May/June 2013 - The ASIA Miner

International Project Survey
lion in 2010 to $146 billion in 2012. Africa’s share of total mining project
investment was down slightly to 14%, but increased in value to
$106 billion. Europe, including all of Russia, maintained its position
but Asia’s share fell from 11% to 10%; Asia reached its peak of 14%
in 2009 but has been falling since.
The investment pipeline in North America grew by $24 billion in
2012, and in Oceania by $8 billion, a considerably slower pace than
the previous year. Latin America’s project pipeline shows the highest
average of all because there are more super large projects in this region
than in any of the others. The average project investment within
the Latin America sector is $730 million, more than twice Asia’s average
of $363 million. The other regions fall between these two extremes:
Europe, $450 million; Africa, $541 million; North America,
$681 million; and Oceania, $583 million, respectively.
In Europe (excluding Russia), focus is increasingly on the Nordic countries,
including Finland, Sweden and Greenland. Sweden has maintained
its position among the top 20 countries. Finland is likely to move up the
list, as Anglo American has announced that its Sakatti
copper/nickel/PGM early-stage project is among the most promising
greenfield finds made by the company globally in 20 years. In addition,
Gold Fields has revitalized its Arctic platinum project in northern Finland.
The European Commission’s renewed interest in the mining sector
has not resulted in any notable improvements in Europe’s investment
climate, despite the Raw Materials Initiative having been in place for
several years. In Africa, the African Union has decided to establish
the Africa Mineral Development Center in Addis Ababa, the capital
city of Ethiopia, to support the implementation of the African Mining
Vision. The World Bank has announced plans to spend $1 billion on
mapping and exploration for metals and minerals in Africa, which
would give this underexplored region a boost. Asia’s problems are
clearly highlighted by the continuing uncertainty surrounding Mongolia’s
Oyu Tolgoi copper project, which has been delayed several times
due to the government’s on-going insistence on renegotiating the project’s
mine agreement.
Investors Wary of Resource Nationalism,
Unstable Environments
The total investment pipeline share of the 10 most attractive countries
was static in 2012 at 71%, identical to 2011. Australia and
Canada continue to dominate both in terms of capex volumes and
number of projects. Together, they account for more than $200 billion,
divided among 326 projects.
Although the promise of “spreading mining investments more evenly
Mining Project Investment by Country, 2012
Investment Share Rank in
(US$ billion) (Percent) 2011
Australia 105 14 01
Canada 104 14 02
Chile 096 09 03
Brazil 052 07 04
Russia 048 07 05
Peru 044 06 06
United States 043 05 07
South Africa 023 03 08
Guinea 016 02 10
Philippines 015 02 09
TOTAL 519 71
across the globe” has been mentioned in the previous three project surveys,
it has become clear that only a small number of countries continue
to attract the largest share of the investments. The growing trend
of resource nationalism is most certainly a key reason for this trend.
Countries that are perceived as offering a stable political and economic
environment receive growing attention. The United States has improved
its share at a faster rate than any other country between 2010 and 2011,
garnering a 38% share in 2011 and 34% in 2012. Chile is another example,
with growth during 2011 and 2012 at 20% and 27%, respectively.
Australia, Canada and the U.S accounted for 34% of the total
project pipeline at the end of 2011. In December 2012, their combined
share remained at the same level despite a slight decline by Australia,
which was compensated by strong U.S. growth.
Australia has kept its standing as one of the most attractive countries
for mining investments despite concerns anticipated by the introduction
of its ”super profit” tax, the final promulgated version of which was a
much weaker version of the original proposal. Iron ore projects continue
to dominate, and of the top 20 projects in Australia 15 are in iron ore and
all of them demand investments of over $1 billion each. Second-ranked
Canada has a much broader mix of projects including several gold and
base metal projects among the top 20 with seven iron ore projects as
well as six gold projects, two copper projects, two nickel projects, one
diamond project and one niobium project on the list. The pipeline value
of projects in both countries is more than $100 billion.
There was little change in ranking of the Top 10 countries in 2012;
in fact, the only change was Guinea moving up from ninth position
from tenth, replacing the Philippines. Brazil’s mining investment total,
which fell in 2011, rebounded in 2012 to its 2010 ranking with more
than $50 billion in project funding. Russia, at 5% grew its investment
share at a slower pace than most of the Top 10 countries, and the volume
of investments in the South African pipeline declined by 7% or
$23 billion, underscoring the problems the country has experienced
during past years; calls from the ruling ANC party’s Youth League for
nationalization of the mining sector have had an impact on international
investors’ perception of the country. Meanwhile, Guinea continued
its upward progress despite a slight drop in the $16 billion
investment total for its three giant iron ore projects.
Below the Top 10 cutoff are Mexico, Papua New Guinea, Sierra
Leone, Argentina, Indonesia, China, Sweden, Republic of the Congo,
Cameroon and Kazakhstan in that order, each with a portfolio of projects
between $8–$15 billion. (Please note that an error in the 2012
project survey text made incorrect reference in this context to the
Democratic Republic of the Congo (DR Congo) instead of Republic of
the Congo). The giant Zanaga iron ore project has propelled this Central
African country to such a high ranking, an example of how just the
start or completion of one large project can significantly alter the ranking
of smaller countries relative to others in the survey.
In Sierra Leone, for example, one new project during 2012 added
more than $6 billion to its country total, illustrating that not a lot of importance
should be associated with a country’s rank outside the top
10. The investment figure for China, it should be noted, is most certainly
an underestimate since many of the projects run by state-owned
companies are never reported in such a way that they reach the international
mining press. Chinese projects are generally lower in project
value at an average cost of $181 million; while in Canada, for
example, the average project cost is $775 million.
Chinese mining investment activity outside China remains mostly
56 | ASIA Miner | May/June 2013