Jun 122013

By Linda Kor
Arizona has long been known as a mining state. From copper and coal to uranium, the state is rich in natural resources. Now adding to the Arizona’s mining potential is potash, a key nutrient for plant growth.
Three mining companies have descended upon the Holbrook basin in recent years intent on mining the deposits that are buried there. Thanks to its shallow depth, the region’s mild climate, and proximity to rail and interstate, the mining of potash in the basin won’t be as costly as in other locations such as Canada, Chile and South Africa, making it an attractive prospect for mining companies.
In 2011, L. William Seidman Research Institute, along with the W.P. Carey School of Business at Arizona State University, prepared an analysis of the impact of mining on the state for the Arizona Mining Association.
In that document it showed that as of year-end 2011, there were 11,300 employees of Arizona mining companies living in the state. Of this total, 10,600 were employed by copper mining companies. The remaining workers were employed by companies engaged in coal mining, gold and silver mining, and uranium mining.
According to the research, the total income paid to employees of Arizona mining companies in 2011 was $1.22 billion. This includes wages, salaries, and fringe benefits such as employer contributions to health insurance and retirement plans. Overall, income per worker in the mining industry is $108,000 in the state. This compares with an average income of $47,000 per worker across all industries in Arizona.
The economic impact of mining in Arizona is substantial. Mining companies spent a total of $2.80 billion in 2011 purchasing goods and services from other Arizona businesses. This includes wholesale purchases of mining equipment, payments to construction firms, payments for outside services, and purchases of fuels, electricity and supplies. Expenditures on products from other Arizona businesses are estimated to support 8,700 jobs and labor income of $606 million just among first-tier suppliers.
Add to that the consumer spending of all employees connected to the industry, as well as the spending of state and local governments out of new tax revenues. For the Arizona mining industry, these indirect effects amount to an additional 29,800 jobs and labor income of $1.41 billion.
The average labor income of all employees directly and indirectly supported by the mining industry is $65,000. This is also significantly higher than $47,000, the average labor income of all Arizona workers.
Although up to this point mining has not been an industry that has fueled the economy of this portion of northeastern Arizona, with the development of potash mining, these figures can be used as a comparative for future growth.
A list of industries needed to sustain a mining operation provided by Prospect Global, one of the companies intending to mine the basin, shows the anticipated resource demand directly related to its operation. They include tire, fuel, paving and concrete vendors, transport services and trucking companies, catering, auto repair and safety supplies, janitorial, laundry, computer and IT, general contractors, lumber and building supplies, heavy equipment supply and rental, and electrical and welding supply houses.
While many of these industries will not be located in Holbrook, proximity may be a requirement for many others, adding to the local business development. In addition, there will also be an increased need for housing, amenities, food, and expansion to schools to accommodate more students, and medical facilities.
Although Passport Potash, Prospect Global and HNZ Potash have been moving forward with their individual projects, the process is long, leaving residents contemplating timeframes and wondering when and if the future holds any major changes for their community.
Although Prospect Global has not released a recent update on its timeline, Joshua Bleak, president and CEO of Passport, recently stated that construction could begin as soon as the second quarter of 2015, as long as permits and mine finance continue as anticipated. The first phase of construction would require 30 to 36 months. At that time underground activities could begin, as well as completing construction of the mill. “From the time the shovel first touches dirt, it will require four to five years before the potash begins leaving Holbrook,” stated Bleak. He added that his company is working on ways to refine the construction and ramp-up processes, and hopes to provide an expedited approach in its pre-feasibility study.