-
8/18/2019 EY - Mining in Emerging Economies - Mining and Metals.pdf
1/32
Mining in Emerging EconomiesSharing the Spoils
-
8/18/2019 EY - Mining in Emerging Economies - Mining and Metals.pdf
2/32
2 | Mining in Emerging Economies - Sharing the Spoils
Global mining overview | 3
-
8/18/2019 EY - Mining in Emerging Economies - Mining and Metals.pdf
3/32
Mining in Emerging Economies - Sharing the Spoils |
Foreword
Anjani K. Agrawal
-
8/18/2019 EY - Mining in Emerging Economies - Mining and Metals.pdf
4/32
2 | Mining in Emerging Economies - Sharing the Spoils
-
8/18/2019 EY - Mining in Emerging Economies - Mining and Metals.pdf
5/32
3Mining in Emerging Economies - Sharing the Spoils |
Volatile and uncertainscenario
Exhibit 1: Roller coaster ride (2008-2013)
Source: IMF World Economic Outlook
-6
-4
-2
0
2
4
6
8
10
12
14
2006 2007 2008 2009 2010 2011 2012 2013E 2014E
World China The US Euro area India
Two periodsof correction
The US:
Exhibit 2: real GDP growth rate (in %)
Source: IHS Global Insight
2.21.6
2.73.5
7.8 7.5 7.88.2
-0.6 -0.7
0.61.3
-2
0
2
4
6
8
10
2012 2013E 2014P 2015P
The US China Eurozone
China:
Global mining overview
-
8/18/2019 EY - Mining in Emerging Economies - Mining and Metals.pdf
6/32
| Mining in Emerging Economies - Sharing the Spoils
Exhibit 3: Manufacturing PMI (China)
Month
2013
Headline Outputs New
orders
New
export
orders
Source: HSBC China Manufacturing PMI (Flash, July):-Dipping To an 11-M, HSBC
Global Research, 24 July 2013
Eurozone:
Economic slowdown loomedheavy
Exhibit 4: Global demand of select commodities (Rebased2007= 100)
Source: NORTH AMERICAN IRON ORE - INITIATING COVERAGE, Credit Suisse, 1December 2011; Iron ore Chartbook, Morgan Stanley, 7 July 2013; Highercoal/iron ore price scenario, ABN Amro, 7 March 2008 (2007 price); The
2013; World steel association;
80
85
90
95
100
105
110
115
120
125
2007 2008 2009 2010 2011 2012 2013E
Iron ore demand (world) Thermal coal trade
Steel demand Copper demand
Exhibit 5: Commodity price trends for iron ore, steel, coal,copper (Rebased 2007= 100)
Source: NORTH AMERICAN IRON ORE - INITIATING COVERAGE, Credit Suisse, 1December 2011; Iron ore Chartbook, Morgan Stanley, 7 July 2013; Highercoal/iron ore price scenario, ABN Amro, 7 March 2008 (2007 price); The
2013; World steel association;
0
20
40
60
80
100
120
140
160
180
200
2007 2008 2009 2010 2011 2012 2013E
Iron ore prices Thermal coal prices
Steel prices (HRC) Copper prices
-
8/18/2019 EY - Mining in Emerging Economies - Mining and Metals.pdf
7/32
Mining in Emerging Economies - Sharing the Spoils |
2
3
-
8/18/2019 EY - Mining in Emerging Economies - Mining and Metals.pdf
8/32
| Mining in Emerging Economies - Sharing the Spoils
Capital raising andinvestments
Exhibit 6: mining indices vs broader indices(rebased 2007=100)
Source: Thomson DataStream
80
85
90
95
100
105
110
115
2007 2008 2009 2010 2011 2012 2013
FTSE All Share mining S&P/ASX 300 Metal & mining
Dow Jones Industrial Average
Mining stockssharplyunderperformed
Mining stocksrebounded onaccount of
Mining indicesunderperformed
2007 2008 2009 2010 2011 2012
Source: EY Research
-
8/18/2019 EY - Mining in Emerging Economies - Mining and Metals.pdf
9/32
Mining in Emerging Economies - Sharing the Spoils |
Exhibit 8: Capital raising (Rebased 2007=100; comparison)
Source: EY Research
1000
100
200
300
400
500
600
700
2007 2008 2009 2010 2011 2012
