Mineral and metals production: an overview Olle Östensson, Caromb Consulting

Mineral and metals production: an
overview
Olle Östensson, Caromb Consulting
Outline of presentation
•
•
•
•
•
What are minerals?
Why is mining important?
Geography of mining
Demand for minerals
Reserves and resources
Some definitions
• Metals are chemical elements that conduct
electricity.
• In nature, they occur in the form of minerals,
which are chemical compounds containing
metals and with specific chemical and physical
characteristics.
• Minerals occurring in sufficient quantity and
grade to be economically exploitable are
called ores.
What are minerals?
Uses of the major metals
• Aluminium:
• Copper:
• Gold:
• Lead:
•
•
•
•
•
Nickel:
Platinum:
Silver:
Tin:
Zinc:
Transport, packaging, construction, high
tension power lines
Electrical conductors, construction,
transport
Investment, jewellery, electronics
Batteries, pigments, ammunition,
radiation shielding
Stainless steels, electroplating
Jewellery, catalysts
Electronics, sterlingware
Tinplate in packaging, solder, pigments
Galvanizing, brass and bronze
Most important metals in world
mining 2005
Metal
Iron ore
Copper
Gold
Nickel
Zinc
Bauxite
Others
All metals
Share in total value Volume of output
of metallic mineral (metal content in
production %
kilotonnes)
(estimates)
21.9
800 000
18.0
16 900
13.5
3
4.9
1 300
3.4
10 300
1.5
31 000
36.8
..
100.0
..
Why is mining relevant to development?
Because…
• Around twenty developing countries depend on mining for
more than half their export income – and the number is
increasing
• Ease of entry into mining
–
–
–
–
–
–
No need to mobilize domestic capital
Easy access to technology
No need for government financed infrastructure
Easy market access
Transparent and simple standards
Minimal need for marketing
• Scale of revenues
– The world’s largest mines generated annual sales of more than US$
12 billion, annual profits of more than US$ 8 billion in 2006-2007
– Governments can easily appropriate rents
Example:
Codelco, Chile, US$ billion
18
16
14
12
Sales
10
Income before taxes
8
Contributions to the
Treasury
6
4
2
0
2004
2005
2006
Source: www.codelco.com
2007
2008
VALUE OF
WORLD MINING
YEAR 2005 TOTAL
~ 910 billion USD
14%
27%
51%
2% 6%
Source: Raw Materials Group, Stockholm 2006.
Metals
Industrial minerals
Diamonds
Coal & uranium
Crushed rock
METALS VALUE
AT MINE
YEAR 2005 TOTAL
6%
~ 250 billion USD
4%
7%
11%
2%
18%
23%
29%
Source: Raw Materials Group, Stockholm 2006.
Gold
Iron ore
Copper
Nickel
Zinc/lead
PGMs
Bauxite
Other
Distribution of global mine
production among regions, %
Source: Calculations by Raw Materials Group
GLOBAL MINING –
GEOGRAPHY 1990
GLOBAL MINING –
GEOGRAPHY 2006
1. China 10.1%
Ira
n,
Po
Ru
I
ss sl am la nd
ian
ic
R
Fe
de ep.
ra t
ion
Br
a
Sw zi l
ed
en
Ch
ina
I
n
Ve
n e d ia
zu
e
Me la
xi
Uk c o
rai
n
Ca e
na
da
Un
C
u
Co
i
ng te d S ba
o,
De tate s
m.
R
Au ep.
str
al i
a
Ne
Ch
w
Ca
ile
l
So e don
uth
ia
Ka Afri
c
za
kh a
s ta
n
P
Co eru
lom
bi
Ind
on a
es
Na ia
mi
Pa
bi
B
pu
a N otsw a
an
ew
Ta
Gu a
nz
ine
an
ia,
Za a
Un
mb
ite
d R ia
Mo e p.
ng
oli
a
Ma
Gu li
ine
Gh a
an
Ga a
Ar bon
ge
nti
na
TNCs IN GLOBAL MINING
100
90
80
70
60
50
40
30
20
10
0
0
0
Sources: UNCTAD, based on Raw Materials Data, 2007.
