Engineering & Mining Journal

AUG 2018

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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MINERAL ECONOMICS 48 E&MJ • AUGUST 2018 www.e-mj.com In several low- and middle-income coun- tries with important extractive sectors, mining makes significant contributions to national economic and social develop- ment. Mineral-rich countries also devel- op faster than countries with few known mineral resources. These facts are based on results from a study within the frame- work of the United Nations University (UNU) World Institute for Development Economics Research (WIDER) initiative, Extractives for Development. The results of this survey contradict the widespread view that mineral resources create a de- pendency that might not be conducive to economic and social development. The study has been updated and now includes socioeconomic factors. One conclusion is that mining countries perform better than oil countries and non-mineral countries in human development and governance. The WIDER survey provided a more up-to-date statistical analysis of the con- tribution of non-fuel minerals mining to low- and middle-income economies. Based on the detailed data available for the minerals sector, an analysis was car- ried out for the current situation for 2016, and trends in mining's contribution to economic development from 1996-2016. The contribution of minerals and min- ing to gross domestic product (GDP) and exports reached a maximum at the peak of the mining boom in 2011. Naturally, the figures for mining's contribution had declined for most countries by 2016, but more importantly, the levels were still considerably higher than in 1996. Introduction Based on the detailed data available for the minerals sector, an analysis was done on the situation in 2016, and recent trends in how mining contributes to the economic development of low- and mid- dle-income countries for the years 1996- 2016. By using data on variables such as production, prices, mineral rents, explo- ration expenditure, government revenues and employment, this study provides up- to-date information and offers answers to questions such as: • At what statistical level do the mining industries contribute to national econo- mies in low- and middle-income develop- ing countries? • Has that level of statistical contribution changed over time — in fact over the past 20 years from 1996 to 2016? • Has the level of contribution changed as a result of the sharp drop in the prices of most extracted commodities since about 2011 — after the end of the so-called "super cycle?" The methodology was based on earli- er work coordinated by the International Council of Mining and Metals (ICMM) in which the same team participated in 2011 and 2014. One existing approach to assessing the magnitude of the dependence of countries on extractive resources is the Mining Contribution Index (MCI) that was developed by ICMM. The MCI has been updated and further developed. The revised version is called MCI WIDER (MCI-W) and is based on four indicators: • Exports of minerals including coal as a share of total merchandise exports (UNCTAD). • The total production value at mine stage of metallic minerals, industrial minerals and coal expressed as a percentage of GDP (USGS, BGS, Raw Materials Data). • Mineral rents as a percentage of GDP (World Bank). • Exploration expenditure as a percentage of production value at mine stage (SNL Metals & Mining, RMG Consulting). To calculate MCI-W, countries were ranked in descending order for each of the four MCI indicators. Countries for which data do not exist were omitted from the ranking. For each country, per- centile ranks are calculated based on the four indicators, by dividing the country rank by the maximum rank within that indicator to generate a ranking between 0 and 1. Finally, the four MCI indicators are weighted equally at 1/4, summed up, and multiplied by 100. Mining's Contribution to National Economies The extraction and export of minerals spurs economic development By Olof Löf and Magnus Ericsson Figure 1—Mining contribution index WIDER, score by country in 2016.

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