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Elemental
Economics
1. Introduction to Mining
Neal Brewster
neal.brewster@elementaleconomics.com
1
Elemental
Economics
www.elementaleconomics.com
© Elemental Economics, 2024
Introduction to mining
What is the mining
industry?
Characteristics
History
Boundaries and mineral products
Value chain and processes
The role and structure of
the mining industry
The industry’s rationale and role
The stages of mining
The structure of the industry
Mineral reserves and
resources
Crustal abundance
Resource and reserve classifications
Physical versus economic
perspectives
2
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Economics
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What distinguishes mining
from other forms of
economic activity?
Does the mining industry
have any unique features?
A basic question about the mining industry posed in
two different ways
“Mining is the
extraction of
valuable minerals or
other geological
materials from the
Earth, usually from
an ore body”
3
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l Prehistoric Era (stone age, bronze age and iron age)
l Ancient Era
l Medieval Era
l Industrial Revolution Era and first globalisation
l Americas Era
l Modern Era
n 1850-1920 Age of empires
n 1920-1950 Rise of local titans
n 1951-1970 New global giants
n 1971-1980 Emergence of statism and diversification
n 1981-2002 Decline, fall and reconsolidation
n 2003-2011 China and the “super-cycle” years
n 2012-2015 Age of regret
n 2016- Rise of the green economy and critical raw materials?
Mining eras
4
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The fundamental characteristics of mining are
unchanged from those of many years ago…
Source: Wikipedia
5
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What is the mining industry today?
Define by product?
Define by types of process?
What are the boundaries?
6
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Mineral products
Everything we physically use is either animal,
vegetable or mineral. These primary products are
indispensable.
Mineral
products can
be defined as:
‘An inorganic substance that occurs
naturally in the earth’
‘An ore or other substance obtained
by mining’
Once they are mined virtually all minerals require
processing to extract usable products
7
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Economics
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Boundaries?
Exclude petroleum, natural gas and water
Coal and uranium?
Sand, gravel, aggregates and construction materials?
Dimension stone (eg granite, marble)?
Downstream boundaries?
8
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Economics
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The main mined mineral products
Steel and steel alloys Battery raw materials
Technology metals Industrial minerals
Iron ore
Bulk alloys
• Chromium
• Manganese
• Silicon and ferrosilicon
Noble alloys
• Molybdenum
• Niobium
• Vanadium
Nickel
Cobalt
Graphite
Lithium
Nickel sulphate
Rare earths
Antimony
Gallium
Germanium
Indium
Magnesium metal
Rhenium
Scandium
Tantalum
Tellurium
Titanium metal
Tungsten
Bauxite, Boron,
Clays, Feldspar,
Fluorspar, Fullers earth,
Gypsum, Iodine,
Kaolin, Lime,
Magnesium compounds,
Mica, Nephaline,
Salt, Soda ash/Trona,
Strontium, Talc,
Titanium minerals,
Zirconium
Base metals
Aluminium
Copper
Lead
Tin
Nickel
Zinc
Energy products
Thermal coal
Coking coal
Uranium
Precious metals
Gold
Silver
Platinum
Palladium
Rhodium
Ruthenium
Iridium
Osmium
Precious stones
Agricultural products
Peat
Potash
Phosphate
Perlite
Sulphur
9
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Economics
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Source: USGS, Wikipedia, Elemental Economics
Note: Prices based on average 2020-22
Crustal abundance, price and market value of
selected mineral products
Thallium
Arsenic
Tellurium
Celestite/Stro
ntium
Selenium
Mercury
Rhenium
Cadmium
Bismuth
Beryllium
Germanium
Gallium
Antimony
Ruthenium
Indium
Iridium
Rutile
Iodine
Bromine
Tantalum
Barytes
Graphite
Niobium
Vanadium
Ilmenite
Soda Ash
Natural
Lithium
Tungsten
Iron oxide
pigments
Fluorspar
Boron
Magnesium
Uranium
Platinum
Silicon
Tin
Sulphur
Lead
Molybdenum
Cobalt
Chromite
Rhodium
Manganese
Bauxite
Magnesia
Palladium
Silver
Salt
Phosphate rock
Zinc
Nickel
Potash
Copper
Gold
Iron ore
0.001
0.01
0.1
1
10
100
1000
10000
100000
1000000
0.00001 0.0001 0.001 0.01 0.1 1 10 100 1000 10000 100000 1000000
Price ($/kg)
Crustal abundance (mg/kg)
Note: Size of bubble denotes relative market size
10
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Economics
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Source: US Geological Survey, calculations
2,218
512
1,362
930
1,029
Petroleum Gas Stone and aggregates Coal Non-fuel minerals
US$
billion
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
Extractive industry turnover, 2018-22 average
Market value of the entire mining
industry is ~US$2-3 trillion
compared to US$3.05 trillion for
Apple (as of end-2023) which has
US$400bn of annual revenue
11
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Economics
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© Elemental Economics, 2024
Source: Misc estimates
l 0.04% global land area
l 0.6% global employment
l 4% global merchandise trade
l 1-2% global GDP (directly)*
l 1-2% global equity capitalisation
l 0.7% global greenhouse emissions (direct energy use) or 4-7% including
coal-bed methane*
… but around half of global economic activity relies upon mining products
and these global figures are much higher in many individual countries
* Extraction of minerals, oil, and natural gas, typically contributes around 5-7% of the world's GDP
** Including downstream processing (scope 3 emissions – mainly steel, aluminium and energy production) rises to 28%
Importance of mining
12
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Economics
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Global mining projects, 2020
13
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Economics
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Mining value chain
Resources
Mining and
concentrating
Smelting and refining
Intermediate products
Final end use products
Distribution
Distribution
Distribution
14
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Economics
www.elementaleconomics.com
© Elemental Economics, 2024
Source: Elemental Economics
Metal and mineral production flows and processes
Intermediate and
finished products
Smelting & refining
Mining open pit or
underground
Logistics
Ore sorting/primary
processing
Base and precious metals,
diamonds
Bulks (iron ore, coal,
potash, industrial minerals)
Aggregates
Leaching,
electrowining,
Refining
Crushing,
Sorting,
Separation
Trucking, Rail, Port
Smelting/
refining
Crushing,
Floatation
Crushing and/
or Leaching
Smelting/
Refining
Refining
Drilling, blasting, loading, hauling, disposing
Electrowining
Low grade
sulphides/oxides
Impure metal
Concentrate
Sulphides
Crushing,
Sorting
Trucking Trucking, Rail, Port
Shipping
Pure metal
Pure metal Pure metal
Final product form
Metal
Final product form
Run of mine ore
Shipping grade ore
Trucking, port
shipping
Shipping
Resource
development and
planning Exploring, resource definition, mine planning
Mining company primary focus
Ore
direct
to
buyer
Refinery
contract
Delivery
contract
Smelter
contract
Delivery
contract
Smelter
contract
Finished products
Alloying, melting, rolling, forming
15
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Economics
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Mining deposits and processes
Overburden
Prestripping
Pushbacks
Overburden
Resource
Surface mining
Mechanical
Open pit
Quarrying
Strip and auger
mining
Stockpile
reclamation
Aqueous
Hydraulicking
Alluvial/dredging
Brine
Solution mining
(leaching)
Underground mining
Unsupported
Room-and-pillar
Stope-and-pillar
Shrinkage
stoping
Sublevel
stoping
Supported
Cut-and-fill
Stull
Square set
Caving
Longwall
Sublevel
Block caving
16
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Large mining trucks
Hydraulic mining shovel
Bucket wheel excavators
Dozers
Rope shovels
High wall miners
Drill rigs
ANFO charging truck
Graders and scrapers
Large wheel loaders
Draglines
Wheel tractor scrapers
Underground mining loaders and trucks
Jumbos
Mechanical mining equipment
Source: https://www.flyability.com/mining-tools
17
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Open pit/open cast
18
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Alluvial/placer deposits
19
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Underground
20
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Leaching (mostly copper and gold)
21
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Crushing, grinding
and screening
Separation, concentration
and drying
Roasting, smelting
and refining
Metals and mineral processing 2/10/2021
67
e.g. ALUMINIA REFINERY
5HGVLGH :KLWHVLGH
6PHOWHU
%DX[LWH
PLQH
e.g. PLATINUM
MINE CONCENTRATOR SMELTER
BASE METALS
REFINERY
PRECIOUS METALS
REFINERY
Nickel
Cobalt
Copper cathodes
Rhodium
Iridium
Platinum
Ruthenium
Palladium
Gold
133
134
- SMELTING
129
2/10/2021
SEPARATION
SHAKING TABLES
MAGNETIC SEPARTION
GRAVITY SEPARTION 
CYCLONES
SEPARATION
FLOAT CELLS
117
2/10/2021
SEPARATION
SHAKING TABLES
MAGNETIC SEPARTION
GRAVITY SEPARTION 
CYCLONES
SEPARATION
FLOAT CELLS
117
2/10/2021
59
SEPARATION
SHAKING TABLES
MAGNETIC SEPARTION
GRAVITY SEPARTION 
CYCLONES
SEPARATION
FLOAT CELLS
117
118
FLOTATION
SMELTING
ALUMINA REFINERY
2/10/2021
63
HEAP
LEACHING
- LEACHING
- ELECTROWINNIING
(OHFWURZLQQLQJLVWKHUHFRYHURIPHWDOIURPDQDTXHRXVVROXWLRQ
EPHDQVRIDQHOHFWULFFXUUHQW
125
126
ELECTROWINNING
2/10/2021
54
‡ BULK[e.g. IRON ORE, COAL]
‡ PRECIOUS / BASE
METAL [e.g. PLATINUM, COPPER,
NICKEL, GOLD, ALUMINIUM, REE, (Lithium)]
‡ PRECIOUS GEM [e.g.
