Vince Matthews

Director Colorado Geological Survey

The Global Scramble for Minerals and Energy— Its Impact on ColoradoThe Global Scramble for Minerals and Energy— Its Impact on Colorado

Harris D. Sherman, Executive Director

YOUR YOUR Geological Survey !!!Geological Survey !!!YOUR YOUR Geological Survey !!!Geological Survey !!!

Geology of Water Resources

Promote Mineral and Energy Resources

Colorado Avalanche Information Center

Geologic Hazards

Educate

Assist State and Federal Agencies

Everything you need to know about Mineral and Energy in Colorado

Production of Natural Resources is an Important Part of Colorado’s Economy

$12.0 billion

Revenue comparison of Colorado’s Important Economic Sectors (2005)

Minerals &

Energy

Agricultu

r

e

$ B

illio

n

Tourism

48% 96

%

Distribution of Colorado Mineral & Energy Value 2007 ($ Billions)

CO2 0.5

Natural Gas

7.0

Oil1.5

Minerals1.8

Coal1.1

Uranium 0.00

Production of Natural Resources has Always been an Important Part of Colorado’s Economy

Just off 51st Street

Boulder 1902

ChinaIndia

U.S.

0

200

400

600

800

1000

1200

1400

China U.S. India

Population Comparison

China

U.S.

India

Land Area Comparison

0

1

2

3

4

5

6

7

8

9

10

China U.S. India

0

1

2

3

4

5

6

7

8

9

10

China U.S. India

China U.S.

India

3.2

13.8

1.1

0

2

4

6

8

10

12

14

China US India

GDP Comparison - 2007

China

U.S.

India

Source: World Bank

GDP Growth Comparison 2004-06

China

U.S.

India

Source: World Bank

World Electrical Growth

World 8.3 terawatts increase (+70%)

China/India/U.S. 4.4 terawatts

World Electrical Growth

India 0.5

U.S. 1.1 China

2.8

World Electrical Growth

Africa

Asia-Pacific

Europe-Eurasia

Middle East

South & Central America

North America

Industrial minerals: Cement 45 1Fluorspar 51 1Rare earths 96 1

Metals:Aluminum 24 1Antimony 86 1Copper 16 2 Gold 9 4Lead 32 1Magnesium 75 1Molybdenum 22 3Silver 12 3Steel, crude 31 1Tin 35 1Tungsten 87 1Zinc 26 1

China’s Share of World Mineral Production in 2005

Source: USGS, Menzie and Tse

% Rank

China’s Production and Consumption of Copper

Productionsupplemented by imports

Source: USGS, Kenzie, et al

Global Impact

457%

Global Impact

Global Impact

307%

Global Impact

457%307%

Colorado ImpactDifficulty in manufacturing of copper products

Increased copper thefts

Increased costs to the consumer

Copper mine reopening

Industrial minerals: Cement 45 1Fluorspar 51 1Rare earths 96 1

Metals:Aluminum 24 1Antimony 86 1Copper 16 2 Gold 9 4Lead 32 1Magnesium 75 1Molybdenum 22 3Silver 12 3Steel, crude 31 1Tin 35 1Tungsten 87 1Zinc 26 1

China’s Share of World Mineral Production in 2005

Source: USGS, Menzie and Tse

% Rank

Leading Importers of Iron Ore—1980–2003

Sources: U.S. Geological Survey Minerals Yearbook; United Nations Conference on Trade and Development.

Trends in Demand for Steel

150

200

250

300

2001 2002 2003 2004

Year

Millio

n m

etr

ic t

on

s China

Other AsiaEuropeAmericas

150

200

250

300

2001 2002 2003 2004

Year

Millio

n m

etr

ic t

on

s China

Other AsiaEuropeAmericas

Source: International Iron and Steel Institute.

