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International Mining International Mining ConferenceConference

Responsible approach Responsible approach to mineral extraction to mineral extraction

with regard to with regard to environment protectionenvironment protection

Detva , Slovakia , November 12 , 2007Detva , Slovakia , November 12 , 2007

7.11..07 15:577.11..07 15:57

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Globalisation of the Globalisation of the Mining Industry Mining Industry

Threats and OpportunitiesThreats and Opportunities

Vasili NicoletopoulosVasili Nicoletopoulos ‘‘Natural Resources GP’ ConsultingNatural Resources GP’ ConsultingManaging Director [Development] , Managing Director [Development] ,

‘Premier Chemicals LLC’ , USA‘Premier Chemicals LLC’ , USAPast President of EurominesPast President of Euromines

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The set-upThe set-up

Globalisation not a new phenomenon , Globalisation not a new phenomenon , quite ancient and evolutionary quite ancient and evolutionary

-Phoenicians, Greeks, Romans, -Phoenicians, Greeks, Romans, Byzantines, Napoleon, …Byzantines, Napoleon, …

-Transportation by ships & airplanes, -Transportation by ships & airplanes, telecoms, satellites, space voyages, …telecoms, satellites, space voyages, …

Same for the globalisation of the Same for the globalisation of the mining industrymining industry

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Nine new important Nine new important

characteristics characteristics 1.1. The EU The EU 2.2. The English languageThe English language3.3. The information revolution The information revolution 4.4. Energy developmentsEnergy developments5.5. Environmental globalisation Environmental globalisation 6.6. New finance tools and mechanismsNew finance tools and mechanisms7.7. The role of BRIC sThe role of BRIC s8.8. Trade institutions Trade institutions 9.9. International environmental NGOsInternational environmental NGOs

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Plus : Excellent Plus : Excellent world market in last world market in last

>5 years>5 years

Commodities boom , lastingCommodities boom , lasting The proponents of globalisation The proponents of globalisation

will say that the market is so will say that the market is so good good because because of globalisation of globalisation

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1. The EU 1. The EU

In 2004/06 : 15>25>27 In 2004/06 : 15>25>27 members,members,

+ 3 more candidates+ 3 more candidates Most national policies originate in Most national policies originate in

Brussels . Examples : Brussels . Examples : environment, health & safety, environment, health & safety, antitrust, antidumping, R&D, antitrust, antidumping, R&D, funding, social, Shengen etc.funding, social, Shengen etc.

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2. English 2. English

TheThe international language international language

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3. Information 3. Information

25 years ago : no faxes !25 years ago : no faxes ! Now : internet, e-mails, search Now : internet, e-mails, search

engines, data bases, e-press, engines, data bases, e-press, mobile phones, palm-tops, mobile phones, palm-tops, Google Earth,…Google Earth,…

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4. Energy4. Energy

Demand at a high point Demand at a high point 100 $ oil100 $ oil Ex-Comecon : at international market Ex-Comecon : at international market

ratesrates Links with the environment Links with the environment

greenhouse gases greenhouse gases

air qualityair quality

renewablesrenewables

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5. New financial 5. New financial schemesschemes

Role of euroRole of euro Stock exchanges , themselves globalized Stock exchanges , themselves globalized

through mergers, acquisitions and alliances, through mergers, acquisitions and alliances, are now on-lineare now on-line

New schemes : options, real options, New schemes : options, real options, derivatives derivatives

Role of mathematics and computer software Role of mathematics and computer software & hardware& hardware

LondonLondon SE stillSE still thethe centercenter ofof miningmining financefinance, , but ΜIFID will increase importance of banksbut ΜIFID will increase importance of banks

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6. Environment6. Environment

Greenhouse effect > EU emissions Greenhouse effect > EU emissions trading scheme & other international trading scheme & other international regulations regulations

Other EU measures : Natura, REACH, Other EU measures : Natura, REACH, IPPC Directive, Waste directive, …IPPC Directive, Waste directive, …

Environmental awareness plus broad Environmental awareness plus broad communication of relevant communication of relevant informationinformation

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7. The role of BRIC 7. The role of BRIC ss

BBrazil, razil, RRussia, ussia, IIndia, ndia, CChinahina China booming, polluting, increasing in China booming, polluting, increasing in

costs, industrial minerals, from costs, industrial minerals, from dumping to rationing ?dumping to rationing ?