DIAMONDS]
CRUSHING  SCREENING
With thanks to Prof. Jan Cilliers for a number of the following images
107
108
2/10/2021
CRUSHING, SCREENING  GRINDING
CRUSHING, SCREENING  GRINDING
115
Usually
at
mine
site
TRAIN
SHIP
TRUCK
Can
be
several
intermediate
steps
22
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Economics
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Infrastructure and logistics
2.2km-long iron ore train in
Australia
Port Headland Australia, 521Mt
throughput in 2021-2
Parabadoo Airport, Australia
Power station to supply Grasberg
mine, Indonesia
Oyu Tolgoi construction camp,
Mongolia
Vale Brasil, with a 400,000 tonne
capacity, 362m length and 65m width Road train, Australia
23
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Economics
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l Downstream mills and fabricators
produce a range of alloyed products and
value-added product forms
l Tends to be more labour intensive then
mining and turnover can be multiple of
metal content value
l Most mining companies largely not
directly involved in downstream sectors
n Resource-based companies’ advantages
are based on exploration and resource
acquisition and development, mine
operations optimisation, managing HSEC
risks with high capital intensity
n Process and market-based companies’
expertise is in technology, logistics, product
development, branding, and logistics and
mostly located nearer end users
Intermediate and finished products
Aluminium products
Unwrought products
Products obtained by casting without further hot or
cold working (eg ingots, blocks, billets, slabs)
Wrought products
Product that has been subjected to hot working
and/or cold working (eg plates, sheets, strip, foil,
wire, bars, rods, basic profiles)
Semi-finished products
Products that have undergone some processing and
are supplied for further processing before it is ready
for use (eg extruded profiles and forgings)
Powder products
Products obtained from fine aluminium powder by
compacting and sintering, often followed by hot
pressing and/or subsequent working
24
Elemental
Economics
www.elementaleconomics.com
© Elemental Economics, 2024
Introduction to mining
What is the mining
industry?
Characteristics
History
Boundaries and mineral products
Value chain and processes
The role and structure of
the mining industry
The industry’s rationale and role
The stages of mining
The structure of the industry
Mineral reserves and
resources
Crustal abundance
Resource and reserve classifications
Physical versus economic
perspectives
25
Elemental
Economics
www.elementaleconomics.com
© Elemental Economics, 2024
l Mining is primarily an economic activity whose basic rationale is usually wealth
creation for owners or developers of mineral resources
l Without the application of other factors of production (capital, labour,
management) minerals in the ground have little or no value
l In relation to other industries minerals are often akin to “vitamins in the human
diet” – without mining many other economic activities could not exist so it is
essential to welfare in the broader economy
n Raw material supplies and downstream industries
n Employment
n Incomes for all factors of production involved, including owners of reserves
n Export earnings
n Technology, education and training
n Social and community
The rationale for having a mining industry
26
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l Small-scale miners and artisanal workers
l Juniors
n Private companies
n Domestic quoted mining companies
l Multinational mining companies
n Multi-product
n Specialist/other (eg gold)
l State owned enterprises
l “Non-mining” companies (eg oil and gas producers, consumers and
traders)
Mining and mineral processing operations are commonly operated
and run as joint ventures between these different players
The structure of the mining industry
27
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Mining stages and industry participants
Stage Activity Main participants
Grass Roots Exploration Government organisations
Prospectors
Exploration companies
Property Exploration and investigative drilling etc. Exploration companies
Junior companies
Senior and State companies
Project Reserve definition Exploration companies
Junior companies
Senior and State companies
Feasibility studies Exploration companies
Junior companies
Senior and State companies
Mine construction Junior companies
Senior and State companies
Operation Ore/concentrate production Senior and State companies
Processing to marketable product Senior and State companies
Closure and rehabilitation Closure of mine, removal of plant, rehabilitation of
mine site, ongoing monitoring and environmental and
safety controls
Junior companies
Senior  State companies
Funds and specialist firms
28
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Economics
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Mining stages’ timeframes and use of resources
Stage Activity Duration
(years)
Area
(‘000km2
)
Costs
($mn pa)
Grass Roots Exploration 2 to 3 1000 to 100 0.2 to 2
Property Exploration+ 2 to 3 10 2 to 10
Project Reserve definition 1 to 5 1 3 to 15
Feasibility studies 2 to 4 Mining lease 2
Mine construction 2 to 7 Mining lease 100 to 1000+
Operation Production Mine life Mining lease Variable
Closure and rehabilitation Remediation of mine and
processing site and ongoing
environmental controls
1 to infinite Mining lease 1-100+
29
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Economics
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Number of operations
• 25,000 industrial-minerals mines
• 100,000 quarries producing aggregate
Aggregates and industrial minerals account for the lion's share of
global mining activity
• 90% (by value) of the world’s mined coal and metals production is produced
by under 2,000 mines
• Larger companies dominate ore production, and control the most important
mines
• Most of the remaining extraction operations are relatively small
• These operations are often family or community run and rely on local expertise and
second-hand equipment (or even no equipment)
• Artisanal and small-scale mines often operate on the fringes of the law, raising major
policy issues
• They are important in some countries and for some products (eg tantalum, cobalt)
Coal and metals production is dominated by a relatively small
number but more economically significant operations
30
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Small scale and artisanal mining
l Gold and diamonds
are relatively simple
to mine, transport
and trade (and so
attract artisanal
miners and the
junior companies)
l There are many
more press
releases on gold
and diamonds than
their relative mined
value (about one
eighth of the total)
might suggest
31
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Economics
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Source: Estimates
Global ore output by volume, 2018
Metals
Industrial minerals
Cement
Coal
Crushed stone
Sand and gravel
Total 77 billion tonnes
32
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Economics
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Waste-to-ore ratios
Metal Type No. of mines 2011 2012
Gold Underground 4
0.6
(0 to 1.4)
0.6
(0 to 1.9)
O/P and U/G 13
3.4
(0 to 9.6)
3.4
(0 to 11.2)
Open Pit 53
3.0
(0.4 to 23.8)
3.0
(0.1 to 20.5)
Copper O/P and U/G 3
3.3
(0.1 to 7.9)
5.1
(1.5 to 7.9)
Open Pit 19
2.7
(0.2 to 9.6)
3.0
(0.2 to 5.1)
33
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Economics
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© Elemental Economics, 2024
Source: Estimates
Global ore and waste output by volume, 2018
Metals
Industrial Minerals
Cement
Coal
Crushed stone
Sand and gravel
Total 120 billion tonnes
34
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Economics
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© Elemental Economics, 2024
World mineral production, 2022
Mn tonnes $/tonne $ billion % Cum%
Coal 8,803 202 1,777 58.6 58.6
Iron ore 2,600 114 296 9.8 68.4
Copper 22 8,818 182 6.0 74.4
Gold(1) 0 55,985,817 168 5.6 79.9
Diamonds(2) 0 194,421,681 74 2.4 82.4
Nickel 3 25,000 70 2.3 84.7
Potash 40 1,700 68 2.2 86.9
Lime 430 140 60 2.0 88.9
Zinc 13 3,527 39 1.3 90.2
PGMs(3) 0 74,950,630 32 1.1 91.2
Sand  gravel ind 380 58 22 0.7 92.0
Phosphate rock 220 90 20 0.7 92.6
Salt 290 60 17 0.6 93.2
Silver(4) 0 653,168 16 0.5 93.7
Chromite 41 340 14 0.5 94.2
Manganese 20 7 13 0.4 94.6
Other 1,038 157 163 5.4 100.0
Total all products 13,977 217 3,033 100 100.0
Cement 4,100 130 533
Stone Crushed 30,000 14 420
Sand  gravel 44,300 11 487
Stone Dimension 152 208 32
Sand  gravel ind 380 58 22
Overall total 53,252 85 4,527
Source: US Geological Service. Misc calculations
(1) 3,100 tonnes,
(2) 14.8 tonnes, 74 mn carats.
(3) 427 tonnes.
(4) 26,000 tonnes
35
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Economics
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© Elemental Economics, 2024
Source: Bernstein
Putting the physical scale of annual metals
production into context…
PUTTING THINGS IN PERSPECTIVE 15
We have taken the 2015 annual production of each commodity in tonnes, multiplied it by
the density of the commodity, and taken the cube root of that calculated volume to give us
the dimensions of each cube of production. For example, according to AME Group,
1.62bn tonnes of crude steel was produced in 2015. Divided by a density of
7.8tonnes/m3
gives the volume of 207.7mn meters3
, and as such the steel production
cube has sides of length c.592m, compared with the Burj Khalifa in Dubai, the tallest
building in the world, which stands at 828m tall.
EXHIBIT 10: Here we scale the annual volume produced of major commodities to well-known landmarks…
Source: AME Group, Wood Mackenzie, World Gold Council, United States Geological Survey, Wikimedia Commons, Vector.me, freevectorsite.com, and Bernstein
analysis.
BERNSTEIN
EXHIBIT 11: …and a giraffe
Source: AME Group, Wood Mackenzie, World Gold Council, USSGS, Wikimedia Commons, Vector.me, freevectorsite.com, and Bernstein analysis.
!$ #     !   
All the gold ever mined
would fit into a 20x20
metre box
36
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© Elemental Economics, 2024
Or…
• Ore production of 77bn
tonnes would cover
Manhattan to a depth of
29km
• Ore and waste
production of 120bn
tonnes would cover
Manhattan to a depth of
49km
37
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Economics
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© Elemental Economics, 2024
Sources: Estimated
Global mining and quarrying output by value, 2022
Major non-
ferrous
metals
Minor metals
Industrial Minerals
Bulk ferrous
Precious metals
Gems
Fertiliser
Uranium
Coal
Cement
Construction minerals
Total US$4538 billion
38
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Economics
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© Elemental Economics, 2024
Sources: Estimated
Global non-coal minerals output by value, 2022
Major non-ferrous metals
Minor metals
Industrial Minerals
Bulk ferrous
Precious metals
Gems
Fertiliser
Uranium
Total US$1290 billion
39
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Economics
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© Elemental Economics, 2024
0
200
400
600
800
1,000
1,200
1,400
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
Major non-ferrous metals
Minor metals
Industrial Minerals
Bulk ferrous
Precious metals
Gems
Fertiliser
Uranium
Sources: Estimates based on USGS data
Global non-coal minerals production by value, 1999-
2022
US$ billion
40
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Economics
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© Elemental Economics, 2024
Sources: Based on data from USGS, WBMS, BGS.
