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

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PROJECT SURVEY 2013 Mining Project Investment by Region, 2012 Share Trend (2011 to 2012) ↔ → → Share (Percent) 014 010 010 029 018 017 100 → → Africa Asia Europe Latin America North America Oceania TOTAL Investment (US$ billion) 106 075 077 210 146 121 735 ↔ than the previous year. Latin America's project pipeline shows the highest average of all because there are more super large projects in this region than in any of the others. The average project investment within the Latin America sector is $730 million, more than twice Asia's average of $363 million. The other regions fall between these two extremes: Europe, $450 million; Africa, $541 million; North America, $681 million; and Oceania, $583 million, respectively. In Europe (excluding Russia), focus is increasingly on the Nordic countries, including Finland, Sweden and Greenland. Sweden has maintained its position among the top 20 countries. Finland is likely to move up the list, as Anglo American has announced that its Sakatti copper/nickel/PGM early-stage project is among the most promising greenfield finds made by the company globally in 20 years. In addition, Gold Fields has revitalized its Arctic platinum project in northern Finland. The European Commission's renewed interest in the mining sector has not resulted in any notable improvements in Europe's investment climate, despite the Raw Materials Initiative having been in place for several years. In Africa, the African Union has decided to establish the Africa Mineral Development Center in Addis Ababa, the capital city of Ethiopia, to support the implementation of the African Mining Vision. The World Bank has announced plans to spend $1 billion on mapping and exploration for metals and minerals in Africa, which would give this underexplored region a boost. Asia's problems are clearly highlighted by the continuing uncertainty surrounding Mongolia's Oyu Tolgoi copper project, which has been delayed several times due to the government's on-going insistence on renegotiating the project's mine agreement. Investors Wary of Resource Nationalism, Unstable Environments The total investment pipeline share of the 10 most attractive countries was static in 2012 at 71%, identical to 2011. Australia and Canada continue to dominate both in terms of capex volumes and number of projects. Together, they account for more than $200 billion, divided among 326 projects. Although the promise of "spreading mining investments more evenly across the globe" has been mentioned in the previous three project surveys, it has become clear that only a small number of countries continue to attract the largest share of the investments. The growing trend of resource nationalism is most certainly a key reason for this trend. Countries that are perceived as offering a stable political and economic environment receive growing attention. The United States has improved its share at a faster rate than any other country between 2010 and 2011, garnering a 38% share in 2011 and 34% in 2012. Chile is another example, with growth during 2011 and 2012 at 20% and 27%, respectively. Australia, Canada and the U.S accounted for 34% of the total project pipeline at the end of 2011. In December 2012, their combined 30 E&MJ; • JANUARY 2013 share remained at the same level despite a slight decline by Australia, which was compensated by strong U.S. growth. Australia has kept its standing as one of the most attractive countries for mining investments despite concerns anticipated by the introduction of its "super profit" tax, the final promulgated version of which was a much weaker version of the original proposal. Iron ore projects continue to dominate, and of the top 20 projects in Australia 15 are in iron ore and all of them demand investments of over $1 billion each. Second-ranked Canada has a much broader mix of projects including several gold and base metal projects among the top 20 with seven iron ore projects as well as six gold projects, two copper projects, two nickel projects, one diamond project and one niobium project on the list. The pipeline value of projects in both countries is more than $100 billion. There was little change in ranking of the Top 10 countries in 2012; in fact, the only change was Guinea moving up from ninth position from tenth, replacing the Philippines. Brazil's mining investment total, which fell in 2011, rebounded in 2012 to its 2010 ranking with more than $50 billion in project funding. Russia, at 5% grew its investment share at a slower pace than most of the Top 10 countries, and the volume of investments in the South African pipeline declined by 7% or $23 billion, underscoring the problems the country has experienced during past years; calls from the ruling ANC party's Youth League for nationalization of the mining sector have had an impact on international investors' perception of the country. Meanwhile, Guinea continued its upward progress despite a slight drop in the $16 billion investment total for its three giant iron ore projects. Below the Top 10 cutoff are Mexico, Papua New Guinea, Sierra Leone, Argentina, Indonesia, China, Sweden, Republic of the Congo, Cameroon and Kazakhstan in that order, each with a portfolio of projects between $8–$15 billion. (Please note that an error in the 2012 project survey text made incorrect reference in this context to the Democratic Republic of the Congo (DR Congo) instead of Republic of the Congo). The giant Zanaga iron ore project has propelled this Central African country to such a high ranking, an example of how just the start or completion of one large project can significantly alter the ranking of smaller countries relative to others in the survey. In Sierra Leone, for example, one new project during 2012 added more than $6 billion to its country total, illustrating that not a lot of importance should be associated with a country's rank outside the top 10. The investment figure for China, it should be noted, is most certainly an underestimate since many of the projects run by state-owned companies are never reported in such a way that they reach the international mining press. Chinese projects are generally lower in project value at an average cost of Mining Project Investment by Country, 2012 Australia Canada Chile Brazil Russia Peru United States South Africa Guinea Philippines TOTAL Investment (US$ billion) 105 104 096 052 048 044 043 023 016 015 519 Share (Percent) 14 14 09 07 07 06 05 03 02 02 71 Rank in 2011 01 02 03 04 05 06 07 08 10 09 www.e-mj.com

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