THE ROLE OF GOVERNMENT GEOSCIENCE AND MINERALS EXPLORATION IN THE ECONOMIC
DEVELOPMENT OF WEST AFRICA
John P. Sykes Department of Mineral & Energy Economics, Curtin University
Centre for Exploration Targeting, The University of Western Australia
The Metallogenesis, Tectonics & Surface Evolution of the West African Craton University Club, The University of Western Australia
Monday 25th of May 2015
Photo: Joshua Wright
THE PURPOSE OF DEVELOPMENT ECONOMICS THE ROLE OF GOVERNMENT GEOSCIENCE AND MINERALS EXPLORATION IN THE ECONOMIC DEVELOPMENT OF WEST AFRICA
John P. Sykes | The Role of Government Geoscience and Minerals Exploration in the Economic Development of West Africa
Monday 25th of May 2015 | The Metallogenesis, Tectonics & Surface Evolution of the West African Craton Workshop | The University of Western Australia
Photo: Joshua Wright
Development economics is about catching up the rest of the world with the ‘West’
GDP nominal per capita for the world according to the 2009 data from IMF
John P. Sykes | The Role of Government Geoscience and Minerals Exploration in the Economic Development of West Africa
Monday 25th of May 2015 | The Metallogenesis, Tectonics & Surface Evolution of the West African Craton Workshop | The University of Western Australia
Brief global economic history: divergence then convergence (sort of…)
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
1 1000 1500 1600 1700 1820 1870 1900 1950 1970 1990 2000 2008
Shar
e o
f G
lob
al G
ross
Do
me
stic
P
rod
uct
(G
DP
)
Other
USSR
USA
Europe
Japan
India
China
John P. Sykes | The Role of Government Geoscience and Minerals Exploration in the Economic Development of West Africa
Monday 25th of May 2015 | The Metallogenesis, Tectonics & Surface Evolution of the West African Craton Workshop | The University of Western Australia
Data from Maddison (2010)
Economic development efforts should now focus on the ‘Bottom Billion’
Paul Collier divides the world into three economic units:
• OECD: Rich, developed countries, i.e. USA, Europe, Australia. • approx. ¼ world’s land; 1 billion people; $50 trillion GDP; $50,000 per capita
• Middle: Developing economies, where manufacturing export-focused ‘Big Push’ economics is allowing these countries to catch up, i.e. Brazil, Russia, India, China.
• approx. ½ world’s land; 5-6 billion people; $25 trillion GDP; $4,500 per capita
• “Bottom Billion”: Undeveloped economies, where ‘Big Push’ development strategies will not work (they’re too late) – urgent ‘alternative’ intervention required! Includes all WAXI countries. • approx. ¼ world’s land; 1 billion people; $1.5 trillion GDP; $1,500 per capita OECD: Organisation for Economic Co-
operation & Development GDP: Gross Domestic Product Data from World Bank
John P. Sykes | The Role of Government Geoscience and Minerals Exploration in the Economic Development of West Africa
Monday 25th of May 2015 | The Metallogenesis, Tectonics & Surface Evolution of the West African Craton Workshop | The University of Western Australia
All the WAXI countries are in the ‘Bottom Billion’
100,898
67,463
6,807 1,858 1,498 1,069 1,047 761 715 636 523 454 415 0
20,000
40,000
60,000
80,000
100,000
120,000121416181
101121141161181
2013 GDP per capita (current US$) 2013 GDP per capita (rank out 190)
John P. Sykes | The Role of Government Geoscience and Minerals Exploration in the Economic Development of West Africa
Monday 25th of May 2015 | The Metallogenesis, Tectonics & Surface Evolution of the West African Craton Workshop | The University of Western Australia
Data from World Bank (2015)
Not just about ‘money’: WAXI countries also low on the Human Development Index
0.3
0.4
0.5
0.6
0.7
0.8
0.9
1121416181
101121141161181
Human Development Index (score out of 1) Human Development Index (rank out of 187)
John P. Sykes | The Role of Government Geoscience and Minerals Exploration in the Economic Development of West Africa
Monday 25th of May 2015 | The Metallogenesis, Tectonics & Surface Evolution of the West African Craton Workshop | The University of Western Australia
Data from Human Development Index (2014)
The ‘Bottom Billion’ countries are victims of a number of economic development ‘traps’
The Traps • Conflict Trap: destroys economic
activity, the longer it lasts the more entrenched groups (militias etc) have to lose
• Natural Resource Trap: linked to conflict, encourages opaque government, ‘Dutch Disease’
• Landlocked with Bad Neighbours: no access to coast for trade, economy reliant on poor/bad neighbours
• Bad Governance in a Small Country: struggle to attract foreign investment as too small to be ‘on the radar’
The Solutions • Aid: smarter, and crucially focused on
the ‘Bottom Billion’
• Military interventions: appropriate and opportunistic, with the aim of protecting democratic governments
• International charters: encouraging good governance
• Trade Policy: free trade required, but also trade preference for Bottom Billion countries
NB: countries can be stuck in multiple traps, indeed many are linked!
