The Outlook for Zinc, Lead, Copper and Nickel

1
The Outlook for Zinc, Lead,Copper and Nickel

• Don Smale
• Secretary-General ILZSG, ICSG, INSG

Lima, Peru, 26-27 June 2008
2
Introduction Outline

• The Study Groups
• Promoting a Forum for Governments and Industry to
  meet
• How we can make a difference
• Provision of accurate data on production, usage
  and trade in copper, lead, zinc and nickel
• Directories comparing regulations
• Recycling and sustainability
• International discussion on areas of mutual
  concern

3
The Study Groups

• Three independent intergovernmental organisations
  set up within the UN system
• International Lead and Zinc Study Group (1959) -
  30 member countries
• International Copper Study Group (1992) - 21
  member countries
• International Nickel Study Group (1990) - 15
  member countries

4
Study Groups (cont.)

• Located in Lisbon, Portugal since January 2006,
  with significant cost savings and synergies
• Share one common Secretary-General
• Significant role for industry representation
• Invite observer countries, industry and observer
  organisations such as UNCTAD, World Bank, UNIDO,
  Common Fund for Commodities and metals
  associations, including IZA

5
A Forum for Discussion

• Markets forecasts of supply and demand for
  metals a year ahead
• Trade monitoring of international trade in
  metals
• Environmental policy sharing information on
  approaches to regulation
• Industry Advisory Panel metals industry
  executives provide input to member governments
• Study Group Sessions up to 200 participants at
  ILZSG (the largest)

6
Data Provision

• Monthly Bulletins of Statistics on Copper, Lead
  Zinc and Nickel
• Biannual/annual reporting on mine, smelter an
  refinery start-ups, closures, expansions and
  planned development
• Reporting on smelting and refining capacity and
  other plant details
• Publication of data on principal end uses of
  metals
• Studies on trends in downstream metals sectors
• Interactive data on lead and zinc accessible
  through internet
• Historical data series available on request
• Monthly press releases distributed widely

7
Sharing Policy Approaches

• Discussion about national regulatory measures and
  market-based incentives
• Reporting by member countries on environmental
  approaches in their jurisdictions in relation to
• Metals emissions to air, water and soil during
  production
• Mine closure and remediation
• Risk assessment and risk management of metals
• Discussion on multilateral environmental policy
  (e.g. UNEP, Basel Convention)

8
Recycling Efficiency

• Study Groups formed a Recycling Project Team with
  the aluminium, copper, lead, nickel, zinc and
  iron and steel industry associations
• Common methodology on assessing recycling
  efficiency agreed
• Successful seminar on recycling efficiency held
  in Lisbon in October 2007 bringing together
  industry and Study Groups member governments

9
Attending the Study Group Meetings

• All industry representatives from member
  countries are welcome to participate in Study
  Group Sessions
• Industry or government delegates from non-member
  countries can request participation in Study
  Group Meetings
• The Study Groups are unique forums where mining
  ministries can meet their global counterparts and
  the international metals industry
• We hope that this information today will
  encourage you to come and join us in Lisbon

10
ILZSG Main Publications
50 Discount For companies based in member
countries

• Lead and Zinc Statistics Monthly
• Bulletin of the International Lead and Zinc
• Study Group
• Highly regarded publication that comprehensively
  reports mine production, metal production,
  consumption, prices, stocks, trade flows and
  market balances. Includes subscription to
  electronic statistical database with data back to
  1960
• Users sum up to around 200 organisations
  worldwide, amongst industry, governments and
  associations, including more than 80 paying
  subscribers

11
ILZSG Main Publications
50 Discount For companies based in member
countries

• Lead and Zinc New Mine and Smelter Projects 2008
• Principal Uses of Lead and Zinc 2008
• World Zinc Oxide and Zinc Dust Production 2004
  (to be updated in 2008)
• World Directory Primary Secondary Zinc Plants
  2008 (in preparation)
• Environment and Health Controls on Zinc 2008
• The Use of Zinc in Construction and Public
  Infrastructure 2007
• The Market for Zinc Fundamentals Driving Change
  2006
• The Dynamics of Zinc Usage in Automobiles 2006
• World Directory Continuous Galvanizing Lines
  2004

12
Distribution of Lead Mine Output
Source Brook Hunt / ILZSG
13
Lead Stocks and PricesMay 2002 May 2008
Source ILZSG / LME
14
World Lead Metal Usage Forecast
Annual Change

