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Mining whispers [*].

With the exception of agriculture, there is no industry as fundamental to world economic development as mining. As slogans at MINExpo reminded us in October, 'if you can't grow it, you have to mine it.' Yet, our industry (with the exception of the oil sector) has little influence where it counts. The industry needs to be heard, louder and more widely.

Of course, few industries come with as much historical baggage as mining, and most of it serves as an adverse influence on politicians and investors. The image, strong still in Europe, of cloth-capped coal miners toiling away underground does precious little for the modern mining executive trying to eke out funds for new developments. Worse still, in terms of public sentiment, are the reoccurring pictures of derelict mines, ravaged landscapes and leaking dumps. Whilst miners themselves still enjoy considerable public sympathy, mining (with very few exceptions) does not enjoy widespread support -- and where public opinion wanders, politicians will be close behind.

Because of this historical baggage and, more recently, the increased awareness of the environment, mining is unpopular. The industry does have an important role, of course, particularly in the ongoing debate about sustainable development, but (at both the corporate and industry 1evels)it is failing to guide the agenda. The industry's chief executives also have relatively little political influence. Although our trucks and shovels are large, the leading companies are not. Standard & Poor's weighting for metals mining in its 500 index is under 0.6%, which is less than that of the Walt Disney group alone.

In its annual 'Who Owns Who' survey (published by Roskill of London), Sweden's Raw Materials Group (RMG) lists the top ten mining companies as Anglo American, Rio Tinto, CVRD, BHP, Norilsk, Codelco, Freeport McMoran, Phelps Dodge, Noranda and Grupo Mexico. The combined market capitalisation of these ten is currently under $80 billion. Indeed, even if we include companies which derive much of their value from processed metal and fabrication (such as the aluminium producers), the combined market capitalisation of the 20 largest 'mining' companies is only about $166 billion. By comparison, BPAmoco and Exxon Mobil have a combined market capitalisation of $520 billion.

As a result, mergers and acquisitions in the mining industry are also dwarfed by the deals in other sectors. The largest deals in the mining industry during the past five years were Alcan's $4.7 billion takeover of algroup, Alcoa's $4.6 billion offer for Reynolds and Rio Tinto's $4.0 billion takeover of CRA. In contrast, this year's America Online merger with Time Warner was valued at $182 billion, Glaxo Wellcome and SmithKline Beecham are merging to create a $78 billion deal, and France Telecom bought Orange for $46 billion. According to RMG, the total volume of global mergers and acquisitions last year amounted to $3,400 billion, with the mining industry reaching barely $19 billion (0.6%).

In terms of metal sales, the two largest companies in North America are Alcoa and Alcan, with revenue in 1999 of $12.6 billion and $6.7 billion, respectively. Leading 'mining' companies in North America include Inco (in 16th place last year with metal sales of $2.1 billion), Freeport-McMoRan Copper & Gold (20th; $1.9 billion), Phelps Dodge (22nd; $1.8 billion), and Barrick Gold and Newmont Mining (26th and 27th on about $1.4 billion each). In contrast, BPAmoco alone had revenue of $100 billion in 1999.

Taken globally, the sales of coal (whose annual mined production has averaged a value of some $110 billion in recent years), gold, bauxite and copper (an average of around $20 billion each for run-of-mine output), and iron ore ($15 billion) dominate, followed by zinc and diamonds ($6 billion each). The total value of annual mined output is probably less than $300 billion (with operating costs accounting for some two-thirds of this amount, the construction of new mines over $50 billion each year and $3-5 billion being spent on annual exploration). For comparison, the annual value of oil output is currently $800 billion (73 Mbbl/day at $30/bbl).

Not surprising, taken from a global perspective, mining has relatively little influence on politicians, particularly those in developed countries. Equally, mining has little influence on the world stage in general, but without our metals and other mineral commodities, the world would grind to a halt. We need to find a stronger voice in the global economy.

(*.) This is a brief extract from Dr. Hinde's paper, Repositioning of an Industry, presented at the World Mining Congress, Las Vegas, Nevada, October 10, 2000.
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Title Annotation:popular opinion
Author:Hinde, Chris
Publication:Mining Magazine
Article Type:Brief Article
Geographic Code:00WOR
Date:Dec 1, 2000
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