World non-coal minerals production, 1980-2022
Index, 1980=100
0
50
100
150
200
250
300
350
1980 1985 1990 1995 2000 2005 2010 2015 2020
41
Elemental
Economics
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© Elemental Economics, 2024
Sources: Based on data from USGS, WBMS and BGS
Non-coal minerals price index in real terms,1980-
2022
Index, 1980=100
0
20
40
60
80
100
120
140
160
180
1980 1985 1990 1995 2000 2005 2010 2015 2020
42
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Economics
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© Elemental Economics, 2024
Source: Mining Intelligence
World’s largest mines
43
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Economics
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© Elemental Economics, 2024
Source: SP
Notes: (1) As measured by revenue
Most valuable mines, 2021
Mine Country Type Owner Value(1) ($bn) Share (%) Cumulative (%) Mineral
Hamersley Australia OP Rio Tinto 33,712 3.5 3.5 Iron Ore
Serra Norte Brazil OP Vale 17,519 1.8 5.4 Iron Ore
Chichester Hub Australia OP Fortescue Metals Group 16,028 1.7 7.1 Iron Ore, Mn
Area C Australia OP BHP 13,348 1.4 8.5 Iron Ore
Serra Sul Brazil OP Vale 11,812 1.2 9.7 Iron Ore
Newman Australia OP BHP 11,354 1.2 10.9 Iron Ore
Yandi Australia OP BHP 11,052 1.2 12.1 Iron Ore
Solomon Hub Australia OP Fortescue Metals Group 11,043 1.2 13.2 Iron Ore
Escondida Chile OP BHP, Rio Tinto, etc 9,851 1.0 14.3 Copper,
Jimblebar Australia OP BHP 9,763 1.0 15.3 Iron Ore
Roy Hill Australia OP Hancock 9,296 1.0 16.3 Iron Ore
Grasberg Indonesia UG PT, Freeport-McMoRan 8,237 0.9 17.2 Copper, Gold,
Hope Downs Australia OP Rio Tinto, Hancock 7,899 0.8 18.0 Iron Ore
Polar Division Russia UG Norilsk 7,240 0.8 18.8 Nickel, PGMs
Kola Division Russia UG Norilsk 7,024 0.7 19.5 Nickel, PGMs
44
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© Elemental Economics, 2024
Source: SP, industry data
Share of Global Iron Ore Production by Largest Producers
Corporate control in mining
1975 1985 1995 2000 2005 2013 2021
Largest 5 9 11 13 19 16 13
Top Five 16 21 32 35 42 46 46
Top Ten 27 30 46 46 51 56 56
Top 25 42 46 73 68 70 71 71
Share of Global Copper Production by Largest Producers
1975 1985 1995 2000 2005 2013 2021
Largest 9 13 11 12 12 10 8
Top Five 30 38 35 40 39 37 33
Top Ten 47 53 51 59 57 53 48
Top 25 66 68 74 80 78 72 68
45
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© Elemental Economics, 2024
Source: SP, industry data
Leading producers’ cumulative shares of world
production for different minerals, 2021
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
0 1 2 3 4 5 6 7 8 9 10
Cumulative
%
share
of
world
production
Cumulative number of producers
Aluminium
Bauxite
Coal
Chromite
Copper Mine
Diamonds
Gold
Traded Iron Ore
Lead
Lithium
Manganese
Molybdenum
Nickel
Platinium
Palladium
Potash
Silver Mine
Tin
Uranium
Zinc
46
Elemental
Economics
www.elementaleconomics.com
© Elemental Economics, 2024
Source: “Modern management in the Global Mining Industry”, Robin Adams. Commodity data are for 2015.
https://en.wikipedia.org/wiki/Herfindahl–Hirschman_index
l HHI index is a common measure of market concentration and is used to
determine market competitiveness based on sum of squares of market
shares
l A market with an HHI of less than 1,500 is considered a competitive
marketplace, an HHI of 1,500 to 2,500 is moderately concentrated, and
an HHI of 2,500 or greater is highly concentrated
l Previous examples of blocked mergers in mining include Alcan (2003),
Rio Tinto/BHP (2008) and BHP/Potash Corp (2010)
l Regional or market segment factors
Herfindahl index (HHI)
47
Elemental
Economics
www.elementaleconomics.com
© Elemental Economics, 2024
Source: SP, industry data
Herfindahl index scores in mining markets, 2021
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
4,500
5,000
C
oal
N
ickel
Lead
G
old
Zinc
Silver
Alum
inium
C
opper M
ine
Bauxite
M
anganese
M
olybdenum
C
hrom
ite
Lithium
Traded
Iron
O
re
Tin
U
ranium
Potash
Platinium
Palladium
D
iam
onds
Steel
O
il
M
obile
phones
- U
S
M
obile
phones
- w
orld
10,000
2,500 = Highly concentrated
1,500-2,500 = Moderately concentrated
1,500 = Competitive
48
Elemental
Economics
www.elementaleconomics.com
© Elemental Economics, 2024
Source: SP, industry data
Industry market concentration has been slightly
declining since 2000
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
0 1 2 3 4 5 6 7 8 9 10
Cumulative
%
share
of
world
production
Gold
2000
2006
2021
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
0 1 2 3 4 5 6 7 8 9 10
Cumulative
%
share
of
world
production
Copper
2000
2006
2021
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
0 1 2 3 4 5 6 7 8 9 10
Cumulative
%
share
of
world
production
Traded Iron Ore
2000
2006
2021
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
0 1 2 3 4 5 6 7 8 9 10
Cumulative
%
share
of
world
production
Aluminium
2000
2006
2021
49
Elemental
Economics
www.elementaleconomics.com
© Elemental Economics, 2024
Compan
y
Country Operations
Market
cap $bn
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
Source: Mining-dot-com
Top global mining companies by market
capitalisation, Q2 2022
Compan
y
Country
Operation
s
Market
cap $bn
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
50
Elemental
Economics
www.elementaleconomics.com
© Elemental Economics, 2024
Introduction to mining
What is the mining
industry?
Characteristics
History
Boundaries and mineral products
Value chain and processes
The role and structure of
the mining industry
The industry’s rationale and role
The stages of mining
The structure of the industry
Mineral reserves and
resources
Crustal abundance
Resource and reserve
classifications
Physical versus economic
perspectives
51
Elemental
Economics
www.elementaleconomics.com
© Elemental Economics, 2024
Source: Western Australian School of Mines
Mineral formation and concentration
A Guide to the World of Metals  Mining
13 September 2011
Citigroup Global Markets
9
Figure 6. Basic Epithermal System
Source: Western Australian School of Mines
„ Placer Deposits
Weathering of mineralized rock over millions of years erodes surrounding material
and transports mineral particles. Mineralisation then accumulates in topographical
features that capture the heavier gold particles such as natural features along a
watercourse.
Figure 7. Placer Deposits
Source: Western Australian School of Mines
„ Shear and Structural Hosted
These deposits are typically located in areas where the Earth's crust has undergone
significant stresses and strains resulting in folding and faulting of the rocks. The
process of gold mineralisation involves fluids travelling through a source rock and
Basic Epithermal System
Placer Deposit Porphyry Deposit Formation
Volcanic Massive Sulphide Deposit
Source: Western Australian School of Mines
„ Placer Deposits
Weathering of mineralized rock over millions of years erodes surrounding material
and transports mineral particles. Mineralisation then accumulates in topographical
features that capture the heavier gold particles such as natural features along a
watercourse.
Figure 7. Placer Deposits
Source: Western Australian School of Mines
„ Shear and Structural Hosted
These deposits are typically located in areas where the Earth's crust has undergone
significant stresses and strains resulting in folding and faulting of the rocks. The
Figure 4. VMS Deposit Formation
Source: Western Australian School of Mines
„ Porphyry
Formed by the cooling of magma to rock of a volcanic intrusion. Magma plumes
ascend through the earths surface typically near active tectonic plate collisions.
Currently the largest source of copper ore, porphyry deposits are typically mined
using an open cut mining method. Deposits tend to be large low grade deposits but
with uniform (massive) mineralization.
Figure 5. Porphyry Deposit Formation
Source: Western Australian School of Mines
A Guide to the World of Metals  Mining
13 September 2011
Figure 4. VMS Deposit Formation
Source: Western Australian School of Mines
„ Porphyry
Formed by the cooling of magma to rock of a volcanic intrusion. Magma plumes
ascend through the earths surface typically near active tectonic plate collisions.
Currently the largest source of copper ore, porphyry deposits are typically mined
using an open cut mining method. Deposits tend to be large low grade deposits but
with uniform (massive) mineralization.
Figure 5. Porphyry Deposit Formation
52
Elemental
Economics
www.elementaleconomics.com
© Elemental Economics, 2024
Source: Barrick
Where to (possibly) go to find world class gold and
copper deposits
9
Where to go to find world class gold and copper deposits…
Guiana
Shield
South American
Cordillera
West African
Craton
Tanzanian
and Congo
Cratons
Arabian
Nubian
Shield
Baltica
Canadian
Shield
North American
Cordillera
Yilgarn Craton
Tien
Shan Belt
Lachlan Fold Belt
Tethyan Metallogenic
Belt
Siberian Craton
Antillean Arcs
Pacific Rim
Central African
Cu Belt
Wits Basin
Kupferschiefer
Cu Belt
South
Australia
Cu/Au
Au
Cu
N America
2 Boz gold
0.49 Bt
copper
Africa 
Middle East
3.5 Boz gold
0.16 Bt copper
LatAm
1.5 Boz gold
0.9 Bt copper
ANZ
1 Boz gold
0.12 Bt copper
Asia Pacific
2.5 Boz gold
0.38 Bt copper
Europe
0.5 Boz gold
0.2 Bt copper
53
Elemental
Economics
www.elementaleconomics.com
© Elemental Economics, 2024
Note: The product of the crustal abundance and concentration factor indicates the average ore grade required to support mining
Crustal abundance and concentration factors
Element
Average crustal
abundance (%)
Economic
concentration
factor
Aluminium 8.1 3 to 4
Iron 5.8 5 to 7
Titanium 0.9 25 to 100
Chromium 0.01 4000 to 5000
Zinc 0.008 300
Copper 0.006 100 to 200
Tin 0.0002 1000
Uranium 0.0002 500 to 1000
Silver 0.000008 1000
Platinum 0.0000005 600
Gold 0.0000004 500 to 1000
54
Elemental
Economics
www.elementaleconomics.com
© Elemental Economics, 2024
l Commodity or product
l Time
l Resource quality
n Grade
n Continuity and depth of orebody
n Impurities
n Reserve and resource size
l Location
l Mining and processing issues
n Deposit type, mining method
n Processing method
l Development issues
n Study stage
n Capital cost and infrastructure
requirements
n Permitting and other constraints
Ore body characteristics
such as the Yilgarn and Pilbara Cratons in Western Australia.
Associated Mineral assemblage
As explained above, the various elements are deposited into the earths crust in a
myriad of ways. As the formation process can differ, so too can the main ore
minerals that host the economic elements of the underlying commodity.
