Resources Policy 36 (2011) 285292

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Resources Policy
journal homepage: www.elsevier.com/locate/resourpol

Optimization of mining by application of the equality principle

Jan Stenis n, William Hogland
School of Natural Sciences, Linnaeus University, SE-391 82 Kalmar, Sweden

a r t i c l e i n f o

abstract

Article history:
Received 15 December 2010
Received in revised form
1 May 2011
Accepted 17 May 2011
Available online 23 July 2011

This paper shows how the equality principle can be applied to traditional mining activities as a
theoretical economic basis for environmentally friendly waste management of natural resources. A
cost structure is proposed to generally improve the exploitation of the natural resources and save
energy due to the promotion of corporate economic incentives to a more cost-effective waste
management related to these resources. The methodology proposed is based on the cost-benet
analysis concept. It employs the previously introduced equality principle and the model for Efcient Use
of Resources for Optimal Production Economy (EUROPE) featuring shadow prices so as to optimize the
mining slope and the ore-concentration when utilizing the resources of the rock and provide
management with a one digit indicator of the performance of a certain mining activity to get in just
once glance an instant comprehension of their mines overall performance. This approach simultaneously improves the protability, the technology used and the environment. A case study presents the
practical application of the proposed theory on a Swedish copper mine. It is concluded that the
presented methodology improves the exploitation of natural resources in mainly technological,
economical and environmental terms. The methods that are developed are regarded as being suitable
information support tools for decision-making in waste management and optimization of the
exploitation of natural resources in the corporate and public context.
& 2011 Elsevier Ltd. All rights reserved.

JEL classication:
L72
Keywords:
Mining
Optimization
The equality principle
The EUROPE model

Introduction
Mining activities and the exploitation of non-renewable resources
date back as far as to the Stone age. For millennia, this consumption
has made the lives of people more comfortable and secure.
Since 2002, real prices of minerals have more than doubled.
Since 1950, global output of minerals on an average had increased
vefold until 2000. Until 2007, production of precious metals
grew by 17%, in the case of mass consumables by 33% percent and
by 46% in the case of doping agents. The global demand for scarce
mineral will rise due to the continued industrialization of the
developing world. According to the OECD, global demand for
minerals will double over the next 25 years. Emerging economies
are expected to consume a growing share of global mineral
output (The Hague Center for Strategic Studies, 2010).
Today the world produces and consumes most mineral commodities at record rates. This explosive development is a result of
(i) technological advances; (ii) new and better mineral commodities serve a range of needs; (iii) rapidly rising living standards
globally increase demands and (iv) world population increase, the
only force of these four showing any sign of abating.
Non-renewable resources are indeed important. Without
them, modern civilization would not exist. Humanity would be

Corresponding author. Tel.: 46 480 446 721; fax: 46 480 447 305.
E-mail addresses: jan.stenis@lnu.se, jan@stenis.info (J. Stenis).

0301-4207/$ - see front matter & 2011 Elsevier Ltd. All rights reserved.
doi:10.1016/j.resourpol.2011.05.004

left to survive using stones and rocks as non-organic renewable

resources.
The mineral commodities in the earths crust are estimated to
last for millions of years, and some for billions of years. Also, the
cost of production for resources in general, and particularly for
non-renewable mineral resources, has fallen since the late 1800s
(Tilton, 2003).
Human creativity, for example as regards the development of
new technologies, has the potential to ameliorate the increased
resource scarcity that is expected to result from exponential
growth. Historical evidence indicates that human expansion into
previously unexploited lands supported by rapid technological
progress have enabled adequate supplies of, for example, food,
forest and mineral products even though population and economic output have increased substantially (Simpson et al., 2005).
Nevertheless, a general view among the public is that rising
environmental and other social costs may halter the production
and use of mineral commodities. Thus, governments are believed
to impose, for example, restricting regulations. This does not have
to happen if the external costs are internalized and if the required
technology can be generated so as to prevent the rising mineral
commodity costs.
Problems exist to internalize these costs because acceptable
techniques to measure the true value of environment still is to be
developed and, secondly, the responsibility for the required
payments for the used social assets still is under debate. Also,
over the decades to follow, ever more of unexploited resources

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J. Stenis, W. Hogland / Resources Policy 36 (2011) 285292

