Plc’s plans to create a
$5.9 billion copper-gold project in the Philippines has been halted
because of a mining reform bill.
Barrick Gold Corp. has lowered its copper production
outlook for 2013 due to permitting delays at its Jabal
Sayid project in Saudi Arabia.
Zambia is Africa’s largest copper
producer (and wants to directly market its copper),
in second place is the DRC. The copper-belt which straddles Zambia’s
and the Democratic Republic of the Congo’s borders is being tied up for
internal development by the two countries. The DRC and Zambia are amending
their mining codes to enable the government to raise taxes and implement a
35-percent minimum ownership threshold for state shareholding in projects.
Approximately 48% of the world's 2007 mined
cobalt was a byproduct of nickel mining from sulfide and laterite deposits.
An additional 37% was produced as a byproduct of copper operations, mainly in
the Democratic Republic of the Congo (DRC) and Zambia. The remaining 15% of
cobalt mining came from primary producers.
There are very, very few primary cobalt
deposits in the world today.
The Congo’s staggering economic
potential (the DRC contains five percent of the world’s copper and 50
percent of its cobalt) is matched only by its poverty and corrupt
Vale’s New Caledonia (Goro)
nickel mine is many years behind schedule. The Goro
nickel project in New Caledonia has become the bad boy poster child for the
assortment of problems associated with HPAL technology. Minority partners
Sumitomo and Mitsui have reduced their participation in the project.
Puma project, a ferronickel producer, has been completely shutdown.
Vale has said that a return to production is not yet scheduled.
Xstrata’s nickel mine, Koniambo – In 2007 capex
was set at US$3.8b, in August of 2011 it was revised upwards to US$5b.
According to Xstrata the increased cost was because of increased labor costs
from competition from the oil and gas sectors for a limited labor pool on a
remote island. First pour was slated in the second half of 2012,
there has been no news from the company.
years have witnessed a significant increase in both labor disputes and
regulatory burden in the resources sector across the world. The ongoing
mining sector unrest in South Africa, marked by
widespread wildcat action and shocking levels of violence, suggests that
these pressures continue to mount and that previous policy responses may
prove insufficient. Moreover, there is a risk that the disorder seen in South
Africa may presage a new, even more contentious phase of global resource
exploitation characterized by a higher incidence of resource nationalism in
both developing and developed economies.” Iain Mills,
South Africa Mining Unrest: A New Era of Resource Nationalism?
In September Anglo-American closed its
17,000 tonne per year Loma de Niquel
mine (a ferronickel producer in Venezuela) because of disputes over mining
Panama recently repealed part of its
mining code allowing investments from foreign governments.
Australia has imposed a 30 percent tax on
While Bolivia has a number of operating
mines they have nationalized exploration projects in the country.
Indonesia (the world’s top exporter
of nickel ore) enacted an export tax system, effective May 6, 2012, under
which a 20% export tax is levied on 14 raw ores of Indonesian origin,
including nickel. This is the first step by Indonesia towards a full ban on
the export of minerals that is scheduled to begin in 2014. The Indonesian government has also approved a
law capping foreign investment in mining projects at 49 percent. Foreign
investors are to divest at least 20 percent of their shares by the fifth year
of production, and gradually reduce their interest over the next five years
to the required 49 percent.
In Canada the province of Quebec raised
its tax rate on mining duties in 2010 and the PQ government has indicated
that they plan to further increase this and impose a 5% mining royalty.
Mongolia is pushing to renegotiate its
stake in the massive Oyu Tolgoi
copper-gold project to 50 per cent from the current 34 per cent. The current
agreement states Mongolia’s interest can be raised to 50 per cent only
after 30 years from the agreement taking effect.
Unrest Directed Towards Mining
At least 15 mining projects in Peru
(world’s second largest copper producer) have been delayed with their
start dates set-back for up to two years because of social unrest, mining
investment in the country is expected to fall 33% in 2013 because of the unrest.
Five protesters were killed at Newmont Mining’s Conga mine in July of
A column of 1,500 strikers, many bearing
machetes, confronted a small group of riot police at Anglo American
Platinum’s Bathopele shaft in the
"platinum belt" near Rustenburg, 100 km (60 miles) northwest of
Johannesburg. This was a repeat of a march undertaken just days before at Lonmin's neighboring Marikana
mine, where police shot dead 34, the infamous Marikana
Massacre, striking miners on August 16, 2012.
