Prevención de los Riesgos

An annual Fraser Institute survey, released in March 2014, asked 690 mineral exploration and development companies which regions (of 112 listed) have the best policy environments for mining investment. Here are some of the results:

• Canadian jurisdictions placed among the world leaders with political stability and security being important variables.

• The top 10 jurisdictions were Sweden, Finland, Alberta, Ireland, Wyoming, Western Australia, New Brunswick, Nevada, Newfoundland and Labrador and Norway.

• Saskatchewan (12) and Yukon (19) were in the top 20 spots.

• The bottom 10 scorers were Kyrgyzstan, Venezuela, Philippines, Mendoza and La Rioja in Argentina, Angola, Zimbabwe, Ivory Coast, Indonesia and Madagascar.

THE WORLD: INTERNATIONAL MARKET ACTIVITIES AND DEVELOPMENTS

composed of 65.5% (2,530 pounds) ferrous metal, 8.5% (328 pounds) aluminum, 4% (154 pounds) other metals and 22% (849 pounds) non-metallic materials. By this benchmark, if China and India reached one-third of the vehicle density of the United States, their automobile manufacturing sectors would need 1.57 trillion pounds of ferrous metal, 204 billion pounds of aluminum, and 95 billion pounds of other metals such as lead, zinc, tin and nickel. According to a recent McKinsey report, in 2010, China became the largest automotive market in the world, and is poised to surpass both North American and European markets by 2020, with annual sales forecast to reach 22 million units.

A CHALLENGING CAPITAL ENVIRONMENT

Productivity and capital allocation and access were the top business risks facing mining and metals companies in 2014, according to Ernst & Young. Threatening the long-term growth prospects of major companies and the short-term survival of junior firms, this capital dilemma affects both ends of the mining spectrum.

According to PwC, over the course of 2013, the 40 largest mining companies globally booked record impairments of $57 billion. These, in addition to the $40 billion in impairments recorded in 2012, drove aggregate net profits down 72% to their lowest level in a decade, and lowered the companies’ collective market capitalization by 23%, or $280 billion. While net profits from emerging market companies were $24 billion in aggregate in 2013, companies headquartered in developed

countries operated at an aggregate net loss of $4 billion. Simultaneously, the expectations of both shareholders and host jurisdictions have increased, with greater focus placed on returns to shareholders and value extraction from mineral development for host jurisdictions. Companies have also made substantial changes in direction. Nearly half of the top 40 companies have replaced their CEOs in the last two years.

Mining companies have largely turned to cost control through productivity enhancements and other measures. There is a strong desire to regain lost productivity to achieve long-term profitability and an adequate return on capital employed. These goals require a whole-of- business response.

Meanwhile, juniors are crunched for cash. Since the economic downturn, investors have generally sought low-risk, short-term yields, rejecting the higher risk nature of exploration investment. These capital challenges have resulted in juniors being restricted from accessing capital, sectors. Many countries and governments earn needed

revenues from the industry. Recent years have brought some interesting developments in the world market for mining and its products.

STRONG GLOBAL DEMAND, WITH CYCLICAL REALITIES

The cyclical nature of the mining industry is never far from the surface, even during strong economic times. Companies try to even out the cycles by seeking quality properties, managing their risks and keeping a balanced mix of opportunities to provide some flexibility in the face of market fluctuations.

Ups and downs in market demand, despite being perennial in the world of mining, present challenges for mining companies trying to decide where, when, how much and how quickly to invest in exploration, project development or mine expansions.

Cyclical realities aside, demand for metals and minerals is expected to grow in the medium and long term. China and India are the most populous nations in the world, and the second and ninth largest economies globally by nominal GDP. They are also among the top three largest economies based on purchasing power parity. Even though their growth has moderated in recent years, it has remained strong in both countries, despite volatility. They continue to have an appetite for minerals and metals that will only increase, especially because their per capita usage of many metal-intensive products is still relatively low.

Automobile consumption, for example, serves as a measure of demand for mining products because of its metal intensity. According to the most recently available World Bank data (2010), there are only 58 motor vehicles (including cars, buses and freight vehicles) for every 1,000 people in China, and only 18 for every 1,000 people in India. By comparison, the United States has 797 motor vehicles for every 1,000 people, with comparable numbers for other western industrialized countries. In 2012, the populations of China and India were 1.35 billion and 1.24 billion, respectively. Using the above indicator as an approximation, both China and India combined possess 196.8 million motor vehicles, compared to the 250 million vehicles in the United States. Should China and India approach US vehicle density, an additional 1.87 billion vehicles would be required between the two countries.

Ducker Worldwide observes that the average light vehicle in 2010 weighed 3,863 pounds, and was

whereas majors have a significantly reduced appetite to deploy it.