Engineering and Mining Journal - Whether the market is copper, gold, nickel, iron ore, lead/zinc, PGM, diamonds or other commodities, E&MJ takes the lead in projecting trends, following development and reporting on the most efficient operating pr
Issue link: https://emj.epubxp.com/i/239773
PROJECT SURVEY 2014 E&MJ;'s Annual Survey of Global Metal-mining Investment Harsh global economics have dragged investment levels from boom to bust in many sectors. However, 2014 may be the year the industry touches bottom and begins to regain economic traction. By Viktoriya Larsson and Magnus Ericsson New Projects: Led by Lead The fall in metal prices (especially for copper and gold), and the related slowdown of Chinese consumption, clearly influenced last year's mining investment. The only metal that showed a continued price increase last year was lead (where there is a supply deficit), and RMG expects this trend to continue for the next few years. The number of projects announced in the third and fourth quarters of 2013 was lower than both the first half of the year and the equivalent period of 2012. However, there is always a delay in reporting new projects, and this analysis is based only on figures captured up to early December. Nevertheless, RMG is cautious about price expectations, and has reduced its investment forecasts for both the year just ended and the new year. RMG annually monitors the 700 companies that report capex data. These represent the majority of all mining-related companies listed on the world's stock exchanges outside China but, taken together, only account for 40% of the total value of all metals, industrial minerals and coal production in the world. This indicates the growing value of production coming from countries, mainly China, where transparency—related to investment plans in particular—is low. Project costs have been rising. This trend continued in 2013, and even strengthened. Many of the industry's largest gold and copper projects reported higher-than-expected capital expenditure. RMG has previously noted that project costs grow when moving from feasibility to the construction phase, and this tendency Mine Project Investment Pipeline, 2013 Investment Share Share Trend (x US$B) (Percent) (2012 to 2013) 036 030 009 194 791 025 100 → 288 241 068 → Greenfield Projects Early Stages Conceptual & Prefeasibility Feasibility Construction Brownfield Projects All Stages TOTAL → 26 E&MJ; • JANUARY 2014 economies are less than the recent experience but remain positive, and so provide a strong base for continued growth in metal demand. In addition, the sharp drop in exploration expenditure in 2013 indicates that too few new deposits will be ready to develop into new mines in five to 10 years. → The end of the mining-investment boom was signaled by the global financial crisis that started in late 2007, but the actual decline in new project announcements appeared much later—in late 2011 (as recorded by the Raw Materials Database). The situation worsened in 2012 and project announcements reached record lows last year. Only 95 new projects, with a total projected cost of $38 billion, were registered in Raw Material Group's mines/projects database in 2013. This compares with 113 projects (valued at $47 billion) in 2012 and the peak year of 2010, when 167 projects worth $115 billion were reported. Historically, these figures have proven to be reliable leading indicators of future mining industry capital expenditure. The rate of decline in new project announcements eased, however, in 2013. This suggests that the slowdown in mining investments will start to bottom-out this year or next. (There has, historically, been a time lag of one or two years.) In 2010 and 2011, the increase of the total number of projects in the pipeline was around 20% annually, while in 2012 and 2013 the figures were 9% and 8%, respectively. Given the continued growth of metals demand, albeit at a lower pace than a few years ago, the need for continued huge amounts of mining capex is obvious. The complexity of new projects and the necessity to invest heavily in infrastructure (whether roads, ports or utilities, such as electricity and increasingly, water) will keep average project costs at high levels. The investments necessary to increase mine production by 3%-4% annually from the new, higher level will be higher than that of a 7%-8% production from a lower base tonnage. Accordingly, despite the recent, widely publicized cuts in major companies' investment budgets, RMG does not expect a return to the low global capex levels of the 1990s and early 2000s. Most of the cutback in corporate capex has fallen on gold and nickel projects. These include projects on hold, such as Barrick Gold's Pascua-Lama in Chile (total capex of $8 billion), and Goldcorp and New Gold's El Morro project, also in Chile (capex of almost $4 billion). Abandoned projects include the Reko Diq venture in Pakistan of Antofagasta and Barrick ($3 billion in capex), Metals X's Wingellina nickel project in Australia (capex of around $2.3 billion) and, also in Australia, Mitsubishi's Jack Hills iron-ore project (where all operations have been suspended, and the expansion project was earmarked to cost $4 billion). However, mining is a cyclical business, and RMG expects investment activity to increase in 2015. Population growth, urbanization and general economic development in the emerging Source: All table data provided by Raw Materials Data, Stockholm, Sweden, December 2013. www.e-mj.com