This is marketing research on the minerals industry and can include information on the background, market structure, definitions, competitors, trends and developments of minerals and is related to other topics such as metals, ores and mining.

Table of Contents

[edit] Background

Mineral resources are grouped into four basic categories: fuels – oil, coal and natural gas, metals – gold, silver, iron, copper, lead, zinc, gemstones – rubies and gemstones, and industrial minerals – mica, dolomite, limestone, barite, calcite, shale etc. Due to their special physical and chemical properties industrial minerals provide raw materials for construction and agriculture, ceramic, chemical, metallurgical, manufacturing and energy-related industries.

Mineral industries are those primarily engaged in mining or extracting minerals that occur naturally, whether in solid, liquid, or gaseous form; preparing them on-site as necessary, and exploring development of mineral properties. Industries in the mining (except oil and gas) sub-sector primarily engage in mining, mine site development, and beneficiating (i.e., preparing) metallic minerals and nonmetallic minerals, including coal.

While some minerals, such as petroleum and natural gas, require little or no preparation, others are washed and screened, while yet others, such as gold and silver, can be transformed into bullion before leaving the mine site.

[edit] Market Structure

There are mainly three entry barriers - commercial, technological and financial in the mineral-based industries. Commercial barriers depend on the degree of concentration of the industry and on the structure of its international market. For alumina and aluminum, the world market is largely controlled by the big European and North American 'majors', but for copper and iron ore there is a multiplicity of operators. Technological barriers are less important because the basic technical processes and equipment have not changed for a long time. The main barriers to entry in the industries are actually financial. This is due to the higher overhead costs in developing mines and the high cost for mining equipment. Import duties are higher for steel finished products than for semi-finished ones which are more than for iron ore. Duties are relatively low for copper up to the refining stage but are very high for the finished products and beyond the stage of bauxite it is at its maximum for the aluminum industry.

The value added (wages, profits and rents) as a proportion of the price of the metals varies from 20% for copper to 70% for iron and to 90% for aluminum. Value added is determined by the world price system for the products, the factors of production and the labor force. It depends also on a given technology, given production scale, specific labor process and on a particular market structure.

Labor costs in developed countries is significant, although the mineral-based industries are highly mechanized. The wage costs in a US copper smelter of 400,000 tons capacity represent 43% of the production cost, and the proportion is 30% in a copper refinery of 300,000 tons. Labor costs for aluminum represent 12% of the production cost in smelting and 20% in refining, for a US plant using Jamaican bauxite. Wages are much lower in third world countries and, when the technology used is the same as in developed countries, production costs will be much lower. Transport costs are an important component of the price of imported ores. They represent 27% of the price of imported iron ore, but only 12% for steel products. The smelting of bauxite allows great reductions in weight and, therefore, in transport costs, as two tons of bauxite are needed to obtain one ton of alumina. For copper also, transport costs are higher for ore concentrates than for blister or refined copper.

[edit] Industry Definitions

• Nonmetallic Minerals - are mined or quarried nonmetallic minerals, such as lime, gypsum sand, gravel, stone, clay, and refractory materials which are used for manufacturing products such as bricks, refractories, ceramic products, glass, cement etc.

• Clay - an extremely fine-grained natural earthy material composed primarily of hydrous aluminum silicates. It may be a mixture of clay minerals and small amounts of nonclay materials or it may be predominantly one clay mineral.

• Beneficiation - the process whereby the extracted material is reduced to particles which can be separated into mineral and waste, the former suitable for further processing or direct use. The operations that take place in beneficiation are primarily mechanical, such as grinding, washing, magnetic separation, and centrifugal separation.

• Manufacturing - operations that primarily use chemical and electrochemical processes, such as electrolysis and distillation.

• Mining - The Mining sector (sector 21) comprises establishments that extract naturally occurring mineral solids, such as coal and ores; liquid minerals, such as crude petroleum; and gases, such as natural gas. The term mining is used in the broad sense to include quarrying, well operations, beneficiating and other preparation customarily performed at the mine site, or as a part of mining activity. Mining, beneficiating, and manufacturing activities often occur in a single location.

• Surface mining - The mining in surface excavations (as opposed to underground mining)

• Phosphate rock - Any rock that contains one or more phosphatic minerals of sufficient purity and quantity to permit its commercial use as a source of phosphatic compounds or elemental phosphorus.

