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Geography ofsteel raw

materials -policy

implications.

Magnus Ericsson

OECD Workshop on steelmaking raw materialsParis 2011 12 05

REE

drawing:KaiandersSe

mpler.

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World mining for 150 + years

0

10

20

30

40

50

60

70

1850 1870 1890 1910 1930 1950 1970 1990 2010 2030

Europe USA China USSR/CIS Australia/Canada 6 resource rich developing countriesSources: Raw Materials Data, 2011 and Sames.

% of global mining

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Mining:

Society needs metals

Global industry

Iron ore, copper and gold dominates

Cyclical business

Long term industry Current decade positive for miners

Background

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Metals are running out

Mining is not sustainable

China is holding the world to ransom

Myths

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Are metals adepletingresource?

Manganese drawing: Kaianders Sempler.

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Growth of resource base

Source: Crowson.

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Metals arenotrunning out !

Manganese drawing: Kaianders Sempler.

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Vanadium drawing: Kaianders Sempler.

Is miningsustainable?

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Garpenberg - since 13th c.

Courtesy: Boliden.

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Vanadium drawing: Kaianders Sempler.

Mining is for manycountries the onlychance to start

economicdevelopment!

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China

Structure of iron ore mining. Exploration.

Projects and foreign investments.

Conclusions.

Outline

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The role of China Exploration

Foreign Direct Investment

M&A

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061030 Anton Lf

Structure of

Chinese ironore mining

Manganese drawing: Kaianders Sempler.

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Global iron ore production

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Source: Raw Materials Data Iron ore, 2011.

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Chinese iron ore imports

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Source: Raw Materials Data Iron ore, 2011.

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Global iron ore grades

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Source: Raw Materials Data Iron ore, 2011.

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061030 Anton Lf

Chinese

structure

Manganese drawing: Kaianders Sempler.

Fragmented

corporate structure. Many small mines.

Low grades, under

ground. Vertical integration.

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061030 Anton Lf

Chinese

exploration

Nickel drawing: Kaianders Sempler.

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0

2

4

6

8

10

12

14

16

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

0

5

10

15

20

25

30

Total world

China

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

Billion USD

Global exploration 1

Billion RMB

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Chinese exploration 1

14%

27%

59% Central gov

Local gov

Private

Year 2009 total 30.30 billion RMB

Source: MOLAR 2010.

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Chinese exploration 2

34%

14%12%

10%9%

2% 18%1%Coal

Gold

Copper

Iron ore

Pb/Zn

Uranium

Tungsten

Other

Year 2009 total 26.11 billion RMB

Source: MOLAR 2010.

Iron ore 2.55 billion RMB

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061030 Anton Lf

Chinese

explorationMajor exploration efforts.

Worlds largestexploration spender.

400 MUSD iron ore 2009.

No great results.

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New

projects

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Chinese overseas mines

061030

0

5

10

15

2025

30

35

40

45

50

1990Year

1995 2000 2005 2011

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Chinese foreign operations

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Source: Raw Materials Data 2011.Source:Ra

w

MaterialsData,2

011.

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Chinese foreign projects

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Source:Ra

wMaterialsData,2

011.

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Iron ore projects Operating mines

Australia 19.3

Peru 7.0

Brazil 1.7

Canada 0.8 28.8 Projects

Australia 65

Peru 10

Sierra Leone 3 78

Total ~ 110 Mt

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Source: Raw Materials Data, 2011.

Chinese projects in Africa

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Chinese projects in AfricaCountry Metal Company Share % Type

Awaso Ghana Baux Bosai Min. 80 Oper.

Simandou Guinea Fe Chinalco 45 ProjectForcariah Guinea Fe China Int. F. 50 ProjectBong Liberia Fe China Union 100 ProjectTonkolili Sierra L. Fe Shandong 25 ProjectAvantuur South Afr. Mn Baosteel 11 Project

Dilokong South Afr. Cr East Asia Met. 85 Oper.Weziswe South Afr. PGM JNMC 45 Project

Baluba Zambia Cu CNMC 72 Oper.

Chambishi Zambia Cu CNMC 85 Oper.

Gwabw/Njali Zambia U JNMC 30 Project

Muliashi Zambia Cu CNMC 72 Oper.

Munali Zambia Cu CNMC 50 Oper.

Lalapnazi Zimbabwe Cr Sinosteel 100 Oper.Source:Raw

MaterialsData,

2011.

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061030 Anton Lf

New projects

Foreign expansion slow -not continuous.

Will increase in the future.

Long term serious problem. Control over imports infocus.

Not reach internal goals.

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Chinese M&A

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0

50

100

150

200

250

300

350

400

450

500

0

20

40

60

80

100

120

140

160

Chinese overseas M & A Word Total RMG Metal Price Index (RHS)

Billion USD

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Summary China

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Engine of demand reduced growth pace.Largest mining country

many small, high cost mines.

Largest exploration country since 2010.

Foreign expansion slow, not continuous.

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Policy implications

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Mineral supply long term, serious problem.

But no physical scarcity.

Asessment of Chinas role based on facts.

Window of opportunity for emergingeconomies.

More proper political focus:

R&D; Training; Balance mining/environment. Rare earths not a problem Chinese import

dependency iron ore, copper is!

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Magnus EricssonPO Box 3127

SE-169 03 Solna, Sweden

magnus.ericsson@rmg.se

Tel: +46-8-744 00 65

Fax: +46-8-744 0066

www.rmg.se

Thank you !

REE drawing: Kaianders Sempler.