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 52 E&MJ • AUGUST 2018 the highest MCI-W score, there is only one additional HIE among the top 50, which is Canada. Russia was an HIE country in 2014, but is now a UMIE. In Figure 2, a 4D chart, the export contribution is shown on the X-axis and mineral value as percent of GDP on the Y-axis. The size of the circles is propor- tional to the value of mine production in absolute terms (USD) and the 4D is time: the data being presented just for 2016 in the figure. The chart shows the top 30 MCI countries. Australia has by far the largest mining industry by value of pro- duction and the high value is represented by the size of the circle. The export con- tribution ranking is topped by Botswana, Sierra Leone, DRC and Mongolia at levels of 80%-90% of total exports, followed by Mali, Burkina Faso and Zambia with export contribution levels at around 70%- 80%. The graphic confirms the countries with the highest levels of export contri- bution are mainly LIE or LMIE. Eritrea with only one mine (of industrial scale in operation in 2016) is represented by the small light blue circle. Value of Mine Production While there are 30 LIE and LMIE among the top 50 MCI-W countries, the HIE and UMIE are substantially more important in terms of production value, for example, China, Australia, USA, Canada, Chile, Russia, South Africa and Brazil (See Fig- ure 3 and Table 3). It should be noted that the main engine of metal demand, China, is also by far the most important mining country when coal is included in the production total. If coal is omitted and only metals and industrial minerals are considered, Australia and China are roughly the same size. The absolute levels of production are relatively small for sev- eral of the states, such as Guyana, Eritrea and Guinea in the MCI-W top 50, but for the economy in broader sense mining is an important contributor to all the states in the MCI-W top 50. The total value of mineral production at the mine stage is dominated by coal, the dark grey in Figure 3. Coal constitutes roughly half of the total value of industry production globally. Iron ore (Fe - green), copper (Cu - red) and gold (Au - yellow) follow next. The industrially important metals, nickel and zinc are each rough- ly an order of magnitude smaller. These metals are of the same value in total glob- al production as the fertilizer minerals, namely phosphate and potash: 2%-3% of the total value of production. Thereafter, there are a number of metals and indus- trial minerals, which each contribute less than 1% of total global value. China is by far the most important country in terms of total production value followed by Austra- lia and the USA. The top 10 countries in terms of the value of their mine produc- tion contribute 75% of the total value of non-fuel mineral production at the mine stage globally. For each of the MCI-W Top 20 LIE and MIE, Figure 4 shows how metals and minerals contributed to the total value of their mine production in 2016. Gold min- ing is the major mineral contributor in no less than nine countries in this top 20. In Suriname, Mali and Sudan, gold is the only mineral mined and thus contributes 100% of the total value, and in Burkina Faso, Guyana, Ghana, Uzbekistan and Tanzania gold mining contributes be- tween 75%-99%. Copper is the most im- portant commodity in Zambia, the DRC and Laos. In Namibia and Botswana, dia- monds are the main contributor. In 2016, the total global value of mine production at the mine stage, including coal, was around $1 trillion. Coal con- tributed $470 billion and iron ore is es- timated at $125 billion. The changeover time in the total global value of miner- al production follows the general metal/ mineral prices as seen in Figure 5. For some individual countries, however, the changes in the level of production have also been very important. For example, copper production in DRC has increased tenfold over the last 10 years and is now twice as large as during the previous peak in the 1980s. Metal and mineral prices reached a peak in 2011 and then experienced a five-year downturn until 2016 when prices started to increase slowly again. It should be noted that most metal pric- es in nominal terms are still higher than they were in the early 2000s. As Figure 5 shows, the metal price index had been on a downward trend since 2011 with a flattening in 2016 and increase in 2017 and beginning of 2018. As can also be seen from Figure 5, mineral prices are important, but not the sole determinant of the changing levels of exports, value of mine production, miner- al rents and exploration expenditures. Other Factors Non-fuel minerals and metals are the major contributor to many nations' ex- ports. Among the top 50 countries with the highest mineral exports relative to total exports in 2016, there were 21 na- tions with a total mineral export of more than 50% of the total. Among the top 50, ranked by export contribution, no less than 36% are LIE and 28% are LMIE. Only nine countries or 18% are HIE. The export contribution to the MCI-W score in LIE and MIE is the most important factor explaining their high ranks. Botswana is No. 1 with a mineral export contribution of no less than 93% of total exports. Si- erra Leone, the DRC and Mongolia are all countries where mineral exports contrib- ute more than 80% (See Table 4). Exploration activity and spending is mainly driven by expectations of future, mostly short term, mineral demand and prices. In reality, exploration expenditure in a given year is closely related to met- al prices the preceding year. This means that future metals demand, which should logically determine levels of exploration is not a prime driver. This is a failure of the market for this specific service. Mineral rent is the difference between the value of production for a stock of min- erals at world prices and their total costs of production, including in costs an esti- mate of the "normal" return on capital. Minerals for which this indicator is cal- culated by the World Bank are tin, gold, lead, zinc, iron, copper, nickel, silver, bauxite and phosphate. A number of indicators were studied and combined to arrive at a MCI-W. A number of factors were expended and compared to the original ICMM MCI, but Country Value billion US$ % China 0, 304 0 30 Australia 0, 109 0 11 USA 0,0 72 00 7 India 0,0 62 00 6 Russia 0,0 61 00 6 South Africa 0,0 40 00 4 Indonesia 0,0 39 00 4 Brazil 0,0 37 00 4 Canada 0,0 29 00 3 Chile 0,0 29 00 3 Others 0, 248 0 24 Total 1,029 100 Table 3—Value of mine production, top 10 countries.

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