MINING & RESOURCES

26051202

Introduction

Mining provides the building blocks for human development. The world’s population annually consumes 32 billion tonnes of mineral resources valued at well over USD1 trillion per year. A decade ago every American uses an average of 40,000 pounds of new minerals each year. The average American will need the over 1.3 million pounds of mineral resources in their lifetime. Also one mile of Interstate highway uses 170 million pounds of earth materials.

The mining & resources industry is pivotal to the global economy. Numerous industries worldwide depend on the supply of commodities from underground such as minerals and metals.

Minerals and metals are key to all services and infrastructure that are used by contemporary society. This includes shelter, food and water supply, sewage treatment, energy supply for a vast range of needs, including heat and light, transportation, construction, manufacturing, education, health, communication, entertainment, the arts, tourism, and the vast range of associated consumer goods and services. As the material standard of living grows, mineral and metal demand also expands. This pattern has been followed by all developing countries in history. Studies have now consistently demonstrated that when per capita income in a country reaches USD5,000 to USD10,000 per year, metal demand increases quickly.

Regaining confidence depends on how the mining industry responds to its rising costs, increasingly volatile commodity prices and other challenges such as resource nationalism.

The supply of metal and mineral products has underpinned human endeavour through millennia and will continue to play its role in meeting society’s needs. The need will remain strong, so in order to satisfy demand, finding and developing new mines is required, even as resource use becomes more efficient and recycling systems ramp up.

Fortunately, the geological supply of metals within the earth remains robust and new technologies will help bring new deposits on stream. But these will increasingly be located in more remote regions, raising production and investment costs.

Australia

Mining in Australia is a significant primary industry and contributor to the Australian economy. Much of the raw material mined in Australia is exported overseas. Asia represents a major market where raw materials are processed into refined product and are both consumed and exported.

Minerals constitute a large portion of Australia’s total exports to China. More than half of Australia’s iron ore exports are shipped to China. Australia’s mining industry is volume and price-competitive on a global scale.

In 2015, mining contributed about 5.6% of Australia’s Gross Domestic Product. In contrast, mineral exports contribute around 35% of Australia’s exports. Australia is the world’s largest exporter of coal (35% of international trade), iron ore, lead, diamonds, rutile, zinc and zirconium, second largest of gold and uranium, and third largest of aluminium. Australia is also a large copper and nickel producer.

Australia has a large number of projects at the committed stage with a combined value in excess of AUD200 billion. Australia has some of the world’s largest mineral reserves, including lead, nickel, uranium and zinc. It is the world leader in the production of bauxite, alumina and a major producer of iron ore, gold, lead, coal, silver and copper.

Australia has seen enormous beneficial wealth-effects of the recent mining boom in jobs, exports, and technological development.

For the past 160 and more years, beginning with the gold rush of the 19th century and including the development of Australia’s iron ore deposits in the Pilbara from the 1960s, Australia has been developing its expertise as a mining nation.

ASX – Materials

Materials stocks make up 12.8% of the ASX 200 index and 13.3% of the All Ordinaries index.

The ASX

The ASX is one of the world’s leading financial market exchanges, offering a full suite of services, including listings, trading, clearing and settlement, across a comprehensive range of asset classes.

Historically the resources sector represented almost 20% of the ASX market by market capitalisation, and almost one third of the companies listed.

The ASX has over 150 years of exchange experience and a highly skilled team of 530 people. We put our customers at the centre of everything we do – 6.7 million share owners, 180 participants, and over 2,200 listed companies and issuers.

As the first major financial market opens every day, ASX is a world leader in raising capital, consistently ranking among the top five exchanges globally. With a total market capitalisation of around AUD1.5 trillion, the ASX is home to some of the world’s leading resource, finance and technology companies. The AUD47 trillion interest rate derivatives market is the largest in Asia and among the biggest in the world.

The ASX’s network and data centre are connected to leading financial hubs. Speed, reliability, state-of-the-art technology and the diversity of the user community, are fundamental to the success of the Sydney-based ASX Australian Liquidity Centre.

The ASX operates in a world class regulatory environment, meeting the highest global standards. Its clearing houses are among the most secure and well capitalised in the world, and help underpin the stability of Australia’s financial markets.

China

China’s per capita consumption of minerals and metals continues to increase. In response to its need for minerals and metals, China has put security of supply high on its political agenda. It is spending large and increasing amounts on exploring for minerals inside China and is also reaching out to participate in the world’s mining and metals industry.

China continues to be the industry’s most important customer. While Chinese growth rates are easing, they are coming from a growing base, with future demand for commodities continuing to remain positive.

The sheer size of population growth and the speed of urbanization in China and other Asian countries, coupled with ongoing requirements in the developed world has created unprecedented demand for minerals and metals. Strong demand growth comes mainly from governments and millions of aspiring individuals in emerging economies, striving for a better material standard of living.

Even with dramatic increases in recycling, an overall increase in newly mined materials is required to support the emergence of individuals, communities and countries from stagnation and poverty.

