OECD Workshop on steelmaking raw materials Paris 2011 12 05

Magnus Ericsson

REE drawing: Kaianders Sempler.

Geography of steel raw materials policy implications.

World mining for 150 + years

% of global mining
70
60

50
40 30

20
10

0 1850
Europe

1870
USA

1890
China

1910

1930

1950

1970

1990

2010

2030

USSR/CIS

Australia/Canada

6 resource rich developing countries

Sources: Raw Materials Data, 2011 and Sames.

Background
Mining: Society needs metals Global industry Iron ore, copper and gold dominates Cyclical business Long term industry Current decade positive for miners

Myths
Metals are running out Mining is not sustainable China is holding the world to ransom

Are metals a depleting resource?

Manganese drawing: Kaianders Sempler.

Growth of resource base

Source: Crowson.

Metals are not running out !

Manganese drawing: Kaianders Sempler.

Is mining sustainable?

Vanadium drawing: Kaianders Sempler.

Garpenberg - since 13th c.

Courtesy: Boliden.

Mining is for many countries the only chance to start economic development!

Vanadium drawing: Kaianders Sempler.

Outline
China Structure of iron ore mining. Exploration. Projects and foreign investments. Conclusions.

The role of China

Exploration Foreign Direct Investment M&A

Structure of Chinese iron ore mining

Manganese drawing: Kaianders Sempler.

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Global iron ore production

Source: Raw Materials Data Iron ore, 2011.

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Chinese iron ore imports

Source: Raw Materials Data Iron ore, 2011.

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Global iron ore grades

Source: Raw Materials Data Iron ore, 2011.

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Chinese structure
Fragmented corporate structure. Many small mines. Low grades, under ground. Vertical integration.
Manganese drawing: Kaianders Sempler.

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Chinese exploration

Nickel drawing: Kaianders Sempler.

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Global exploration 1
16 14 12 10 8 6 4 2 0 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 5 0 20 15 10
Total world China

Billion USD

30 25

Billion RMB

Sources: Total world MEG, China Ministry of Land and Resoruces.

Chinese exploration 1
Year 2009 total 30.30 billion RMB

59%

14%

Central gov Local gov Private

27%
Source: MOLAR 2010.

Chinese exploration 2
Year 2009 total 26.11 billion RMB Iron ore 2.55 billion RMB

2% 1% 9% 10%

18%

12% 14%
Source: MOLAR 2010.

34%

Coal Gold Copper Iron ore Pb/Zn Uranium Tungsten Other

Chinese exploration
Major exploration efforts. Worlds largest exploration spender. 400 MUSD iron ore 2009. No great results.

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New projects

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Chinese overseas mines

50 45 40 35 30 25 20 15 10 5 0

1990 Year

1995

2000

2005

2011

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Chinese foreign operations

Source: Raw Materials Data 2011.

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Source: Raw Materials Data, 2011.

Chinese foreign projects

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Source: Raw Materials Data, 2011.

Iron ore projects

Operating mines Australia Peru Brazil Canada Projects Australia Peru Sierra Leone Total
Source: Raw Materials Data, 2011.

19.3 7.0 1.7 0.8

65 10 3 ~ 110 Mt

28.8

78

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Chinese projects in Africa

Country Metal Company Share % Type
Awaso Ghana Simandou Guinea Forcariah Guinea Bong Liberia Tonkolili Sierra L. Avantuur South Afr. Dilokong South Afr. Weziswe South Afr. Baluba Zambia Chambishi Zambia Gwabw/Njali Zambia Muliashi Zambia Munali Zambia Lalapnazi Zimbabwe Baux Fe Fe Fe Fe Mn Cr PGM Cu Cu U Cu Cu Cr Bosai Min. Chinalco China Int. F. China Union Shandong Baosteel East Asia Met. JNMC CNMC CNMC JNMC CNMC CNMC Sinosteel 80 45 50 100 25 11 85 45 72 85 30 72 50 100 Oper. Project Project Project Project Project Oper. Project Oper. Oper. Project Oper. Oper. Oper.

Source: Raw Materials Data, 2011.

New projects
Foreign expansion slow not continuous. Will increase in the future. Long term serious problem. Control over imports in focus. Not reach internal goals.

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Chinese M&A
160 500

Billion USD
140

450 400

120
350 100 80 60 40 100 20 0 50 0 300 250 200 150

Chinese overseas

M & A Word Total

RMG Metal Price Index (RHS)

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Summary China
Engine of demand reduced growth pace. Largest mining country many small, high cost mines. Largest exploration country since 2010. Foreign expansion slow, not continuous.

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Policy implications
Mineral supply long term, serious problem.
But no physical scarcity. Asessment of Chinas role based on facts. Window of opportunity for emerging economies. More proper political focus: R&D; Training; Balance mining/environment. Rare earths not a problem Chinese import dependency iron ore, copper is!
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Thank you !
Magnus Ericsson PO Box 3127 SE-169 03 Solna, Sweden magnus.ericsson@rmg.se Tel: +46-8-744 00 65 Fax: +46-8-744 0066

www.rmg.se
REE drawing: Kaianders Sempler.