Modern Mining February 2015

EVENTS

He cautioned delegates not to read too much into the latest Chinese trade figures recording a record trade surplus, pointing out that the Chinese economy was today twice as big as six years ago (the implication being that the trade surplus is shrinking measured as a proportion of GDP). The outlook for commodities On the outlook for commodities, a particularly interesting presentation was given by Vanessa Davidson , Group Manager, CRU Group whose address was entitled ‘Copper: Long-Term Bull Story?’ She dealt with the issue of whether the sharp decline in the copper price recently to a five-and-a-half-year low was a short-term phenomenon or a long-term structural change that producers would have to contend with for years to come. Her conclusion was surpris- ingly optimistic. “We believe the copper market will be back in deficit by 2018 at the latest,” she stated. She noted that China accounted for around 45 % of world copper demand and said CRU expected Chinese demand to continue growing. She added that all other key regions (in contrast to the past several years) were also expected to see growth in copper consump- tion over the next few years. “Copper market fundamentals remain fairly solid and we don’t believe they justify the low prices we see in the marketplace today,” she said. Looking at planned new production, she said 56 % of new projected output would come from the Americas, particularly Chile, but she also noted that Africa’s copper output had shown a marked increase in recent years, growing from just over half a million tonnes of copper in con- centrate in 2002 to approximately 2 Mt in 2014 (most of it from Zambia and the DRC). On the negative side, she said Africa’s copper mines faced significant challenges and were among the highest cost producers in the world, most of them falling into the third or fourth quartile. The increase in royalties – from 6 % to 20 % on open-pit operations – in Zambia, as well as an ongoing dispute over VAT refunds in that same country, were also not good news, with Barrick having already announced that it would sus- pend operations at its Lumwana mine (which produced around 63 000 tonnes of copper in the first nine months of 2014) and Vedanta reviewing its Copperbelt operations. On the current malaise in the iron ore mar- ket, Roger Emslie of Wood Mackenzie – in an address on the ‘New era for Iron Ore’ – said the more than halving of the iron ore price over the past year (to a price last seen in May 2009) could be attributed in large measure to

visible progress to date, and confusion over exactly what the ‘National Champion’ concept entails. Emergence of a new China Perhaps filling the role that economist Robert Hale did at previous Mining Indabas, Jim O’Neill , Chairman of the Cities Growth Commission and previously Chairman of Goldman Sachs Asset Management (where he was responsible for managing US$800 billion of assets and coining the acronym ‘BRIC’) gave an overview of the world economy. The title of his presentation was ‘Managing the Commodities Curse – What are the Options?’ but, in practice, he looked more at global economic trends than this specific issue. Major points he made were that the global economy was doing far better than popular perception suggested, that levels of inequality were actually narrowing rather than widening and that the current low oil prices were a net positive for global growth. On China, he observed that its commodity imports were currently running at half the level of a year ago, reflecting the emergence of a new China where the emphasis was on the “qual- ity and sustainability of growth rates” rather than on simply achieving high rates of output to the exclusion of other factors. He predicted that the days of double-digit growth in China had now ended and said the country’s GDP growth for the remainder of the current decade would likely be in the range of 5,5 to 7,5 %.

JimO’Neill, the man who coined the term ‘BRIC’, gives his views on the world economy.

“Copper market fundamentals remain fairly solid and we don’t believe they justify the low prices we see in the marketplace today.” Vanessa Davidson, CRU Group

26  MODERN MINING  February 2015