Globalism to localism - Living with Minerals conference report
The global financial crisis is affecting supply and driving up prices, claimed speakers at the fourth Living with Minerals conference in London, UK. Michael Forrest finds out what is shaping UK policy.
It has been three years since the Living with Minerals conference last put the spotlight on the state of the minerals industry in the UK and its future. A lot has changed since 2008 and even more in the world economy. Minerals, together with agriculture, form the basis of the UK manufacturing industry, but the global recession has taken its toll. ‘Minerals are the biggest materials flow in the UK, producing 300Mt annually and 70,000 jobs’, says Nigel Jackson, Chairman of the CBI Minerals Group. The majority of UK mineral production is for commodities that support the construction industry – aggregates, cement, bricks and lime, so it is not surprising that these have been hit hard. The purpose of the CBI conference is to identify those minerals where there is an issue of security of supply and seek to ensure that the UK industry is not penalised by taxes and imports. Bricks, ceramic bricks and lime are energy intensive and it is important to ensure there is a parity of costs.
John Cridland, Director-General of the CBI, explained that in the UK the 2009 recession was financially induced and as such would take longer to recover. He stated that the UK economy declined by more then seven per cent over five quarters. Cridland supported the Government’s objective of reducing the deficit and suggested infrastructure development was a key objective to stimulate the economy. One way would be to bring forward existing infrastructure plans. However, this would not be enough and the large balance sheets of private companies might be a way of financing projects. A way must be found to mitigate the costs of energy in domestic ceramic, brick, cement and limebased industries or they are not sustainable. According to CBI data, every pound spent on infrastructure projects is worth £2.84 to the economy.
The UK minerals balance is mainly negative, with a large proportion of metals and energy minerals being imported. For some metals, the security of supply has become a major issue, highlighted by an EU report that identified 14 critical metals and minerals. This was the subject of Michael Lynch-Bell’s presentation to the conference. Lynch-Bell is a senior partner of the Mining and Metals Transactions Advisory Services at Ernst and Young, and Chairman of the United Nations Expert Group on Resource Classification. He illustrated the state of the global industry with demand not only being led by the BRICs (Brazil, Russia, India and China) but by other developing countries across the globe. This happens when the supply side is being constrained and costs are increasing.
Some nations are increasing their taxes from mining operations stimulated by the high price of most commodities. The recent debate over the proposed 40% rate in Australia is a case in point. These factors have led mining companies to consider exploring and developing in higher risk countries that offer good potential, but these too have their problems relating to security of tenure of leases and unpredictable regime changes. Added to these are the recent legislation of the Dodds-Frank Wall Street Reform and Consumer Protection Act, and the UK Bribery Act that rightly restrict the corruption practices that can be endemic. Other countries are yet to follow suit.
‘The UK has a long and proud history of mining,’ said Lynch-Bell, something that is now only pre-eminent in the finance sector with London taking the lion’s share of capital raising. Some 40% of the FTSE 100 market is comprised of companies in the extractive industry sector, while at the same time we import 50% of our coal and virtually all our metals. To ensure security of supply, bilateral arrangements are required, and countries such as Japan and China are already investing in projects in developing producing nations, with Africa a particular target. Other policies to ensure raw materials for industry include research into substitution, recycling and stockpiling. The USA has recently re-established a stockpiling agency after disbanding the Defense Logistics Agency in the early 1990s.
The European Union has similar views relating to the security of supply of not only metals, but aggregates and other construction minerals. Gwenole Cozigou, Director of the European Commission Enterprise and Industry Directoriate-General, illustrated the EU policy by referring to three pillars of support for the minerals sector. Firstly, a policy of fair access to mineral resources must be established not only within Europe but around the world.
Secondly, the policy must allow for the supply of essential raw materials and, thirdly, the EU must support efficient use and promote recycling. In reference to the first ‘pillar’, the 2010 review of critical minerals, including the rare earths that are most quoted, access must be fair and undistorted. To this end the Commission is actively engaging with the USA, China, Chile and Brazil.
Feeding the nine billion
Cozigou also stressed the importance of data on resources and, in particular, the work of national geological surveys in identifying resources globally. Nearer to home, the mineral potential within EU countries must be revisited. He encouraged people to, ‘think globally, act locally’. There are too many barriers for development, including land access, and best practice must be put in place in all members’ countries. He also recommended a reduction in the time and planning consent takes across the Union, and while not advocating unregulated development said, ‘A yes to development of mineral resources in 20 years time is of no interest to investors’.
The world population is predicted to reach nine billion by mid-century. Feeding this population will be a major challenge and farmers will be dependent on the adequate supply of fertilisers. David Manning, Professor of Soil Science at Newcastle University, UK, investigated this problem. ‘We need minerals more than ever,’ he remarked, referring particularly to potash and phosphate rock, the basis of the fertiliser business. Potash comes from limited sources and we need to double the amount of application to balance the off-take from soils that enters food crops. This is prevalent in most developing countries, such as those in West Africa where potash consumption is much greater than production. Potash prices are now three times those of 2007 and look unlikely to drop below US$350/t. Ninety per cent of phosphate production originates in 16 countries and again security of supply to meet global demands is likely to be problematic in the future.
A local issue
The minerals sector in the UK is heavily dominated by construction materials, particularly aggregates from sand, and gravels and crushed rocks. There are four major hard rock aggregate quarries on the Leicestershire stone line (Materials World, July 2010, p26) that will be depleted by 2030, and this problem is occupying those in mineral planning at local and national levels. The coalition Government’s Localism Bill will shortly be sent for Royal assent and will refocus decision making.
However, Ian Lamond, partner at Stephens Scown LLP, and member of the Law Society planning panel, maintains that planning consultations are a waste of time and slow the decision-making process. Mineral deposits cannot be moved around to fit a localism plan. Furthermore, there is a national need to be met that may not fit with local impact.
Although minerals are out of scope in the Localism Bill, the effect of neighbourhood planning has yet to be felt. The UK Minerals Forum, hosted by the CBI Minerals Group, has looked at the likely impact in a series of working groups of experts. Its findings cover resource identification, particularly the transport of hard rock aggregates and coal to meet requirements in 2030. Significant policy support is needed to maintain the local supply of aggregates, and although transport networks for coal are deemed sufficient until 2025, any shift in the origin of supply, such as replacing imports with deep UK mines, will require a revision of plans. Rail only accounts for 11% of mineral transport, a value that should increase if carbon targets are to be met.