are expected to become ever more difcult to nd and more

costly to mine due to them being deposited deep beneath covering rock, ice-sheets or sediments.
Thus, regardless of the existing statistics for the long-run
availability of mineral commodities, mankind simply do not know
with absolute certainty if there will be a shortage of mineral
commodities in the future (Tilton, 2003). In this context, exploration of outer space seems to be a promising possibility. Mankind
is far from understanding the exact function of ecosystems and
the interdependence of their many different elements makes it
difcult to design simple remedies (Simpson et al., 2005).
Thereby, the present focus commonly lays in the limitation of
our planetary border. However, the focus is shifting to encompass
the whole planetary system and many scientists, including prior
critics, now recognize that the Earth does behave like a selfregulating system in which life and its material environment are
massively interconnected (Lovelock, 2000).
Thereby, the main question is how much faith, or lack of faith,
one can have in technology. Thus, the debate concerning the
scope of mankinds activities and its environmental impact
continues (Tilton, 2003). All-in-all, there exists a need for optimizing the production and use of natural resource commodities.
Therefore, the objective of this study is to improve the
exploitation of the natural and energy resources in general by
optimizing the economy of the waste management of these
resources in particular. Thereby, the mining slope and the oreconcentration are the main parameters of the study. In doing so,
the cost-benet analysis (CBA) (European Commission, 1996) and
the contribution margin analysis (CMA) methodologies are primarily employed and further elaborated upon, for example, in the
discussion that follows. The main distinctive characteristics of
CBA underline its necessity and sufciency for application to the
eld of waste management (Moutavtchi et al., 2010). The proposed methodology is studied with the intention to enable its
application to any industrial company that processes raw material stemming from natural resources or to landll mining
projects (Hogland, 2002).
In particular, the study provides a exible tool for internal,
economic control within the company this being an alternative to
external, environmental taxes as instruments of, for example,
environmental improvement. In practice, management is free to
allocate, for example, extra nancial burdens on important substances or fractions such as certain waste rock fractions. By doing
so, corporate management may contribute to the conservation of
the environment as well. There are numerous examples in the
literature of how a preventive environmental protection strategy
within an industry can result in substantial savings (Lidgren,
1993). Thus, implementation of the ndings in this study may, for
example, result in cost-effective means and measures that
improve both prots and the environment.
In practice, the nancial manager is supposed to budget
activities that give balance between the economic and environmental prole of the company in question. In doing so, the
EUROPE model that is based on the equality principle is intended
to be integrated into the budgetary process in order to maintain
the corporate protability. Also the board of the companies
should use the EUROPE model as a common tool in their decision
process and learn to interpret the different results stemming from
frequent usage of the model.

such a scheme, also in a brief historical perspective, highlights

economic aspects. Thereafter, particularities of resource economics
in the light of an exploration of cost structures for management of
residual products are reviewed. The previously introduced equality
principle and the EUROPE model (Stenis, 2002, 2005) are applied in
this context. Guidelines are presented for how to apply the
methodology introduced for improving the cost effectiveness of
resource economy as regards waste management. The case study
that follows concerns is a Swedish copper mine. Finally, the results
are discussed and the importance of the research conducted here is
analyzed. Also, conclusions and benets are summarized and a
recommendation is given. Suggestions of further research are
presented. The scientic methodology chosen here combines the
study of (a) what should be changed and how through, for
example, case studies, and (b) the development of theories and
models based on the build-up of knowledge. Both qualitative and
quantitative methodology is applied as, for example, both interviews and neutral numerical data are applied in the case study.
The validity of the methods developed here is promoted by the
application of commonly accepted traditional economic theory
based on research results from classical mainstream theory and
long experience of its practical usage. The reliability is ensured
using relevant scientic literature. Also, a relevant case study
shows the practical value of the research conducted here and
hence reinforces the reliability of the obtained results. The study
is delimited to non-renewable resources, which are exploited
within the system-limit of traditional mines.

Mining technology
The ore body may lay tilted some hundred meters down under
the surface covered with rock. In order to reach the ore body,
waste rock mining is applied. Generally, if the stripping ratio
exceeds one-tenth, open-pit mining takes place, else underground
mining is applied disregarding, for example, the physical, geological and mineralogical properties of the deposit, technological
requirements, land-use and legal restrictions and the like. In the
case of copper, globally 23 units of waste rock must be
excavated in order to obtain one tonne of copper ore. This ratio
represents a global average (Mr. Ulf Marklund, Boliden Plc.,
personal communication). The blasted and excavated material is
grinded in order to reduce the sterile rock waste through otation.
Thereby, additives are used to facilitate extraction of minerals of
commercial interest. The end product of the mine, the concentrate,
is sent to the smelters to remove impurities from the mineral and to
extract the metals in question that are to be sold in the world
market via metal exchanges.
Two of the most important factors that inuence the protability of the mine are as follows:

 The slope angle when performing waste rock mining; the more


Methodology
In this paper, a general cost structure is proposed for generally
optimizing the exploitation of natural resources. An introduction,
touching upon difculties in resource economics when implementing

the deviation is from the vertical plane, the more rock has to
be excavated and the costlier the mining will be. Thus, a
steeper mining slope means a reduced excavation cost. Application of the EUROPE model hence induces economic incentives to gure out innovative methods to excavate in a steeper
angle, which in turn will increase prots due to less dead rock
needed to excavate in order to reach the ore body.
The concentration of ore in the blasted and excavated rock; the
less the ore-concentration can be in the material that is
grinded and still be of commercial interest, the more protable
the mining will be. Thus, if the mining company in question
can make prots out of mining ore with ever more less
concentration, the larger the part of the rock in question will
be that can contribute to increased corporate prots. This