China2005 – Opened 70,000 new supermarkets

2006 – Became #3 car manufacturer

– 42% increase in capital investment

11th Five-year plan

- Plan to build the equivalent of three Manhattan Islands

Price of Scrap Iron

559%

Ball mill gets real Leadville welcome

Image courtesy of Leadville Herald Democrat

U.S. molybdenum exports

21,900

34,500

41,400

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

45,000

2003 2004 2005

MOLYBDENUM Price

997%

Ball mill gets real Leadville welcome

Image courtesy of Leadville Herald Democrat

MOLYBDENUM Price

997%

MOLYBDENUM Price

MOLYBDENUM Price

~ 100 Known Occurrences of Molybdenum

Precious & Base Metal Increases 01/03 - 01/09

Silver367%

Platinum

255%

Gold 205%

Palladium

284%

Zinc 497%

Lead 800%

Aluminum 144%

Nickel 630%

Tin 229%

Average Price Increase

379%

Selenium

Germanium

Iridium Manganese

Titanium

Cadmium Chromium

Cobalt

Tungsten

Vanadium

671%908%

719%

581%

531%

159%

1620%

8

Tellurium1123%

600%

2060%

193% 411%

Magnesium354% 580%

Rhenium

685%

Antimony Bismuth

Average Price Increase

746%

Increase in Coal Spot Price

17

37

0

5

10

15

20

25

30

35

40

2005

2004

2005 Coal Price Spot versus Contract

24.4

37

0

5

10

15

20

25

30

35

40

SpotContract

2007$29.75

Metal prices fall further than during Great Depression The price of key industrial metals has fallen further over the last four months than occurred during the worst years of Great Depression between 1929 and 1933, according to research by Barclays Capital.  By Ambrose Evans-Pritchard Last Updated: 7:29AM GMT 03 Dec 2008

“Chinese companies and their rivals are scouring the globe from Australia to Africa for access to the raw materials needed to sustain the Asian nation’s growth as commodity prices surge.”

--June 23, 2006 (Bloomberg)

Renewable EnergyWIND

- Neodymium- Molybdenum- Iron Ore SOLAR

- Cadmium- Tellurium- Indium-

Germanium- Gallium- Selenium- Silicon- Copper

Commodity Primary Sources Applications in Alternative EnergyAntimony China Thermoelectric/paraelectric materialsBarium China Thermoelectric/paraelectric materialsBismuth China, Mexico Thermoelectric/paraelectric materialsCobalt Kinshasa,Australia Photovoltaics (solar cells)Gallium China Photovoltaics, paraelectric materialsGermanium Belgium,Canada Photovoltaics (solar cells)Indium China, Canada Solar cells, thermo/paraelectric materialsManganese Gabon, S. Africa PhotovoltaicsNickel Canada Fuel cellsPlatinum group South Africa Fuel cells, para/thermoelectric mtrlsRare Earths China Fuel cells, para/thermoelectric mtrlsScandium China, Russia Thermoelectric/paraelectric materialsSelenium Canada Solar cells, thermoelectric materialsStrontium Mexico Thermoelectric/paraelectric materialsTantalum Brazil Thermoelectric/paraelectric materialsTellurium Belgium, Germany Solar cells, thermoelectric metrls, semiconductorsTin Peru Thermoelectric materialsTitanium Australia, S. Africa Solar cellsVanadium Czech Rep., S. Africa Fuel cells

Zinc Canada, Mexico Photovoltaics, fuel cells, thermoelectric mtrls

Strategic and Critical Materials with uses in Alternative Energy applicationsfor which the U.S. is dependent on imports for 50% or more of consumption

Percent imported

REE = Rare Earth Elements = 15 + 2

neodymium, lanthanum, terbium, dysprosium

Toyota Prius

Rare Rare EarthsEarths

Rare Rare EarthsEarths

“The biggest user of rare earths of any object in the world!”

HONG KONG — China is set to tighten its hammerlock on the market for some of the world’s most obscure but valuable minerals.

