UNCTAD Secretary-General's High-Level Multi-Stakeholder Dialogue on Commodities

in the context of UNCTAD XII

28-29 January 2008

Trends in Mining Present & Future

By

Mr. Magnus Ericsson President, Raw Materials Group, Sweden

The views expressed are those of the author and do not necessarily reflect the views of UNCTAD

UNCTADDialogue on Commodities

Geneva 28-29 January 2008

TRENDS IN MINING –

PRESENT & FUTURE

Magnus Ericsson

Manganese drawing: Kaianders Sempler.

GLOBAL MINING -GEOGRAPHY

GLOBAL MINING –GEOGRAPHY 2006

1. China 10.1%

GLOBAL MINING –GEOGRAPHY 1990

0

10

20

30

40

50

60

70

1850 1870 1890 1910 1930 1950 1970 1990

% of global mining

GLOBAL MINING –GEOGRAPHY

VALUE OF GLOBAL MINING1995 - 2006

0

50

100

150

200

250

300

350

1995 2000 2001 2002 2003 2004 2005 2006

Billion USD

Sources: Raw Materials Data, 2007.

18%

29%

23%

11%6%

4%2%7%

GoldIron oreCopperNickelZinc/leadPGMsBauxiteOther

METALS VALUE AT MINE

YEAR 2005 TOTAL ~ 250 billion USD

Source: Raw Materials Group, Stockholm 2006.

VALUE OF WORLD MINING

27%

6%2%

51%

14% MetalsIndustrial mineralsDiamondsCoal & uraniumCrushed rock

YEAR 2005 TOTAL ~ 910 billion USD

Source: Raw Materials Group, Stockholm 2006.

SPECIAL PROPERTIES OF METALS

• High strength• Affordable cost• Conduct heat and electricity• Beautiful• Undestructable• Mines must be located at source

Source: T. Graedel, Yale University.

AGENDA

• Demand• Exploration• Mining• Conclusions

Vanadium drawing: Kaianders Sempler.

DEMAND

Vanadium drawing: Kaianders Sempler.

DEMANDSUMMARY

• Extended period of growth.

• China, India engines but East Europe, CIS also strong.

• Infrastructure & personal use.

• No (?) signs of weakening but it will come to an end.

Nickel drawing: Kaianders Sempler.

EXPLORATION

GLOBAL EXPLORATION1995 - 2008

0

2

4

6

8

10

12

1995 1997 1999 2001 2003 2005 2007

Billion USD

Sources: RMG, MEG.

Projected

GLOBAL EXPLORATION

Sources: RMG, MEG.

Nickel drawing: Kaianders Sempler.

EXPLORATIONSUMMARY

• Exploration increasing, peak soon reached.

• Exploration more difficult –M&A in favour.

• Politically secure regions in favour.

• New technologies necessary.

• Government support !?

REM drawing: Kaianders Sempler.

MINING

MINING COMPANIES

3067

957

149

MajorsMedium & smallJuniors

Total 4 100 companies

Source: Raw Materials Data, Stockholm 2007.

CONTROL OF MINING

17

83

Metals total 332 billion USD

Source: Raw Materials Data, Stockholm 2007.

MajorsMedium & smallJuniors

TNCs IN GLOBAL MINING

000

10

20

30

40

50

60

70

80

90

100

Pola

nd

Iran,

Isla

mic

Rep

.

Rus

sian

Fed

erat

ion

Bra

zil

Swed

enC

hina

Indi

aVe

nezu

ela

Mex

ico

Ukr

aine

Can

ada

Cub

aU

nite

d St

ates

Con

go, D

em. R

ep.

Aus

tral

iaC

hile

New

Cal

edon

iaSo

uth

Afri

caK

azak

hsta

nPe

ruC

olom

bia

Indo

nesi

aN

amib

iaB

otsw

ana

Papu

a N

ew G

uine

aZa

mbi

a

Tanz

ania

, Uni

ted

Rep

.M

ongo

liaM

ali

Gui

nea

Gha

naG

abon

Arg

entin

a

Sources: UNCTAD, based on Raw Materials Data, 2007.

PRODUCTION BY FOREIGN COMPANIES

0 10 20 30 40 50 60 70% of world production

Bauxite

Copper

Gold

Zinc

Nickel

Iron ore

MINING M&A NOV 2007

0

500

1000

1500

2000

2500

3000

3500

4000

4500

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

LME Index

0

50

100

150

200

250billion USD

Value BHPB + Rio LMEXSource: Raw Materials Data.

CORPORATE CONCENTRATION

0

5

10

15

20

25

30

35

1990 1995 2000 2003 2004 2005 2006

Largest 3 largest 10 largest

So

urc

e: R

awM

ater

ials

Gro

up

, Sto

ckh

olm

200

7.% of total value of non-fuel mineral productionat the mine stage

RMG TOP COMPANIES 06/07Metals

Controlling company Country Share of value of Cumulative Rank 2005mine production (%) value (%)

1 CVRD/Inco Brazil 5.2 5.2 4 (13)2 BHP Billiton Australia 4.6 9.8 13 Anglo American UK 4.5 14.3 24 Rio Tinto/Alcan UK 4.4 18.7 3 (~100)5 Freeport/Phelps Dodge USA 3.4 22.1 10 (7)6 Codelco Chile 3.4 25.5 57 Xstrata/Falconbridge Switzerland 3.0 28.5 14 (11)8 Norilsk Nickel Russia 2.7 31.2 69 Barrick Canada 1.8 33.0 15

10 Grupo Mexico Mexico 1.6 34.6 8

Source: Raw Materials Data, Stockholm 2005.