J. Stenis, W. Hogland / Resources Policy 36 (2011) 285292

means that fractions that today are not protable may be so by

time when the mining technology is improved later on.
In practice, the mining production process starts with in-situ
exploration by the geologists who might dene where a mine
should be located to optimize the production of ore. An attractive
prospect make investors provide the necessary nancing to start
the production based on the calculations by the engineers.
The economists then tell the CEO, which excavation-option is
most protable. When the mine is in full operation it is time
to apply the equality principle to cut costs and increase prots
by optimizing the extraction of the commercial fractions only
since the less waste produced, the more of the excavated material
can be turned into products that can be protably sold in the
market.
In this context, the EUROPE model can, for example, be used to
optimize ongoing production at maximal capacity. This is due to
the feature of the model to both optimize and monitor a production process. Thus, the relevant factor in this context is the feature
of the novel equality principle to impose economic incentives to
improve both the technology and the nature and also enable its
monitoring and evaluation by studying a one digit gure in the
form of a suitable shadow cost.
However, rst of all the relevant internal economic estimations (calculations and budgets and so forth) of short-term
character must be made, such as those for product costs. Thus,
the existence of the waste fraction in question affects the
estimation of the desired operating income. And this gives
management economic incentives to take action to further, for
example, source reduction that promotes the environment as well
as the cost efciency of the input usage and hence the long-run
protability.
Within Europe, the most important regulation systems for the
mining industry to comply with currently are the directive on the
management of waste from extractive industries (the mining
waste directive) (European Parliament and the Council, 2006a)
and the regulation concerning the Registration, Evaluation,
Authorization and Restriction of Chemicals (REACH) (European
Parliament and the Council, 2006b), (Mr. Ulf Marklund, Boliden
Plc., personal communication). Other documents for the European
mining industry to consider are, for example, the waste framework directive (European Parliament and the Council, 2008) and
the raw material initiative for a resource-efcient Europe
(European Commission and the Council, 2008) plus the Flagship
initiative under the Europe 2020 strategy (European Commission,
2011).
The two former documents emphasize the control and reduction of dangerous substances as well as the promotion of the best
available production technique and ensure a high level of human
health and environmental protection in the approximation of
legislation on substances, with the goal of achieving sustainable
development, respectively. The three latter documents dene key
concepts such as waste, recovery and disposal and put in place
the essential requirements for the management of waste. They
also focus on non-energy minerals, the underlying analysis and
the proposed measures, in particular with regard to trade distortions of third countries and, nally, highlights the intensive use of
the worlds resources that puts pressure on our planet and
threatens the security of supply seeing the continuation of our
current patterns of resource use as not an option to secure growth
and jobs for Europe, respectively.
The present work supports these ambitions in that it enables
better control of not wanted substances that promotes a more
sustainable development and improves waste management,
also in a third country perspective due to the intended, globally
harmonized use of the equality principle. Finally, the presented

287

methodology increases the resource efciency when performing

mining activities and otherwise. All this is accomplished
through the wanted application of ctive shadow costs that, if
implemented in reality, give rise to economic incentives to
promote both the environment and the corporate protability
as well.

The general cost structure

It is necessary to regard the issue of waste management from a
new perspective. If not, the shift to an environmentally sound
industry may be slowed down. A shift in paradigm has been
introduced that proclaims the equalization of industrial waste
with normal products as regards the allocation of occurring costs
and revenues, This approach is termed as the equality principle
(Stenis, 2002) and makes up the basis for the forthcoming
discussion. Eq. (1) below considers in mathematical terms the
view of the waste fractions studied as a company output. The
equation is intended to be used to allocate costs and revenues to
certain waste fractions of interest through multiplication of the so
called proportionality factor (PF) by the costs or revenues in
question. Thus, they are to be allocated to the residuals by
logically splitting them up in relation to their parts of the whole,
i.e. their proportion of the whole body of costs and revenues,
respectively.
PF quantity Aquantity =Bquantity Cquantity

where PFquantity is the proportionality factor for a certain residual

quantity; Aquantity is the quantity of a certain waste fraction
produced; Bquantity is the quantity of normal product output and
Cquantity is the sum of the quantities of all the different waste
fractions produced within a relevant and adequate systems limit.
Note: normal product output refers to the mean value of the
regular production per time unit.
This procedure results in so called shadow prices, or shadow
costs, that induce substantial nancial incentives to reduce the
unwanted waste fractions if considered as real money to be taken
into account. The novel approach hence comprises, for example,
additional but ctive (shadow) costs that can be used for both
creating, optimizing, nancial incentives and also provide an
instant ash light overview of the performance of the mine in
question in terms of the efciency of the technology used, the
development of the protability and the environmental friendliness of the current mine expressed as a shadow cost that changes
by time and hence preferably can be studied as an overall
performance indicator.
The allocation of these shadow costs hence lead to the unprotable production of residual products being economically punished. Thus, the companys forecasts, company budgets
consolidated prot and loss accounts for external use that
companies present, etc. will hence mostly be negatively affected
and hence also hamper the excessive occurrence of waste and the
failure to utilize it productively (Stenis, 2005).
The implicit values of market-phenomena, or the shadow
prices, represent their relative values, like regular prices.
In general terms, by denition a shadow price represents the true
marginal value of a product or the opportunity cost of a resource,
both of which may differ from the market price. The idea of
using a shadow price here is that if rms were actually charged
the shadow price associated with pollution of some type, in reality
they would take this into account. Such a nancial burden
would result in a pressure to meet the desired environmental
standard for nancial reasons (Stenis, 2005). These ctive shadow
costs that hence do not really exist are only internal and totally

