Simulating Economics for Mining and Shipping Projects using Transaction Cost Economics

Bell, Peter (2026): Simulating Economics for Mining and Shipping Projects using Transaction Cost Economics.

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.

• Item Type: MPRA Paper
• Language: English
• Keywords: Mining, Shipping, Critical Minerals, Infrastructure, Transaction Cost Economics,
• Subjects: B - History of Economic Thought, Methodology, and Heterodox Approaches > B5 - Current Heterodox Approaches; B - History of Economic Thought, Methodology, and Heterodox Approaches > B5 - Current Heterodox Approaches > B52 - Institutional ; Evolutionary; D - Microeconomics > D3 - Distribution; D - Microeconomics > D7 - Analysis of Collective Decision-Making; D - Microeconomics > D7 - Analysis of Collective Decision-Making > D79 - Other; E - Macroeconomics and Monetary Economics > E6 - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook; E - Macroeconomics and Monetary Economics > E6 - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook > E65 - Studies of Particular Policy Episodes; F - International Economics > F2 - International Factor Movements and International Business; F - International Economics > F5 - International Relations, National Security, and International Political Economy; F - International Economics > F5 - International Relations, National Security, and International Political Economy > F53 - International Agreements and Observance ; International Organizations; G - Financial Economics > G3 - Corporate Finance and Governance; G - Financial Economics > G3 - Corporate Finance and Governance > G38 - Government Policy and Regulation; H - Public Economics > H1 - Structure and Scope of Government; H - Public Economics > H2 - Taxation, Subsidies, and Revenue; H - Public Economics > H2 - Taxation, Subsidies, and Revenue > H25 - Business Taxes and Subsidies; H - Public Economics > H5 - National Government Expenditures and Related Policies; K - Law and Economics > K0 - General; K - Law and Economics > K2 - Regulation and Business Law; K - Law and Economics > K2 - Regulation and Business Law > K23 - Regulated Industries and Administrative Law; K - Law and Economics > K3 - Other Substantive Areas of Law; L - Industrial Organization > L3 - Nonprofit Organizations and Public Enterprise; L - Industrial Organization > L3 - Nonprofit Organizations and Public Enterprise > L32 - Public Enterprises ; Public-Private Enterprises; L - Industrial Organization > L5 - Regulation and Industrial Policy; L - Industrial Organization > L5 - Regulation and Industrial Policy > L51 - Economics of Regulation; L - Industrial Organization > L6 - Industry Studies: Manufacturing; L - Industrial Organization > L6 - Industry Studies: Manufacturing > L61 - Metals and Metal Products ; Cement ; Glass ; Ceramics; L - Industrial Organization > L7 - Industry Studies: Primary Products and Construction; L - Industrial Organization > L7 - Industry Studies: Primary Products and Construction > L72 - Mining, Extraction, and Refining: Other Nonrenewable Resources; N - Economic History > N5 - Agriculture, Natural Resources, Environment, and Extractive Industries; O - Economic Development, Innovation, Technological Change, and Growth > O1 - Economic Development; O - Economic Development, Innovation, Technological Change, and Growth > O1 - Economic Development > O13 - Agriculture ; Natural Resources ; Energy ; Environment ; Other Primary Products; O - Economic Development, Innovation, Technological Change, and Growth > O2 - Development Planning and Policy; P - Economic Systems > P0 - General; P - Economic Systems > P1 - Capitalist Systems; Q - Agricultural and Natural Resource Economics ; Environmental and Ecological Economics > Q3 - Nonrenewable Resources and Conservation; Q - Agricultural and Natural Resource Economics ; Environmental and Ecological Economics > Q3 - Nonrenewable Resources and Conservation > Q32 - Exhaustible Resources and Economic Development; Q - Agricultural and Natural Resource Economics ; Environmental and Ecological Economics > Q3 - Nonrenewable Resources and Conservation > Q33 - Resource Booms

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