IPO Follow ons Convertible Bonds Bonds
Loans total
*High volume andlarge-scale issues
Exhibit 9: IPOs volume and proceeds
Source: EY Research
0
50
100
150
200
250
300
0
5
10
15
20
25
2007 2008 2009 2010 2011 2012
N u m b e r o f I P O s
P r o e e d s $ b i l l i o n
Proceeds Number
Exhibit 10: Bond volume and proceeds
Source: EY Research
020406080100120140160180200
0
20
40
60
80
100
120
2007 2008 2009 2010 2011 2012
N u m b e r o f b o n d i s s u e s
P r o e e d s $ b i l l i o n
Proceeds Number
-
8/18/2019 EY - Mining in Emerging Economies - Mining and Metals.pdf
10/32
| Mining in Emerging Economies - Sharing the Spoils
(2012)
Company Type Total
proceeds$m*
Focus of
activity
Iron ore in
Iron ore in
33
Source: Mining Eye Q42012, EY (Yearly average pound (£)-dollar ($) conversion
-
8/18/2019 EY - Mining in Emerging Economies - Mining and Metals.pdf
11/32
Mining in Emerging Economies - Sharing the Spoils |
Deal values
Country Change in global
share by value (%)
Change in global
share by volume (%)
33
Source: EY research
-
8/18/2019 EY - Mining in Emerging Economies - Mining and Metals.pdf
12/32
| Mining in Emerging Economies - Sharing the Spoils
-
8/18/2019 EY - Mining in Emerging Economies - Mining and Metals.pdf
13/32
Mining in Emerging Economies - Sharing the Spoils |
Exhibit 14: Copper production - 10-year CAGR
Source: United States Geological Survey
-20%
-10%
0%
10%
20%
30%
40%
0
1,000
2,000
3,000
4,000
5,000
6,000
U n i t e d S t
a t e s
A u s t
r a l i a
C a n a d a
C h i l e
C o n g o ( K i n s h
a s a )
C
h i n a
P e r u
R u s s i a
Z a m b i a
I n d o n
e s i a
k t
Exhibit 15: Gold production - 10-year CAGR
Source: United States Geological Survey
-10%
-5%
0%
5%
10%
15%
20%
0
50
100
150200
250
300
350
400
A u s t r a l i a
C a n a d a
U n i t e d S t a t e s
C h i n a
R u s s i a
M e x i c o
S o u t h A f r i c a
P e r u
I n d o n e s i a
U z b e k i s t a n
t o n s
Exhibit 16: Iron ore production - 10-year CAGR
Source: United States Geological Survey
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
20%
0
50
100
150
200
250
300
350
400
450
A u s t r a l i a
U n i t e d S t a t e s
C a n a d a
S w e d e n
C h i n a
B r a z i l
I n d i a
R u s s i a
S o u t h A f r i c a
U k r a i n e
m i l l i o n t o n s
Exhibit 13: Bauxite production - 10-year CAGR
Source: United States Geological Survey
-5.0%
0.0%5.0%
10.0%
15.0%
20.0%
0
20
40
60
80
A u s t r a l i a
C h i n a
B r a z i l
I n d i a
G u i n e a
J a m a i c a
R u s s i a
K a z a k h s t a n
V e n e z u e l a
S u r i n a m e
m i l l i o n t o n s
Emerging Economies: future growthengine for the mining industry
-
8/18/2019 EY - Mining in Emerging Economies - Mining and Metals.pdf
14/32
| Mining in Emerging Economies - Sharing the Spoils
Exploration trends
Latin America and Africa takethe lion’s share
-
8/18/2019 EY - Mining in Emerging Economies - Mining and Metals.pdf
15/32
Mining in Emerging Economies - Sharing the Spoils |
Exhibit 18: Percentage deals by target region (2007–12)
0%10%20%30%40%50%60%70%80%90%
100%
2007 2008 2009 2010 2011 2012
Europe North America Middle East CIS Latin America
Africa Asia Pacic
Source: EY research
M&A trend in emergingeconomies
Exhibit17: Top destinations for non-ferrous exploration, 2012
Source: Metals Economics Group, World Exploration Trends 2013
16%
8%
2%
5%
5%
3%
3%
7%
9%
4%
3%
3%
4%
