An economic framework for producing critical minerals as joint products

Mahelet Fikru () and Kwame Awuah-Offei

Resources Policy, 2022, vol. 77, issue C

Abstract: The topic of economics of critical minerals production has received little attention in the economics literature. This study presents a two-stage optimization model to frame the economics of critical minerals. In the first-stage, firms minimize cost to choose input levels, including the extraction of a common ore to produce a critical mineral with or after the production of a main mineral. We examine the impact of geological, cost, and technology parameters on the level of input use and the decision to further process for critical minerals. We characterize the marginal cost of producing critical minerals, which is used in the second stage to determine production decisions. Results suggest that (1) production of critical minerals could be expanded by investing in technically efficient technologies and technologies with increasing returns to scale, (2) prescriptive mandates requiring firms to process a given percentage of geological input to recover critical minerals would have unintended consequences such as increasing the marginal cost of producing main minerals, and (3) the supply elasticity of critical minerals depends on returns to scale of production.

Keywords: Ore; Returns to scale; Geological input; Mineral recovery; Mineral policy; USGS; Rare earth elements (search for similar items in EconPapers)
JEL-codes: D2 Q3 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jrpoli:v:77:y:2022:i:c:s030142072200201x

DOI: 10.1016/j.resourpol.2022.102753

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