Figure 8. Main ore minerals
Mineral Main Ore Minerals
Bauxite Gibbsite (Al(OH)3), Diaspore (AlO(OH), Bohmite (AlO(OH)
Copper Chalcopyrite (CuFeS2), Chalcocite (Cu2S) Bornite (Cu5FeS4), Malachite (Cu2Co(OH)2)
Nickel Pentlandite (Fe,Ni)9S8) Pyrrhotite (FeS), Niccolite (NiAs)
Iron Ore Magnetite (Fe3O4) Hematite (Fe2O3) Siderite (FeCO3)
Rare Earths Bastnasite (Ce,La)(CO3)F), Monazite (Ce,La Nd,Th)PO4)
Zinc Sphalerite (ZnS) Smithsonite (ZnCO3)
Uranium Uranite (UO), Coffinite (U(SiO4)
Molybdenum Molybdenite (MoS)
Source: Citi Investment Research and Analysis
What’s a good grade
The grade profile of a similar type of deposits vary massively given the different
formation process, host rocks, size, etc. Thus it is very difficult to classify what is a
good or bad grade for a deposit or commodity type, as even low grades can deliver
economical returns in favorable geological settings. The table below attempts to
loosely assign what is a good and poor grade for a deposit.
Figure 9. Grade profile of various commodity and deposit types
Deposit Type Unit Low Average Good
Iron Ore % 50% 50% 60%
Copper - Porphyry % 0.5% 0.50% 1%
Copper - IOCG %
Copper - Open Pit % 0.5% 0.50% 1%
Copper - Underground % 1% 1%-2% 2%
Gold - epithermal g/t 1g/t 4g/t 6g/t
Gold - sulphide g/t
Gold - oxide g/t
Nickel - laterite % 1% 1-2% 2%
Nickel - sulphide % 1% 2-4% 4%
Uranium ppm 400 1500
Source: Citi Investment Research and Analysis
Common Mineable Ore Grades
55
Elemental
Economics
www.elementaleconomics.com
© Elemental Economics, 2024
Source: Geological survey Ireland, Dadco
Exploration funnel
Desktop studies
and office based
research
Geological
mapping
Soil sampling,
stream
sediments and
ground-based
geophysics
Early-stage
drilling
Advanced-
stage
drilling
56
Elemental
Economics
www.elementaleconomics.com
© Elemental Economics, 2024
Source: The Northern Miner
Greenfield exploration methods
Method Parameters recorded Application
Magnetics Strength of magnetic field Deposits of magnetic minerals such as iron
and pyrrhotite-nickel have high magnetics
susceptibility
Electromagnetics Electric current in ground due to alternating
magnetic field
Airborne geophysical surveying
Resistivity Forcing an electric current into the ground
through widely paced electrodes and measuring
current which flows to identify rock resistance
Massive sulphide occurrences exhibit
anomalously low resistance
Induced polarisation “Charging” orebodies by passing an electric
current through them and measuring charge
held
Detecting disseminated sulphide minerals
Gravity Measuring changes in gravitational strength due
to differences in rock density
Identity areas favourable to further mineral
exploration
Seismics Measure speed and which soundwaves travel
through rock and are reflected back to determine
rock structure and change in rock types
Widespread in petroleum exploration
Radiometrics Use scintillometer or gamma ray spectrometer to
look for presence of radioactivity
Finding the three main radioactive elements in
nature - uranium, potassium and thorium
57
Elemental
Economics
www.elementaleconomics.com
© Elemental Economics, 2024
Resource and reserve reporting standards
l Committee for Mineral Reserves
International Reporting Standards
(CRIRSCO) (International)
l Australasian Joint Ore Reserves Committee
(JORC)
l CIM Standing Committee on Reserve
Definitions (Canada)
l South African Code for Reporting of Mineral
Reserves and Mineral Resources (SAMREC
Code)
l Code for Reporting of Mineral Exploration
Results, Mineral Resources  Mineral
Reserves (UK/ Western Europe)
l SME Code (USA)
l Chile
l Peru
INTERNATIONAL
REPORTING
TEMPLATE
for the public reporting of
EXPLORATION TARGETS, EXPLORATION
RESULTS, MINERAL RESOURCES AND MINERAL
RESERVES
November 2019
58
Elemental
Economics
www.elementaleconomics.com
© Elemental Economics, 2024
CRIRSCO main principles
TRANSPARENCY MATERIALITY COMPETENCE
Source: The Committee for International Reserves International Reporting Standards
59
Elemental
Economics
www.elementaleconomics.com
© Elemental Economics, 2024
Source: CRIRSO
CRIRSCO resource and reserve definitions
Degree of
geological
certainty
Feasibility of economic
recovery
60
Elemental
Economics
www.elementaleconomics.com
© Elemental Economics, 2024
Source: Bernstein
A useful way to visualise reserves and resources…
Economic
Reserves
Not-economic
Resources
Proven
Inferred
Indicated
Measured
Probable
Drill holes
61
Elemental
Economics
www.elementaleconomics.com
© Elemental Economics, 2024
See https://en.wikipedia.org/wiki/Bre-X
The 1997 Bre-X scandal
62
Elemental
Economics
www.elementaleconomics.com
© Elemental Economics, 2024
Source: US Geological Survey
(1) One quarter of gross bauxite totals, reflecting the amount of bauxite needed to produce one tonne of aluminium
(2) 1,800 in identified resources and 3,100 in unidentified resources.
World resources and reserves, 2021
Resources Reserves
Aluminium(1)
13,750 to 18,750 8,000
Copper(2)
5,600 880
Lead 2,000 90
Nickel 130 (land) 95
Zinc 1,900 250
Million tonnes of contained metal
63
Elemental
Economics
www.elementaleconomics.com
© Elemental Economics, 2024
Source: Company reports
Cumulative ore reserves and grades of copper
mines, 2021
0
1
2
3
4
5
6
7
0 100 200 300 400 500 600 700
Reserve
grade (% Cu)
Cumulative reserves (Mt Cu)
0
50
100
150
200
250
300
0.0
to
0.5
0.5
to
1.0
1.0
to
1.5
1.5
to
2.0
2.0
to
2.5
2.5
to
3.0
3.0
to
3.5
3.5
to
4.0
4.0
to
4.5
4.5
to
5.0
O
ver 5.0
Mt Cu
Reserve grade (% Cu)
Copper Reserve-Grade Curve Copper Reserve-Grade Distribution
64
Elemental
Economics
www.elementaleconomics.com
© Elemental Economics, 2024
Note: Growth rates: 2000-18 averages of global usage. Assumes constant recycling share.
Sources: USGS, WBMS and estimates
Estimated lives of non-ferrous metal reserves, 2021
Reserves
(Mt)
Assumed
growth %
(pa)
Reserve
Life
(years)
Implied annual %
depletion of
reserves
Copper 880 2.7 27 3.7
Lead 90 3.2 14 7.1
Nickel 95 3.1 22 4.5
Zinc 250 2.3 14 7.1
65
Elemental
Economics
www.elementaleconomics.com
© Elemental Economics, 2024
Physical versus economic perspectives
The world (?), and hence resources, are theoretically finite
‘Ultimately recoverable’ resources
‘Peak production’
Policies needed?
Technology
Recycling
Demand
Prices
66
Elemental
Economics
www.elementaleconomics.com
© Elemental Economics, 2024
Palabora’s estimated reserves, 1966-2003
As defined at
start up 1966
Potential in
1991
Potential in
2003
Tonnage 259M tonnes 854M tonnes 1,133M tonnes
Grade 0.69% cu 0.55% cu 0.57% cu
Contained copper 1.79M tonnes 4.67M tonnes 6.43M tonnes
Cut off grade 0.3% cu 0.15% cu Not available
Capacity: Ore milled
30,000 tpd
open pit
80,000 tpd
open pit
30,000tpd
underground
Mine Life (from start up) 24 years 35 years 59 years
67
Elemental
Economics
www.elementaleconomics.com
© Elemental Economics, 2024
Lines represent cumulative production plus Mineral Inventories. Decreases are due to reporting variations over time and the use of different cut-off grades.
Discovery of El Teniente, Chuquicamata and Rio Blanco-Los Bronces reset to 1976. Discovery of La Granja is reset to 1994.
Source: Elemental Economics, MinEx Consulting
Copper endowment at selected mines over time
0
25
50
75
100
125
150
175
200
225
1 6 11 16 21 26 31 36 41 46
Escondida
Rio Blanco - Los Bronces
Chuquicamata
El Teniente
Collahuasi
Los
Pelambres-El
Pachon
La Granja
Grasberg
Oyu Tolgoi
Copper
endowment
(Mt
Contained
Cu)
Time after discovery (years)
68
Elemental
Economics
www.elementaleconomics.com
© Elemental Economics, 2024
Source: USGS, Elemental Economics
Despite rising production global reserves have
tended to increase over time
0
20
40
60
80
100
120
140
160
180
200
1930 1940 1950 1960 1970 1980 1990 2000 2010 2020
Copper
Lead
Zinc
Nickel
Bauxite
Index of global reserves, 2005=100
69
Elemental
Economics
www.elementaleconomics.com
© Elemental Economics, 2024
0
200
400
600
800
1000
1200
1400
1600
1800
1930 1940 1950 1960 1970 1980 1990 2000 2010 2020
Cumulative output from 1726
Remaining reserves
Copper
0
50
100
150
200
250
300
350
400
450
1930 1940 1950 1960 1970 1980 1990 2000 2010 2020
Cumulative output from 1800
Remaining reserves
Lead
0
100
200
300
400
500
600
700
800
900
1930 1940 1950 1960 1970 1980 1990 2000 2010 2020
Cumulative output from 1823
Remaining reserves
Zinc
0
20
40
60
80
100
120
140
160
180
1950 1960 1970 1980 1990 2000 2010 2020
Cumulative output from 1867
Remaining reserves
Nickel
Sources: USGS, ILZSG, ICSG, INSG, CJ Schmitz
‘Ultimately recoverable’ reserves,1930-2020
Million tonnes of relevant metal
70
Elemental
Economics
www.elementaleconomics.com
© Elemental Economics, 2024
Source: Company reports, Elemental Economics
Theoretical cumulative copper ore reserves and
grades
0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
0 500 1000 1500 2000 2500 3000 3500 4000 4500 5000
Reserve grade (% Cu)
Cumulative reserves (Mt Cu)
Actual
Theoretical
71
Elemental
Economics
www.elementaleconomics.com
© Elemental Economics, 2024
Reserves and resources: Summary
Several probabilistic dimensions
Geology
Economics
Accessibility
Technology moves frontiers
Each deposit finite
‘Infinitely finite’

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1. Elemental Economics - Introduction to mining.pdf

  • 1. Elemental Economics 1. Introduction to Mining Neal Brewster neal.brewster@elementaleconomics.com
  • 2. 1 Elemental Economics www.elementaleconomics.com © Elemental Economics, 2024 Introduction to mining What is the mining industry? Characteristics History Boundaries and mineral products Value chain and processes The role and structure of the mining industry The industry’s rationale and role The stages of mining The structure of the industry Mineral reserves and resources Crustal abundance Resource and reserve classifications Physical versus economic perspectives
  • 3. 2 Elemental Economics www.elementaleconomics.com © Elemental Economics, 2024 What distinguishes mining from other forms of economic activity? Does the mining industry have any unique features? A basic question about the mining industry posed in two different ways “Mining is the extraction of valuable minerals or other geological materials from the Earth, usually from an ore body”
  • 4. 3 Elemental Economics www.elementaleconomics.com © Elemental Economics, 2024 l Prehistoric Era (stone age, bronze age and iron age) l Ancient Era l Medieval Era l Industrial Revolution Era and first globalisation l Americas Era l Modern Era n 1850-1920 Age of empires n 1920-1950 Rise of local titans n 1951-1970 New global giants n 1971-1980 Emergence of statism and diversification n 1981-2002 Decline, fall and reconsolidation n 2003-2011 China and the “super-cycle” years n 2012-2015 Age of regret n 2016- Rise of the green economy and critical raw materials? Mining eras
  • 5. 4 Elemental Economics www.elementaleconomics.com © Elemental Economics, 2024 The fundamental characteristics of mining are unchanged from those of many years ago… Source: Wikipedia
  • 6. 5 Elemental Economics www.elementaleconomics.com © Elemental Economics, 2024 What is the mining industry today? Define by product? Define by types of process? What are the boundaries?