6%
12%
Canada
United States
Mexico
Colombia
Peru
Chile
Argentina
Europe
Russia
FSU/
Mongolia
China
Australia
Pacic
Islands
West
Africa
Sub-Saharan
AfricaBrazil
6%
-
8/18/2019 EY - Mining in Emerging Economies - Mining and Metals.pdf
16/32
| Mining in Emerging Economies - Sharing the Spoils
emerging economies
Exhibit 19: Global distribution of mineral reserves in 2012
0%
20%
40%
60%
80%
100%
B a u x i t e
C o p p e r
I r o n
O r e ( C r u d e O r e )
G o l d
N i c k e l
P G M s
S i l v e r
T i n
Z i n c
Developed Economies Emerging Economies
Source: United States Geological Survey
Major factors shifting miningto emerging economies
Commodity demand and price boom:
Liberalization of mineral policies:
-
8/18/2019 EY - Mining in Emerging Economies - Mining and Metals.pdf
17/32
Mining in Emerging Economies - Sharing the Spoils |
Advancement in technology:
other emerging markets:
22
23
Challenges in emerging economies
22
23
-
8/18/2019 EY - Mining in Emerging Economies - Mining and Metals.pdf
18/32
-
8/18/2019 EY - Mining in Emerging Economies - Mining and Metals.pdf
19/32
Mining in Emerging Economies - Sharing the Spoils |
Recent developments
Mineral Global rank
3
3
Iron ore
Source: Annual report FY13, Ministry of mines, Government of India
Iron ore bans in Karnataka and Goa created shortage among
surplus:
Environmental monitoring in Goa affecting production:
village
Despite slowdown, Indian mining majors stick to capital
expenditure plans:
Coal India faces challenges in increasing production:
Government plans to hike iron ore royalty by 50%:
Indian mining industry — slowing down buthuge potential
-
8/18/2019 EY - Mining in Emerging Economies - Mining and Metals.pdf
20/32
| Mining in Emerging Economies - Sharing the Spoils
Impact of Currencydepreciation
Exhibit 21: Dollar Index Movement
Source: Wall Street Journal
70
72
74
76
78
80
82
84
86
88
90
0 8 / 0 3 / 2 0 0 9
1 2 / 0 7 / 2 0 0 9
0 4 / 1 4 / 2 0 1 0
0 8 / 1 8 / 2 0 1 0
1 2 / 2 2 / 2 0 1 0
0 4 / 2 9 / 2 0 1 1
0 9 / 0 2 / 2 0 1 1
0 1 / 0 6 / 2 0 1 2
0 5 / 1 1 / 2 0 1 2
0 8 / 3 0 / 2 0 1 2
1 2 / 1 4 / 2 0 1 2
0 3 / 3 1 / 2 0 1 3
0 7 / 3 1 / 2 0 1 3
D X Y
Exhibit 22: Historical Currency Movement
Source: RBI
0
20
40
60
80
100
O c t - 0 9
F e b - 1 0
J u n - 1 0
O c t - 1 0
F e b - 1 1
J u n - 1 1
O c t - 1 1
F e b - 1 2
J u n - 1 2
O c t - 1 2
F e b - 1 3
J u n - 1 3
A v g E x h c h a n g e r a t e : I N R
INR- USD INR - EURO INR - GBP
Exhibit 23: Iron ore prices (62% Fe) price
Source: “Mired in Mining Mess- Next is Odisha,” 28 May 2013 via ThomsonResearch
-40%-20%0%20%40%60%80%100%
020406080
100120140160
FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13
U S $
-
8/18/2019 EY - Mining in Emerging Economies - Mining and Metals.pdf
21/32
Mining in Emerging Economies - Sharing the Spoils |
US$
million
Iron ore export
(value)
Total export
(value)
Percentage
Source: “Mired in Mining Mess- Next is Odisha,” 28 May 2013 via Thomson
Research
India iron ore mining update
State R & R
(million tons)
Production
FY12 (million
tons)
PSU share in
production
Private share in
production
State’s
production (%)
Goa
Source: “Mired in Mining Mess- Next is Odisha,” 28 May 2013 via Thomson Research
-
8/18/2019 EY - Mining in Emerging Economies - Mining and Metals.pdf
22/32
| Mining in Emerging Economies - Sharing the Spoils
32
Exhibit 26: Twelfth plan target — earth-moving and miningequipment