• ILZSG Forecast
• 2008 3.9

Source ILZSG
15
E-Bikes in China

• Huge rise in popularity
• Low cost
• Zero emission
• Powered by lead-acid batteries

16
Chinese E-Bike Production
Source South China Normal University
17
Chinese E-Bike Development

• Designs become more sophisticated
• Newer, more powerfull models utilise 48v 72v
  batteries
• E-tricycle sales rising

18
World Lead Mine Output Forecast
Annual Change

• ILZSG Forecast
• 2008 8.4

Source ILZSG
19
World Lead Mine Output

• San Cristobal in Bolivia commissioned in August
  2007
• European output benefiting from new capacity in
  Macedonia and Portugal
• Increases in Australia, Canada, China, Iran,
  Mexico, Peru and the U.S.

20
World Lead Metal Output Forecast
Annual Change

• ILZSG Forecast
• 2008 4.3

Source ILZSG
21
World Lead Metal Output

• Higher Chinese production
• Increases in Canada, India, Japan, Poland, Russia
  and U.K.

22
Chinese Lead Trade
Source ILZSG
23
Lead Metal World Balance
Source ILZSG
24
Zinc Reserves Introduction

• Zinc Occurrence
• Zinc is an abundant component of the earths
  crust it is estimated that the amount of zinc in
  the first mile of the earths crust under dry
  land is 224,000,000 million mt. In the Oceans and
  seabed the amount of zinc is 15,000 million mt

• Zinc Deposits
• Zinc ore deposits are widely spread throughout
  the world. Zinc ores are extracted in more than
  50

countries. Zinc occurs normally associated with
lead and other metals including copper, gold and
silver

• Zinc Mines
• Largest zinc mines Red Dog - USA (570 million
  tonnes (Mt) of annual capacity, contained metal),
  Century - Australia (500 Mt), Rampura Agucha -
  India (375 Mt) and Antamina - Peru (320 Mt)

Sources Porter 1991 USGS ILZSG
25
Zinc Reserves Definition and Concepts

• Resources vs Reserve Base vs Reserves
• Terms often confused
• A resource is the identified concentration of a
  mineral in the Earths crust in such form and
  amount that economic extraction is currently or
  potentially feasible
• Reserve base is that part of an identified
  resource that meets specified minimum criteria
  related to current mining and production
  practices it thus reflects current knowledge,
  technology and prices
• Reserves refer to the portion of the reserve base
  which has been measured and which is, or may
  become in the close future, available for
  production. The term reserves need not signify,
  however, that extraction facilities are in place
  and operative

Source USGS
26
World Zinc Reserves 2006
Resources about 1900 million tonnes (Mt)
Reserve Base 460 Mt
Not to scale
Reserves 220 Mt
Mine Production 10.5 Mt
contained zinc metal
Sources USGS, ILZSG
27
World Zinc Reserves 2006Breakdown
(000 tonnes of contained metal)
Sources USGS, ILZSG
28
Distribution of Zinc Mine Output
Source Brook Hunt / ILZSG
29
Zinc Stocks and PricesMay 2002 May 2008
Source ILZSG / LME
30
World Zinc Metal Usage Forecast
Annual Change

• ILZSG Forecast
• 2008 5.2

Source ILZSG
31
Chinese Zinc Demand

• Data from National Bureau of Statistics shows
  construction in 2007 of
• 150,000Km of new highways
• 100GW of electricity generating capacity
• 30,000Km of transmission lines
• China Metals reports 28 rise in sales of
  domestic appliances

32
Zinc Market Chinas Infrastructure Requirements
Source China Metals
33
Apparent Consumption of Galvanized Steel in China

• Other Indicators Confirm Fast Pace of Growth
• 150000Km of new highways and 100GW of electricity
  generating capacity in 2007
• Housing starts have risen by 1/3
• 2008 Olympics in Beijing
• 2010 World exposition in Shanghai
• Sales of domestic appliances increased by 28 in
  2007

Source China Metals
34
Chinese Vehicle Population and Production
1980-2005
35
Galvanized Steel Production in India
Source WSD/CRU
36
World Zinc Demand

• Increases in India, Japan, Korea, Taiwan (China)
  and Thailand
• Rise in Europe of 0.9
• 4.8 increase in U.S. after 11.8 fall in 2007

