Mineral and metals production: an overview Olle Östensson , Caromb Consulting

1. Mineral and metals production: an overviewOlleÖstensson, Caromb Consulting

2. Outline of presentation • What are minerals? • Why is mining important? • Geography of mining • Demand for minerals • Reserves and resources

3. Some definitions • Metals are chemical elements that conduct electricity. • In nature, they occur in the form of minerals, which are chemical compounds containing metals and with specific chemical and physical characteristics. • Minerals occurring in sufficient quantity and grade to be economically exploitable are called ores.

4. What are minerals?

5. Uses of the major metals • Aluminium: Transport, packaging, construction, high tension power lines • Copper: Electrical conductors, construction, transport • Gold: Investment, jewellery, electronics • Lead: Batteries, pigments, ammunition, radiation shielding • Nickel: Stainless steels, electroplating • Platinum: Jewellery, catalysts • Silver: Electronics, sterlingware • Tin: Tinplate in packaging, solder, pigments • Zinc: Galvanizing, brass and bronze

6. Most important metals in world mining 2005

7. Why is mining relevant to development?Because… • Around twenty developing countries depend on mining for more than half their export income – and the number is increasing • Ease of entry into mining • No need to mobilize domestic capital • Easy access to technology • No need for government financed infrastructure • Easy market access • Transparent and simple standards • Minimal need for marketing • Scale of revenues • The world’s largest mines generated annual sales of more than US$ 12 billion, annual profits of more than US$ 8 billion in 2006-2007 • Governments can easily appropriate rents

8. Example:Codelco, Chile, US$ billion Source: www.codelco.com

9. VALUE OF WORLD MINING YEAR 2005 TOTAL ~ 910 billion USD Source: Raw Materials Group, Stockholm 2006.

10. METALS VALUE AT MINE YEAR 2005 TOTAL ~ 250 billion USD Source: Raw Materials Group, Stockholm 2006.

11. Distribution of global mine production among regions, % Source: Calculations by Raw Materials Group

12. GLOBAL MINING – GEOGRAPHY 1990

13. GLOBAL MINING – GEOGRAPHY 2006 1. China 10.1%

14. TNCs IN GLOBAL MINING Sources: UNCTAD, based on Raw Materials Data, 2007.

15. CORPORATE CONCENTRATION % of total value of non-fuel mineral productionat the mine stage Source: Raw Materials Group, Stockholm 2007. Source: Raw Materials Data

16. Demand has increased – and so have pricesPrice index minerals, ores and metals (January 2000=100) Source: UNCTAD Commodity Price Bulletin

17. Reasons • Asian minerals and metals demand has grown very rapidly and Asian countries have accounted for almost all of the increase in demand over the past five years • China is now the world’s largest steel producer, steel consumer, steel exporter and iron ore importer, the world’s third largest iron ore producer and the third largest steel importer • Metals use per capita is still very low in countries such as China and India, but they are still at a stage where metals consumption relative to GDP is rising and large populations make them more than significant forces on the market

18. China in the world iron and steel economy: per cent of world Source: UNCTAD, The Iron ore market 2009-2011

19. Outlook • Demand will continue to be strongly linked to Asian growth and high rates of increase are expected • Once the recovery from the recession is completed, capacity is expected to just keep up with growth in demand in the long term (next 8-10 years) • A large share of output growth will take place in developing countries (Africa and Latin America), where there is now strong investor and exploration interest

20. Share of value added at the mining stage, 2005/2006 Source: UNCTAD, World Investment Report, 2007

21. CLASSIFICATION OF MINERAL RESOURCES

22. Evolution of copper ore grades Source: Raw Materials Group

23. Growth of resource base Source: Crowson, P., 2000, Minerals Handbook, 2000-2001, London

24. Number of years’ production at 2 % annual growth Source: Tilton, J.E., 2003, On Borrowed Time? Assessing the Threat of Mineral Depletion, Resources for the Future, Washington, D.C.

25. Recycling: a hypothetical example Assumptions • Metals use has increased by 5 % annually in the past and continues to do so until year 5; • from year 6 to year 15, metals use grows at an annual rate of 20 %; • from year 16 to year 24 it grows at 10 %; • from year 25 to 35 it is constant; • from year 36 onwards it declines by 2 % per year • The average life of metal containing products is 15 years • 67 % of the metal in a product can be recycled.

26. Are mineral prices rising in the long term? • Hotelling: Mineral prices should rise at the same annual rate as the rate of interest – if the price increase is lower, then more should be produced, if higher, resources should be left in the ground • However, technology changes and new resources are discovered • Over most of human history, real mineral prices have declined – technological progress has offset depletion • Is the trend about to change?