What can your country do for you?
- By: John P Sykes
Posted in: Blog, Exploration, Media, Mineral Economics, Mineral Policy, Mining, Publications, Strategy
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Continuing our catch-up on the May Strictly Boardroom articles, that I write with Allan Trench (The University of Western Australia) on MiningNews.net, the next article looks at the different types of mining economy, and what this means for corporate strategy and minerals policy.
Borrowing from the World Economic Forum’s classification of countries, we break mining economies into three types: factor-driven, efficiency-driven, and innovation driven.
Factor-driven mining economies are the world’s least developed nations, such as the D.R. Congo. Here only basic industry is possible, due to a lack of skills, infrastructure, and institutions. As such mining has to focus on high-unit value commodities, such as gold, and highly profitable mines, such as those with unusually high-grades. However, these countries also remain some of the few underexplored countries, so they also host great conventional greenfields exploration potential. The operation of high-value mines and discovery of world-class deposits marks the first step in minerals industry driven economic growth.
Efficiency-driven mining economies are the world’s developing nations, such as China. These countries now host the world’s mass industry, with a combination of relatively low costs but skilled labour, better infrastructure and developing institutions. Lacking a consumer class, these economies tend to be export-orientated. These countries are therefore suited to low cost, bulk mining, and bulk commodity operations. Management efforts focus on efficiency and maximising production, as engineers battle with slowly increasing labour costs and declining quality deposits. These countries tend to be too mature for conventional greenfields exploration, with most of the best deposits already discovered, therefore the focus switches to brownfields and near-mine exploration with the focus on feeding the large operating mines. The exploitation of large mines and mass exploration for more resources marks the second step in minerals industry driven economic growth.
Innovation-driven mining economies are the world’s developed nations, such as Australia. Hosting highly educated, but high cost workforces, high-quality intellectual infrastructure and institutions, the competitive advantage of these countries is innovation and the export of intellectual property and services. In a mining context, these means operational innovation to combat high labour costs and declining deposit quality, with these innovations in turn being exported to the rest of the sector. Such countries tend to be the source of mining sector finance, corporate headquarters, and host to thriving mining service sectors and support businesses. An innovation focus also renews greenfields exploration, allowing the application of new approaches targeting major new greenfields discoveries in what were previously ‘mature’ terrains. The reinvention of mining and greenfields exploration marks the third (and final?) step in minerals industry driven economic growth.
For those interested in reading the rest of the article, it is entitled “What can your country do for you?” and is available to MiningNewsPremium.net subscribers online. Otherwise contact me for a copy.
For keen followers of the Strictly Boardroom column, our book “Strictly (Mining) Boardroom Volume II: A Practitioners Guide for Next Generation Directors” was published last year and is available as a paperback or e-book from Major Street Publishing or Amazon. We’re pleased to say that the book received a very positive review in the AusIMM Bulletin.