John P. Sykes | The Role of Government Geoscience and Minerals Exploration in the Economic Development of West Africa
Monday 25th of May 2015 | The Metallogenesis, Tectonics & Surface Evolution of the West African Craton Workshop | The University of Western Australia
OVERCOMING THE NATURAL RESOURCE TRAP / CURSE THE ROLE OF GOVERNMENT GEOSCIENCE AND MINERALS EXPLORATION IN THE ECONOMIC DEVELOPMENT OF WEST AFRICA
John P. Sykes | The Role of Government Geoscience and Minerals Exploration in the Economic Development of West Africa
Monday 25th of May 2015 | The Metallogenesis, Tectonics & Surface Evolution of the West African Craton Workshop | The University of Western Australia
Photo: Joshua Wright
Paradoxically it seems ‘resource-rich’ countries are often the poorest
The Natural Resource Trap • Conflict: uneven local geographic
distribution of minerals encourages conflict over them
• Corruption: tax revenue not dependent on the people, reducing democratic scrutiny
• (Un-) Competitiveness: strong exchange rates & high inflation destroy non-resource parts of the economy i.e. manufacturing & services, known as ‘Dutch Disease’
Natural Resource Abundance and Economic Growth (Sachs and Warner, 1995)
John P. Sykes | The Role of Government Geoscience and Minerals Exploration in the Economic Development of West Africa
Monday 25th of May 2015 | The Metallogenesis, Tectonics & Surface Evolution of the West African Craton Workshop | The University of Western Australia
Mini-Quiz: Which of these regions is ‘resource rich’ (by share of GDP from mineral rents)?
N. America, Euro etc1:
Africa, central Asia etc2:
China, Brazil etc3:
India, Indonesia etc4:
1: ‘High income’ ; 2: ‘’Low income’; 3: ‘Upper middle income’; 4: ‘Lower middle income’ as defined by the World Bank Idea from: Collier (2010); Data from World Bank (2015)
0.4%
2.3%
John P. Sykes | The Role of Government Geoscience and Minerals Exploration in the Economic Development of West Africa
Monday 25th of May 2015 | The Metallogenesis, Tectonics & Surface Evolution of the West African Craton Workshop | The University of Western Australia
1.6%
1.4%
Mini-Quiz: Which of these regions is ‘resource rich’ (by total GDP from mineral rents)?
N. America, Euro etc1:
Africa, central Asia etc2:
China, Brazil etc3:
India, Indonesia etc4:
1: ‘High income’ ; 2: ‘’Low income’; 3: ‘Upper middle income’; 4: ‘Lower middle income’ as defined by the World Bank Idea from: Collier (2010); Data from World Bank (2015)
US$200 billion
US$15 billion
John P. Sykes | The Role of Government Geoscience and Minerals Exploration in the Economic Development of West Africa
Monday 25th of May 2015 | The Metallogenesis, Tectonics & Surface Evolution of the West African Craton Workshop | The University of Western Australia
US$300 billion
US$75 billion
Mini-Quiz: Which of these regions is ‘resource rich’ (by GDP from mineral rents per sq. km of land)?
N. America, Euro etc1: (40% of world’s land)
Africa, central Asia etc2: (11% of world’s land)
China, Brazil etc3: (33% of world’s land)
India, Indonesia etc4: (16% of world’s land)
1: ‘High income’ ; 2: ‘’Low income’; 3: ‘Upper middle income’; 4: ‘Lower middle income’ as defined by the World Bank Idea from: Collier (2010); Data from World Bank (2015)
US$4,000 / sq. km
< US$1,000 / sq. km
John P. Sykes | The Role of Government Geoscience and Minerals Exploration in the Economic Development of West Africa
Monday 25th of May 2015 | The Metallogenesis, Tectonics & Surface Evolution of the West African Craton Workshop | The University of Western Australia
US$7,000 / sq. km
US$3,500 / sq. km
Mini-Quiz: Which of these regions is ‘resource rich’ (by GDP from mineral rents per person)?