• Ore - The naturally occurring material from which a mineral or minerals of economic value can be extracted profitably.

[edit] Market Metrics

Mining industry statistics from U.S.Census Bureau (table 1) show that liquid minerals (oil and gas) add the greatest value in terms of dollars when compared with mining metals and minerals. Capital investment is high in oil and gas mining as well as minerals and metals mining. Amongst marketable products in metal ores, iron ore from surface mines constitutes a large section followed by phosphate rock, clays and gypsum in industrial minerals.

As seen in table 2, total domestic mining and waste removal for nonfuel mineral materials (nonfuel minerals exclude coal, petroleum coke) production amounted to 6.0 billion metric tons (Gt) in 2005, a 2% increase compared with that of 2004. These materials included 4.5 Gt of crude ore mined or quarried and 1.4 Gt of mine ore and waste from development operations. Of the nonfuel mineral materials mined, 62% was for the production of industrial minerals, and 38% was for the production of metals. Overall, 97% of nonfuel minerals was mined and quarried using surface methods, and 3% was mined underground.

Total surface mining, quarrying, and waste removal for industrial minerals production amounted to 3.5 Gt, a 4% increase compared with the figure for 2004. Underground mining for industrial minerals was only 138 Mt, nearly all of which was crude ore Total surface mining and waste removal for metal ores amounted to 2.3 Gt, about the same level as that of 2004. Of the 2.3 Gt, 1.2 Gt was crude ore mined, and 1.1 Gt was ore and waste from development operations. Underground mining of metal ores amounted to only 20 Mt, of which 95% was crude ore.

Table 1 :Mining Industry Statistics (2002 Economic Census, U.S. CENSUS BUREAU)

The Mining sector comprises establishments that extract naturally occurring mineral solids, such as coal and ores; liquid minerals, such as crude petroleum; and gases, such as natural gas.

• Oil And Gas Extraction

Industries in the Oil and Gas Extraction subsector operate and/or develop oil and gas field properties.

• Mining (Except Oil And Gas)

Industries in the Mining (except Oil and Gas) subsector primarily engage in mining, mine site development, and beneficiating metallic minerals and nonmetallic minerals, including coal.

• Support Activities For Mining

Industries in the Support Activities for Mining subsector group establishments primarily providing support services, on a contract or fee basis, required for the mining and quarrying of minerals and for the extraction of oil and gas.

• Value Added

This measure of mining activity is derived by subtracting the cost of supplies, minerals received for preparation, purchased machinery installed, purchased fuel, purchased electricity, and contract work from the sum of the value of shipments and receipts for services and capital expenditures.

• Capital Expenditures

This item includes permanent additions and major alterations as well as new and used machinery and equipment used for replacement and additions to plant capacity.

According to NAICS Metallic and non-metallic minerals mining except oil and gas covers minerals as listed below:

• Coal Mining

Coal

Bituminous coal and Lignite

Anthracite

• Metal Ore Mining

Iron ore

Gold ore And Silver ore

Copper, Nickel, Lead, And Zinc

Uranium-Radium-Vanadium ore

• Nonmetallic Mineral Mining And Quarrying

Stone , Limestone , Granite, Sand, Gravel, Clay, Ceramic

Industrial Sand Kaolin and Ball Clay

Potash, Soda, and Borate Mineral Mining

Natural Potassium, Sodium, and Boron compounds.

Phosphate Rock

Table 2: Material Handled at Surface and Underground Mines in the United States, by Type (Million metric tons)

• Less than ½ unit.

Looking from a global perspective in mineral industry, there is decrease in number of Canadian companies among top 40 in 2005 due to acquisitions. A rejuvenation of mid-tier mining companies in Australia is taking place and United Kingdom based companies are catching up. Also significant is the emergence of 4 Asian companies in top 40 companies.

Revenue growth in mining metal and mineral industry is in line with commodity price increases. The average annual price growth for selected commodities is reflected in the graph below. Growth in copper and nickel prices was substantial with percentage increases similar to that experienced for iron ore in 2005. Price negotiations for coal during 2006 resulted in a moderate fall in prices, although overall the market remained strong. The average prices on prior year have also increased for other commodities such as silver (58%), aluminum (34%), cobalt (84%), uranium (106%) and zinc (138%).