Bolivian officials report an Indian was killed
and six people were injured in a clash with police. This happened in a remote
area of the country where locals seized five people working for a Canadian
company planning to mine for silver.
November, 2012 the military-backed government of President Thein Sein sent armed police to
disperse six small camps of protesters occupying sites around a copper mine
at Letpadaung, near the town of Monywa
in northwestern Burma. Police used water cannon and tear gas to forcibly
remove the protesters.
First Nations protesters blockaded the road to the
largest new mine development in Manitoba, Canada. Work was disrupted at HudBay Minerals' Lalor mine
site, about 680 kilometres north of Winnipeg.
men were killed and dozens more injured in connection with a police crackdown
on dissent over mining and hydroelectric developments in Panama.
Dominican Republic - In October, 2012 the La Vega provincial court
ordered the suspension of Xstrata subsidiary, Xstrata Nickel Falcondo's Loma Miranda project. The project is opposed
by locals and NGOs, protests against the Pueblo Viejo project have led to
men are dead (security guards) and another nine were injured during a
confrontation over a silver mine in Guatemala.
Urbanization & Population Growth
By 2025, nearly 2.5 billion Asians will live
in cities, accounting for almost 54 percent of the world’s urban
population. India and China alone will account for more than 62 percent of
Asian urban population growth and 40 percent of global urban population
growth from 2005 to 2025.
“That emerging markets should play
host to an increasing proportion of the world’s largest mining
companies should not perhaps be so surprising since these countries host a
large proportion of the world’s undeveloped resources and are the
fastest growing mineral markets. The bank, Citi, has estimated that between
2004 and 2010, the EV (enterprise value4) of the global mining industry
increased from $500 billion to $2,100 billion, with emerging markets increasing
their share of the total from 16 percent to 39 percent.” David Humphreys, Transatlantic Mining Corporations
in the Age of Resource Nationalism
China had 172 million urban residents in 1978
when Deng Xiaoping started his economic reform program. By 2006 there were
577 million Chinese urbanites. In January of 2012 there were 680 million
urban Chinese – 51.27 percent of the population.
China has set a goal of 65 percent
urbanization by 2050. China's current urbanization rate of 46 percent is much
lower than the average level of 85 percent in developed countries and is
lower than the world average of 55 percent.
By 2025 China's urban population is expected
to rise to 926 million. By 2030 that number will increase to a billion.
China's urban residents saw
their average per capita disposable income increase 9.6 percent in 2012 after
being adjusted for inflation. The growth was 1.2 percentage points more than
that of 2011, bringing average income to 24,565 yuan
(3,912 U.S. dollars). Rural residents' average per capita net income climbed
10.7 percent in real terms to 7,917 yuan last year,
0.7 percentage points lower than the growth of 2011.
BCG Consulting’s November 2010 Report:
“Big Prizes in Small Places: China’s Rapidly Multiplying Pockets
of Growth” says China is expected to become the world's second largest
consumer market by 2015 and by 2020 China’s consumer consumption
nation-wide will amount to 22 percent of total global consumption, behind
only the U.S. at 35 percent. The expected transition from an investment led
economy to a more consumer focused model will bring about continued growth.
The McKinsey Global Institute projects China's middle class will increase
from 43% of the population to 76% by 2025.
"The shift from investment to increasing
consumption overall - and as a share of GDP - is very important to
sustainable growth in the long-term. China has maxed out on the input model."
Diana Farrell Director, McKinsey Global Institute
India has 1.2 billion people and the second
largest urban system in the world – almost one in three Indians now lives in areas classified as urban.
A report done by the McKinsey Global Institute
called India Urban Awakening predicts that 40% of the population will live in
cities by 2030. By that time, Asia’s third largest economy would have
68 cities with populations over one million, up from 42 today, 12 cities are
expected to cross the 2.5 million mark by 2015.
The 2011 census data showed, for the first
time, that the increase in population in India is more in urban areas, at 91
million, than in rural areas at 90.4 million.