--August 31, 2009 (The New York Times )

World faces hi-tech crunch as China eyes ban on rare metal exports –August 24, 2009 (London Telegraph)

China Tightens Grip on Rare Minerals–August 31, 2009 (New York Times)

China Considers Rare-Earth Reserve in Inner Mongolia –September 2, 2009 (Bloomberg News)

As hybrid cars gobble rare metals, shortage looms –August 31, 2009 (Reuters)

22% Imported

Cement producers

1. China

2. India

3. U.S.

China Consumes ½ of all the concrete in the world

20032004

U.S. cement manufacturing is 81% foreign owned

$50/ ton > $200/ ton in 2008

Fertilizers

Potash

$50/ ton > $500/ ton in one year

Sulfur

Nitrogen urea $1000/ ton.

( 2000 = 100 )

0

100

200

300

400

500

600

700

800Ja

n-00

May

-00

Sep-

00Ja

n-01

May

-01

Sep-

01Ja

n-02

May

-02

Sep-

02Ja

n-03

May

-03

Sep-

03Ja

n-04

May

-04

Sep-

04Ja

n-05

May

-05

Sep-

05Ja

n-06

May

-06

Sep-

06Ja

n-07

May

-07

Sep-

07Ja

n-08

May

-08

Sep-

08

Energy Fertilizers Agriculture Metals/minerals

Dr Colin Thirtle, Professor of Development Economics, Imperial College London

U.S. Energy Split

Oil

Natural Gas

Coal

Ura

niu

mRe

new

able

s

Rene

wab

les

Commodity Percent of U.S. Percentage Price Percent Imported energy supply Increase  2003-07 (2007 Net)

Coal 22.8 381 0

Oil 39.8 306 67

Uranium 8.4 481 89

Natural Gas 23.6 206 16

Hydroelectric 2.5 - -Biomass 3.6 - -Solar .1 - -Wind .3 - -Geothermal .3 - -

94%

6%6%

Source: EIA, Annual Report 2007

U.S. Energy Split

World Coal Consumption

COAL Consumption- China

0%

imported!

China’s Production and Consumption of Coal

Coal Spot Price 2/06 – 2/09

China begins importing coal

$38 per ton

$140 per ton

COAL Consumption- India

16%

imported!

COAL U.S.

0%

imported!

China/U.S. Coal

51% of world consumption.

54% of world production.

Colorado’s Coal is

becoming increasingly

desirable

Colorado has the seventh largest bituminous coal reserves in the nation.

Colorado has the largest reserves of bituminous compliance coal in the nation.

Colorado is the seventh largest coal producer in the nation.

Colorado Impact

Colorado Coal Production

1960-2007

World Nuclear Consumption

NUCLEAR- China

NUCLEAR- India

China : 32 new plants by 2020

4 per year through 2015

9 GW to 60 GWIndia: 17 new reactors by 2012

NUCLEAR- U.S.The last nuclear power plant came on line in 1996

Since then has U.S. nuclear generation --

Increased?Decreased?Remained flat?

NUCLEAR- U.S.Last nuclear power plant came online.

And, the largest nuclear power generator in the world?

The United States generates as much

nuclear energy as—

France, Germany, Spain, Sweden, United Kingdom

combined!

World Nuclear Power Consumption

436 Plants Operating

44 Under Construction

50 - 60 Countries Applied to IAEA

The world’s existing 436 nuclear reactors currently need 180 million pounds of uranium each year.

0

20

40

60

80

100

120

140

160

180

Million Pounds

Needed Produced

80 million pound gap

Uranium prices

Source: Cameco

Uranium-vanadium districts and mines, Colorado

10,000+ claims filed on federal lands in Colorado in 2005-6.

Three new mines opened in Colorado in 2008

Colorado Impact

10,000+ claims filed on federal lands in Colorado in 2007.