[edit] Industry Players

The total market capitalization of the global mining industry grew strongly in the year ended December 2006, rising by 22% to $962 billion. Revenue growth is in line with commodity price increases. Revenue in 2006 is at 2.6 times the 2002 level.

During 2006, the global mining industry witnessed lot of takeover activity. Consolidation and expansion through acquisition of new assets was important part of strategy of these companies. A number of “mega-deals” were sealed in 2006, with CVRD leading the way, by purchasing Inco and becoming one of the world’s leading nickel producers. Companhia Vale do Rio Doce (CVRD) has emerged as a full scale, integrated, diversified and successful global mining giant from a regional iron ore company.

The following companies are leaders in various subsectors:

• Industrial metals and minerals

BHP Billiton Limited, together with its subsidiaries, engages in mining, drilling, and processing mineral resources. It operates through seven segments: Petroleum, Aluminum, Base Metals, Carbon Steel Materials, Diamonds and Specialty Products, Energy Coal, and Stainless Steel Materials.

• Copper

Freeport-McMoRan Copper & Gold, Inc., through its subsidiaries, engages in the exploration, mining, and production of copper, gold, and silver.

Southern Copper Corporation produces copper, molybdenum, zinc, and silver. It engages in mining, milling, and flotation of copper ore to produce copper concentrates and molybdenum concentrates; the smelting of copper concentrates to produce anode and blister copper; and the refining of blister/anode copper to produce copper cathodes.

• Aluminum

Alcan, Inc. operates in the aluminum, engineered products, and packaging industries primarily in North America, Europe, and Asia. It’s Bauxite and Alumina group produces specialty aluminas, such as fire retardant products, refractory bricks, zeolite, alum, solid surface products, absorbents, and ceramics.

Alcoa, Inc. engages in the production and sale of primary aluminum, fabricated aluminum, and alumina worldwide. The company involves in technology, mining, refining, smelting, fabricating, and recycling of aluminum.

• Nonmetallic minerals

Potash Corporation of Saskatchewan, Inc. (PotashCorp) engages in the production and sale of fertilizers, and related industrial and feed products. The company manufactures and sells solid and liquid phosphate fertilizers; animal feed supplements; and industrial acid, which is used in food products and industrial processes. It produces potash from six mines in Saskatchewan and one mine in New Brunswick.

• Iron

Companhia Vale do Rio Doce, together with its subsidiaries, operates as a diversified metals and mining company worldwide. It produces, exports, and supplies iron ores and pellets to the steel making industry, as well as manganese ores and iron alloys. The company also produces nickel; copper; platinum-group metals, such as platinum, palladium, rhodium, ruthenium, and iridium; precious metals, including gold and silver; coal; and other non-ferrous minerals, such as kaolin, potash, cobalt, sulphuric acid, liquid sulphur dioxide, selenium, and tellurium, as well as engages in bauxite mining, alumina refining, and aluminum metal smelting operations.

Rio Tinto plc engages in finding, mining, and processing mineral resources. Its products include aluminum; copper; diamonds; energy products, such as coal and uranium; gold; industrial minerals, including borax, titanium dioxide, salt, and talc; and iron ore.

Mineral Industry Market Capitalization

Mineral Industry Market share based on annual sales 2006 ($ billions)

[edit] Recent Trends and Developments

New processes, more capital intensive and energy-saving and less polluting, are being rapidly developed in the advanced countries. Volatile and falling commodity prices, depleted mineral reserves, stringent environmental regulations and restriction, rising operating costs and ever intensifying competition have seen the mining industry reassess its strategies and become ever more global in its focus.

The mining companies around the world have responded to these challenges by consolidating and restructuring their companies, seeking new capital resources, and adopting innovative technologies. Investment incentive opportunities, deregulation, low-cost labor and the opportunities for large, high quality ore reserves have enticed companies to overcome previous entry barriers and explore emerging markets in developing mining markets. This ever-increasing move towards globalization is driving a record number of mergers, acquisitions strategic alliances and joint ventures around the world.

[edit] Sources

• U.S. Census Bureau
• International Trade Administration
• U.S.Commercial Service
• PricewaterhouseCoopers’ annual review
• US Bureau of Mines
• M Metals and Mining
• Review of global trends in the mining industry – 2007

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