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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PROJECT SURVEY 2013 → Share Trend (2011 to 2012) ↔ ↔ → ↔ ↔ → www.e-mj.com Share (Percent) 034 027 017 008 004 002 002 001 001 006 100 → As in previous years iron ore, copper, gold and nickel, in that order, are the largest investment targets for mining companies. These four metals account for 86% of the total project pipeline, a small increase from 84% in 2011. They also dominate the mining business in terms of total value of its output, which for these metals only is $606 billion or 71% of the total value of all mine production of metals during 2011. Iron ore project investment remains firmly in the top spot, as it has since 2010, and even increased its share in 2012 with a project pipeline of $245 billion; while copper, in second place, accounted for $200 billion. Gold and nickel are at much lower levels ($125 billion and $60 billion respectively), followed by a significant drop to the $15–$25 billion level where uranium, lead/zinc and the PGMs, in that order, are to be found. The average iron ore project demands an investment of $1.24 billion— Iron ore Copper Gold Nickel Uranium Lead/zinc PGMs Diamonds Silver Other Total Investment Total (US$ billion) 245 200 125 60 25 17 16 9 8 00 735 → Iron Ore Grabs a Bigger Share Mining Project Investment by Metal, 2012 → of the junior companies that initiate most of these projects. This will likely cause some problems in the future, as there will not be enough conceptual- or prefeasibility-stage projects in the pipeline to meet the inevitable rising demand for metal. The share of projects at the construction stage increased marginally compared with 2011. However, the investment value of this sector grew strongly in 2012. The average cost of projects under construction in 2012 was $930 million—a large difference from the average of $645 million in 2011. The same situation is noticeable for brownfield projects, although for those the average project cost is generally much lower, at $450 million, than for a greenfield project. It is difficult to accurately monitor the progress of brownfield projects from project studies to construction because they are often carried out internally and quickly, without public disclosure. Thus, the total investment figure for projects under construction is undoubtedly an underestimate, particularly for this project category. All of this year's survey statistics are based on projects with an announced investment estimate. The RMD Metals database also includes approximately 1,900 projects—mostly in the conceptual stage—for which no investment figure has been announced. The investment total for all mining projects, including projects for which no investment estimate has been published, is therefore larger than the $735 billion recorded at the end of 2011—but it is difficult to estimate how much larger. If it is assumed that the projects without published investment estimates have a similar cost structure to those projects whose costs are known, the total figure would increase considerably. It could, however, also be argued that unannounced-project costs are lower, as most megaprojects are conducted by public companies that must publicly disclose all significant expenditures. If this is indeed the case, the total figure would be smaller. Projects involving metals not covered in this survey but included in the database also represent a specific investment total but one that is estimated at a much lower level than the major metals represented in the survey Given the continued strong metal demand from China, India and other emerging economies, RMG expects metal prices to mildly decline in 2013 before possibly rising again in 2014. Many of the early stage projects included in this year's total investment figure will not pass from the conceptual study phase to the construction stage for a number of reasons. However, historically RMG has observed that 60%–75% of all projects announced will materialize during a three-year period. more than four times the average investment cost of gold projects, at $304 million—while average copper and nickel project costs are $816 million and $777 million, respectively. The project growth rate for iron ore and gold both decreased considerably in 2012, dropping to 14% and 13%, respectively, from 2011's rate of 33% and 34%. The growth rate of the gold pipeline had started to recover in 2011 after a weak year in 2010, which had a growth rate of only 11%. New gold projects in 2012 totaled $14 billion compared with $28 billion in 2011 and only $7 billion in 2010. Given gold's on-going high price, these swings are difficult to explain. The iron ore sector had only $13 billion of new investment enter the pipeline in 2012 compared with $53 billion in 2011, while copper's $10 billion of new investment in 2012 fell well below 2011's $24 billion. Gold's per-project investment, on average, is relatively small but the number of gold projects is high. In 2012, 64 new gold projects were announced—not at all surprising considering the record high gold prices of 2012—compared with 53 in 2011. A total of 16 new iron ore projects and 21 new copper projects also were announced in 2012, compared with 21 new iron ore and 24 new copper projects in 2011. It is obvious that copper is the metal that has done best in terms of the number of new projects in 2012. Somewhat surprisingly the number of new nickel projects increased in 2012 after a downturn in 2011, with six new projects announced at a total investment of $3.7 billion. The rare earths continued to attract interest after a slowdown in 2011 as well: eight new projects at a total of $3.6 billion were announced. If all of them are carried through to construction an over-supply situation will quickly develop. Also unexpected was a revival of interest in silver during 2012, with six new projects at a total announced investment of $1.2 billion. Lead/zinc, uranium and PGMs continued to decline in 2012, with only one, three and two new projects announced, respectively. Latin America Still No. 1 Latin America remained in top position in 2012 with a 29% share of the global investment pipeline, which is below its highest previous share of 32% in 2010. North America is the only region showing strong, continuous growth for the past three years, up from 15% in 2010 to 20% in 2012, with total investment value rising from $86 billion in 2010 to $146 billion in 2012. Africa's share of total mining project investment was down slightly to 14%, but increased in value to $106 billion. Europe, including all of Russia, maintained its position but Asia's share fell from 11% to 10%; Asia reached its peak of 14% in 2009 but has been falling since. The investment pipeline in North America grew by $24 billion in 2012, and in Oceania by $8 billion, a considerably slower pace JANUARY 2013 • E&MJ; 29