‘High-Grade’ Uranium Deposit at Saskatchewan Mine

Economics Blog #5 (Bonus)
By: Alisha Tupchong
‘High-Grade’ Uranium Deposit at Saskatchewan Mine

Summary of the Event

Denison Mines Corp., a Canadian public company that invests in and produces uranium, has confirmed that one of its drilling locations in Saskatchewan has the potential of “an economically significant, high-grade uranium deposit.” Uranium is a natural metal that is used extensively for providing energy to nuclear power plants because of its high energy potential and efficiency. One drilling area in Saskatchewan, called Zone A, has the potential to contain between 40 million and 80 million pounds of uranium, while another one, Zone B, may contain between 5 and 15 million pounds, as estimated by Denison Mines Corp. Within the last decade, uranium prices have continuously risen, and because uranium is in fact a very inelastic product, the increased prices have not affected the demand whatsoever. Canada is the largest uranium producer in the world, responsible for nearly 28 percent of the world’s production in 2005.

3 Positive Economic Statements

If Canada continues to have an absolute advantage in uranium production and the demand for uranium remains high, Canadian companies that mine for uranium will remain successful and Canada will have good trading relations with other countries that require uranium and supply goods to Canada that Canada would not otherwise be able to produce.

If the demand for uranium increases while its scarcity increases, Canadian uranium-mining companies will hire more workers to increase its production levels to satisfy the demand in the economy, resulting in a lower national unemployment rate and therefore lower a welfare-dependence rate, which in turn lowers government-spending costs.

If the demand for uranium increases, then Canada will have to export more uranium, which will increase the exchange rate, since exchange rates are determined by the demand for and supply of currencies on the foreign exchange market; with increased demand for uranium, countries will have to purchase more Canadian dollars, therefore increasing the exchange rate.

2 Normative Statements

Canada should invest in uranium production because uranium has the potential to positively affect the Canadian economy, since uranium will continue to be in high demand due to its importance in nuclear power plants.

Canadian uranium-mining companies should set up mines in other countries where uranium is also prevalent, so that the uranium is not coming from a singular source, Canada.

Opinion About What Should Happen

Canada should invest in uranium production because uranium is a natural resource that is abundant in Canada, whereas it is not as abundant in other countries. Eventually, Canada will be one of the only countries to produce uranium; therefore its scarcity will increase prices dramatically, allowing Canadian companies to profit greatly. It is particularly strategic to invest in uranium production because uranium is a highly inelastic product. In other words, an increase in price levels does not significantly alter the quantity demanded. Although there are four factors that affect elasticity (availability of substitutes, fraction of income spent on the item, amount of time available, and the nature of the item), it is singularly the nature of the item that is the reason why uranium is inelastic. Uranium is highly sought after because of its importance in nuclear power plants. Uranium is very effective and efficient, causing it to be environmentally-friendly because it provides lasting energy. With global warming and other environmental issues becoming increasingly pressing concerns, companies are turning to energy-efficient products for use in manufacturing, and uranium is one of them. Therefore, the demand for uranium will remain high, making it a wise choice to invest in. When Canada becomes one of the only countries containing uranium, demand will increase because of scarcity, causing Canadian companies to hire more workers. This will lower the national unemployment rate and increase GDP, both benefitting the Canadian economy.

Works Cited

"Denison drilling program confirms 'high-grade' deposit at Saskatchewan mine." The Canadian Press. Google News, 19 Jan. 2010. Web. 19 Jan. 2010. .
"Denison Mines: Fact Sheet." Denison Mines Corp. Web. 19 Jan. 2010. .

Gold and Copper Mines in B.C.

Economics Blog #4
By: Alisha Tupchong

Gold and Copper Mines in B.C.

Summary of the Event

Taseko Mines Ltd.’s $800-million copper-gold Prosperity project was environmentally approved of by the British Columbia provincial government during the week prior to January 15, 2010. The Prosperity project, which pumps out copper and gold from the earth, is scheduled for construction this summer as it joins Copper Mountain Mining Corp.’s similar $440-million project. The demand for mining industries has increased recently, as there is more money to be made now than before. Copper is a metal highly demanded by China because it used widely in manufacturing. Back in the 1990s, the price of copper was less than $1 (U.S.) per pound; now, copper is around $3.40 a pound. While environmental controversy and poor relations with first nations communities have slowed development in the past, companies like Taseko Mines Ltd., who now have environmental approval by the provincial government, will be able to carry out their mining activities as demanded. The price of gold is also looking strong, according to the Energy and Mining Minister, breaking $1100 (U.S. per ounce). Now, all there is left to wait for is the approval of the federal government in the next several months.