World Oil Consumption

OIL CONSUMPTION- China

Source: BP

OIL- CONSUMPTION India

Source: BP

OIL- U.S. Consumption

1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 2000 2010 2020 2030 2040 2050

PEAK 1970

U.S. OIL PRODUCTION - 1900 to 2050

1.6 billion barrels

40% less

DOWN THE OIL

“ESCALATOR”

1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 2000 2010 2020 2030 2040 2050

GONE:2/3 OF U.S. OIL HAS

BEEN USED. IT’S HISTORY.

U.S. OIL PRODUCTION - 1900 to 2050

How do you communicate what “2/3 of something

gone” means?

In 1969, M. King Hubbert Predicted that World Productionwould Begin Declining in 2000.

5% 19481% 1924

10% 1959

20% 1969

30% 1975

40% 1980

50% 1986

60% 1990

70% 1995

80% 2000

90% 2004

50% of the OILConsumed by theHuman RaceUsed Since 1986

90% of the OILConsumed by theHuman RaceUsed Since 1959

1094 Billion barrelsConsumed

Start 1859

(data from Arnulf Grubler, 1998; BP Statistical Review of World Energy, 2008)Copyright J. D. Hughes GSR Inc, 2008

(data from Arnulf Grubler, 1998; BP Statistical Review of World Energy, 2008; U.S. Bureau of Census, 2008)

Perc

en

tag

e o

f 2007

Year

5.3 times

Population

8.6 times

WOOD

OIL

COAL

GAS

Year

HYDRO

Per Capita ConsumptionR

enew

able

11%N

on-R

enew

able

89%

Year

Total Consumption

45 times

OIL

COAL

GA

S

Copyright J. D. Hughes GSR Inc, 2008

85% of the world’s oil comes from just 20of the 65 producing countries

54 of the 65 producing countries are in decline

Mexico’s declining production at Cantarell field accelerating

Mexican state oil company Pemex said Wednesday that production at its Cantarell oil field, the world’s second-largest, will drop faster than expected. 08/03/06

2005 producing 2.2 million barrels per day2009 producing 0.6 million barrels per day

1 of 65 producing countries

USA

Peak 1970 Source: BP Annual Energy Report

USA

MexicoNorwayUKIndonesia

Peak 1997

5 of 65 producing countries

Source: BP Annual Energy Report

45 small producers

USA

Peak ~2000

50 of 65 producing countries

Source: BP Annual Energy Report

45 small producers

USA

61 of 65 producing countries BrazilAlgeriaCanadaChina

KuwaitUAENigeriaLibya

IraqVenezuelaIran Peak 2004

Source: BP Annual Energy Report

45 small producers

USA

QatarAngola

63 of 65 producing countries

Flat 2004

Source: BP Annual Energy Report

45 small producers

USA

Saudi Arabia

64 of 65 producing countries

Flat?Source: BP Annual Energy Report

FSU Former Soviet Union nations

45 small producers

USA

Saudi ArabiaFSU

65 of 65 producing countries Slight Increase

Source: BP Annual Energy Report

Crude Oil Prices

Wattenberg oil well near Longmont

16th Largest oil field

0.0

5.0

10.0

15.0

20.0

25.0

30.0

35.0

40.0

45.0

50.0

Colorado Impact

Rangely still has large reserves (57R/65P).

Commerce City refinery will be processing Canadian oil sands.

Colorado Oil Production - 1960-2006

Oil shale is being seriously re-appraised.

World Natural Gas Consumption

NATURAL GAS CONSUMPTION - China

6% imported!

NATURAL GAS CONSUMPTION - India

26%

imported!

NATURAL GAS CONSUMPTION - U.S.

11%

imported!

Natural Gas – America’s Silver Bullet?