India following India following Russia and Brazil in metals, energy, Russia and Brazil in metals, energy,

industrial mineralsindustrial minerals Affecting all mining [and shipping!] Affecting all mining [and shipping!]

worldwideworldwide

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8. Trade institutions8. Trade institutions

They respond to many of the They respond to many of the above challenges : info, lobbying, above challenges : info, lobbying, networksnetworks

EurominesEuromines EurometauxEurometaux IMAIMA The World Mining CouncilThe World Mining Council

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9. Environmental NGOs9. Environmental NGOs

WWF, Greenpeace, local [?]WWF, Greenpeace, local [?] A perception : mining benefits are A perception : mining benefits are

national, costs are localnational, costs are local The concept of a ‘social licence’The concept of a ‘social licence’ Backlash : minerals extraction Backlash : minerals extraction

vital to economic development > vital to economic development > movie “Mine Your Own Business”movie “Mine Your Own Business”

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Commercial Commercial developments…developments…

As a response to the above challenges, As a response to the above challenges, mining companies got involved in 3 mining companies got involved in 3 M&A waves since 1990:fm Rio M&A waves since 1990:fm Rio Tinto/CRA, to VRH,Cyprus, Asarco, Tinto/CRA, to VRH,Cyprus, Asarco, Billiton, Falconbridge, Arcelor/Mittal, Billiton, Falconbridge, Arcelor/Mittal, now Rio Tinto /Alcan now Rio Tinto /Alcan

Depletion & barriers to entry vs Depletion & barriers to entry vs shareholder value : is the balance shareholder value : is the balance positive?positive?

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……Commercial Commercial developments…developments…

Set up alliances, eg one company Set up alliances, eg one company contributes contributes assets assets

Involvement in distribution Involvement in distribution channels : Grecian channels : Grecian Magnesite/PossehlMagnesite/Possehl

Join in R&D projects, eg EU Join in R&D projects, eg EU Framework projectsFramework projects

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… … CommercialCommercial developments developments

Chinese mining giants invest abroad : Chinese mining giants invest abroad : Latin America/Australia > now AfricaLatin America/Australia > now Africa

Same for Russian : China, Europe, US?Same for Russian : China, Europe, US? Private equity capital enters the field : Private equity capital enters the field :

examples in industrial mineralsexamples in industrial minerals Miners to get involved in shipping, esp. Miners to get involved in shipping, esp.

dry cargo?dry cargo?

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Conclusion Conclusion

Should be clear by now Should be clear by now

Whether they like what is going or Whether they like what is going or not, modern mining companies not, modern mining companies cannot pretend this new reality cannot pretend this new reality does not existdoes not exist

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Strategy Strategy recommendations…recommendations…Mining companies should :Mining companies should : Always be well informed, on market Always be well informed, on market

issues as well as on institutional onesissues as well as on institutional ones Be prepared for major M&A s & Be prepared for major M&A s &

alliances eg in alliances eg in industrial mineralsindustrial minerals : : their customers [refractories] & their their customers [refractories] & their customers’ customers [steel] already customers’ customers [steel] already doing it !doing it !

Participate in alliances, initially to test Participate in alliances, initially to test the watersthe waters

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……Strategy Strategy recommendations…recommendations…

Mining companies should also:Mining companies should also: Actively participate in Actively participate in

international institutionsinternational institutions Be socially and environmentally Be socially and environmentally

aware and proactiveaware and proactive Employ globally-minded, Employ globally-minded,

multilingual staffmultilingual staff Make full use of ITMake full use of IT

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… … Strategy Strategy recommendationsrecommendationsFinally, mining companies should : Finally, mining companies should : Use financial institutions and Use financial institutions and

consultants as antennaeconsultants as antennae Set clear strategy and business plan, Set clear strategy and business plan,

but be prepared to change if a great but be prepared to change if a great new opportunity arisesnew opportunity arises

Not rule out going downstream : Not rule out going downstream : processing, distribution, even shippingprocessing, distribution, even shipping

Be prepared for a market downturn -Be prepared for a market downturn -good times do not last forever !good times do not last forever !

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Thank you very much ! Thank you very much !

V.NicoletopoulosV.Nicoletopoulos