N. America, Euro etc1: (1.3 billion people)
Africa, central Asia etc2: (850 million people)
China, Brazil etc3: (2.4 billion people)
India, Indonesia etc4: (2.6 billion people)
1: ‘High income’ ; 2: ‘’Low income’; 3: ‘Upper middle income’; 4: ‘Lower middle income’ as defined by the World Bank Idea from: Collier (2010); Data from World Bank (2015)
US$155 / person
US$15 / person
John P. Sykes | The Role of Government Geoscience and Minerals Exploration in the Economic Development of West Africa
Monday 25th of May 2015 | The Metallogenesis, Tectonics & Surface Evolution of the West African Craton Workshop | The University of Western Australia
US$125 / person
US$30 / person
‘Resource-rich’ countries are actually ‘resource-poor’ and ‘everything else-poor’
John P. Sykes | The Role of Government Geoscience and Minerals Exploration in the Economic Development of West Africa
Monday 25th of May 2015 | The Metallogenesis, Tectonics & Surface Evolution of the West African Craton Workshop | The University of Western Australia
0
5000
10000
15000
20000
25000
30000
35000
40000
45000
N. America,Euro etc [1]
China, Braziletc [2]
India,Indonesia
[3]
Africa,central Asia
etc [4]
Non-mineral rent GDP per person (US$)
0
20
40
60
80
100
120
140
160
180
N. America,Euro etc [1]
China, Braziletc [2]
India,Indonesia [3]
Africa,central Asia
etc [4]
Mineral rents per person (US$)
x10
incr
eas
e r
eq
uir
ed
Further potential for growth?
x50
incr
eas
e r
eq
uir
ed
Further potential for growth?
The challenge then is to use mineral resources to develop a ‘diversified’ economy
Paul Collier recommends a four step process for developing a minerals economy, whilst avoiding the ‘resource trap’:
1. ‘Discovering natural assets’: find the minerals!
2. ‘Capturing the natural assets’: ensure the government gets a fair share
3. ‘Selling the family silver’: so make sure you save most of the revenues
4. ‘Investing in investing’: make sure what you do invest is done so smartly, with the aim of building a diversified economy
John P. Sykes | The Role of Government Geoscience and Minerals Exploration in the Economic Development of West Africa
Monday 25th of May 2015 | The Metallogenesis, Tectonics & Surface Evolution of the West African Craton Workshop | The University of Western Australia
BUILDING A ‘RESOURCE RICH’ ECONOMY: EXPLORATION THE ROLE OF GOVERNMENT GEOSCIENCE AND MINERALS EXPLORATION IN THE ECONOMIC DEVELOPMENT OF WEST AFRICA
John P. Sykes | The Role of Government Geoscience and Minerals Exploration in the Economic Development of West Africa
Monday 25th of May 2015 | The Metallogenesis, Tectonics & Surface Evolution of the West African Craton Workshop | The University of Western Australia
Photo: Joshua Wright
West Africa generally has low mineral wealth & modest perceived mineral potential
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
0.20 0.30 0.40 0.50 0.60 0.70 0.80
Wo
rld
Ban
k 2
01
3 M
ine
ral R
en
ts p
er
sq. k
m
Fraser Institute 2014 Mineral Potential Index (out of 1)
John P. Sykes | The Role of Government Geoscience and Minerals Exploration in the Economic Development of West Africa
Monday 25th of May 2015 | The Metallogenesis, Tectonics & Surface Evolution of the West African Craton Workshop | The University of Western Australia
Burkina Faso
Ghana
Guinea
Liberia Mali
Mauritania
Niger
NB: Data point for Philippines excluded for scaling clarity. World Bank 2013 Mineral Rent per sq. km is US$20,074. Fraser Institute 2014 Mineral Potential Index is 0.59.
West Africa has divided up the mineral wealth before it has discovered it
0102030405060708090
100
No
rmal
ise
d r
ank
ou
t o
f 1
00
Performance of WAXI countries in Fraser Institute Survey 2014
High-Low Range Average
Characteristics:
• Good minerals policy
• Good bureaucracy
• Few land access issues
• Competitive taxation
BUT
• Lack of geological data
• Weak infrastructure
• Few skills
• Insecurity & instability
Data for Burkina Faso, Ghana, Guinea, Liberia, Mali, Mauritania and Niger. Senegal and Togo not included.