Natural Gas Electrical Generation vs Natural Gas Imports

Electricity from Natural Gas

Natural Gas Imports

0

200000

400000

600000

800000

1000000

1200000

1400000

1600000

1800000

2000000

Jan-

95

Jul-9

5

Jan-

96

Jul-9

6

Jan-

97

Jul-9

7

Jan-

98

Jul-9

8

Jan-

99

Jul-9

9

Jan-

00

Jul-0

0

Jan-

01

Jul-0

1

Jan-

02

Jul-0

2

Jan-

03

Jul-0

3

Jan-

04

Jul-0

4

Jan-

05

Jul-0

5

Jan-

06

Jul-0

6

Jan-

07

Jul-0

7

Mill

ion C

ub

ic F

eet

of

Gas

U.S. Monthly Natural Gas Production

Well Completions8,900 30,180

Average Initial ProductionIP

286

528

0

100

200

300

400

500

600

1998 2007

Avg Reserves per WellReserves

439

1128

0

200

400

600

800

1000

1200

1998 2007

Rockies Trends

Colorado Drilling PermitsApproved

Colorado Drilling Rigs

Source: Baker-Hughes

Source: Baker-Hughes

Colorado has the fifth largest gas reserves in the nation.Colorado has the largest reserves of coalbed methane in the nation.

Colorado is the seventh largest gas producer in the nation.

Colorado Impact

Colorado Natural Gas Production 1960-2007

Location of the 78,000+ wells that have been drilled for oil and gas. About half are dry holes.

0

1

2

3

4

5

6

7

8

Natural Gas Prices

$2.00 +/- $0.50

$6.50

21st CenturyNatural Gas

Prices

Colorado has all, or parts, of seven of the top 50 natural gas fields in the nation!

Gas Price Needed to achieve a 10% IRR Piceance Basin

Morgan Stanley

Morgan Stanley

Encana IHS

4/08/09

Delta Petroleum

Drilled 163 Colorado wells

Last month announced a loss of $459.7 million

Next day stock dropped 41%

Natural Gas – America’s Silver Bullet?

(data copyright IHS Energy, Diagram prepared and copyright by EOG Resources Inc., 2006)

60%FromMostRecentFOURYEARS

Natural Gas – America’s Silver Bullet?

Oil

Geothermal

SolarWind

Coal

Natural Gas

Efficiency

Conservation

Hydro Nuclear

Biomass

Hydro Generation - China

Hydro Generation – U.S.

Geothermal Energy

Direct Use

Electric Generation

Geoexchange Heat Pumps

Below the 690 apartments—not to mention the gyms, bars, dry cleaners and movie theater—that make up the 15-acre Linked Hybrid residential complex in Beijing, China, are 660 geothermal wells that eliminate the need for air conditioners and boilers. Each well funnels water 325 feet beneath the ground into bedrock, where the constant 55ºF temperature either heats or cools it before it’s pumped back to the surface and piped through the building’s concrete floors. The system will reduce energy costs by up to 30 percent in the summer and up to 40 percent in the

winter.

The Escalator DilemmaNatural Forces are Working Against Our Goals

Deplet

ion o

f Natu

ral R

esou

rces

Demand for Energy

Dem

and

Greenhouse G

as

Reduction

The future is here! Are we ready?

Overall ImpactsColoradans will suffer from effects of inflation

Coloradans may see increasing shortages of critical raw materials

Conflicts may arise with multi-national corporations operating in Colorado

Pressures will mount to develop more of Colorado’s natural resources

How do we turn lemons into lemonade?

So– Working with GEO on geothermal electrical generation.Encouraging the use of Geoexchange heat pumps.

Studying the potential of alternative energy minerals in Colorado

Studying the potential of CCS.

Trying to reduce our energy consumption

Trying to increase public understanding of our energy situation.

What is CGS doing?

“The world is a football field now and you’ve got to be sharp to be on the team which plays on that field.

If you’re not good enough, you’re going to be sitting and watching the game. That’s all.”

--Rajesh Rao, founder and CEO of Dhurva Interactive

The End!

Of the talk, that is.