  • 7. 6 Elemental Economics www.elementaleconomics.com © Elemental Economics, 2024 Mineral products Everything we physically use is either animal, vegetable or mineral. These primary products are indispensable. Mineral products can be defined as: ‘An inorganic substance that occurs naturally in the earth’ ‘An ore or other substance obtained by mining’ Once they are mined virtually all minerals require processing to extract usable products
  • 8. 7 Elemental Economics www.elementaleconomics.com © Elemental Economics, 2024 Boundaries? Exclude petroleum, natural gas and water Coal and uranium? Sand, gravel, aggregates and construction materials? Dimension stone (eg granite, marble)? Downstream boundaries?
  • 9. 8 Elemental Economics www.elementaleconomics.com © Elemental Economics, 2024 The main mined mineral products Steel and steel alloys Battery raw materials Technology metals Industrial minerals Iron ore Bulk alloys • Chromium • Manganese • Silicon and ferrosilicon Noble alloys • Molybdenum • Niobium • Vanadium Nickel Cobalt Graphite Lithium Nickel sulphate Rare earths Antimony Gallium Germanium Indium Magnesium metal Rhenium Scandium Tantalum Tellurium Titanium metal Tungsten Bauxite, Boron, Clays, Feldspar, Fluorspar, Fullers earth, Gypsum, Iodine, Kaolin, Lime, Magnesium compounds, Mica, Nephaline, Salt, Soda ash/Trona, Strontium, Talc, Titanium minerals, Zirconium Base metals Aluminium Copper Lead Tin Nickel Zinc Energy products Thermal coal Coking coal Uranium Precious metals Gold Silver Platinum Palladium Rhodium Ruthenium Iridium Osmium Precious stones Agricultural products Peat Potash Phosphate Perlite Sulphur
  • 10. 9 Elemental Economics www.elementaleconomics.com © Elemental Economics, 2024 Source: USGS, Wikipedia, Elemental Economics Note: Prices based on average 2020-22 Crustal abundance, price and market value of selected mineral products Thallium Arsenic Tellurium Celestite/Stro ntium Selenium Mercury Rhenium Cadmium Bismuth Beryllium Germanium Gallium Antimony Ruthenium Indium Iridium Rutile Iodine Bromine Tantalum Barytes Graphite Niobium Vanadium Ilmenite Soda Ash Natural Lithium Tungsten Iron oxide pigments Fluorspar Boron Magnesium Uranium Platinum Silicon Tin Sulphur Lead Molybdenum Cobalt Chromite Rhodium Manganese Bauxite Magnesia Palladium Silver Salt Phosphate rock Zinc Nickel Potash Copper Gold Iron ore 0.001 0.01 0.1 1 10 100 1000 10000 100000 1000000 0.00001 0.0001 0.001 0.01 0.1 1 10 100 1000 10000 100000 1000000 Price ($/kg) Crustal abundance (mg/kg) Note: Size of bubble denotes relative market size
  • 11. 10 Elemental Economics www.elementaleconomics.com © Elemental Economics, 2024 Source: US Geological Survey, calculations 2,218 512 1,362 930 1,029 Petroleum Gas Stone and aggregates Coal Non-fuel minerals US$ billion 0 1,000 2,000 3,000 4,000 5,000 6,000 7,000 Extractive industry turnover, 2018-22 average Market value of the entire mining industry is ~US$2-3 trillion compared to US$3.05 trillion for Apple (as of end-2023) which has US$400bn of annual revenue
  • 12. 11 Elemental Economics www.elementaleconomics.com © Elemental Economics, 2024 Source: Misc estimates l 0.04% global land area l 0.6% global employment l 4% global merchandise trade l 1-2% global GDP (directly)* l 1-2% global equity capitalisation l 0.7% global greenhouse emissions (direct energy use) or 4-7% including coal-bed methane* … but around half of global economic activity relies upon mining products and these global figures are much higher in many individual countries * Extraction of minerals, oil, and natural gas, typically contributes around 5-7% of the world's GDP ** Including downstream processing (scope 3 emissions – mainly steel, aluminium and energy production) rises to 28% Importance of mining
  • 14. 13 Elemental Economics www.elementaleconomics.com © Elemental Economics, 2024 Mining value chain Resources Mining and concentrating Smelting and refining Intermediate products Final end use products Distribution Distribution Distribution
  • 15. 14 Elemental Economics www.elementaleconomics.com © Elemental Economics, 2024 Source: Elemental Economics Metal and mineral production flows and processes Intermediate and finished products Smelting & refining Mining open pit or underground Logistics Ore sorting/primary processing Base and precious metals, diamonds Bulks (iron ore, coal, potash, industrial minerals) Aggregates Leaching, electrowining, Refining Crushing, Sorting, Separation Trucking, Rail, Port Smelting/ refining Crushing, Floatation Crushing and/ or Leaching Smelting/ Refining Refining Drilling, blasting, loading, hauling, disposing Electrowining Low grade sulphides/oxides Impure metal Concentrate Sulphides Crushing, Sorting Trucking Trucking, Rail, Port Shipping Pure metal Pure metal Pure metal Final product form Metal Final product form Run of mine ore Shipping grade ore Trucking, port shipping Shipping Resource development and planning Exploring, resource definition, mine planning Mining company primary focus Ore direct to buyer Refinery contract Delivery contract Smelter contract Delivery contract Smelter contract Finished products Alloying, melting, rolling, forming
  • 16. 15 Elemental Economics www.elementaleconomics.com © Elemental Economics, 2024 Mining deposits and processes Overburden Prestripping Pushbacks Overburden Resource Surface mining Mechanical Open pit Quarrying Strip and auger mining Stockpile reclamation Aqueous Hydraulicking Alluvial/dredging Brine Solution mining (leaching) Underground mining Unsupported Room-and-pillar Stope-and-pillar Shrinkage stoping Sublevel stoping Supported Cut-and-fill Stull Square set Caving Longwall Sublevel Block caving
  • 17. 16 Elemental Economics www.elementaleconomics.com © Elemental Economics, 2024 Large mining trucks Hydraulic mining shovel Bucket wheel excavators Dozers Rope shovels High wall miners Drill rigs ANFO charging truck Graders and scrapers Large wheel loaders Draglines Wheel tractor scrapers Underground mining loaders and trucks Jumbos Mechanical mining equipment Source: https://www.flyability.com/mining-tools
  • 22. 21 Elemental Economics www.elementaleconomics.com © Elemental Economics, 2024 Crushing, grinding and screening Separation, concentration and drying Roasting, smelting and refining Metals and mineral processing 2/10/2021 67 e.g. ALUMINIA REFINERY 5HGVLGH :KLWHVLGH 6PHOWHU %DX[LWH PLQH e.g. PLATINUM MINE CONCENTRATOR SMELTER BASE METALS REFINERY PRECIOUS METALS REFINERY Nickel Cobalt Copper cathodes Rhodium Iridium Platinum Ruthenium Palladium Gold 133 134 - SMELTING 129 2/10/2021 SEPARATION SHAKING TABLES MAGNETIC SEPARTION GRAVITY SEPARTION CYCLONES SEPARATION FLOAT CELLS 117 2/10/2021 SEPARATION SHAKING TABLES MAGNETIC SEPARTION GRAVITY SEPARTION CYCLONES SEPARATION FLOAT CELLS 117 2/10/2021 59 SEPARATION SHAKING TABLES MAGNETIC SEPARTION GRAVITY SEPARTION CYCLONES SEPARATION FLOAT CELLS 117 118 FLOTATION SMELTING ALUMINA REFINERY 2/10/2021 63 HEAP LEACHING - LEACHING - ELECTROWINNIING (OHFWURZLQQLQJLVWKHUHFRYHURIPHWDOIURPDQDTXHRXVVROXWLRQ EPHDQVRIDQHOHFWULFFXUUHQW 125 126 ELECTROWINNING 2/10/2021 54 ‡ BULK[e.g. IRON ORE, COAL] ‡ PRECIOUS / BASE METAL [e.g. PLATINUM, COPPER, NICKEL, GOLD, ALUMINIUM, REE, (Lithium)] ‡ PRECIOUS GEM [e.g. DIAMONDS] CRUSHING SCREENING With thanks to Prof. Jan Cilliers for a number of the following images 107 108 2/10/2021 CRUSHING, SCREENING GRINDING CRUSHING, SCREENING GRINDING 115 Usually at mine site TRAIN SHIP TRUCK Can be several intermediate steps
  • 23. 22 Elemental Economics www.elementaleconomics.com © Elemental Economics, 2024 Infrastructure and logistics 2.2km-long iron ore train in Australia Port Headland Australia, 521Mt throughput in 2021-2 Parabadoo Airport, Australia Power station to supply Grasberg mine, Indonesia Oyu Tolgoi construction camp, Mongolia Vale Brasil, with a 400,000 tonne capacity, 362m length and 65m width Road train, Australia
  • 24. 23 Elemental Economics www.elementaleconomics.com © Elemental Economics, 2024 l Downstream mills and fabricators produce a range of alloyed products and value-added product forms l Tends to be more labour intensive then mining and turnover can be multiple of metal content value l Most mining companies largely not directly involved in downstream sectors n Resource-based companies’ advantages are based on exploration and resource acquisition and development, mine operations optimisation, managing HSEC risks with high capital intensity n Process and market-based companies’ expertise is in technology, logistics, product development, branding, and logistics and mostly located nearer end users Intermediate and finished products Aluminium products Unwrought products Products obtained by casting without further hot or cold working (eg ingots, blocks, billets, slabs) Wrought products Product that has been subjected to hot working and/or cold working (eg plates, sheets, strip, foil, wire, bars, rods, basic profiles) Semi-finished products Products that have undergone some processing and are supplied for further processing before it is ready for use (eg extruded profiles and forgings) Powder products Products obtained from fine aluminium powder by compacting and sintering, often followed by hot pressing and/or subsequent working
  • 25. 24 Elemental Economics www.elementaleconomics.com © Elemental Economics, 2024 Introduction to mining What is the mining industry? Characteristics History Boundaries and mineral products Value chain and processes The role and structure of the mining industry The industry’s rationale and role The stages of mining The structure of the industry Mineral reserves and resources Crustal abundance Resource and reserve classifications Physical versus economic perspectives