John P. Sykes | The Role of Government Geoscience and Minerals Exploration in the Economic Development of West Africa
Monday 25th of May 2015 | The Metallogenesis, Tectonics & Surface Evolution of the West African Craton Workshop | The University of Western Australia
West Africa needs to find world class deposits to develop its mining industry
John P. Sykes | The Role of Government Geoscience and Minerals Exploration in the Economic Development of West Africa
Monday 25th of May 2015 | The Metallogenesis, Tectonics & Surface Evolution of the West African Craton Workshop | The University of Western Australia
Source: Schodde & Hronsky (2006)
West Africa needs find world class deposits by exploring new areas
John P. Sykes | The Role of Government Geoscience and Minerals Exploration in the Economic Development of West Africa
Monday 25th of May 2015 | The Metallogenesis, Tectonics & Surface Evolution of the West African Craton Workshop | The University of Western Australia
Source: Hronsky (2009)
Discovery history for Nickel Sulphide deposits in Western Australia.
A typical early exploration scenario: Boom and fizzle (externalities problem)
• Exploration generates minerals information – a positive externality – everyone benefits: however this is bad for encouraging exploration
Boom
• One outcome is a ‘rush’ or ‘boom’ scenario. Everyone benefits from the information associated with the first discovery, but this can lead to an ever declining industry, where marginal mines and deposits are developed at the expense of new discovery, and there is a focus on dividing up what has been discovered rather than developing the industry.
Fizzle
• No one wants to take the risk of exploring high risk locations first as they have the cost, but everyone else gets the benefit. You cannot guarantee that you will benefit from the exploration information you generate.
Nomadic herding communities, but no minerals exploration
activity Gold-rush mining region – many
artisanal miners, and small junior
‘explorers’
Capital City
Unpopulated desert – no economic activity
N
E W
S
1,000km
Potential iron ore?
Potential copper?
John P. Sykes | The Role of Government Geoscience and Minerals Exploration in the Economic Development of West Africa
Monday 25th of May 2015 | The Metallogenesis, Tectonics & Surface Evolution of the West African Craton Workshop | The University of Western Australia
The mining industry will not ‘find the minerals’ and if it does it will be ‘unfair’
• To encourage the exploration, the ‘explorer’ needs to be able to capture the benefits from the externalities – a monopoly needs to be awarded, either private or state, BUT:
• If awarded to a private company, the government will not get a fair price, due to time asymmetry – the likelihood that the government will change the rules in the future – gets priced in to the bid for the exploration monopoly.
• For example if the expected value of the exploration ground is $500 million, any company would bid substantially less due to uncertainty about whether the government may change the rules in the future on taxation etc.
Nomadic herding communities, but no minerals exploration
activity Gold-rush mining region – many
artisanal miners, and small junior
‘explorers’
Capital City
Unpopulated desert – no economic activity
N
E W
S
1,000km
Potential iron ore?
Potential copper?
John P. Sykes | The Role of Government Geoscience and Minerals Exploration in the Economic Development of West Africa
Monday 25th of May 2015 | The Metallogenesis, Tectonics & Surface Evolution of the West African Craton Workshop | The University of Western Australia
Nor do the West African countries have the capacity to find the minerals themselves
Remember the strengths and weaknesses of West African nations:
Strengths
• Good minerals policy
• Good bureaucracy
• Few land access issues
• Competitive taxation
Weaknesses
• Lack of geological data
• Weak infrastructure
• Few skills
• Insecurity & instability
• LACK OF CAPITAL!
Thus the typical West African country, if awarding the exploration monopoly to itself, cannot conduct the exploration effectively due to a lack of skills.
Nomadic herding communities, but no minerals exploration
activity Gold-rush mining region – many
artisanal miners, and small junior
‘explorers’
Capital City
Unpopulated desert – no economic activity
N
E W
S
1,000km
Potential iron ore?
Potential copper?
John P. Sykes | The Role of Government Geoscience and Minerals Exploration in the Economic Development of West Africa
Monday 25th of May 2015 | The Metallogenesis, Tectonics & Surface Evolution of the West African Craton Workshop | The University of Western Australia
Government geoscience (inc. WAXI) is critical to ‘finding the minerals’ & ensuring ‘fairness’
Foreign (often aid) funded exploration programmes with the host country can therefore resolve the problem of how to ‘capture the exploration information externality’:
• Turns high risk-high return exploration into modest risk-high return exploration, as everyone now shares the externalities – this encourages the kind of greenfields exploration in new areas (i.e. the mountains and deserts in this map) that leads to world-class mineral discoveries (that pay more tax and provide proportionally larger economic benefits).
• This also means that prospecting licences attract a fair price in auction, as there are likely to be multiple competitive bids based on the new information. This means the local people benefit, as they receive a fair price for the mineral assets. Such transparency also reduces the scope for corruption, which is a net cost to society.
