March/April 2011

Feeding the global appetite

Resource demand is forcing stakeholders to confront mining industry challenges

By Peter Diekmeyer


CIM president Chris Twigge-Molecey delivers his speech at the Council on Foreign Relations in Montreal | Photo credit:

Global demand for mining products will continue to rise in the coming years, even as those products get harder to come by, predicted CIM president Chris Twigge-Molecey at a recent presentation to the Montreal Council on Foreign Relations. “Almost everything we consume today is either grown or mined,” he said. “However, resources are scarce and we need to make tough choices over how to develop them.”

Twigge-Molecey cited modern mobile devices, which typically include components made from more than two dozen minerals, ranging from iron to nickel to rare earths such as neodymium, as an example of how complex modern societies have become. “Environmental protesters would hate to part with their cell phones,” he noted. “We have got to be realistic. Even production of the food most of us eat relies on fertilizers requiring significant quantities of mined products such as potash and phosphates.”

Having served as engineering firm Hatch's managing director in Latin America and China, two economies driving much of the growing minerals demand, Twigge-Molecey understands the issues very well. “China, which in recent times has accounted for as much as 40 per cent of world GDP growth, is now growing at a pace that civilization has not seen before,” said Twigge-Molecey, who currently oversees strategic development at Hatch. “They are moving rural dwellers into the cities at a record pace of 20 million per year. This in turn is creating demand for infrastructure to be built at a rate equivalent to that of seven Montreals each year. In fact China alone, which is currently in the process of building 53,000 kilometres of heavy rail and 13,000 kilometres of high-speed rail tracks, now produces half of the world’s steel production.”

That said, many of the risks to current raw material demand growth projections are also China-related. “There is massive civil unrest in China, including an official number of 80,000 riots per year, or 200 per day, many of which go unreported,” said Twigge-Molecey. “Furthermore China is aging quickly and will likely, as a country, get old before it gets rich. Like much of the developing world, China is also suffering from significant inflation in food prices, which could crimp demand for other products.”

Mining companies are also coming under increasing pressure in the developing world to earn and keep their “licence to operate,” which means working very closely with local people and respecting their concerns about land and mineral rights, permitting and the delivery of local benefits. In many regions, companies are being forced to renegotiate royalty rates due to current high mineral prices.

“Resource nationalism will also become a larger challenge going forward,” noted Twigge-Molecey, pointing out that even Canada got in front of the trend when it blocked BHP Billiton’s recent attempt to acquire PotashCorp of Saskatchewan.

Then there is getting the financial backing to exploit a find in the first place, he added. Mining companies face the additional complication of having to raise capital in an environment in which the discovery- to-production cycle lasts, on average, 22 years, while a normal business cycle only lasts between seven and 10.

Increasing demand for mined resources is expected to continue for decades as China makes the great leap forward into the 21st century. How the mining industry responds to the challenges and meets the demands made upon it will be watched with great expectation.

Post a comment


PDF Version