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?