In a world populated by small corporations, and blessed with abundant resources, this simplistic mantra was in fact a general economic truism ... about 100 years ago. In today's world of scarce resources, already over-populated with mega-corporations, it is a dinosaur-strategy, assuring one's path to extinction.
While this observation is appropriate to most of the corporate world, it is especially easy to illustrate the truth of this (modern) principle by examining precious metals mining. Look at every large gold mining company on the planet, and one will see the clear illustration of a strategic decision by management: The choice to operate a (relatively) small number of mega-mines, vs. choosing instead to produce gold from a larger number of smaller mines.
At a very elementary level, this strategy may seem to represent wisdom. The simplistic corporate mantra is that larger operations must be "more efficient" than smaller ones. While this assertion is not necessarily true in general, it is patently untrue with respect to precious metals mining (and most forms of mining).
In a world of diminishing resources, resource scarcity implies two realities in mining. The number of (undeveloped) "large deposits" in the world is steadily declining, and the "grades" (i.e., richness) of the ore is also steadily declining. This means extracting/crushing/refining more and more tons of ore to get less and less ounces of gold.From an environmental standpoint, this is an appalling dynamic. To begin with, the amount of environmental disruption/devastation that results from mining operations rises exponentially with the size of the mine. One large mine (typically) doesn't produce an amount of "pollution" equal to four mines, one-fourth its size -- but often two or three times that quantity. Yet even from the standpoint of corporate efficiency, this is clearly an inept, if not suicidal, strategy. In our world of scarce resources, nowhere is this reality more apparent (and expensive) than with respect to energy. At best (i.e., producing high-grade ore from efficient mines), mining companies represent a highly energy-intensive form of industry. Deliberately choosing to produce gold from deposits with rapidly declining grades, in an economic paradigm of soaring energy costs, in an energy-intensive industry, is nothing less than a recipe for destroying one's own profit margins. Out of desperation, the large-cap gold miners have turned to polymetallic deposits for their jumbo mines, bolstering their sagging bottom-lines by using the "credits" from these other metals to offset soaring production (energy) costs.
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