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J. Stenis, W. Hogland / Resources Policy 36 (2011) 285292

controlled by the companys management without comprising

any external, scal burden at all. The theoretical principles of
measuring nonmarket prices are well understood in economics
even though the practical difculties are profound. Shadow prices
could indeed, in principle, be derived when solving an economic
model for optimal growth of the present value (Simpson et al.,
2005).
As a result, due to economic concerns the production apparatus in question will become more efcient. Both its utilization of
the purchased material and the energy input will be improved for
corporate internal cost-saving reasons. Also, the efciency of the
operation of the production process will be enhanced and also the
input resources will hence be utilized more efciently. Consequently, the economy as well as the environment will gain from
less residual products produced.
The application of Eq. (1) requires the denition of a suitable
production or administrative unit as the suitable system-limit.
Eq. (1) expresses the economic implications of the equality
principle and is denoted as the model for Efcient Use of Resources
for Optimal Production Economy (EUROPE) (Stenis, 2005).
The underlying main concept of using the EUROPE model is
not to primarily view industrial waste as a resource, but to punish
its very existence by internal economic means so to achieve a
maximal reduction at the source of the occurring waste that
preferably seize to exist or at least is minimized. Here, the
EUROPE model is applied after adaption to the most commonly
used methods for economic estimation.
Applied on a mine, Eq. (1) is generally transformed as follows:
PF mining Amining =Bmining Cmining

Eqs. (2) and (3) applied on the main factors that inuence the
protability of the mining activity in question, in this case the
mining slope, gives
Stot slope SSj yj S PF j  TC=unit  yj
S Aj = B C  TC=unit  yj 

where Stot slope is the total shadow cost of the n waste rock mining
slopes; Sj is the shadow cost per unit of the waste rock mined with
angle j; PFj is the proportionality factor for mining with angle j; TC
is the total cost for the production within the relevant and
adequate systems limit; Aj is the cost reduction of mining with
one degree steeper angle (j); B is the monetary value of all the ore
output at all the different mining slopes; C is the monetary value
of eliminating mining with all the different, remaining slopes; yj is
the amount of tonnes or liters of the waste rock fraction mined
with angle j; yj Z0, j 0, 1, 2, y, n.
The more the current slope deviates from the vertical plane,
the more rock has to be excavated to reach the ore body and the
more of total shadow costs are allocated to the fractions mined at
higher angles. Thus, development of commercially practicable
methods for waste rock mining with a less slope is promoted due
to this reducing the total amount of shadow costs allocated to the
waste rock fractions mined at steeper slopes, in relative terms.
Eq. (4) applied on the main factors that inuence the protability of the mining activity in question, in this case the
concentration of the ore, gives
Stot concentration SSj zj SPF j  TC=unit  zj
SAj =B C  TC=unit  zj 

where PFmining is the proportionality factor for a certain residual

quantity when mining; Amining the monetary value of the rock
waste produced when mining; Bmining is the monetary value of
the regular mineral product output when mining; and Cmining is
the monetary value of all the different waste fractions produced
when mining within a relevant and adequate systems limit.
Then, the PF is multiplied with the costs or revenues in
question in order to additionally allocate costs and revenues to
certain waste fractions of interest. The adding principle is necessary to obtain a net punishment of the companies poor
performance. Otherwise, the EUROPE model would mean just a
relocation of costs and revenues and no net-increased costs would
occur. No substantial overall economic incentive to improve the
business in this sense would hence exist.
Information about the relative size of the studied schemes
costs can be useful for facilitating decision-making. Therefore, to
provide an indicator based on generally applicable statistical facts
for the shadow costs applied, the authors suggest that Eq. (3) can
express the size and extent of the total amount of shadow costs
employed at the current mine.
In general, in case of n waste fractions, for example, copper and
iron ore together, the total shadow cost can be calculated as
follows:
Stot n waste fractions SSj xj

where Stot n waste fractions is the total shadow cost of the n waste
fractions; Sj is the shadow cost per unit of waste fraction j
calculated using Eq. (2); xj is the amount of tonnes, liters, Euros,
etc. of waste fraction j; xj Z0, j1, 2, 3, y, n.
Stot n waste fractions or the total amount of the company-internal
punishment taxes, expresses the level of ambition as regards
how many fractions that shadow costs are allocated to at the same
time in order to stimulate the simultaneous reduction of several
not wanted residuals.

