Simulating Economics for Mining and Shipping Projects using Transaction Cost Economics

Peter Bell

MPRA Paper from University Library of Munich, Germany

Abstract: This article analyzes shipping infrastructure around mining projects using empirical examples, a toy model of a hypothetical mine and port, and transaction cost economics. This article presents examples of two mining operations on Vancouver Island, called the Myra Falls Mine and the Orca Quarry. These two mines both have integrated shipping facilities, and the article uses transaction cost economics to analyze why these mines built their own ports. The article also builds a toy model of mining, processing, and shipping based on a bottom-up approach. The article presents different designs for the mine and compares them based on things like profitability, total GDP impact, and reliability of supply. One way to design the hypothetical mining and shipping project is to start with an assumption on the shipping capacity and then reverse-engineer the amount of mining required to use this port capacity. Another way to design it starts with an assumption about the mineral deposit and then infers the shipping capacity required to transport the mineral concentrates to market. The article shows how to compare the designs according to different goals. For example, one goal is to maximize the profit of the mine from the perspective of a private company. Another goal is to maximize the total GDP impact from the mine and port from the perspective of the Canadian government. A third goal is to ensure reliable, domestic production of critical minerals at any cost from the perspective of the military. The article presents an example of a hypothetical mining project with breakeven economics that would nonetheless generate large, positive economic impacts.

Keywords: Mining; Shipping; Critical Minerals; Infrastructure; Transaction Cost Economics (search for similar items in EconPapers)
JEL-codes: B5 B52 D3 D7 D79 E6 E65 F2 F5 F53 G3 G38 H1 H2 H25 H5 K0 K2 K23 K3 L3 L32 L5 L51 L6 L61 L7 L72 N5 O1 O13 O2 P0 P1 Q3 Q32 Q33 (search for similar items in EconPapers)
Date: 2026-01-21
New Economics Papers: this item is included in nep-ppm and nep-tre
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