37
World Zinc Mine Output Forecast
Annual Change

• ILZSG Forecast
• 2008 10.4

Source ILZSG
38
Selected Zinc Mine Openings in 2007
Mine San Cristobal, Bolivia Jaguar,
Australia Young, Immel, Coy , U.S. Caribou,
Canada Langlois, Canada Cerro Lindo,
Peru Aljustrel, Portugal
Annual Capacity 215,000t 33,000t 48,000t 50,000t 5
4,000t 85,000t 80,000t
Open 2007 2007 2007 2007 2007 2007 2007
39
Selected Zinc Mine Openings in 2008
Mine Perseverance, Canada Talvivaara,
Finland Rampura Agucha, India Duddar,
Pakistan Aguas Tenidas, Spain Handlebar Hill,
Australia McArthur River, Australia
Annual Capacity 115,000t 60,000t 170,000t 50,000t
45,000t 45,000t 40,000t
Open 2008 2008 2008 2008 2008 2008 2008
40
World Zinc Metal Output Forecast
Annual Change

• ILZSG Forecast
• 2008 6.4

Source ILZSG
41
World Zinc Metal Output

• 7.4 rise in China
• Opening in Dec 07 of 170kt Chanderinga 2 in India
• 3.2 increase in Europe
• Higher output in Canada, Iran, Japan, Kazakhstan,
  Korea, Mexico, Peru, U.S.

42
Chinese Zinc Trade
Source ILZSG
43
Zinc Metal World Balance
Source ILZSG
44
ICSG MAIN PUBLICATIONS/OUTPUTS
Copper Bulletin (monthly) includes annual and
monthly statistics, by country, on copper mine,
smelter, refined and semis production, copper
usage and trade, as well as stocks and exchange
prices, providing a global view of supply and
demand. Statistical Yearbook As above,
covering the past 10 years. Monthly Press
Release on the state of the copper market (to be
included in the email distribution list please
contact mail_at_icsg.org) World Copper Market
Forecast Prepared twice a year for the following
two years.
45
ICSG MAIN PUBLICATIONS/OUTPUTS
Directory of Copper Mines Plants (semi-annual)
the Directory highlights current capacity and
provides a five year outlook of forecasted
capacity for over 700 existing and planned copper
mines, smelters and refineries on a country by
country basis, identified as Operating
Developing or Exploration Feasibility
stages. Directory of Copper Copper Alloy
Fabricators First Use (annual) provides a
global overview of companies and plants involved
in the first use of copper. Covers wire rod
plants, ingot makers (for castings), master alloy
plants, brass mills, and electrodeposited copper
foil mills (over 1200 existing, developing and
planned plants.
46
ICSG MAIN PUBLICATIONS/OUTPUTS

• The Indian Copper Market Focus on recycling
  (2003)
• The China Factor in Global Copper Usage and its
  Consequences (June 2007)
• Analysis of the impact of high copper prices
  (substitution) in the different Chinese industry
  sectors - complement to the study above (June
  2007)
• The Russian Copper Market (July 2007)
• The World Copper Factbook (November 2007)

47
Copper Stocks vs. Price
48
World Refined Copper Usage 1900-2007 (thousand
metric tonnes)
49
Refined Copper Usage by Region (thousand metric
tonnes)
50
Intensity of Refined Copper Use1
1/ Note Refined copper is consumed by semis
fabricators or the first users of refined
copper, including ingot makers, master alloy
plants, wire rod plants, brass mills, alloy wire
mills, foundries and foil mills. As a result, per
capita consumption of refined copper refers to
the amount of copper consumed by industry divided
by the total domestic population and does not
represent consumption of copper in finished
products per person.
51
World Copper Mine Production (1960-2007)
52
Copper Mine Production by Region (thousand metric
tonnes)
53
Trends in Mining Capacity, 1990-2011 (thousand
metric tonnes copper)
54
Copper Mine Production Forecast
55
Leading Exporters and Importers of Copper Ores
and Concentrates, 2006 (thousand metric tonnes)
56
World Refined Copper Production (1960-2007)
57
Refined Copper Production by Region (thousand
metric tonnes)
58
Trends in Refining Capacity, 1990-2011 (thousand
metric tonnes copper)
59
Copper Refined Production Forecast
60
Leading Exporters and Importers of Refined
Copper, 2006 (thousand metric tonnes)
61
Copper Semis and Casting Production
1980-2006 (thousand metric tonnes)
62
Copper Semis and Casting Production By
Region (thousand metric tonnes)
63
Leading Exporters and Importers
of Semi-Fabricated Copper Products,
2006 (thousand metric tonnes)
64
2007 in Review

