10. Case studies
The cyclicality of mineral prices has profound implications for mining countries as illustrated by the following three examples, from the ICMM’s publication The Role of Mining in National Economies (2nd edition) 2014.
1. Gold prices rose significantly over the period from 2000 to 2012. However, Ghana achieved only a moderate expansion of mineral production volumes in the period. The total volume of gold produced only increased by 16%. So even though the production value of Ghana’s gold between 2000 and 2012 increased by almost 600%, the increase was almost entirely due to price increases.
2. Iron ore dominates mining in Brazil. Brazil’s production volumes of iron ore, copper and gold almost doubled during the 12 years to 2012, rising by 85.2%. However, growth in production volumes was overshadowed by large price increases. Taken together, price increase and volume growth enabled value growth rate in US$ terms of over 1,100% between 2000 and 2012.
3. Over the period from 2000 to 2012, Zambia enjoyed rapid growth in both production volumes and prices of copper. The combination of rising production volumes and higher prices over this period meant that Zambia’s production value grew by almost 1,200% over the period.
Since this period of rising commodity prices that was the focus for the ICMM study, mineral prices have fallen back sharply, giving rise to another range of challenges for mining countries as the next quotation from UNDP illustrates.
“[The Sierra Leone] Government’s fiscal space and foreign exchange reserves became increasingly dependent on iron ore proceeds. However, the high expectations were short-lived as international iron ore prices fell from US$ 139.87 per metric ton in March 2013 to US$ 41 by December 2015, which coupled with the Ebola Virus Disease (EVD) crisis, substantially eroded the country’s fiscal space and undermined its growth prospects. According to Statistics Sierra Leone real GDP growth declined from 20.7% in 2013 to 4.6% in 2014 and the IMF estimates that the economy contracted to minus 21% in 2015 and expected to grow by 4.3% in 2016.”