Source: Raw Materials Data.

RMG TOP COMPANIESMetals & Coal

Controlling company Country Share of value of Cumulativemine production value

(%) (%)

1 Rio Tinto UK 3.5 3.52 BHP Billiton Australia 3.2 6.83 Anglo American UK 2.9 9.7 4 State of India India 2.8 12.5 5CVRD Brazil 1.9 14.46 Peabody Energy USA 1.9 16.27 Codelco Chile 1.4 17.6 8 State of Poland Poland 1.3 18.99 Arch Coal USA 1.1 20.1

10 RWE Germany 1.1 21.2

Source: Raw Materials Data, Stockholm 2005.

Source: Raw Materials Data.

RMG TOP COMPANIES 07Metals

Controlling company Country Share of value of Cumulative Rank 2006mine production (%) value (%)

1 BHP/Rio Australia 8.7 8.7 2 (4)2 CVRD Brazil 5.2 13.9 13 Anglo American UK 4.5 18.4 34 Freeport USA 3.4 21.5 55 Codelco Chile 3.4 25.5 66 Xstrata Switzerland 3.0 28.5 77 Norilsk Nickel Russia 2.7 31.2 88 Barrick Canada 1.8 33.0 99 Grupo Mexico Mexico 1.6 34.6 10

10 Newmont USA 1.1 35.7 11

Source: Raw Materials Data, Stockholm 2005.

Source: Raw Materials Data.

VERTICAL INTEGRATION

0

10

20

30

40

50

60

70

80

90

Zn Cu Al Ni

1995

2005

Source: Raw Materials Data, Stockholm 2007.

Top 20 miners’ control of refining

CORPORATE CONCENTRATION

0 20 40 60 80 100

Nickel

Molybdenum

Chromite

Titanium

Tantalum

Platinum

Palladium

Source: Raw Materials Data 2007.

Norilsk Inco BHP Billiton

Codelco Phelps Dodge Grupo Mexico

Euroasian Kermas Xstrata

Rio Tinto Iluka Anglo

Anglo Impala Norilsk

Norilsk Anglo Impala

Sons of Gwalia Cabot

% of world production

GEOGRAPHICAL CONCENTRATION

0 20 40 60 80 100

Cobalt

Chrome

Molybdenum

Tin

Tantalum

Platinum

Tungsten

Source: Raw Materials Data 2007.

Congo Canada Zambia

South Africa Kazakhstan India

USA Chile China

Indonesia China Peru

South Africa Russia Canada

China Canada Australia

Australia Mocambique Brazil

% of world production

IRON ORE DEMANDDomestic/import

0 100 200 300 400 500

South Korea

USA

India

Russia

Japan

EU 27

China

Source: UNCTAD, RMG 2006.

Mt iron ore

Importdependence

100 %

23 %

0 %

11 %

100 %

88 %

58 %

CHINESE FOREIGN EXPANSION

14

1048

124

5

370

17

0.1

0.64 0.27

102

24

0.5

0% 50% 100%

World production

ChineseproductionPlanned Chineseforeign expansion

Ferro-

chrome

Bauxite

Iron ore

Copper

Source: BGR 2007.

% of world production

REM drawing: Kaianders Sempler.

MININGSUMMARY

• Slow supply response –but will catch up.

• Increasing competition: M&A activity at peak.

Middle ground disappearing. China & India enter the scene.

Vertical integration/diversification

• More state intervention.

• Speed of change increase.

Tungsten drawing: Kaianders Sempler.

CONCLUSIONS

CONCLUSIONS• Corporate concentration increasing.• More M&A necessary to meet societal demands:

– Exploration– R & D

• Emerging markets’ companies entering the race.• Window of opportunity.• China/India - we have only seen the beginning.• Government interest increasing.• Outsiders: Steel companies coming in!

WORLD MINING to 2030

0

10

20

30

40

50

60

70

1850 1870 1890 1910 1930 1950 1970 1990 2010 2030

Europe

USA

China

USSR/CIS

Australia/Canada

6 resource rich developingcountries

Sources: Raw Materials Data, Stockholm 2004 and Sames.

Forecast

% of global mining

Tungsten drawing: Kaianders Sempler.

Raw Materials GroupMagnus Ericsson

PO Box 3127 SE-169 03 Solna

Tel: +46-8-744 00 65 Fax: +46-8-744 0066

E-mail: magnus.ericsson@rmg.se

www.rmg.se

THANK YOU !

EXPLORATION vs M&A1995 - 2007

0

50

100

150

200

250

1995 1997 1999 2001 2003 2005 2007

Billion USD

Sources: RMG, MEG.