• World production below expectations due to supply
  disruptions
• Recovering from a zero growth in 2006 mine
  production still underperformed in 2007 as
  compared to expectations and increased by 3
  (460 Kt) to 15.5 MT
• Refined production increased by 4.4 (760 Kt)
  from 17.3 to 18.1 MT
• Labor disputes, strikes, unusual weather
  conditions, accidents, lower then anticipated ore
  grades, delays in start-up of new projects
  continued to affect mine and refined production
  in several countries.
• In 2007 the mine and refinery capacity
  utilization rates (respectively 87.5 and 82.6)
  were below 2006 rates with mine capacity
  utilization at the lowest level in more than 10
  years.
• Strong refined production growth in India and
  China, increases in Zambia and the USA, and a
  recovery in Chile and Mexico from weak 2006
  levels supported world production growth in 2007.

65
2007 in Review

• Main supply disruptions in 2007
• Chile Andina rock slide in May, Codelco
  operations affected by sub-contractors strike
  (Jun-Jul), unusual cold weather affected mining
  operations, Collahuasi and Escondida strike.
• Mexico Grupo Mexico strike at Cananea San
  Martin mines
• Peru labor disputes in Southern Copper Cuajone
  and Toquepala mines and Ilo smelter/refinery.
• Canada one month strike at CCR refinery
• Indonesia lower production at Grazberg and Batu
  Hijau
• Zambia strikes at Mopani, Konkola and Kansanshi
  mines
• PNG low production at Ok Tedi due to high levels
  of fluorine in the ore
• Congo Heavy rain affected production and project
  development
• Australia accident at the Olympic Dam smelter

66
2007 in Review

• World usage growth driven by Chinese growth
• Recovering from a growth of 2 in 2006, copper
  refined usage increased by 6.4 from 17 Mt in
  2006 to 18.1 MT in 2007
• Chinese apparent usage up by 36 in 2007
  supported by a 134 increase in net imports (1.4
  Mt). Effective usage growth supported by strong
  performance of copper using sectors (semis
  production up by 17).
• World usage outside of China decreased by around
  1.7 with usage in the other three major
  consuming regions (United States, EU-15 countries
  and Japan) decreasing by around 3.3.
• EU usage seems to have readjusted after 11
  growth in 2006 and decreased by 6 in 2007.
• United States usage was up by 1 from a weak 2006
  level, affected by weak auto and construction
  sectors, substitution, and weakening of the US
  economy.
• Japan usage down by 2.4 in 2007, affected mainly
  by a weak construction and auto sectors.
• India usage was robust reflecting the development
  of its copper sectors (8 growth).

67
ICSG Copper Mines and Plants Capacity Projections
Data Source ICSG Mines and Plants Directory
December 2007.
68
Major Copper Development and Expansion Projects
69
2008/2009 Forecast Main Assumptions (forecast
published 25th April 2008)

• World Mine production expected to grow by 6 in
  2008 and a further 9 in 2009, supported by the
  ramp-up and start-up of new projects in Africa,
  America and Oceania. However concentrate
  production is forecast to grow by only 3.4 in
  2008 and 6.7 in 2009, with the biggest share of
  growth attributed to SX-EW output (18 in both
  years)
• Electrolytic refined production to continue to
  be constrained by a shortage of concentrates.
• Refined production (after adjustments) foreseen
  to increase by around 2.7 in 2008 and 7 in 2009
  mainly driven by growth in electrowining
  production. Growth driven by new SX-EW projects
  in Africa and America and expansions of capacity
  at electrolytic refineries in Brazil, China,
  Bulgaria, India and Sweden among others.

70
2008/2009 Forecast Main Assumptions (forecast
published 25th April 2008)

• Refined usage growth levels for 2008/2009
  expected to be lower than in 2006 (2008 at 2 and
  2009 at 5). China to remain robust but growth
  rates at lower levels, usage in the EU region at
  around 2 growth for both years, United States
  down by 2.3 in 2008 should recover in 2009,
  Japan to remain flat in 2008 and decrease by 1
  in 2009, and significant growth predicted for the
  Middle East region.
• Uncertainties remain over world economical
  outlook for 2008/2009 that may affect copper
  usage forecast supply disruptions probability is
  high and could reduce supply China performance
  to remain the main driver in the next two years.
• Based on the current assumptions, small market
  surplus expected for 2008 and growth in copper
  usage not sufficient to absorb the expected
  increase in refined production in 2009 leading to
  a higher market surplus of around 400kt.

