug up is not destroyed; it sits in buildings, cables, vehicles and machines for years or decades before it becomes scrap. This part measures that stock, separates the kinds of scrap and two easily confused recycling rates, and shows why recycling cannot meet most demand while the stock grows. Steel is the worked case.

   • Society's material stock rose 23-fold in a century
   • New scrap, old scrap, and two recycling rates
   • Steel is the most recycled material and still mostly new
   • While stocks grow, recycling cannot close the loop
5. Part 5 Inventories: the buffers between harvest, mine and market

   Reserves and in-use stocks change over decades. Inventories, the metal in warehouses, oil in tanks and grain in silos, change every week, and they link today's price to next year's. This part explains how commercial and exchange stocks shape the forward curve, why government stockpiles are hard to run, and how the stocks-to-use ratio governs grain prices, with the 2007-08 and 2010-11 food price spikes as cases.

   • Commercial and exchange stocks set the shape of the forward curve
   • Government stockpiles are cheap insurance that is hard to manage
   • Crop stocks: the stocks-to-use ratio and where the grain sits
   • Thin stocks turned modest shocks into the food price spikes
6. Wrap-up Key terms, try it in the table, final quiz, sources