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 AUGUST 2018 • E&MJ 55 www.e-mj.com 2016, but the situation for most coun- tries was still a significantly larger con- tribution of (dependency on) mining than in 1996. For some countries, production value as a percent of GDP and mineral exports are even higher in 2016 after the price peak in 2011 because of a strong growth in production, this is the case for the DRC, Sierra Leone and Eritrea. Social Development and Mining The analysis can be taken a step further to include a number of indicators of so- cial development: • Human Development Index (HDI). • Governance, extensively including cor- ruption, political stability, rule of law, government effectiveness, regulatory quality, voice and accountability. • Inequality, the so-called GINI coefficient. HDI as defined by the UN measures several aspects of social development, such as health, living, education, etc. The top 20 economies in the MCI-W index has increased on average from 0.45 to about 0.55 in HDI, an increase with 27%. By contrast, the bottom 20 economies in the MCI-W index have "only" increased with 18% between the years 1996-2015 (See Figure 6). To have a deeper look into the social de- velopment, the analysis has focused on the sub-Saharan African countries. In sub-Sa- haran Africa, a great progress can be seen over the 20-year period. In mining coun- tries in the region, HDI has risen by 43%, while in non-mining countries with only 24% and the same in the oil countries. Measured with all governance indi- cators, mining countries have developed significantly better than non-mining countries, and in some oil countries, some indicators have even gone back. In the 20 LIE and MIE with the high - est MCI-W ranking in 1996, the GINI coefficient, i.e., inequality, has been con- stant or decreased in 13 countries and increased only in four countries. Future Implications of Extractives Dependency Metals and minerals prices are at present low, relative to the peaks of 2011, but still well above their low levels in the early 2000s. Exploration expenditure is also low and investments into new mines are also at a relatively low level. At the same time, it is clear that demand for metals and min- erals in general has not dropped as much as prices. There are clear indications that the price trough is generated more by an over-supply situation than by a fall in demand. It seems as if with the gradual improvement in standards of living, in- creased life expectancy and continuing urbanization, which constitute the three major long-term drivers of metal and min- eral use, there will be a continuing, slow and gradual increase in metal demand. Increased recycling and alternative energy sources might change this situa- tion in the long-term future, but will not affect midterm scenarios. One of the ma- jor reasons for the 2003-2011 "super cy- cle" was the slow response of the mining industry to increased demand. It takes a minimum 3-5 years to increase mine ca- pacity and this time lag is increasing all the time due to the increasing advantages of scale economies i.e., bigger mines with larger investments and longer and more difficult permitting processes. In short, there are no signs of the lag time decreas- ing rather the opposite. In principle, the global mining industry faces a similar situation during the next few years as it did in the early 2000s: slowly increasing demand but some hes- itancy about investing and so a low elas- ticity in mine production in response to demand. There is today, less indication of such a strong growth in demand as seen in the early 2000s. Nevertheless, metal prices might shoot up when supply gets short. The situation might be exacerbat- ed also by the fact that investments into exploration have dropped dramatically in the recent past and hence this might be a factor slowing the opening of new mines when new capacity is needed. The bottom of the downturn was reached in 2016 and prices have since increased. However, the question remains as to how long prices will remain at their presently relatively low levels. The possi- Country 1996 2016 ↑ ↔↓ Congo, Dem. Rep. L L ↔ Burkina Faso L L ↔ Mali L L ↔ Papua New Guinea LM LM ↔ Eritrea L L ↔ Namibia LM UM ↑ Mauritania L LM ↑ Suriname LM UM ↑ Peru LM UM ↑ Liberia L L ↔ Botswana LM UM ↑ Chile UM H ↑ Zambia L LM ↑ Guyana L UM ↑ Sierra Leone L L ↔ Mongolia L LM ↑ Guinea L L ↔ Tanzania L L ↔ Kyrgyz Republic L LM ↑ Ghana L LM ↑ Table 6—Change in country classification, 1996-2016. Country % change Lao PDR 303.5 Eritrea 255.6 Cote d'Ivoire 154.8 Burkina Faso 0 74.6 Sudan 0 68.8 Mozambique 0 64.5 Serbia 0 60.9 Togo 0 59.5 Mali 0 58.6 Congo, Dem. Rep. 0 35.7 Sierra Leone 0 35.0 Senegal 0 32.7 Madagascar 0 32.3 Tanzania 0 29.9 Mongolia 0 29.3 Morocco 0 27.9 Table 7—Change in MCI-W score, 1996-2016. Country Gold Gold contribution production, mt Surinam 100% 0 13 Mali 100% 0 47 Sudan 100% 0 93 Fiji 0 97% 00 2 Nicaragua 0 96% 00 8 Cote d'Ivoire 0 95% 0 24 Guyana 0 94% 0 22 Ghana 0 94% 129 Burkina Faso 0 93% 0 39 Tanzania 0 92% 0 44 Togo 0 90% 0 14 Kyrgyzstan 0 84% 0 21 Uzbekistan 0 84% 100 Papua New Guinea 0 83% 0 62 Niger 0 69% 00 1 Dominican Republic 0 67% 0 38 Argentina 0 62% 0 56 Guinea 0 59% 0 30 Senegal 0 55% 00 7 Zimbabwe 0 45% 0 23 Liberia 0 44% 00 2 Table 8—Share of total value of mineral production for gold (2016).

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