71
ICSG 2008-2009 Forecasts (published 25th April
2008)
1/ Based on a formula for the difference between
the projected copper availability in concentrates
and the projected use in primary refined
production 2/ Based on capacity utilization of
mines and refineries.
72
Note 2007-2008 ICSG Forecast published 25th
April 2008.
73
INSG publications

• World Nickel Statistics Bulletin
• Eleven monthly issues focused on the latest
  available monthly data.
• Special issue published once a year in November
  annual data for the latest available 11-year
  period.
• World Directory of Nickel Production Facilities
• Nickel Mines, Nickel Smelters and Refineries, New
  Nickel Industry Developments (Committed
  Developments, Likely Project Developments,
  Potential Project Developments) and Contact
  details.
• Published each year in September.

74
INSG publications

• Report Market for Nickel
• Comprehensive analysis of drivers for change in
  the world nickel market
• First issue in 2008. To be published each year.
• Press Releases and Newsletters
• Press Releases after the Spring and Autumn
  Meetings.
• 2 Newsletters Metals Despatch and INSG Insight.

75
World Nickel Ore Production
in 1000 tonnes
76
World Primary Nickel Production
in 1000 tonnes
77
World Primary Nickel Production
in 1000 tonnes
78
World Primary Nickel Usage
in 1000 tonnes
79
World Primary Nickel Usage
in 1000 tonnes
80
World Primary Nickel Balance
in 1000 tonnes
81
World Primary Nickel Balance
in 1000 tonnes
82
LME nickel prices and stocks
83
Principal End Uses of Primary Nickel in 2006
84
Nickel projects

• One can see from the following listings that
  there are no shortage of nickel projects
• Difficulty to find rich deposits, most have a
  low to medium nickel content and limited quantity
  
• To obtain sufficient financing is a problem
• Actual timing to a possible realization of a
  deposit is virtually impossible to accurately
  forecast

85
Nickel projects2007 Directory
Capacity (Ni content, t/y)
86
Refined Nickel Capacity by Country
New committed developments ? 0.5Mt
2006 ? 1.5Mt
New producing country
New producing country
87
New committed developments main projects

• Australia Yabulu Refinery (BHP Billiton)
• Brazil Níquel do Vermelho, Onça Puma (Vale),
  Barro Alto (Anglo American), Santa Rita
  (Mirabela)
• China P.R. Jinchuan
• Finland Talvivaara, Keivitsa (Scandinavian
  Minerals)
• Japan Niihama (Sumitomo)
• Korea, Rep. of Posco (Posco / SMSP)
• Madagascar Ambatovy (Sherritt / Sumitomo)
• New Caledonia (France) Goro (Goro Nickel),
  Koniambo (Xstrata)
• Papua New Guinea Ramu (Highlands Pacific / PNG)
• Zambia Munali (Albion)

88
Nickel Market - Key Issues (1 / 2)

• The nickel market has become very volatile
• Primary nickel usage down by 5 in 2007, but
  could increase by 10 in 2008
• Primary nickel projects are starting to come into
  production and up to 0.5Mt have been identified
  as committed
• Primary nickel production is estimated to
  steadily increase, by 8 in 2007 and a further 7
  in 2008

89
Nickel Market - Key Issues (2 / 2)

• The nickel market is experiencing a stock build
  up
• Sufficient primary nickel units should be
  available in, at least, the short to medium term
• China will remain the most important market
• China is increasing the production of
  "Ferro-Nickel/Pig Iron, targeting the stainless
  steel producers, from low grade nickel ores, from
  The Philippines, Indonesia and New Caledonia
• Developments in nickel pig iron might become a
  surprise factor in the future.

90
Next Meetings in Lisbon, Portugal

• INSG 6-7 October 2008
• ICSG 6-7 October 2008
• Joint CNIA/Study Groups Metals in China
  Seminar 8 October 2008
• ILZSG 9-10 October 2008
• Subsequent meetings during week beginning
• 20 April 2009

91
To learn more about the International Metals
Study Groups www.icsg.org www.ilzsg.org www.insg
.org
92
The Outlook for Zinc, Lead,Copper and Nickel

• Don Smale
• Secretary-General ILZSG, ICSG, INSG

Lima, Peru, 26-27 June 2008