3 Positive Economic Statements

If Canadian mining companies retrieve more gold and copper from the ground compared to other countries, China will look to Canada to import metals used for manufacturing, causing aggregate demand to increase, which in turn, will cause prices to increase.

If Canadian mining companies have an absolute advantage in retrieving gold and copper, stronger trade relations can build between Canada and other countries, creating a situation where Canada would specialize in gold/copper production, while the other country would specialize in another demanded product, leading to increased productivity due to specialization.

If prices for gold and copper increase, Canadian mining companies will increase productivity by hiring more workers, therefore supplying more jobs to Canadian workers, which lowers the national unemployment rate, increases the GDP, and increases the standard of living since more households are receiving more income.

2 Normative Statements

The Federal government should approve of Taseko Mines Ltd.’s Prosperity project because the prices of gold and copper have been increasing recently, which can create a greater profit for the Canadian company, especially since Canada has a large supply of natural resources.

Canada should focus on specializing in the production of gold and copper because the demand for these metals is very high due to their various uses in the manufacturing industry.

Opinion About What Should Happen

Canada should focus on specializing in the production of gold and copper because they are considered valuable resources and are widely demanded. Currently, the prices of these metals have been increasing, and with specialization, they can increase even more if Canada becomes one of the only countries to produce so much gold and copper in later years. While other countries will eventually run out of these metals, Canada will still have a relatively abundant supply due to its location. If Canada specializes in producing gold and copper, it can increase trade relations with another country, like China, that produces goods that Canada cannot produce. This creates a win-win situation, and the two countries will increase their productivity as they focus on producing the good that gives them an absolute advantage. As well, if Canada becomes one of the only countries to produce gold and copper in the future, it can profit greatly because the scarcity and high demand will increase the prices, therefore benefitting the Canadian economy as exports increase.

Works Cited

Ebner, David. "New gold, copper mines to spark B.C. economy." Globe Investor. The Globe and Mail, 15 Jan. 2010. Web. 18 Jan. 2010. .

Toxic Children's Jewelry

Economics Blog #3
By: Alisha Tupchong

Toxic Children's Jewelry

Summary of the Event

Health Canada issued an advisory on January 15, 2010, warning consumers that some children’s jewelry products sold in Canada have been found to contain excessively high levels of lead. This warning occurred just two days after the U.S. Consumer Product Safety Commission issued an advisory about cadmium, another toxic metal, which was present in jewelry. Following this event, the Associate Press made an investigation that revealed that China-imported jewelry, made almost completely out of cadmium, was being sold at major North-American chains such as Wal-Mart and Claire’s. Cadmium, more toxic than lead, is a heavy metal that made up at least 10 percent of 12 metal components out of 103 pieces of low-priced children’s jewelry. Even at low levels, lead and cadmium can negatively affect children’s behavior and development.

3 Positive Economic Statements

If studies show that goods made in China are found to contain toxic or harmful materials, then consumers in Canada will be discouraged to purchase them; therefore the demand for Chinese products will decrease, causing a decrease in the supply and imports of Chinese goods to Canada.

If China builds a reputation for producing hazardous products, then countries will decrease the number of imports from them and will look for other countries to import from, which may include Canada, causing demand for Canadian products and manufacturing to increase.

If Canadian products and manufacturing are in high demand, prices will increase for the goods and services due to scarcity, which will cause demand to decrease again so that the prices don’t continually increase beyond the market equilibrium.

2 Normative Statements

Canada should reduce its dependence on China for goods and instead become more self-dependent so that health and safety regulations that are performed on the products are according to Canadian standards.

Canada should test imported products from countries where health and safety regulations have been an issue in the past before being sold at chain retailers and to prevent the recall/banning of substances, which lower the consumer’s confidence in purchasing imported goods.

Opinion About What Should Happen

Canada should reduce its dependence on China for its goods and instead become more self-dependent. When a country relies too heavily on another country, it is not good because if anything were to happen to the supplying country, the receiving country would be affected as well. In Canada’s case, Canada is too dependent on goods from China. With the jewelry incident, Health Canada is being criticized for not banning the products, and merely issuing an advisory. If Canadian companies had to produce the jewelry, it would have to be regulated and checked under Canadian standards, and would not contain cadmium or lead, preventing the outburst of the public. Therefore, Canada should not rely as heavily on products from a single country where regulations are different, in this case China, and instead look to its own manufacturers for production. This benefits the Canadian economy, because the goods purchased and distributed in Canada are produced in Canada, meaning there are no importing fees or foreign exchange fees. In addition, it provides more job opportunities for Canadians, therefore lowering the national unemployment rate.

Citations

"Health Canada issues advisory on metal kids' jewelry." CBC News. Canadian Broadcasting Corporation, 15 Jan. 2010. Web. 17 Jan. 2010. .