where Stot concentration is the total shadow cost of the n rock mining
fractions with different ore-concentrations, Sj is the shadow cost
per unit of the rock fraction mined with concentration j; PFj is the
proportionality factor for the rock fraction mined with concentration j; TC is the total cost for the production within the relevant
and adequate systems limit, Aj the monetary value of the rock
block mined with concentration j; B is the monetary value of all
the ore output with different concentrations; C is the monetary
value of all the waste rock produced with different concentrations; zj is the amount of tonnes or Euros of the rock fraction
mined with concentration j; zj Z0, j 0, 1, 2,y,n.
The higher the concentration of the ore in the blasted and
excavated rock that is of commercial interest, the more the total
shadow cost is allocated to the rock blocks with higher concentrations of ore and the economic incentive increases to grind more of
the low-concentration ore that still is of commercial interest.
Thus, the development of commercially viable technological
methods for excavation of rock with a lower concentration of
ore is promoted due to this reducing the total amount of shadow
costs allocated to the rock blocks mined at different concentrations. The proposed methodology hence promotes mining of ore
with less concentration than currently but with an acceptable
prot level due to the strong economic incentives to develop
methods to exploit ore with less concentration that the implementation of the EUROPE model induces. Thus, the economic
incentives will by time make those fractions protable that are
not so today.
This approach can be combined with the employment of
punishing or rewarding weights applied on certain fractions,
mining slopes and/or concentrations according to, for example,
the preferences of the management or the current authority
directives. Thus, the existence of the not wanted waste fractions
may be even more internally punished and hence the production
even better optimized.

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289

Case study: A Swedish copper mine

Eq. (4) applied on the mining slope, gives:

The company

j1, 2, 3 4Stot slope 3  [(Mh2/(Mh200 3  Mh2))  h5 

20,000,000 tonnes]Mh2.91 h0.049/tonne of waste rock
mined with angle j 2.9% of TC
j1, 2 4Stot slope Mh1.96 h0.049/tonne of waste rock
mined with angle j 1.9% of TC
j1 4Stot slope Mh0.99h0.050/tonne of waste rock mined
with angle j 1.0% of TC

The case study presented here deals with a major Swedish

mining company that manufactures copper in Northern Sweden.
To a large extent, this is done through mining of copper ore giving
rise to the by-product waste rock being the primary object of
study here. The current case study is a simplied example based
on real world data to show the general applicability of the
proposed method.

Eq. (5) applied on the concentration of the ore, gives:

Application of the methods considered
In the process of collecting data, the mining manager of the
company in question was interviewed. Thereby, relevant economic information and production statistics concerning the
copper mine was obtained.
Analysis of the data was conned to timeless production.
This means that the input and the output pertain to the same time
period, in this case the year 2009.
The numerical values used are approximated. An approximated exchange rate of h110 Swedish crowns (SEK) was
assumed throughout. Rounded gures that still are realistic are
used to show the general usefulness of the approach suggested
here. Depreciation is assumed to be applied over the whole
operational lifetime of the equipment used.
Here, the raw material consists of excavated material to be
transformed to the product, in this case the ore. Finally, the ore is
turned into pure metal to make up different end-products.
The thrust to make the production more cost-effective, specically by applying the EUROPE model, is primarily directed
towards the method of blasting and the procedure for separating
the commercially interesting fractions from the non-protable
waste. Also, the implementation of the EUROPE model might
inuence the management of the conveyor belt system and the
loading of the ore on trucks and cargoes.
However, the very technical method per se is not important
but rather the existence of economic incentives to make improvements to increase the rms competitiveness. And the EUROPE
model, based on the equality principle, provides these incentives
when implemented.
The industrial ambition of the authors with this work is
to conduct a prefeasibility study and then perform a pilot
project based on the current ndings. The next step will be a
prototype and, nally, to apply the ndings in full scale
operation.
The following basic data are common for the application of
Eqs. (4) and (5):
Current mining angle31, wanted angle 01 (theoretical
example just to show the principle)
Output 20,000,000 tonnes of mined ore
TC Mh100h5/tonne mined ore TC/unit
Aj slope Mh2h0.1/tonne of mined ore (Mh2/20,000,000
tonnes of mined ore)
Aj concentration Mh0.2 h0.01/tonne of mined ore (Mh0.2/
20,000,000 tonnes of mined ore)
B Mh200 ((h10/tonne of mined ore)  20,000,000 tonnes of
mined ore)
C 3  Mh2 for j1, 2, 3 (in practice, the mining-cost declines
with the steepness)
xj 20,000,000 tonnes of waste rock mined with angle j and/or
concentration j
j 1, 2, 3

j1, 2, 3 4Stot concentration 3  [(Mh0.2/(Mh2003  Mh2)) 