CORPORATE CONCENTRATION
% of total value of non-fuel mineral productionat the mine stage
30
25
20
15
10
5
0
1990
1995
2000
Largest
Source: Raw Materials Data
2003
3 largest
2004
2005
10 largest
2006
Source: Raw Materials Group, Stockholm 2007.
35
Demand has increased – and so have
prices
Price index minerals, ores and metals (January 2000=100)
450.00
400.00
350.00
300.00
250.00
200.00
150.00
100.00
50.00
Source: UNCTAD Commodity Price Bulletin
03/2009
10/2008
05/2008
12/2007
07/2007
02/2007
09/2006
04/2006
11/2005
06/2005
01/2005
08/2004
03/2004
10/2003
05/2003
12/2002
07/2002
02/2002
09/2001
04/2001
11/2000
06/2000
01/2000
-
Reasons
• Asian minerals and metals demand has grown very rapidly
and Asian countries have accounted for almost all of the
increase in demand over the past five years
• China is now the world’s largest steel producer, steel
consumer, steel exporter and iron ore importer, the world’s
third largest iron ore producer and the third largest steel
importer
• Metals use per capita is still very low in countries such as
China and India, but they are still at a stage where metals
consumption relative to GDP is rising and large populations
make them more than significant forces on the market
China in the world iron and steel
economy: per cent of world
80
70
60
50
Iron ore production
40
Iron ore imports
Crude steel production
30
20
10
0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Source: UNCTAD, The Iron ore market 2009-2011
Outlook
• Demand will continue to be strongly linked to Asian
growth and high rates of increase are expected
• Once the recovery from the recession is completed,
capacity is expected to just keep up with growth in
demand in the long term (next 8-10 years)
• A large share of output growth will take place in
developing countries (Africa and Latin America),
where there is now strong investor and exploration
interest
Share of value added at the mining
stage, 2005/2006
Metal
Gold
Platinum Group Metals
Tin
Copper
Lead
Nickel
Zinc
Cobalt
Bauxite/aluminium
Share of value added, %
100
100
83
77
77
70
63
33
9
Source: UNCTAD, World Investment Report, 2007
CLASSIFICATION OF MINERAL
RESOURCES
Evolution of copper ore grades
Source: Raw Materials Group
Growth of resource base
Source: Crowson, P., 2000, Minerals Handbook, 2000-2001, London
Number of years’ production at 2 %
annual growth
Reserves
Aluminium
Copper
Iron
Lead
Nickel
Silver
Tin
Zinc
81
22
65
17
30
15
28
20
Resource base
1065
736
886
607
526
731
759
778
Source: Tilton, J.E., 2003, On Borrowed Time? Assessing the Threat of Mineral Depletion,
Resources for the Future, Washington, D.C.
Recycling: a hypothetical
example
250
Assumptions
Metals use has increased by
5 % annually in the past and
continues to do so until year
5;
– from year 6 to year 15,
metals use grows at an
annual rate of 20 %;
– from year 16 to year 24 it
grows at 10 %;
– from year 25 to 35 it is
constant;
– from year 36 onwards it
declines by 2 % per year
•
•
The average life of metal
containing products is 15
years
67 % of the metal in a
product can be recycled.
200
Tons and per cent
•
Metals use, tons
150
Use of scrap, tons
100
Share of scrap in
consumption, %
50
0
Years
Are mineral prices rising in the
long term?
• Hotelling: Mineral prices should rise at the same
annual rate as the rate of interest – if the price
increase is lower, then more should be produced,
if higher, resources should be left in the ground
• However, technology changes and new resources
are discovered
• Over most of human history, real mineral prices
have declined – technological progress has offset
depletion
• Is the trend about to change?