Engineering & Mining Journal

JAN 2013

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

Issue link: https://emj.epubxp.com/i/102812

Contents of this Issue

Navigation

Page 29 of 99

PROJECT SURVEY 2013 E&MJ;'s Annual Survey of Global Mining Investment Last year's survey questioned whether the long boom in mining investment was starting to fade, or just experiencing a temporary market adjustment. This year's verdict: the boom has peaked. By Magnus Ericsson and Viktoriya Larsson Economic Weakness, Lower Expectations 28 E&MJ; • JANUARY 2013 Mining Project Investment Pipeline, 2012 Investment Share Share Trend ( x US$ B) (Percent) (2011 to 2012) Greenfield Projects Early Stages Conceptual & Prefeasibility Feasibility Construction Brownfield Projects All Stages 269 204 082 037 028 011 180 TOTAL 735 024 100 ↔ → As 2012 drew to a close, the total value of announced investment in the project pipeline of the global mining industry was $735 billion, as registered in the RMD Metals 'Mines/Projects' database. The deepening financial crisis in Europe and the slow recovery in North America seem to have slowed growth in 2012. Metal prices during the past year have, on the whole, not performed badly, with gold prices higher than in 2011, copper and iron ore on slightly lower levels while nickel and zinc have been trending downward for about two years. Industry expectations for 2013 are cautious and might have depressed investments toward the end of the past year. The number of projects announced in the third and fourth quarters of 2012 is down compared with both the first half of the year and the same two quarters in 2011. However, it is important to remember: 1) there is always a delay in reporting new projects; and 2) this analysis is based only on figures captured up to late November/ early December. The upward trend of increased project costs, highlighted in the 2011 survey, continued in 2012. We previously noted that many projects have been enlarged in both announced cost and capacity when moving from the feasibility to the construction phase and this tendency continues. Of all of the gold projects in this year's list, 10 experienced cost increases totaling more than $8 billion, from an original total of $15.4 billion. The average increase was 54%. Only one project managed to cut its cost, by a marginal 5%. Six projects are new to the list and no comparison is possible. Project cost increases are not entirely due to increasing unit costs but also to rapid growth in metal demand. Other important cost drivers include more complex ore bodies, deeper lying deposits with lower grades and increasingly remote locations of new mines. Equipment prices and construction costs are increasing and many equipment suppliers are working at near full capacity. Problems caused by lack of experienced mining staff, which disappeared in 2009 and 2010, have re-emerged although not at the same serious level as in late 2007 and early 2008. In some regions— Western Australia, for example—recruitment of staff has become a serious problem and salary and wage levels are getting out of hand. The number of projects at the feasibility stage has increased strongly, to 28% of total investment. This growth is to be expected given the high numbers of new projects announced in 2010 and 2011, which now have matured and evolved to the next stage in the development process. At the same time, the number of projects at the conceptual and pre-feasibility stages has decreased because of a drop in new, early-stage projects, reflecting the declining investment appetite and increasing financial problems ↔ → The investment boom in the global mining sector slowed down during 2012. The annual growth rate of the project pipeline was only 9% in 2012 compared with 20% and 21% in 2011 and 2010. The number of projects in the pipeline even decreased between 2011 and 2012—only by 1%, but marking the end of a continuous increase over the past years. The slowdown, which continued throughout the year but accelerated in the last quarter, has included a number of project deferrals such as the postponement of the high-profile $8-billion Olympic Dam project by BHP Billiton. Other examples are the Prioskolskoye iron ore project and the Sukhoi Log gold project, both in Russia; Grupo Mexico's El Arco copper project in Mexico; Vale's Vermelho nickel project in Brazil; and others. During 2012, 130 new mining projects with an estimated total cost of $47 billion were registered in Raw Materials Group's (RMG) Raw Materials Data Metals (RMD Metals) 'Mines/Projects' database. Project investment in 2012 was considerably lower than in 2011, when the number of new projects registered was 165 with an estimated total investment cost of $110 billion. The final figures for 2012 will most likely increase somewhat as a number of projects from the end of 2012 will only be registered in the database early in 2013. This correction has been as much as 15%–20% in some years, but most probably will be less than that this year. Although it is too early to draw any detailed conclusions it is clear that the peak in investments in the present cycle has been reached and we will most likely see a slight decline in investment activities in 2013. However, this decline will not represent the start of a long-term trend. Mining and mining investments have always been and will remain cyclical businesses, and RMG remains optimistic for the long-term outlook of the sector. Population growth, urbanization and general economic development in the emerging economies are still positive and provide a strong base for continued growth in metal demand and hence the need for increased mine production and for new investment projects. Source: All table data provided by Raw Materials Data, Stockholm, Sweden, December 2012. www.e-mj.com

Articles in this issue

Links on this page

Archives of this issue

view archives of Engineering & Mining Journal - JAN 2013