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 54 E&MJ • AUGUST 2018 www.e-mj.com ticular, have gained an increase in MCI-W score. Among the 16 countries for which the MCI-W score has increased, more than 25% between 1996 and 2016, no fewer than 13 are in Africa. The Impact of the End of the Super Cycle Over the first decade of the new millenni- um, the global mining industry moved from a long period of low prices, unacceptable levels of return and limited investments to a boom with record-high metal prices, improved profitability and a flurry of new projects. The main driving force for this change back in 2003-2004 was strong de- mands for metals and minerals, especially from China. These spurred high levels of investments into the extractive-industry increase supply to meet growing demand. Since 2011-2012, metal prices have dropped, but — excluding nickel — not to pre-boom price levels. Among the most important metals, gold stands out in that its price has not fallen as precipitously as that of the other minerals and indeed has also already started to move upward again. As shown in Figure 4, gold is the sin- gle-most-important metal for those LIEs and MIEs with the highest MCI-W rank- ing. 45% of their total mine value is from gold mining and it is the main contributor in nine out of these 20 individual coun- tries. Table 8 below lists those 21 LIE and MIEs in the top 50 MCI-W counties where gold was the single-largest contributor to the value of mine production in 2016. In 19 countries, gold mining contributed more than 50% of the total value of all mineral production. In Suriname, Mali and Sudan, gold contributed 100% of to- tal value. Among all the LIEs and MIEs together, there is a total of 34 nations where gold mining is the main contribu- tor. When also small-scale/artisanal gold mining is considered (such production is not always fully accounted for in the national statistics used), the importance of gold production and the significance of the relative stability of the gold price is even greater. This is also valid for a num- ber of LIEs such as Sudan, Burundi and Cameroon where small-scale/artisanal gold production is considerable. One conclusion is that those LIEs and MIEs dependent on gold mining have not been affected as severely by the end of the super cycle as those countries pro- ducing certain other metals — nickel and iron ore, for example. In Burkina Faso for example, gold output was fairly constant between 2011 and 2014 around 30-35 mt, while the gold price had decreased 24% between 2012 and 2014. The levels of mine value as a percentage of GDP and mineral exports, however, were at rough- ly the same levels in 2012 as in 2014, which confirms that the impact of the end of the super cycle has been smaller for Burkina Faso and other LIE and MIE countries where gold mining is important. Mongolia was ranked as No. 4 on the MCI-W 2014 and is now ranked No. 16. It is dependent on copper and coal for about 70% of its total mineral output. Despite copper production doubling since 2011, mine value as a percentage of GDP de- creased from 25% of GDP in 2011 to about 17% of GDP in 2016 a 30% decrease. The copper price fell by almost 50% in the same period, explaining a part of the decline in mining's contribution. Parts of the decline are probably explained by other sectors of the economy having grown at a higher rate than the economy in general. Mongolia is, however, still heavily depen- dent on mineral exports, around 80%-85% in the years 2006-2016. It is likely the contribution of mining to the economy of Mongolia will remain on a high level. The end of the super cycle has hit countries in different ways depending on the composition of their mineral produc- tion and many other factors. Gold mining countries are experiencing a slower but still continuing growth. The level of ex- port dependency and mining's share of GDP reached a maximum at the peak of the mining boom in 2011 when the GDP contribution reached as high as 25% for some countries and export dependency was more than 85%. Naturally these fig- ures had declined for some counties by Figure 4—Contribution by commodity to MCI-W for top 20 low- and middle-income economies (Source: Raw Materials Group). Figure 5—Mining development trends 1995-2018: prices, exports, exploration, value of mine production and min- eral rents (Sources: Raw Materials Data, World Bank, SNL Metals & Mining, an offering of S&P Global Market Intelligence, UNCTAD).

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