  • 26. 25 Elemental Economics www.elementaleconomics.com © Elemental Economics, 2024 l Mining is primarily an economic activity whose basic rationale is usually wealth creation for owners or developers of mineral resources l Without the application of other factors of production (capital, labour, management) minerals in the ground have little or no value l In relation to other industries minerals are often akin to “vitamins in the human diet” – without mining many other economic activities could not exist so it is essential to welfare in the broader economy n Raw material supplies and downstream industries n Employment n Incomes for all factors of production involved, including owners of reserves n Export earnings n Technology, education and training n Social and community The rationale for having a mining industry
  • 27. 26 Elemental Economics www.elementaleconomics.com © Elemental Economics, 2024 l Small-scale miners and artisanal workers l Juniors n Private companies n Domestic quoted mining companies l Multinational mining companies n Multi-product n Specialist/other (eg gold) l State owned enterprises l “Non-mining” companies (eg oil and gas producers, consumers and traders) Mining and mineral processing operations are commonly operated and run as joint ventures between these different players The structure of the mining industry
  • 28. 27 Elemental Economics www.elementaleconomics.com © Elemental Economics, 2024 Mining stages and industry participants Stage Activity Main participants Grass Roots Exploration Government organisations Prospectors Exploration companies Property Exploration and investigative drilling etc. Exploration companies Junior companies Senior and State companies Project Reserve definition Exploration companies Junior companies Senior and State companies Feasibility studies Exploration companies Junior companies Senior and State companies Mine construction Junior companies Senior and State companies Operation Ore/concentrate production Senior and State companies Processing to marketable product Senior and State companies Closure and rehabilitation Closure of mine, removal of plant, rehabilitation of mine site, ongoing monitoring and environmental and safety controls Junior companies Senior State companies Funds and specialist firms
  • 29. 28 Elemental Economics www.elementaleconomics.com © Elemental Economics, 2024 Mining stages’ timeframes and use of resources Stage Activity Duration (years) Area (‘000km2 ) Costs ($mn pa) Grass Roots Exploration 2 to 3 1000 to 100 0.2 to 2 Property Exploration+ 2 to 3 10 2 to 10 Project Reserve definition 1 to 5 1 3 to 15 Feasibility studies 2 to 4 Mining lease 2 Mine construction 2 to 7 Mining lease 100 to 1000+ Operation Production Mine life Mining lease Variable Closure and rehabilitation Remediation of mine and processing site and ongoing environmental controls 1 to infinite Mining lease 1-100+
  • 30. 29 Elemental Economics www.elementaleconomics.com © Elemental Economics, 2024 Number of operations • 25,000 industrial-minerals mines • 100,000 quarries producing aggregate Aggregates and industrial minerals account for the lion's share of global mining activity • 90% (by value) of the world’s mined coal and metals production is produced by under 2,000 mines • Larger companies dominate ore production, and control the most important mines • Most of the remaining extraction operations are relatively small • These operations are often family or community run and rely on local expertise and second-hand equipment (or even no equipment) • Artisanal and small-scale mines often operate on the fringes of the law, raising major policy issues • They are important in some countries and for some products (eg tantalum, cobalt) Coal and metals production is dominated by a relatively small number but more economically significant operations
  • 31. 30 Elemental Economics www.elementaleconomics.com © Elemental Economics, 2024 Small scale and artisanal mining l Gold and diamonds are relatively simple to mine, transport and trade (and so attract artisanal miners and the junior companies) l There are many more press releases on gold and diamonds than their relative mined value (about one eighth of the total) might suggest
  • 32. 31 Elemental Economics www.elementaleconomics.com © Elemental Economics, 2024 Source: Estimates Global ore output by volume, 2018 Metals Industrial minerals Cement Coal Crushed stone Sand and gravel Total 77 billion tonnes
  • 33. 32 Elemental Economics www.elementaleconomics.com © Elemental Economics, 2024 Waste-to-ore ratios Metal Type No. of mines 2011 2012 Gold Underground 4 0.6 (0 to 1.4) 0.6 (0 to 1.9) O/P and U/G 13 3.4 (0 to 9.6) 3.4 (0 to 11.2) Open Pit 53 3.0 (0.4 to 23.8) 3.0 (0.1 to 20.5) Copper O/P and U/G 3 3.3 (0.1 to 7.9) 5.1 (1.5 to 7.9) Open Pit 19 2.7 (0.2 to 9.6) 3.0 (0.2 to 5.1)
  • 34. 33 Elemental Economics www.elementaleconomics.com © Elemental Economics, 2024 Source: Estimates Global ore and waste output by volume, 2018 Metals Industrial Minerals Cement Coal Crushed stone Sand and gravel Total 120 billion tonnes
  • 35. 34 Elemental Economics www.elementaleconomics.com © Elemental Economics, 2024 World mineral production, 2022 Mn tonnes $/tonne $ billion % Cum% Coal 8,803 202 1,777 58.6 58.6 Iron ore 2,600 114 296 9.8 68.4 Copper 22 8,818 182 6.0 74.4 Gold(1) 0 55,985,817 168 5.6 79.9 Diamonds(2) 0 194,421,681 74 2.4 82.4 Nickel 3 25,000 70 2.3 84.7 Potash 40 1,700 68 2.2 86.9 Lime 430 140 60 2.0 88.9 Zinc 13 3,527 39 1.3 90.2 PGMs(3) 0 74,950,630 32 1.1 91.2 Sand gravel ind 380 58 22 0.7 92.0 Phosphate rock 220 90 20 0.7 92.6 Salt 290 60 17 0.6 93.2 Silver(4) 0 653,168 16 0.5 93.7 Chromite 41 340 14 0.5 94.2 Manganese 20 7 13 0.4 94.6 Other 1,038 157 163 5.4 100.0 Total all products 13,977 217 3,033 100 100.0 Cement 4,100 130 533 Stone Crushed 30,000 14 420 Sand gravel 44,300 11 487 Stone Dimension 152 208 32 Sand gravel ind 380 58 22 Overall total 53,252 85 4,527 Source: US Geological Service. Misc calculations (1) 3,100 tonnes, (2) 14.8 tonnes, 74 mn carats. (3) 427 tonnes. (4) 26,000 tonnes
  • 36. 35 Elemental Economics www.elementaleconomics.com © Elemental Economics, 2024 Source: Bernstein Putting the physical scale of annual metals production into context… PUTTING THINGS IN PERSPECTIVE 15 We have taken the 2015 annual production of each commodity in tonnes, multiplied it by the density of the commodity, and taken the cube root of that calculated volume to give us the dimensions of each cube of production. For example, according to AME Group, 1.62bn tonnes of crude steel was produced in 2015. Divided by a density of 7.8tonnes/m3 gives the volume of 207.7mn meters3 , and as such the steel production cube has sides of length c.592m, compared with the Burj Khalifa in Dubai, the tallest building in the world, which stands at 828m tall. EXHIBIT 10: Here we scale the annual volume produced of major commodities to well-known landmarks… Source: AME Group, Wood Mackenzie, World Gold Council, United States Geological Survey, Wikimedia Commons, Vector.me, freevectorsite.com, and Bernstein analysis. BERNSTEIN EXHIBIT 11: …and a giraffe Source: AME Group, Wood Mackenzie, World Gold Council, USSGS, Wikimedia Commons, Vector.me, freevectorsite.com, and Bernstein analysis. !$ # ! All the gold ever mined would fit into a 20x20 metre box
  • 37. 36 Elemental Economics www.elementaleconomics.com © Elemental Economics, 2024 Or… • Ore production of 77bn tonnes would cover Manhattan to a depth of 29km • Ore and waste production of 120bn tonnes would cover Manhattan to a depth of 49km
  • 38. 37 Elemental Economics www.elementaleconomics.com © Elemental Economics, 2024 Sources: Estimated Global mining and quarrying output by value, 2022 Major non- ferrous metals Minor metals Industrial Minerals Bulk ferrous Precious metals Gems Fertiliser Uranium Coal Cement Construction minerals Total US$4538 billion
  • 39. 38 Elemental Economics www.elementaleconomics.com © Elemental Economics, 2024 Sources: Estimated Global non-coal minerals output by value, 2022 Major non-ferrous metals Minor metals Industrial Minerals Bulk ferrous Precious metals Gems Fertiliser Uranium Total US$1290 billion
  • 40. 39 Elemental Economics www.elementaleconomics.com © Elemental Economics, 2024 0 200 400 600 800 1,000 1,200 1,400 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 Major non-ferrous metals Minor metals Industrial Minerals Bulk ferrous Precious metals Gems Fertiliser Uranium Sources: Estimates based on USGS data Global non-coal minerals production by value, 1999- 2022 US$ billion
  • 41. 40 Elemental Economics www.elementaleconomics.com © Elemental Economics, 2024 Sources: Based on data from USGS, WBMS, BGS. World non-coal minerals production, 1980-2022 Index, 1980=100 0 50 100 150 200 250 300 350 1980 1985 1990 1995 2000 2005 2010 2015 2020
  • 42. 41 Elemental Economics www.elementaleconomics.com © Elemental Economics, 2024 Sources: Based on data from USGS, WBMS and BGS Non-coal minerals price index in real terms,1980- 2022 Index, 1980=100 0 20 40 60 80 100 120 140 160 180 1980 1985 1990 1995 2000 2005 2010 2015 2020
  • 43. 42 Elemental Economics www.elementaleconomics.com © Elemental Economics, 2024 Source: Mining Intelligence World’s largest mines