Nomadic herding communities, but no minerals exploration
activity Gold-rush mining region – many
artisanal miners, and small junior
‘explorers’
Capital City
Unpopulated desert – no economic activity
N
E W
S
1,000km
Potential iron ore?
Potential copper?
John P. Sykes | The Role of Government Geoscience and Minerals Exploration in the Economic Development of West Africa
Monday 25th of May 2015 | The Metallogenesis, Tectonics & Surface Evolution of the West African Craton Workshop | The University of Western Australia
But minerals exploration does not really generate wealth: we need to build mines!
0
1000
2000
3000
4000
5000
6000
Resource(in-ground)
Reserve(in-ground)
MinedGold
ProcessedGold
NPV ofRevenues
NPV ofProfits
NPVProject
TotalEconomic
Cost
Val
ue
(U
S$M
)
Estimated value of a typical medium sized open pit gold mine
4Moz gold deposit
150,000oz/year
15 year mine life
Total project value = US$390 million
Total project economic costs = US$4.8 billion
NB: project value is then shared between company,
financiers and government!
John P. Sykes | The Role of Government Geoscience and Minerals Exploration in the Economic Development of West Africa
Monday 25th of May 2015 | The Metallogenesis, Tectonics & Surface Evolution of the West African Craton Workshop | The University of Western Australia
Resource to reserve
conversion losses
Mining losses Processing
losses
Time value of money
Operating costs
Capital costs
Total economic
costs
BUILDING A ‘RESOURCE RICH’ ECONOMY: DEVELOPMENT THE ROLE OF GOVERNMENT GEOSCIENCE AND MINERALS EXPLORATION IN THE ECONOMIC DEVELOPMENT OF WEST AFRICA
John P. Sykes | The Role of Government Geoscience and Minerals Exploration in the Economic Development of West Africa
Monday 25th of May 2015 | The Metallogenesis, Tectonics & Surface Evolution of the West African Craton Workshop | The University of Western Australia
Photo: Joshua Wright
Building mines is another challenge in itself for governments and the private sector
I would suggest an extra stage in Paul Collier’s framework:
1. ‘Discovering natural assets’: find the minerals!
2. ‘Developing natural assets’: build the mines! 3. ‘Capturing the natural assets’: ensure the government
gets a fair share
4. ‘Selling the family silver’: so make sure you save most of the revenues
5. ‘Investing in investing’: make sure what you do invest is done so smartly, with the aim of building a diversified economy
John P. Sykes | The Role of Government Geoscience and Minerals Exploration in the Economic Development of West Africa
Monday 25th of May 2015 | The Metallogenesis, Tectonics & Surface Evolution of the West African Craton Workshop | The University of Western Australia
Building some mines is either than building other mines
John P. Sykes | The Role of Government Geoscience and Minerals Exploration in the Economic Development of West Africa
Monday 25th of May 2015 | The Metallogenesis, Tectonics & Surface Evolution of the West African Craton Workshop | The University of Western Australia
2000
1000 1000
200 200 100 100 100
0
500
1000
1500
2000
2500
Typical Capital Cost of an ‘Average’ Mine (US$M)
10
5 5 5
2 1
0.5 0.2 0
2
4
6
8
10
12
Typical Capital Cost of a World Class Mine (US$B)
Some of the easiest minerals to discover (gold, silver, diamonds etc) are also the easiest to develop into mines:
• Low capital costs
• Minimal infrastructure requirements
• Known processing technology
You also cannot build an economy on small mines in small commodity markets
250
100 100 100
25 25 25 5
0
50
100
150
200
250
300
Approximate Market Size (US$B)
John P. Sykes | The Role of Government Geoscience and Minerals Exploration in the Economic Development of West Africa
Monday 25th of May 2015 | The Metallogenesis, Tectonics & Surface Evolution of the West African Craton Workshop | The University of Western Australia
100
25
5 5 2 2 2 1 0
20
40
60
80
100
120
Typical Net Present Value (NPV) of a World Class Mine
(US$B)
• The easiest mines to develop have low barriers to entry, so often do not generate much economic impact – small and marginally profitable.
• But the best projects, with high barriers to entry – big iron ore, coal and copper mines – remain out of reach.
• The large infrastructure developments required are not possible until these countries have developed more broadly.
• In addition, to develop multiple mines in a country, they need to be in large commodity market – there are few large niobium mines around the world, but many large copper mines – some countries (i.e. Chile, Peru, USA) have multiple large copper mines.