The rise of the Chinese economy since the late twentieth century has been phenomenal. This growth was even more remarkable considering it started at close to zero only a half a century ago. Clearly a dominant driver is urban and related service infrastructure development as modernization takes place. This same pattern is beginning to occur in other emerging nations as well. However, from a perspective that considers the past millennium, China is only regaining the strong position it once held. For this reason, economic growth in other newly-industrialising countries may not, for various cultural, economic and political reasons, match that of China. But there is no doubt that all countries have gone, or will go through, a metal intensive stage in their economic development. There is also no doubt the speed of this transition is increasing.

In response to changing global economic conditions, growth in China and other emerging nations will inevitably fluctuate going forward, and the rate will likely slow. However, a continued emphasis on domestic consumption in the long-term will combine to see continued growth in demand for minerals and metals in the economies of China and other emerging nations.

Japan

Japan is a major player in the global mining & resources industry. Since the 1960s the Japanese government has encouraged Japanese firms to invest in overseas production and primary processing of minerals and energy, in order to enhance Japan’s access to raw materials.

Japanese trading companies act as gatekeepers for domestic end users of minerals and metals. They play a key role in the global trading markets as well. Trading companies operate a large supply chain in their metals & mineral resources divisions, including the operation of large-scale iron ore and aluminium projects; development of mineral resources such as minor metals and base metals, and the trading of iron ore and non-ferrous metal products.

The most valuable Japanese import products also include iron, copper, platinum and aluminium. Iron & Steel products are still a top 10 export for Japan and are valued at USD60.6 billion (2.6% of exports).

Australia’s exports to Japan amounted to USD34.9 billion or 5.4% of its overall imports.

  1. Oil: USD21.4 billion
  2. Ores, slag, ash: USD6.8 billion
  3. Meat: USD1.8 billion
  4. Aluminium: USD975.8 million
  5. Wood: USD497.1 million
  6. Dairy, eggs, honey: USD371.7 million
  7. Cereals: USD358.3 million
  8. Oil seed: USD351.1 million
  9. Gems, precious metals: USD215.5 million
  10. Salt, sulphur, stone, cement: USD189.8 million

South Korea

The South Korean economy is the 11th largest economy in the world and the third largest in Asia. South Korea’s economic growth in the last 60 years has been incredible; its GDP per capita has grown from USD100 in 1963 to over USD20,000 in 2007, and is now in excess of USD30,000.

Korea is an another major player in the global mining & resources industry. Korean trading companies and large conglomerates act as gatekeepers for domestic end-users of minerals and metals. They play a key role in the global trading markets as well.

Trading companies operate a large supply chain in their metals & mineral resources divisions, including the operation of large-scale iron ore and aluminium projects; development of mineral resources such as minor metals and base metals, and the trading of iron ore and non-ferrous metal products.

The most valuable Korean import products include crude materials and fuels (including iron ore of 6.5Mt and coal) and heavy machinery. Iron & Steel products are a top 10 export for Korea, as well as heavy equipment, transport and passenger vehicles.

Africa

Africa is thought to have 30% of the world’s mineral resources. At the recent peak in 2011, 230 ASX listed Australian resource companies now held more than 650 projects in 43 African countries and territories. Of all overseas Australian mining projects, more than 40% were in Africa and billions of dollars of further investment was in the pipeline. The scale of all that exploration, extraction and processing involves current and potential investment worth more than AUD40 billion.

About one in twenty companies listed on the Australian Stock Exchange has an investment in Africa and nowhere else in the world do Australian mining firms have so much invested. Their activities include exploration, extraction and processing across a wide range of minerals–diamonds, coal, uranium, gold, iron ore and so on.

Most recently in 2016, according to AAMEG, Africa is Australia’s most important resource investment destination with 190 ASX-listed companies active on 590 projects in 38 countries across the continent.

GC Partners Asia Capabilities

  1. GCP is uniquely positioned and committed, with experienced tertiary qualified bi-lingual staff, to provide investment banking, corporate finance and advisory services to companies involved with the global mining industry.
  2. We act for private companies and companies listed on the LSE & AIM, ASX and TSX & TSXV stock exchanges. Being located “on the ground” amongst the key Asian markets, GCP is attuned to local business practices, conduct, processes & culture, as well as news flow, corporate announcements, government policy and economic initiatives. Combined with regular contact and our long standing relationships with key industry participants, we are equipped with an understanding of the demand and the potential for sources of corporate equity investment, project equity & debt, joint ventures, and for product offtake.
  3. With Australia’s proximity to the key Asian markets, and combined with GCP’s strong differentiation, we are able to assist a variety of mining & resource companies with their financing requirements who have projects along the full value chain, from exploration, to development & production.
  4. Our current and past clients have projects in iron ore, copper, gold, nickel, graphite, kaolin, potash and phosphate. These projects are located in Australia, Africa, Central Asia and SE Asia.