  • 44. 43 Elemental Economics www.elementaleconomics.com © Elemental Economics, 2024 Source: SP Notes: (1) As measured by revenue Most valuable mines, 2021 Mine Country Type Owner Value(1) ($bn) Share (%) Cumulative (%) Mineral Hamersley Australia OP Rio Tinto 33,712 3.5 3.5 Iron Ore Serra Norte Brazil OP Vale 17,519 1.8 5.4 Iron Ore Chichester Hub Australia OP Fortescue Metals Group 16,028 1.7 7.1 Iron Ore, Mn Area C Australia OP BHP 13,348 1.4 8.5 Iron Ore Serra Sul Brazil OP Vale 11,812 1.2 9.7 Iron Ore Newman Australia OP BHP 11,354 1.2 10.9 Iron Ore Yandi Australia OP BHP 11,052 1.2 12.1 Iron Ore Solomon Hub Australia OP Fortescue Metals Group 11,043 1.2 13.2 Iron Ore Escondida Chile OP BHP, Rio Tinto, etc 9,851 1.0 14.3 Copper, Jimblebar Australia OP BHP 9,763 1.0 15.3 Iron Ore Roy Hill Australia OP Hancock 9,296 1.0 16.3 Iron Ore Grasberg Indonesia UG PT, Freeport-McMoRan 8,237 0.9 17.2 Copper, Gold, Hope Downs Australia OP Rio Tinto, Hancock 7,899 0.8 18.0 Iron Ore Polar Division Russia UG Norilsk 7,240 0.8 18.8 Nickel, PGMs Kola Division Russia UG Norilsk 7,024 0.7 19.5 Nickel, PGMs
  • 45. 44 Elemental Economics www.elementaleconomics.com © Elemental Economics, 2024 Source: SP, industry data Share of Global Iron Ore Production by Largest Producers Corporate control in mining 1975 1985 1995 2000 2005 2013 2021 Largest 5 9 11 13 19 16 13 Top Five 16 21 32 35 42 46 46 Top Ten 27 30 46 46 51 56 56 Top 25 42 46 73 68 70 71 71 Share of Global Copper Production by Largest Producers 1975 1985 1995 2000 2005 2013 2021 Largest 9 13 11 12 12 10 8 Top Five 30 38 35 40 39 37 33 Top Ten 47 53 51 59 57 53 48 Top 25 66 68 74 80 78 72 68
  • 46. 45 Elemental Economics www.elementaleconomics.com © Elemental Economics, 2024 Source: SP, industry data Leading producers’ cumulative shares of world production for different minerals, 2021 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 0 1 2 3 4 5 6 7 8 9 10 Cumulative % share of world production Cumulative number of producers Aluminium Bauxite Coal Chromite Copper Mine Diamonds Gold Traded Iron Ore Lead Lithium Manganese Molybdenum Nickel Platinium Palladium Potash Silver Mine Tin Uranium Zinc
  • 47. 46 Elemental Economics www.elementaleconomics.com © Elemental Economics, 2024 Source: “Modern management in the Global Mining Industry”, Robin Adams. Commodity data are for 2015. https://en.wikipedia.org/wiki/Herfindahl–Hirschman_index l HHI index is a common measure of market concentration and is used to determine market competitiveness based on sum of squares of market shares l A market with an HHI of less than 1,500 is considered a competitive marketplace, an HHI of 1,500 to 2,500 is moderately concentrated, and an HHI of 2,500 or greater is highly concentrated l Previous examples of blocked mergers in mining include Alcan (2003), Rio Tinto/BHP (2008) and BHP/Potash Corp (2010) l Regional or market segment factors Herfindahl index (HHI)
  • 48. 47 Elemental Economics www.elementaleconomics.com © Elemental Economics, 2024 Source: SP, industry data Herfindahl index scores in mining markets, 2021 0 500 1,000 1,500 2,000 2,500 3,000 3,500 4,000 4,500 5,000 C oal N ickel Lead G old Zinc Silver Alum inium C opper M ine Bauxite M anganese M olybdenum C hrom ite Lithium Traded Iron O re Tin U ranium Potash Platinium Palladium D iam onds Steel O il M obile phones - U S M obile phones - w orld 10,000 2,500 = Highly concentrated 1,500-2,500 = Moderately concentrated 1,500 = Competitive
  • 49. 48 Elemental Economics www.elementaleconomics.com © Elemental Economics, 2024 Source: SP, industry data Industry market concentration has been slightly declining since 2000 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 0 1 2 3 4 5 6 7 8 9 10 Cumulative % share of world production Gold 2000 2006 2021 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 0 1 2 3 4 5 6 7 8 9 10 Cumulative % share of world production Copper 2000 2006 2021 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 0 1 2 3 4 5 6 7 8 9 10 Cumulative % share of world production Traded Iron Ore 2000 2006 2021 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 0 1 2 3 4 5 6 7 8 9 10 Cumulative % share of world production Aluminium 2000 2006 2021
  • 50. 49 Elemental Economics www.elementaleconomics.com © Elemental Economics, 2024 Compan y Country Operations Market cap $bn 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 Source: Mining-dot-com Top global mining companies by market capitalisation, Q2 2022 Compan y Country Operation s Market cap $bn 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15
  • 51. 50 Elemental Economics www.elementaleconomics.com © Elemental Economics, 2024 Introduction to mining What is the mining industry? Characteristics History Boundaries and mineral products Value chain and processes The role and structure of the mining industry The industry’s rationale and role The stages of mining The structure of the industry Mineral reserves and resources Crustal abundance Resource and reserve classifications Physical versus economic perspectives
  • 52. 51 Elemental Economics www.elementaleconomics.com © Elemental Economics, 2024 Source: Western Australian School of Mines Mineral formation and concentration A Guide to the World of Metals Mining 13 September 2011 Citigroup Global Markets 9 Figure 6. Basic Epithermal System Source: Western Australian School of Mines „ Placer Deposits Weathering of mineralized rock over millions of years erodes surrounding material and transports mineral particles. Mineralisation then accumulates in topographical features that capture the heavier gold particles such as natural features along a watercourse. Figure 7. Placer Deposits Source: Western Australian School of Mines „ Shear and Structural Hosted These deposits are typically located in areas where the Earth's crust has undergone significant stresses and strains resulting in folding and faulting of the rocks. The process of gold mineralisation involves fluids travelling through a source rock and Basic Epithermal System Placer Deposit Porphyry Deposit Formation Volcanic Massive Sulphide Deposit Source: Western Australian School of Mines „ Placer Deposits Weathering of mineralized rock over millions of years erodes surrounding material and transports mineral particles. Mineralisation then accumulates in topographical features that capture the heavier gold particles such as natural features along a watercourse. Figure 7. Placer Deposits Source: Western Australian School of Mines „ Shear and Structural Hosted These deposits are typically located in areas where the Earth's crust has undergone significant stresses and strains resulting in folding and faulting of the rocks. The Figure 4. VMS Deposit Formation Source: Western Australian School of Mines „ Porphyry Formed by the cooling of magma to rock of a volcanic intrusion. Magma plumes ascend through the earths surface typically near active tectonic plate collisions. Currently the largest source of copper ore, porphyry deposits are typically mined using an open cut mining method. Deposits tend to be large low grade deposits but with uniform (massive) mineralization. Figure 5. Porphyry Deposit Formation Source: Western Australian School of Mines A Guide to the World of Metals Mining 13 September 2011 Figure 4. VMS Deposit Formation Source: Western Australian School of Mines „ Porphyry Formed by the cooling of magma to rock of a volcanic intrusion. Magma plumes ascend through the earths surface typically near active tectonic plate collisions. Currently the largest source of copper ore, porphyry deposits are typically mined using an open cut mining method. Deposits tend to be large low grade deposits but with uniform (massive) mineralization. Figure 5. Porphyry Deposit Formation
  • 53. 52 Elemental Economics www.elementaleconomics.com © Elemental Economics, 2024 Source: Barrick Where to (possibly) go to find world class gold and copper deposits 9 Where to go to find world class gold and copper deposits… Guiana Shield South American Cordillera West African Craton Tanzanian and Congo Cratons Arabian Nubian Shield Baltica Canadian Shield North American Cordillera Yilgarn Craton Tien Shan Belt Lachlan Fold Belt Tethyan Metallogenic Belt Siberian Craton Antillean Arcs Pacific Rim Central African Cu Belt Wits Basin Kupferschiefer Cu Belt South Australia Cu/Au Au Cu N America 2 Boz gold 0.49 Bt copper Africa Middle East 3.5 Boz gold 0.16 Bt copper LatAm 1.5 Boz gold 0.9 Bt copper ANZ 1 Boz gold 0.12 Bt copper Asia Pacific 2.5 Boz gold 0.38 Bt copper Europe 0.5 Boz gold 0.2 Bt copper
  • 54. 53 Elemental Economics www.elementaleconomics.com © Elemental Economics, 2024 Note: The product of the crustal abundance and concentration factor indicates the average ore grade required to support mining Crustal abundance and concentration factors Element Average crustal abundance (%) Economic concentration factor Aluminium 8.1 3 to 4 Iron 5.8 5 to 7 Titanium 0.9 25 to 100 Chromium 0.01 4000 to 5000 Zinc 0.008 300 Copper 0.006 100 to 200 Tin 0.0002 1000 Uranium 0.0002 500 to 1000 Silver 0.000008 1000 Platinum 0.0000005 600 Gold 0.0000004 500 to 1000
