Story of a Country With Mineral Resources

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Mr. Federoff was taking a walk one morning. It made him feel sad to see how uncared for the homes and businesses, some vacant, were. He wished that people could afford to spend the money to fix up their places—but the country was just too poor. People had to try hard just to keep food on the table, there was no money for paint or anything extra. He was better off than most, due to the small pension he received from the company he worked for abroad as a geologist. He was retired now, and liked walking in the open areas near the edge of town. He enjoyed identifying interesting rock formations and soil colorations here and there.

He was also fortunate that his daughter, Anna, had married well—she was the wife of the mayor, Sam Starfield, and that brought some occasional favors to she and her family that not every family gets. The people liked the mayor, so probably he would get to keep the job for a long time—so his daughter would be assured of a stable income. That was comforting. But he knew not all were so lucky.

As he neared the edge of town, he decided to turn off toward the low hills to the West. Being still early in the morning, the rising sun was illuminating the sides of the hills and this morning they seemed to be beckoning him. He loved the morning sun. Several minutes later he was at the hills and started up the worn trail. The trail itself was now a few centimeters deeper than the surrounding ground—it had been worn down from years of use.

He had only gone a few meters when he stopped suddenly—what was that greenish-brownish rock that was half exposed in the side cut of the trail worn deep by long use? Wow! He wondered—could it be?! He picked it up and examined it. He turned it over in his hand. He started to grin. He spat on it to see what it looked like wet. Yes, maybe it could be …. he rubbed the wet spot vigorously with his fingers, then, … hesitantly … touched them to his lips and tongue. There was that unmistakable tangy, slightly bitter, taste. Sure enough, it was copper!

His thoughts went reeling. How much of it would there be? Would it be deep, deep down and hard to get—requiring expensive underground mining operations? Or would it be nearer the surface and accessible by open-face mining? What grade was it? Would it be high quality? And what about pollution from the mining—people talked so much about not polluting the environment these days. But many in his town were close to starving— how much pollution would be ok if it brought in the money that fed the people?

He somehow knew he had just stumbled upon something that could very possibly become a life changer for him and his town. Wow! It was almost like finding money lying on the ground. But was it real? And how much was there? They would need more testing than his simple spit and taste test. And yes, mines were noisy, and unless special care was taken, could leave the earth looking ugly. If the copper deposit were rich enough, they could afford to do the environmental restoration. Even a little pollution was not good—but so many were going without things they really needed. Poverty could leave his town forever if the people got jobs. On and on went his thoughts…

But finally, maybe 45 minutes later, with 5 or 6 more little rocks laced with copper in his pocket, he decided he better get back home and do the field kit type of test himself before saying anything to anybody. He hurried along—knowing that if it was what he thought, it would be hard to keep it secret!

The test proved positive—it was copper!! Mayor Starfield was quick to contact friends in the University town to get a team to come assess the situation more thoroughly. In simple terms, they found there to be a lot of copper and it was high grade. Some was near the surface, with much more deep underground. The mayor knew more than just their town would eventually be affected by this, so he contacted leaders from all around his section of the country. There ended up being 16 men and women who were stake holders with influence and concern for the wellbeing of this section of the country.

They formed the Area Planning Group responsible for creating goals and a plan to fulfill those goals. They knew the economy of their section of the country was about to change and they wanted a say in how that happened. They had heard stories of mineral wealth being found in a country and all the benefits ending up in the hands of persons who don’t even live in the country!

At their meeting Mayor Starfield retold the group how his Father-in-law, Mr. Fedhoffer, retired geologist, had serendipitously made the copper find and how it had looked to be very promising. Everyone knew the story by now—but still loved hearing it. Many in the group had already been on the phone and meeting in coffee shops. While not everyone agreed, a majority consensus had already been reached: the good fortune of finding wealth in the ground was a gift from the Creator and so should go to benefit all—not just a few. That is, all who were willing to work for it—to pitch in and help make it happen.

Mr. Starfield summed up his remarks by saying, “Well, I think money, political influence and education are what it really boils down to. That is what our people really want.” As if to clarify, he added, “they want enough money for a decent living, a say in what happens to them, and to be able to give their kids a good education so they can get ahead in life.” After a couple of seconds of silence, as if by unseen command, hearty shouts of “YES!, YES!, YES!” filled the room. Apparently Mayor Starfield had put it exactly right—he knew what really mattered to his people.

Clearing his throat, he spoke: “Alright then, how do we go about getting those things for our people—how do we make this copper wealth work for us?”