Government geoscience (inc. WAXI) also helps build mines!
250
100 100 100
25 25 25 5
0
50
100
150
200
250
300
Approximate Market Size (US$B)
John P. Sykes | The Role of Government Geoscience and Minerals Exploration in the Economic Development of West Africa
Monday 25th of May 2015 | The Metallogenesis, Tectonics & Surface Evolution of the West African Craton Workshop | The University of Western Australia
100
25
5 5 2 2 2 1 0
20
40
60
80
100
120
Typical Net Present Value (NPV) of a World Class Mine
(US$B)
• To build a significant mining industry countries need to move from small markets to big markets – coal, iron ore, copper etc
• And from small mines to world class mines
• WAXI (and similar programmes) therefore has an important role in finding the right minerals and projects first – low barrier to entry world class deposits in gold, diamonds etc that are easy to build.
• Then move onto higher barrier to entry industries such as iron ore, copper, coal etc which are more profitable overall.
Government geoscience (inc. WAXI) also helps build mining economies!
250
100 100 100
25 25 25 5
0
50
100
150
200
250
300
Approximate Market Size (US$B)
John P. Sykes | The Role of Government Geoscience and Minerals Exploration in the Economic Development of West Africa
Monday 25th of May 2015 | The Metallogenesis, Tectonics & Surface Evolution of the West African Craton Workshop | The University of Western Australia
100
25
5 5 2 2 2 1 0
20
40
60
80
100
120
Typical Net Present Value (NPV) of a World Class Mine
(US$B)
• WAXI is obviously involved in Paul Collier’s first stage of developing a minerals economy (discovering natural assets), but WAXI is also important in the second stage (capturing natural assets).
• Effective government geoscience programmes build the capacity of both the host government and workforce, so that the future industry is competently administered.
• Moving from small projects to large projects also helps develop skills and capacities further down the policy chain (Collier steps 2-4) by ‘practicing’ on smaller mines and projects first, before moving onto ‘mega-projects’. In a more advanced, diversified and larger economy, these mega-projects are also relatively smaller, so become less of a political issue.
Building mines also finds more minerals as perceived project risk is lowered
Minerals resources can be ‘discovered’ two ways:
1. Physically discovering new deposits,
2. Establishing a better mining industry and more stable, economically developed, infrastructure-rich country, such that risk premiums are lowered and companies become more willing to invest in marginal projects, and marginal mine expansions, as is the case in Australia, Canada etc.
NB: But remember you still have to discover the world class deposits first, before you can benefit from their growth, expansion and positive externalities (infrastructure, skills etc)
John P. Sykes | The Role of Government Geoscience and Minerals Exploration in the Economic Development of West Africa
Monday 25th of May 2015 | The Metallogenesis, Tectonics & Surface Evolution of the West African Craton Workshop | The University of Western Australia
-0.50% 0.00%
1.00%
3.50% 3.25% 4.00% 4.25%
8.00%
-1.00%
0.00%
1.00%
2.00%
3.00%
4.00%
5.00%
6.00%
7.00%
8.00%
9.00%
CRU Group Country risk premiums relative to the USA for mining investments (2010)
Source: CRU Group (2012)
Building mines also finds more minerals as more resources are discovered after mining
John P. Sykes | The Role of Government Geoscience and Minerals Exploration in the Economic Development of West Africa
Monday 25th of May 2015 | The Metallogenesis, Tectonics & Surface Evolution of the West African Craton Workshop | The University of Western Australia
Source: Mudd, Weng & Jowitt (2013)
THE NEXT STEP: BUILDING A DIVERSIFIED ECONOMY THE ROLE OF GOVERNMENT GEOSCIENCE AND MINERALS EXPLORATION IN THE ECONOMIC DEVELOPMENT OF WEST AFRICA
John P. Sykes | The Role of Government Geoscience and Minerals Exploration in the Economic Development of West Africa
Monday 25th of May 2015 | The Metallogenesis, Tectonics & Surface Evolution of the West African Craton Workshop | The University of Western Australia
Photo: Joshua Wright
Building mines also helps build the rest of the ‘non-mining’ economy
• You cannot build an economy on mining alone, so it is critical that the exploration and mining leads to wider external benefits in the economy.
• We can see what external benefits the mining industry offers for the wider economy, by looking at the World Economic Forum Global Competitiveness Report, which lists a series of 'nation building' pillars.
• Infrastructure, open government and basic education being three of the most critical early stage economic pillars for development.
• Clearly exploration and mining can help in the building of each of these.