  • 55. 54 Elemental Economics www.elementaleconomics.com © Elemental Economics, 2024 l Commodity or product l Time l Resource quality n Grade n Continuity and depth of orebody n Impurities n Reserve and resource size l Location l Mining and processing issues n Deposit type, mining method n Processing method l Development issues n Study stage n Capital cost and infrastructure requirements n Permitting and other constraints Ore body characteristics such as the Yilgarn and Pilbara Cratons in Western Australia. Associated Mineral assemblage As explained above, the various elements are deposited into the earths crust in a myriad of ways. As the formation process can differ, so too can the main ore minerals that host the economic elements of the underlying commodity. Figure 8. Main ore minerals Mineral Main Ore Minerals Bauxite Gibbsite (Al(OH)3), Diaspore (AlO(OH), Bohmite (AlO(OH) Copper Chalcopyrite (CuFeS2), Chalcocite (Cu2S) Bornite (Cu5FeS4), Malachite (Cu2Co(OH)2) Nickel Pentlandite (Fe,Ni)9S8) Pyrrhotite (FeS), Niccolite (NiAs) Iron Ore Magnetite (Fe3O4) Hematite (Fe2O3) Siderite (FeCO3) Rare Earths Bastnasite (Ce,La)(CO3)F), Monazite (Ce,La Nd,Th)PO4) Zinc Sphalerite (ZnS) Smithsonite (ZnCO3) Uranium Uranite (UO), Coffinite (U(SiO4) Molybdenum Molybdenite (MoS) Source: Citi Investment Research and Analysis What’s a good grade The grade profile of a similar type of deposits vary massively given the different formation process, host rocks, size, etc. Thus it is very difficult to classify what is a good or bad grade for a deposit or commodity type, as even low grades can deliver economical returns in favorable geological settings. The table below attempts to loosely assign what is a good and poor grade for a deposit. Figure 9. Grade profile of various commodity and deposit types Deposit Type Unit Low Average Good Iron Ore % 50% 50% 60% Copper - Porphyry % 0.5% 0.50% 1% Copper - IOCG % Copper - Open Pit % 0.5% 0.50% 1% Copper - Underground % 1% 1%-2% 2% Gold - epithermal g/t 1g/t 4g/t 6g/t Gold - sulphide g/t Gold - oxide g/t Nickel - laterite % 1% 1-2% 2% Nickel - sulphide % 1% 2-4% 4% Uranium ppm 400 1500 Source: Citi Investment Research and Analysis Common Mineable Ore Grades
  • 56. 55 Elemental Economics www.elementaleconomics.com © Elemental Economics, 2024 Source: Geological survey Ireland, Dadco Exploration funnel Desktop studies and office based research Geological mapping Soil sampling, stream sediments and ground-based geophysics Early-stage drilling Advanced- stage drilling
  • 57. 56 Elemental Economics www.elementaleconomics.com © Elemental Economics, 2024 Source: The Northern Miner Greenfield exploration methods Method Parameters recorded Application Magnetics Strength of magnetic field Deposits of magnetic minerals such as iron and pyrrhotite-nickel have high magnetics susceptibility Electromagnetics Electric current in ground due to alternating magnetic field Airborne geophysical surveying Resistivity Forcing an electric current into the ground through widely paced electrodes and measuring current which flows to identify rock resistance Massive sulphide occurrences exhibit anomalously low resistance Induced polarisation “Charging” orebodies by passing an electric current through them and measuring charge held Detecting disseminated sulphide minerals Gravity Measuring changes in gravitational strength due to differences in rock density Identity areas favourable to further mineral exploration Seismics Measure speed and which soundwaves travel through rock and are reflected back to determine rock structure and change in rock types Widespread in petroleum exploration Radiometrics Use scintillometer or gamma ray spectrometer to look for presence of radioactivity Finding the three main radioactive elements in nature - uranium, potassium and thorium
  • 58. 57 Elemental Economics www.elementaleconomics.com © Elemental Economics, 2024 Resource and reserve reporting standards l Committee for Mineral Reserves International Reporting Standards (CRIRSCO) (International) l Australasian Joint Ore Reserves Committee (JORC) l CIM Standing Committee on Reserve Definitions (Canada) l South African Code for Reporting of Mineral Reserves and Mineral Resources (SAMREC Code) l Code for Reporting of Mineral Exploration Results, Mineral Resources Mineral Reserves (UK/ Western Europe) l SME Code (USA) l Chile l Peru INTERNATIONAL REPORTING TEMPLATE for the public reporting of EXPLORATION TARGETS, EXPLORATION RESULTS, MINERAL RESOURCES AND MINERAL RESERVES November 2019
  • 59. 58 Elemental Economics www.elementaleconomics.com © Elemental Economics, 2024 CRIRSCO main principles TRANSPARENCY MATERIALITY COMPETENCE Source: The Committee for International Reserves International Reporting Standards
  • 60. 59 Elemental Economics www.elementaleconomics.com © Elemental Economics, 2024 Source: CRIRSO CRIRSCO resource and reserve definitions Degree of geological certainty Feasibility of economic recovery
  • 61. 60 Elemental Economics www.elementaleconomics.com © Elemental Economics, 2024 Source: Bernstein A useful way to visualise reserves and resources… Economic Reserves Not-economic Resources Proven Inferred Indicated Measured Probable Drill holes
  • 62. 61 Elemental Economics www.elementaleconomics.com © Elemental Economics, 2024 See https://en.wikipedia.org/wiki/Bre-X The 1997 Bre-X scandal
  • 63. 62 Elemental Economics www.elementaleconomics.com © Elemental Economics, 2024 Source: US Geological Survey (1) One quarter of gross bauxite totals, reflecting the amount of bauxite needed to produce one tonne of aluminium (2) 1,800 in identified resources and 3,100 in unidentified resources. World resources and reserves, 2021 Resources Reserves Aluminium(1) 13,750 to 18,750 8,000 Copper(2) 5,600 880 Lead 2,000 90 Nickel 130 (land) 95 Zinc 1,900 250 Million tonnes of contained metal
  • 64. 63 Elemental Economics www.elementaleconomics.com © Elemental Economics, 2024 Source: Company reports Cumulative ore reserves and grades of copper mines, 2021 0 1 2 3 4 5 6 7 0 100 200 300 400 500 600 700 Reserve grade (% Cu) Cumulative reserves (Mt Cu) 0 50 100 150 200 250 300 0.0 to 0.5 0.5 to 1.0 1.0 to 1.5 1.5 to 2.0 2.0 to 2.5 2.5 to 3.0 3.0 to 3.5 3.5 to 4.0 4.0 to 4.5 4.5 to 5.0 O ver 5.0 Mt Cu Reserve grade (% Cu) Copper Reserve-Grade Curve Copper Reserve-Grade Distribution
  • 65. 64 Elemental Economics www.elementaleconomics.com © Elemental Economics, 2024 Note: Growth rates: 2000-18 averages of global usage. Assumes constant recycling share. Sources: USGS, WBMS and estimates Estimated lives of non-ferrous metal reserves, 2021 Reserves (Mt) Assumed growth % (pa) Reserve Life (years) Implied annual % depletion of reserves Copper 880 2.7 27 3.7 Lead 90 3.2 14 7.1 Nickel 95 3.1 22 4.5 Zinc 250 2.3 14 7.1
  • 66. 65 Elemental Economics www.elementaleconomics.com © Elemental Economics, 2024 Physical versus economic perspectives The world (?), and hence resources, are theoretically finite ‘Ultimately recoverable’ resources ‘Peak production’ Policies needed? Technology Recycling Demand Prices
  • 67. 66 Elemental Economics www.elementaleconomics.com © Elemental Economics, 2024 Palabora’s estimated reserves, 1966-2003 As defined at start up 1966 Potential in 1991 Potential in 2003 Tonnage 259M tonnes 854M tonnes 1,133M tonnes Grade 0.69% cu 0.55% cu 0.57% cu Contained copper 1.79M tonnes 4.67M tonnes 6.43M tonnes Cut off grade 0.3% cu 0.15% cu Not available Capacity: Ore milled 30,000 tpd open pit 80,000 tpd open pit 30,000tpd underground Mine Life (from start up) 24 years 35 years 59 years
  • 68. 67 Elemental Economics www.elementaleconomics.com © Elemental Economics, 2024 Lines represent cumulative production plus Mineral Inventories. Decreases are due to reporting variations over time and the use of different cut-off grades. Discovery of El Teniente, Chuquicamata and Rio Blanco-Los Bronces reset to 1976. Discovery of La Granja is reset to 1994. Source: Elemental Economics, MinEx Consulting Copper endowment at selected mines over time 0 25 50 75 100 125 150 175 200 225 1 6 11 16 21 26 31 36 41 46 Escondida Rio Blanco - Los Bronces Chuquicamata El Teniente Collahuasi Los Pelambres-El Pachon La Granja Grasberg Oyu Tolgoi Copper endowment (Mt Contained Cu) Time after discovery (years)
  • 69. 68 Elemental Economics www.elementaleconomics.com © Elemental Economics, 2024 Source: USGS, Elemental Economics Despite rising production global reserves have tended to increase over time 0 20 40 60 80 100 120 140 160 180 200 1930 1940 1950 1960 1970 1980 1990 2000 2010 2020 Copper Lead Zinc Nickel Bauxite Index of global reserves, 2005=100
  • 70. 69 Elemental Economics www.elementaleconomics.com © Elemental Economics, 2024 0 200 400 600 800 1000 1200 1400 1600 1800 1930 1940 1950 1960 1970 1980 1990 2000 2010 2020 Cumulative output from 1726 Remaining reserves Copper 0 50 100 150 200 250 300 350 400 450 1930 1940 1950 1960 1970 1980 1990 2000 2010 2020 Cumulative output from 1800 Remaining reserves Lead 0 100 200 300 400 500 600 700 800 900 1930 1940 1950 1960 1970 1980 1990 2000 2010 2020 Cumulative output from 1823 Remaining reserves Zinc 0 20 40 60 80 100 120 140 160 180 1950 1960 1970 1980 1990 2000 2010 2020 Cumulative output from 1867 Remaining reserves Nickel Sources: USGS, ILZSG, ICSG, INSG, CJ Schmitz ‘Ultimately recoverable’ reserves,1930-2020 Million tonnes of relevant metal
  • 71. 70 Elemental Economics www.elementaleconomics.com © Elemental Economics, 2024 Source: Company reports, Elemental Economics Theoretical cumulative copper ore reserves and grades 0.0 1.0 2.0 3.0 4.0 5.0 6.0 7.0 0 500 1000 1500 2000 2500 3000 3500 4000 4500 5000 Reserve grade (% Cu) Cumulative reserves (Mt Cu) Actual Theoretical
  • 72. 71 Elemental Economics www.elementaleconomics.com © Elemental Economics, 2024 Reserves and resources: Summary Several probabilistic dimensions Geology Economics Accessibility Technology moves frontiers Each deposit finite ‘Infinitely finite’