h5  20,000,000 tonnes]Mh0.29h0.005/tonne of waste rock
mined with concentration j0.29% of TC
j1, 2 4Stot concentration Mh0.196 h0.005/tonne of waste
rock mined with concentration j 0.19% of TC
j1 4Stot concentration Mh0.099h0.005/tonne of waste
rock mined with concentration j 0.10% of TC
Results and discussion
The equality principle emphasizes the equalization of industrial
waste with regular products in a business sense. This paper shows
how the equality principle can be applied to traditional mining
activities as a theoretical economic basis for environmentally
friendly waste management of natural resources and energy sources.
The results of the case study show that the cost of (solid)
mining waste is substantial and that the exact costs obtained are
differing according to the current method employed. Thereby, the
principle of the true internal shadow price constitutes the basis
of the economic theory for the suggested allocation process.
The different results of the methods tested in the case study
are expected, the differing itself being of less importance. To a
large extent, the different methods were to be investigated as
regard possibilities to adapt the methods practically. The minor
variations in the estimated total cost of the waste fraction
indicate the applicability, however calculated without employing
weight factors due to the inherent mathematical triviality.
No specic obstacles are found in applying the equality
principle to the mining industry. Therefore, the proposed methodology is assumed to be generally applicable to all mining
activities, including the ever more important landll mining and
soil remediation aspects, and all the excavation companies that
produce (solid) waste. Thereby, an economic basis for environmentally friendly waste management is provided.
The case study shows how the equality principle produces a
substantial negative impact on the nal protability of the mining
company. This is a result of the internal shadow cost applied in
association with (solid) wastes employing assignation to the
waste rock fractions in question. Of course, mining costs have a
large impact on the companys prot, but the EUROPE model
provides management with a novel and exible tool to both
improve the mines performance and monitoring it by studying
the development of an one digit shadow cost key-gure.
Specically, the occurring shadow prices in the two case study
examples give a pre-tax reduction of the prot of Mh2.9 and Mh0.3
when applying the equality principle on the mining slope and the
concentration of the ore for the 20,000,000 tonnes of waste rock
produced in these two generalized examples referring to a reduction
of the current mining slope with 31. These gures may be
somewhat unnatural since weights are not included to express
the environmental impact. Nevertheless, the examples are illustrative
as regards showing the underlying principle and the logical
consequences that follow when the equality principle is applied.

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J. Stenis, W. Hogland / Resources Policy 36 (2011) 285292

When applying the methodology proposed here, a certain

weakness of the current models exists in that a somewhat
distorted transfer of costs from the goods to the bads may
take place. However, no known estimation method yields completely valid results. The methodology creates a direct link between
losses and the existence of (solid) waste through cost redistribution and weighting of, for example, the environmental impact.
Then, industry experiences economic pressure to introduce
environmentally friendly measures that maximize the efciency of the source reduction of all the relevant production
waste when mining. Such measures also tend to enhance the
efciency of the production.
Thus, also the efciency of the production apparatus is likely to
be improved due to the emerging strong economic incentives to
improve the physical production technology that is used when
the methodology presented here is applied. This, in turn, is a
result of the company in question being likely to then experience
a substantial need to reduce the existence of the waste fractions
that the shadow costs are allocated to if fully regarded in practice.
This is believed to reduce also the degree of distortion
occurring when allocating costs. Such distortion becomes progressively less, due to an increased co-ordination of accounting
principles as the geographical area in which the suggested
approach is employed is expected to be enlarged. Thus, a tradeoff inevitably takes place between economic exactness and
environmental benets.
The methodology introduced here provide management with a
one digit shadow cost indicator of the performance of a certain
mining activity so to in just once glance get an instant comprehension of their mines performance in terms of the resource
efciency of the technology used, the protability and the
environmental friendliness. Substantial economic incentives are
hence created to, at the same time, improve the protability, the
technology used and the environment and also provide an easy to
use tool to monitor the progress of the work to ever more
optimizing these parameters. Thus, the EUROPE model can constitute the basis for a most useful ash light performance
indicator expressed in just one shadow cost digit.
The application of the EUROPE model gives strong incentives
for the nancial management to ask the CEO to instruct the
engineering division of the company in question to set some
technicians to improve the technology used in a prot-increasing
way. The precise technical solution does not have to be specied
in this work. The important thing is that the equality principle is
used as an easy to use tool to create economic incentives to
improve the performance, then the rest will follow suit.
However, the main purpose of applying the equality principle is
not to maximize company prots, but rather to conserve the
environment. However, experience shows that, in the long-run,
the phenomena of environmental conservation and maximization
of prots tend to be consistent since a protable company can
afford a more advanced environmental technology than a poor
company. The EUROPE model, based on the equality principle,
gives the simple and prot-increasing tool to optimize that
process of improvement by the implementation of shadow costs.
The ndings here are not regarded as being limited to the
mining activities considered here specically. The proposed
methodology is considered to be applicable to any industrial
company that processes raw material stemming from natural
resources or landll mining projects.
This encompasses also, for example, re-used and circulated
material, these parts of an integrated solid waste management
(SWM) system being encapsulated into the theoretical framework
developed here as well. The presented theory is namely regarded
to be applicable on resources and raw materials and the like of
any kind.

