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Global mining splurge in 2011

Dec 08 2011 11:13

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Manila - The China-driven commodities boom transformed economies and environments across the globe in 2011, a year that saw cashed-up mining giants invest record amounts into extracting Earth's riches.

From Australia's barren interior where plans were approved to create one of the world's biggest open pit mines, to the Amazon rainforest where vast copper deposits were targeted, the mining phenomenon went into overdrive.

Thanks to historic high prices for iron ore, gold and a wide range of other natural resources, mining companies had the money to splurge across the globe in a phenomenon that both changed lives and raised environmental fears.

"The most significant trend this year was that most mining companies have come through the GFC (global financial crisis) with very robust balance sheets," Royal Bank of Scotland senior mining analyst Warren Edney told AFP.

"With those robust balance sheets, they can spend a lot of money. It's going on everywhere."

Mining companies' capital expenditure surged to a record $140bn around the world this year, up from $100bn in 2010 and less than $40bn in 2003, according to RBS research.

China's seemingly insatiable appetite for all kinds of natural resources to fuel its historic modernisation drive and remain the world's manufacturing hub was the main driver for the high commodities prices.

Even though prices cooled in the second half of the year amid a range of global economic uncertainties, mining titans pressed on with their expansion plans, believing the commodities boom will transcend short-term crises.

"The longer-term demand picture remains positive," Tom Albanese, chief executive of Anglo-Australian mining giant Rio Tinto, said last month.

"The China growth story has a long way to run and, by utilising our strong balance sheet, we continue to invest throughout the cycle in high quality growth options to meet the future demand."

Rio Tinto alone said its capital expenditure for this year was expected to be about $12bn, while Brazilian conglomerate Vale said its investment budget for 2011 was $19bn.

Such investments performed powerful booster roles for national and local economies amid the rising concerns of another financial crisis, often providing thousands of jobs in remote communities around the globe.

But the mining companies' rapidly expanding global footprints also created social tensions and triggered concerns about the cost their operations will have on the environment.

In Peru, President Ollanta Humala was forced to declare a state of emergency this month in a bid to end protests against plans by US firm Newmont to build an open pit mine 3 700 metres above sea level.

Locals fear the the gold and copper project, which is looking to begin operations in 2017, will ruin the mountains' waterways as well as the region's lucrative livestock industry.

In resource-hungry India, 2011 saw judicial intervention in mining operations following a range of scandals, with the Supreme Court in July imposing a ban on all extraction in the southern Indian state of Karnataka.

The court order came after a committee uncovered widespread deforestation and environment degradation in the region, which produces about 35 million tonnes of iron ore a year.

Another example of the tensions brought about by mining came in Malaysia, where Australian firm Lynas' construction of a rare earths processing facility came came under intense public fire.

It was intended to provide the first new supply of rare earths outside China - breaking the Chinese stranglehold on the market for the minerals, which are used to make high-tech products from iPods to missiles.

But thousands of people protested over fears that radioactive waste from the plant could harm public health and the environment, and the facility that was due to open in the third quarter remained on hold as the year drew to a close.

In landlocked, resource-rich Mongolia, the government faced mounting pressure to secure more of the profits from lucrative new projects coming online.

It attempted to renegotiate a deal with Canada's Ivanhoe Mines and Rio Tinto to increase its stake in a vast gold and copper project from 34% to 50%, but abandoned the bid after firm opposition from the miners.

vale  |  rio tinto  |  mining
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