Decor

The banker, Mark Riddle, spoke up. “We are going to have to pay for constructing a mine—the copper won’t just jump out of ground you know!” There was laughter around the room as visions of copper jumping out of the ground went through the minds of the Area Planning Group members.

Mr. Riddle went on.

“I know of financial groups with experience in mineral extraction operations and capital investment. One is in America, out of Huston, one is from Germany, and the other one is also from America—based in Los Angles. They all have reputations for fair dealing and efficiency. If the Group likes, I can contact them and find out what is normal in a case like this, what terms they offer, what concessions they need and a likely timeline, and initial estimates of our profits over the next several years.” At the latter, he broke into a huge grin.

He added, “I will see if any set up fees and early operations charges can be made part of the loan—collateralized by the future copper mine of course, with no payments due until the mine is producing. We could make bigger profits if we financed and master-minded the whole thing ourselves, but I don’t think we have that kind of money, or experience. I say its better to take less profit in exchange for their expertise and capital—but of course, its up to the Group.” They took a vote. The Group agreed with banker Riddle.

The German financial group, specializing in mineral extraction and raising capital for same, was chosen. Within 90 days contracts were signed and the German Head Engineer and the Financial Procedures Officer had arrived on site. They in turn hired in-country engineers and draftsmen and accountants and computer tech people and got things rolling. Eleven months later the mine had opened, and sales proceeds were coming in and the town was making a net profit. The Area Planning Group was happy!

They got more good news as a result of the area-wide survey they had authorized to be conducted. They surveyed the usual demographics (age, gender, income, nationality, education) and also potentials for new income for the area. They also surveyed what people wanted and felt they needed. But it was the geological portion of the survey that brought the surprise. It revealed a large bed of high quality coal about 70 kilometers from the copper deposit. Over the next many years it, and supplemental enterprises supporting it, would yield billions for the area.

There was of course debate over the use of fossil fuels and the pollution that brings. They learned of minimal environment protection and how much more profit they gained that way versus a medium to high level of protection for the environment and the resulting profit levels in that manner. But in the end they decided upon the approach most people living in a depressed economy in need of jobs would decide upon.

They would mine the coal, sacrifice some of the profits for environment protection, but allow a small amount of pollution in exchange for profitability rates that made the project feasible. That meant jobs that gave paychecks that bought medicine, food, school books and uniforms, hired teachers and improved farm to market roads. They would tolerate a small amount of pollution in exchange for prosperity. They realized that it would be a continual balancing act—but they had held community meetings, had weighed the issues, had public debate, and then made a decision. They were prepare to live with it.

There was already an established shipping center in Central City outside of their area. The plan called for transportation infrastructure development. They were investigating a cost sharing and profit sharing plan to bring a spur line of the railroad from Central City to the copper mine—but branching North of the copper mine and extending the branch line over to the coal bed. The debate was whether or not it would be worth it since the roads would be developed for citizen travel and for farmers to transport to market. Did they need a railroad too?

There was no debate however about the road improvements. They would be needed for product shipment outbound from both mines and inbound for various supplies and replacement parts needed. With better roads coming, amount and type of crop the farmers grew would change as wider markets with easier access (the roads to Central City) came into existence. More farming, road construction, and increased trucking meant more jobs. With income, everyone was driving more—they could afford it now. All this called for more fuel stations and truck drivers and warehouses.

The mayor’s wife, Fern, invited her good friend from school days to return to the country— it promised to now be as good as living abroad. The friend returned with her MBA and about 10 years of experience in factory management—it built household appliances. After doing some surveys and market analysis of her own, she opened a small factory for building household appliances, located near where the new housing development where many of the copper mine workers lived. They created a ready demand. It required little in the way of freight to get the appliances from her factory to the store where the appliances would be sold.

A group made up of gas station operators and computer technicians pooled their funds and set up a small factory of 18 employees to begin with. They made copper parts used in communication technology and copper parts used in the automotive industry. living so close to the copper mine, a lot of their overhead costs were reduced— increasing their profit margin.

One evening at dinner Sam Starfield, the mayor, asked Mr. Fedhoffer if he was glad he found that small copper laced rock on the trail. Of course Mr. Ferhoffer was glad about it. His big smile said that.

 “And what do you like best about it?” asked the mayor.

Mr. Fedhoffer replied, “I like best that people around here who used to be poor are better off now. They have the money to buy the things that they need. People seem less depressed. I like how they stood up for what they believed at the community meetings in debate over prosperity and pollution. The people found their voice! And I like it that parents can have pride that they are getting a good education for their children.”

Then he added this thought, “Money alone won’t make people happy—but it is so much easier to be happy when you have enough money that you don’t have to worry about just surviving. Yes, I’m glad I found the copper!”