• You cannot build an economy on gold mining, but you can build a diversified mining industry on gold mining, upon which you can then build a diversified economy.
John P. Sykes | The Role of Government Geoscience and Minerals Exploration in the Economic Development of West Africa
Monday 25th of May 2015 | The Metallogenesis, Tectonics & Surface Evolution of the West African Craton Workshop | The University of Western Australia
The role of government geoscience & minerals exploration in the economic development of West Africa
• Economic development efforts should now focus on the ‘Bottom Billion’ countries – which includes all the WAXI countries.
• These countries are vulnerable to the ‘resource trap’, but are not actually ‘resource rich’ – their mining sectors first need developing and then a diversified economy.
• The first stage of developing a mining economy is ‘finding the minerals’ – most of the WAXI countries still have relatively low perceived mineral potential, so ‘world class’ discoveries are required.
• ‘Externalities’ mean a monopoly is required to capture the ‘common good’ of exploration information and encourage high risk exploration – this can only be done fairly by the state.
• West African states do not have the capacity to conduct the pre-competitive exploration, so programmes like WAXI are required to assist the local states.
• Exploration is only the first stage of developing a mining economy – next the development of new mines are required.
• Development needs to first focus on small, marginal, low barrier to entry projects then moving to larger, profitable, high barrier to entry projects – WAXI can help with the targeting.
• Programmes such as WAXI also help build government and local workforce capabilities helping grow the mining industry and eventually the broader economy.
John P. Sykes | The Role of Government Geoscience and Minerals Exploration in the Economic Development of West Africa
Monday 25th of May 2015 | The Metallogenesis, Tectonics & Surface Evolution of the West African Craton Workshop | The University of Western Australia
Liberia Mali
Senegal Togo Ghana
Niger
Sponsors in kind (Geological Surveys)
Sponsor: Capacity Building
Sponsors: Research Program
Research Partners
Burkina Faso Guinea Mauritania
Project Broker& Coordinator
References • Collier, P., 2007, The Bottom Billion: Why the Poorest Countries Are Failing and What Can Be Done About It, Oxford University Press: Oxford, UK
• Collier, P., 2010, The Plundered Planet: How to Reconcile Prosperity with Nature, Penguin Books: London, UK
• CRU Group, 2010, Capital costs in mining: 2012 update, August
• Hronsky, J.M.A., 2009, The Exploration Search Space Concept: Key to a Successful Exploration Strategy, Centre for Exploration Targeting Newsletter, June
• Maddison, A., 2010, Statistics on World Population, GDP and Per Capita GDP, 1-2008 AD: http://www.ggdc.net/maddison/oriindex.htm
• Mudd, G. M. Weng, Z., & Jowitt, S.M., 2013, A Detailed Assessment of Global Cu Resource Trends and Endowments, Economic Geology, 108, 1163-1183
• Sachs, J.D., & Warner, A.M., 1995, Natural Resource Abundance and Economic Growth, National Bureau of Economic Research Working Paper 5398: Cambridge, USA
• Schodde, R.C., and Hronsky, J.M.A., 2006, Chapter 4: The Role of World-Class Mines in Wealth Creation, Society of Economic Geologists, Special Publication 12, pp71-90
• Schwab, K., & Sala-i-Martin, X., 2014, The Global Competitiveness Report 2014-2015, World Economic Forum: http://www.weforum.org/reports/global-competitiveness-report-2014-2015
• United Nations Development Project (UNDP), 2014, Human Development Index (HDI): http://hdr.undp.org/en/content/human-development-index-hdi
• World Bank, 2015, Data: http://data.worldbank.org/
John P. Sykes | The Role of Government Geoscience and Minerals Exploration in the Economic Development of West Africa
Monday 25th of May 2015 | The Metallogenesis, Tectonics & Surface Evolution of the West African Craton Workshop | The University of Western Australia
Definitions • WAXI countries: Burkina Faso, Ghana, Guinea, Liberia, Mali, Mauritania, Niger, Senegal, and Togo.
• Bottom Billion countries: Afghanistan, Angola, Azerbaijan, Benin, Bhutan, Bolivia, Burkina Faso, Burundi, Cambodia, Cameroon, Central African Republic, Chad, Comoros, Democratic Republic of the Congo, Republic of the Congo, Ivory Coast, Djibouti, Equatorial Guinea, Eritrea, Ethiopia, Gambia, Ghana, Guinea, Guinea-Bissau, Guyana, Haiti, Kazakhstan, Kenya, North Korea, Kyrgyz Republic, Lao PDR, Lesotho, Liberia, Madagascar, Malawi, Mali, Mauritania, Moldova, Mongolia, Mozambique, Myanmar, Nepal, Niger, Nigeria, Rwanda, Senegal, Sierra Leone, Somalia, Sudan, Tajikistan, Tanzania, Togo, Turkmenistan, Uganda, Uzbekistan, Yemen, Zambia, and Zimbabwe.