Source: Report of the Working Group on Capital Goods & Engineering Sector forthe 12th Five Year Plan (2012-2017)
050
100150200250300350400450500
2011-12 2012-13 2013-14 2014-15 2015-16 2016-17
I N R B i l l i o n
Market Size Production Import Export
32
Mining services picking up
Source: EY Research
-
8/18/2019 EY - Mining in Emerging Economies - Mining and Metals.pdf
23/32
Mining in Emerging Economies - Sharing the Spoils |
Business risks facing mining and metals 2013-
14
Major challenges in the Indianmining sector
Exhibit 27: Business risks facing global mining and metals industry2013-14
Source: EY Research
1 0. T h
r e a t o f s u
bs t i tu tes
9. I n f r
a s t r u c t u re
access
8. S h a
r i n g t h e be
ne ts
7. C a p
i t a l p r o jec t e
xecuti on
6. P r i c
e a n d currency v ol a t i l i t y
5. S k i l l s
s h or tage
4. S o
c i a l l icense
to o p e r a t e
3. R e
s o u rce nati o n a l i s m
2. M a r g
i n prot e c t i o n a n d
p r o d
u c t i vity i m p r o v e m
e n t
1 .
C a p i tal a l l o c a
t i o n a n
d ac c e s s
yrtneweN2102saemaS2102morfpU Down from 2012
-
8/18/2019 EY - Mining in Emerging Economies - Mining and Metals.pdf
24/32
22 | Mining in Emerging Economies - Sharing the Spoils
Regulations:
Infrastructure access:
Capital project execution:
Social license to operate:
33
Competing demand for land use:
33
-
8/18/2019 EY - Mining in Emerging Economies - Mining and Metals.pdf
25/32
23Mining in Emerging Economies - Sharing the Spoils |
Margin protection and productivity improvement:
Recommendations forstakeholders
Promote transparency:
Regulatory certainty:
Fraud and corruption:
-
8/18/2019 EY - Mining in Emerging Economies - Mining and Metals.pdf
26/32
| Mining in Emerging Economies - Sharing the Spoils
Promote risk capital markets in India:
Mining taxation reforms:
Recalibrate exploration:
Promote contract mining and other mining services
in India:
-
8/18/2019 EY - Mining in Emerging Economies - Mining and Metals.pdf
27/32
-
8/18/2019 EY - Mining in Emerging Economies - Mining and Metals.pdf
28/32
| Mining in Emerging Economies - Sharing the Spoils
-
8/18/2019 EY - Mining in Emerging Economies - Mining and Metals.pdf
29/32
Mining in Emerging Economies - Sharing the Spoils |
-
8/18/2019 EY - Mining in Emerging Economies - Mining and Metals.pdf
30/32
| Mining in Emerging Economies - Sharing the Spoils
For more information, visit www.ey.com/in
Connect with us
Assurance, Tax, Transactions, Advisory
A comprehensive range of high-quality services tohelp you navigate your next phase of growth
Read more on www.ey.com/India/Services
Our services
Centers of excellence for key sectors
Our sector practices ensure our work with you istuned in to the realities of your industry
Read about our sector knowledge at ey.com/India/industries
Sector focus
Easy access to ourknowledge publications.
Any time.http://webcast.ey.com/thoughtcenter/
Webcasts and podcasts
www.ey.com/subscription-form
Follow us @EY_India Join the Business networkfrom Ernst & Young
Stay connected
-
8/18/2019 EY - Mining in Emerging Economies - Mining and Metals.pdf
31/32
Mining in Emerging Economies - Sharing the Spoils |
Ahmedabad
Bengaluru
Chandigarh
Chennai
Hyderabad
Kochi
Kolkata
Mumbai
NCR
Pune
-
8/18/2019 EY - Mining in Emerging Economies - Mining and Metals.pdf
32/32
Ernst & Young LLP
EY
About EY