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
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PROJECT SURVEY 2014 The Big 4 Metals Retain Their Rank Iron ore, copper, gold and nickel, in that order, are still the most important investment targets for mining companies. These four metals account for 87% of the total number of projects in the pipeline (their share in 2012 was 86%), and they also www.e-mj.com dominate in terms of the total value of investments, together being valued at $682 billion. Iron ore was under-represented in the project pipeline before 2004 but, since then, the continued high demand for iron ore (and increase in its price) has moved iron ore to the top of the metals ranking. Iron ore has accounted for more than a one-third share each year since 2011, and its related capex amounted to $261 billion in 2013 (33% of the pipeline total, compared with 34% in 2012). In second place, copper projects accounted for 29% of the total pipeline, with an investment value of $228 billion (an increase of $30 billion since 2012). The absolute amount of capital put into copper projects has risen by almost 50% since 2009. Gold follows, with $131 billion in project investment (giving the metal a 17% share, the level maintained annually for at least five years). Although gold is not the highest ranking metal in terms of project investment, it is, however, ranked highest in terms of the number of new projects reported per year (representing 33% of the total in 2013). The investment value of nickel projects has not grown since 2009, and the metal saw a fall in its share of the project pipeline last year (accounting for only 8% of the total), with a value of $62 billion. There is a gap, representing some $16–$24 billion, for the investment into projects for uranium, lead-zinc and the PGMs (in that order). The average iron-ore project costs about $1,240 million, four times more than the average gold project ($303 million). Copper and nickel project costs average $993 million and $792 million, respectively. These numbers were slightly lower in 2012, indicating that projects are becoming more expensive. In 2013, the growth rate for iron ore and gold again decreased considerably, down from some 13%–14% in 2012 to 4% and 7%, respectively (the growth for iron ore and gold was around 33% in 2011). The growth rate in the gold project pipeline had started to recover in 2011, after a weak year in 2010, with a growth rate of only 11%. New gold projects in 2013 added up to $8 billion compared with $14 billion the year before, which reflects the metal's price fall. Iron ore continued its recent rate of growth but at a much slower pace. Only $11 billion was added to the pipeline in 2013, compared with $13 billion during 2012. Copper investment grew by much less in 2013 ($8 billion, compared with $10 billion in 2012 and $24 billion in 2011). Many gold projects are relatively small in terms of the investment, and the physical number of projects (although still accounting for a high share of the total) has fallen considerably. Only 43 new projects were announced in 2013, compared with 64 projects Mining Project Investment by Metal, 2013 Share (Percent) 033 029 017 008 003 002 002 001 001 004 100 Share Trend (2012 to 2013) → Iron ore Copper Gold Nickel Uranium Lead/zinc PGMs Diamonds Silver Other Total Investment Total (US$ billion) 261 228 131 62 24 17 16 8 9 35 791 → has continued. In 2013, 13 leading copper projects increased their capex (by a total of $19 billion, 54% above the level of 2012). Gold projects saw an increase of 60% ($7 billion spread among 11 projects). The share size of projects at the feasibility stage increased strongly in 2013, and reached 30% of total investment value. This growth is to be expected given the high numbers of new projects announced in 2010 and 2011 (these projects have matured and passed to the next stage in the project chain). The number of projects at the conceptual and pre-feasibility stages has decreased because of a lack of inflow of new early-stage projects. This reflects declining investment appetite and increasing corporate financial problems. This will likely cause some problems in the future, as there will not be enough projects at the conceptual and prefeasibility stages to satisfy demand. The share of projects at the construction stage fell 9% in 2013. Investment in these projects also fell, to $68 billion from $82 billion in 2012. The average cost of projects under construction in 2013 amounted to $787 million, which is 15% lower than the average cost in 2012 (and close to the $645 million average of 2011). This is due to several high-cost projects being put on hold (or went into production). The average cost of "brownfield" projects is generally much lower, and last year averaged $430 million per project. This reflects the advantages of such projects over their "greenfield" equivalent. During the past four years, the share of expansion projects at existing mines has increased, whereas the pipeline share of the restarting of suspended or closed brownfield projects has fallen. RMG's statistics focus on projects with a reported investment. RMG removes all projects where there has been no news for eight years. However, the Raw Materials Database (RMD) also includes more than 3,400 projects for which no investment estimates have been given. Most of these projects are at the conceptual stage and cost estimates often cannot be made in such an early phase. The investment total for all mining projects, including also those projects for which no investment estimate has been published, is hence higher than the recorded $791 billion at the end of 2013— but it is difficult to estimate how much bigger. The metals not covered in this report, but available in RMD, such as bauxite and some of the alloying metals, also demand continuous investments, but at a much lower level and of only marginal importance compared with those covered in the survey. Given the continued strong metal demand from China, India and other emerging economies, RMG anticipates metal prices to decline a bit further in the first half of 2014 but to pick up again in the second half of 2014 and in 2015. Many of the early stage projects included in the $791 billion figure will not pass from the conceptual study phase to the construction stage. For example, according to RMG statistics, only around 60% of all iron-ore projects in the pipeline (with a planned start up in the next three years) will materialize (in that period). This statistic for projects that are actually completed on time has declined from the 75–80% level of 10 years ago. ↔ ↔ ↔ ↔ ↔ ↔ ↔ ↔ JANUARY 2014 • E&MJ; 27