Hopefully, the results will promote a new way of regarding

mining and other forms of resource utilization in a business
context that improves the environmental friendliness. In particular, it is intended to encourage the development of alternatives to
ways of traditional taxation in the environmental context in order
to promote voluntary approaches when corporations co-operate
with authorities in preserving the environment. The theory of the
introduced equality principle, including its mathematical expression the EUROPE model, conforms with the ambition of the
European Union of promoting the so called voluntary agreements
by increasing managements liberty of using internal sticks and
carrots instead of just complying with external burdens such as
environmental taxes.
The practices developed here aims at increasing the incentives
to reduce mining and industrial waste and to change the attitudes
towards these kinds of waste. The status of mining and industrial
waste is intended to be enhanced through the nancial impact of
shadow costs, related to wastes, on the current costs and revenues.
The budgets and the consolidated prot and loss accounts of
the companies that are used externally are intended to be affected
by the shadow costs in a way that punishes the excessive
production of waste and the failure to utilize it efciently. To
accomplish this, both ofcial recommendations and voluntary
environmental agreements concerning the economic assessment
of industrial waste are required. This development combines the
regulatory and the voluntary concept of improving the environment. Also, it is supposed to promote the ideal of industrial
sustainability based on improved efciency and productivity of
the resource usage.
Environmentally friendly measures, which are as effective as
possible as regards source reduction, are hence exerted on
industry to introduce through the creation of a direct link between
budgetary costs and the production (generation) of waste. Thus, a
redistribution of costs between normal products and waste is
induced through economic pressure. The point is that such
measures also tend to enhance the efciency of the production
and hence also improve the environment-promoting protability.
Here, it is given a framework of an economic theory of how to
improve the possibilities to reduce the emergence of residuals,
primarily within the mining industry. Thus, the study will contribute to an improved resource economy due to the nances
being improved the more of the input that is turned into goods
that can be sold on the market.
However, the study is regarded as being neutral in the sense of
views of, for example, environmental policies of trade with
emission rights etcetera and the equality of classes, multi-cultural
and race plus gender perspectives. This strength of the models
that are developed is due to the fact that the economic incentives
employed here are regarded as automatically promoting a more
cost-effective use of the input resources for production in general.
As mentioned earlier, this, in turn, is intended to improve nature
as well as the corporate protability. Thus, both nature and prots
are indeed considered in the build-up of the theory, but in rst
place the nature is to be improved.
In particular, the methodology developed here, is intended to
provide a framework for the practical use of efcient information
support tools for decision-making in the eld of waste management of natural resources. Organizationally and geographically,
the results could be applied both within private corporations and
public authorities and at the regional as well as the municipal
levels.
Novel technologies of mining encompasses, for example, dissolving of the ore body with liquids and sound and micro waves.
In the future, geostationary satellites may beam down solar-panel
generated energy to reception-stations on the ground level to be
used for mining activities and the like. Novel technology usually

J. Stenis, W. Hogland / Resources Policy 36 (2011) 285292

means a cheaper and more efcient industrial process plus a less

dangerous working environment for the labor used. It is quite
impossible to stop the never ending ow of ever more advanced
technological achievements.
There will always be some entrepreneurs who transform the
ideas of the scientists into marketable products that can be sold
with prot. Thereby, both the businessman and society gain from
their own increased wealth and the increased job opportunities
for their employees. Thus, as long as man comes up with new,
bright ideas the technological development will never stop. The
implementation of a better technology usually implies better use
of resources and hence an improved resource economy, which
leads to increased prots since the companies are better off the
better they are to utilize the input to their factories and the raw
material and transform them into products that can be sold in the
different markets with prot.
The approach presented here promotes the rapid development
of such novel mining technologies due to the economic incentives
to improve the efciency of the mining that is employed by the
ctive shadow costs. This reasoning is based on the view that if
there is only a strong enough economic incentive present to bring
about technical improvements, it will always show up such an
improvement if the prots can be increased. Thereby, the nature
will also gain due to less resources being used to achieve a certain
industrial production goal.
Furthermore, the study is hoped to induce a change in the
perceived status of mining industrial waste through emphasizing
the economic implications of the costs and revenues involved,
based on the use of shadow prices specically. Thereby, a major
ambition is that the approach advocated here basically will be
adopted by industry in general.
To a certain extent, this process will hopefully be accompanied
by a shift of paradigms towards long-term sustainable production
regarding, in this case, mining industry waste. Better ways of
reducing waste and of industrially utilizing those waste fractions,
which are unavoidably produced are hence promoted. Thus, the
impact of substances that seriously affect the environment might
be alleviated.
The technicians will always nd better ways of conducting
mining if just given an economic reason to do so. Thus, the use of
the equality principle to apply the purely ctive shadow costs to
impose economic incentives is the important part, not the precise
technical solution that is a side effect of the eagerness for
increased prots. The present paper just aims at demonstrating
the general principle for applying the novel theory, not prescribing a well dened technical solution for reducing wastes.
Above all, technicians should join forces with economists so as
to combine the most useful specialties of these worlds related to
the use of the shadow cost approach described here. If so, synergy
effects can be expected, which is likely to, at the same time,
optimize the economy as well as the efciency of the technology
used when mining.
The validity of the methods developed here is regarded to be
satisfactory due to traditional economic theory being used as the
theoretical basis for the scientic results that are obtained. Also, the
extensive experience of the practical usage of the economic theory
in question implies that the validity is satisfying. The reliability of
the study is considered to be acceptable due to the usage of relevant
economic standard literature in order to back up the outcome of the
study. Finally, the relevance of the case study promotes the practical
value of the current research hence strengthening its reliability.
Further research could be conducted, for example, as regards
how to improve the accuracy and the reliability of the economic
estimations based on trigonometric to be applied on the expressions involving the mining slope. Also, a sensitivity analysis of the
main parameters in the nancial surroundings of the typical kinds