• OECD countries: Australia, Austria, Belgium, Canada, Chile, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Iceland, Ireland, Israel, Italy, Japan, Korea, Luxembourg, Mexico, Netherlands, New Zealand, Norway, Poland, Portugal, Slovak Republic, Slovenia, Spain, Sweden, Switzerland, Turkey, United Kingdom, and United States.
• High income countries: Andorra, Antigua and Barbuda, Aruba, Austria, Australia, Bahamas, Bahrain, Barbados, Belgium, Bermuda, Brunei, Canada, Cayman Islands, Channel Islands, Chile, Croatia, Curacao, Cyprus, Czech Republic, Denmark, Equatorial Guinea, Estonia, Faeroe Islands, Finland, France, French Polynesia, Germany, Greece, Greenland, Guam, Hong Kong, Iceland, Ireland, Isle of Man, Israel, Italy, Japan, Kuwait, Latvia, Liechtenstein, Lithuania, Luxembourg, Macao, Malta, Monaco, Netherlands, New Caledonia, New Zealand, Northern Mariana Islands, Norway, Oman, Poland, Portugal, Puerto Rico, Qatar, Russian Federation, San Marino, Saudi Arabia, South Korea, Singapore, Sint Maarten (Dutch part), Slovak Republic, Slovenia, Spain, St. Martin (French part), Sweden, Switzerland, Trinidad and Tobago, Turks and Caicos Islands, United Arab Emirates, United Kingdom, United States, Uruguay, and Virgin Islands (U.S.).
• Upper middle income countries: Albania, Algeria, American Samoa, Angola, Argentina, Azerbaijan, Belarus, Belize, Bosnia and Herzegovina, Botswana, Brazil, Bulgaria, China, Colombia, Costa Rica, Cuba, Dominica, Dominican Republic, Ecuador, Fiji, Gabon, Grenada, Hungary, Iran, Iraq, Jamaica, Jordan, Kazakhstan, Lebanon, Libya, Macedonia, Malaysia, Maldives, Marshall Islands, Mauritius, Mexico, Montenegro, Namibia, Palau, Panama, Peru, Romania, Serbia, Seychelles, South Africa, St. Lucia, St. Vincent and the Grenadines, Suriname, Thailand, Tonga, Tunisia, Turkey, Turkmenistan, Tuvalu, and Venezuela.
• Lower middle income countries: Armenia, Bhutan, Bolivia, Cabo Verde, Cameroon, Cote d'Ivoire, Djibouti, Egypt, El Salvador, Georgia, Ghana, Guatemala, Guyana, Honduras, India, Indonesia, Kiribati, Kosovo, Kyrgyz Republic, Laos, Lesotho, Mauritania, Micronesia, Moldova, Mongolia, Morocco, Nicaragua, Nigeria, Pakistan, Papua New Guinea, Paraguay, Philippines, Republic of Congo, Samoa, Sao Tome and Principe, Senegal, Solomon Islands, South Sudan, Sri Lanka, Sudan, Swaziland, Syria, Timor-Leste, Ukraine, Uzbekistan, Vanuatu, Vietnam, West Bank and Gaza, Yemen, and Zambia.
• Low income countries: Afghanistan, Bangladesh, Benin, Burkina Faso, Burundi, Cambodia, Central African Republic, Chad, Comoros, Democratic Republic of Congo, Eritrea, Ethiopia, Guinea, Guinea-Bissau, Haiti, Kenya, Liberia, Madagascar, Malawi, Mali, Mozambique, Myanmar, Nepal, Niger, North Korea, Rwanda, Sierra Leone, Somalia, Tajikistan, Tanzania, The Gambia, Togo, Uganda, and Zimbabwe.
• Human Development Index (HDI): created to emphasize that people and their capabilities should be the ultimate criteria for assessing the development of a country, not economic growth alone. It includes data on life expectancy at birth, mean years of schooling, expected years of schooling and gross national income (GNI) per capita.
John P. Sykes | The Role of Government Geoscience and Minerals Exploration in the Economic Development of West Africa
Monday 25th of May 2015 | The Metallogenesis, Tectonics & Surface Evolution of the West African Craton Workshop | The University of Western Australia