India will be a country of 53.3 million
middle-class households (267 million people) by 2015-16. The McKinsey Global
Institute projects that India's middle class will grow to 583 million people
(113.8 million households) over the next two decades - at the same time, the
country will advance from the world's 12th largest consumer market to the
The Indian middle class constitutes about 15%
of the population today, up from 5.7% in 2001-02, and by 2025-26, they will
account for 37.2% of the population.
India is young, per the 2011 census, more than 50%
of India's population is below the age of 25 and more than 65% below the age
of 35. It is expected that, in 2020, the average age of an Indian will be 29
years, compared to 37 for China and the US, 45 for Western Europe and 48 for
Africa has been the
second-fastest-growing region in the world over the past 10 years, with
average annual growth of 5.1 per cent.
According to The Economist, between 2000 and
2010, six of the world’s ten fastest growing economies were in
Sub-Saharan Africa. The only BRIC (Brazil, Russia, India and China) country
to make the top ten was China which came in second behind Angola – the
fastest growing country in the world.
The International Monetary Fund (IMF) says
Africa will own seven out of the top ten places for fastest growing economies
between now and 2015.
Africans, on a per capita basis, are richer
than Indians and a full dozen African states have higher gross national
income per capita than China.
A lot of this growth is driven by a blossoming
domestic market - the largest domestic market outside India and China. In the
last four years private consumption of goods and services has accounted for
two thirds of Africa's GDP growth.
Today Africa has 14% of the world’s
population and by 2050 one in every four people on the planet will be African
- by 2027 Africa will have more people than does China or India.
Rates of urbanization in Africa are the
highest in the world - during the next 25 years the urban population will be
growing almost twice as fast as the general population and will have
increased by more than half a billion from 1990 levels.
By 2020, Africa will have 11 mega-cities with
five million inhabitants or more and almost 3000 cities with populations of
more than 20,000, an increase of almost 300% from 1990.
“Poverty is also on the retreat. A new consuming
class has taken its place: since 2000, 31 million African households have
joined the world's consuming class. At the point when household incomes
exceed $5,000, measured at purchasing power parity, consumers begin to direct
more than half their income to things other than food and shelter. The continent
now has around 90 million people who fit this definition. That figure is
projected to reach 128 million by 2020.
Indeed, contrary to conventional wisdom, the majority
of Africa's growth has come from domestic spending and non-commodity sectors,
rather than the resources boom.
By 2035, Africa's labour
force will be bigger than that of any individual country in the world, which
offers the continent a chance to reap a demographic dividend, using its young
and growing workers to boost economic growth.” 10 things you
didn't know about Africa's economy, independent.co.uk
Since 1950, the world’s population has
gone from 2.5 billion people to over seven billion today. Over 75 million
people a year are added to this number, the world’s population is
expected to exceed 9 billion by 2050 and reach 10.1 billion by the end of the
century - according to the United Nations.
Access to raw materials at competitive prices has
become essential to the functioning of all industrialized economies.
PricewaterhouseCoopers, Resource Scarcity
Accessing a sustainable, and secure,
supply of raw materials is going to become the number one priority for all
countries. Increasingly we are going to see countries ensuring their own
industries have first rights of access to internally produced commodities and
they will look for such privileged access from other countries.
Numerous countries are taking steps to
safeguard their own supply by:
- Stopping or slowing the export of natural
- Shutting down traditional supply markets
- Buying companies for their deposits
- Project finance tied to off take agreements
Increasingly we will see falling average
grades being mined, mines becoming deeper, more remote and come with
increased political and nationalization risk.
The supply of most commodities is going to
tighten. This undeniable fact should be on everyone’s radar screen. Is it on yours?
If not, it should be.
Richard (Rick) Mills
Richard is the owner of Aheadoftheherd.com and
invests in the junior resource/bio-tech sectors. His articles have been
published on over 400 websites, including:
WallStreetJournal, USAToday, NationalPost, Lewrockwell, MontrealGazette, VancouverSun, CBSnews, HuffingtonPost, Londonthenews, Wealthwire, CalgaryHerald, Forbes, Dallasnews,
SGTReport, Vantagewire, Indiatimes, ninemsn, ibtimes
and the Association of Mining Analysts.
If you're interested in learning more about
the junior resource and bio-med sectors, and quality individual
company’s within these sectors, please come and visit us at www.aheadoftheherd.com
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