291

of project in question could be performed. The developed methods may be further elaborated in order to optimize the usage in
practice of economic incentives to make the exploitation of the
mining and natural resources even more cost-effective so to
promote source reduction ambitions for physical as well as
immaterial resources such as, for example, electrical energy, also
in times of recession and crises. Thus, there exists a large
potential for future improvements of the equality principle and
its mathematical expression, the EUROPE model.
Another possible approach for the future research is the
integration of also regional and even global cost considerations
into the model by the employment of the EUROPE model in a
more extensive way. Thereby, the ever more improved knowledge
basis of environmental science promotes the development of
constantly improved models to express the equality principle in
mathematical terms.
Thus, the waste reducing ambitions of, for example, the central
European authorities may be promoted. However, the overall goal
to accomplish is the achievement of a more sustainable development of the resource use in general to enable the exibility to
cope with major changes in the corporate surroundings.

Conclusions, benets and recommendation

Based on the presented theoretical and practical ndings, the
overall conclusions are as follows:
1. The research presented in this paper shows a good usefulness
when focusing on the cost related aspects of waste fraction
reduction at mining schemes for natural resources featuring
the allocation of also xed costs to the mining products as a
novelty.
2. The case study performed, investigating the practical application
of the theoretical methodology for a mining scheme for natural
resources shows a promising usefulness for the improvement of
the resource economy of such mining schemes in general.
3. The study is likely to substantially contribute to an improved
resource economy globally due to its general applicability for
nancially and environmentally optimizing the industrial
transformation of raw material into goods and the utilization
of energy resources due to the increased corporate internal
economic incentives that the equality principle induces.
Summarized, the main outcome and benets from the present
study are
1. Elaboration of a principle for estimation of companys costs
and revenues related to residual products from mining and
excavation activities etcetera.
2. Implication of incentives for cost-saving and improved process technology in the mining industry for providing the
necessary economic incentives to encourage the technological
development.
3. Reduction of the mining waste fractions at the source when
exploiting natural resources and energy sources, leading to
less waste produced and, hence, an improved environment.
4. Enhanced environmental good will for industry due to the
induction of a more adequate waste management and a more
efcient use of natural resources.
5. Improved possibilities to chose the adequate mining technology and promotion of alternative mining technologies, even
though the precise technology to be used is not prescribed by
the authors since if there is just money, the right technicians
can always be found to do the adequate calculations to solve
the technical problem.

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J. Stenis, W. Hogland / Resources Policy 36 (2011) 285292

6. Enhanced status of mining waste that is minimized due to

such waste being regarded as in economic terms equivalent
to regular mining products within the ordinary production
process and hence not being ordinary waste anymore.
7. Presentation of an integrated approach to solve the problem
of simultaneously decreasing the negative impact of mining
waste on the environment and the health of the population
while increasing the economic benets by the implementation of waste reducing mining scheme projects, emphasizing
environmental protection and the cost-effective use of natural
resources and energy sources.
8. Provision of a promising information support tool for decision-making in mining waste management at multiple levels
both within the private and governmental context.
9. Promotion of the mining waste reducing ambitions related to
the concept of voluntary agreements of primarily the central
European authorities as well as globally.
10. Proposal for a shift of paradigms in mining waste management of natural resources featuring the equality principle so to
equalize regular products and wastes in nancial terms.
Finally, based on the analysis performed, the following summarizing recommendation is made.
Apply the EUROPE model, based on the equality principle, on
the waste management of exploitation of natural resources in
general and on mining schemes in particular.

Acknowledgments
Mr. Peter Hansson, the Finance Director Business Area Mines,
and Mr. Ulf Marklund, the Mining Manager of Boliden Plc,
Sweden, and Professor Rob Hellingwerf, School of Mining and
Metallurgy, Sweden, are acknowledged for their valuable comments in the preparation of the paper.
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