After experiencing a comprehensive recovery in 2004, during which multiple indices surged significantly, the global mining industry maintained its strong momentum with no significant weakening, and achieved even better results in 2005.
　　 I. The mineral products market remains robust, and China’s influence is significant.
　　 At the beginning of the year, international authorities had forecast that, in 2004, global prices of industrial raw materials would rise by an average of 20.5%, with base metal prices increasing by as much as 36%. Under these circumstances, the general upward trend in prices was expected to ease somewhat in 2005 as demand gradually increased worldwide. However, the overall upward momentum in mineral prices has largely remained unchanged. Mid-year analyses suggested that base metal prices on the international market would reach their peak by the end of 2005 and then begin to decline in 2006 and 2007 as demand waned. As a result, the overall price index for industrial materials in 2005 was revised upward to over 4%.
　　 The analysis points out that the primary reason for the continuous rise in metal prices is that, in recent years, global production has fallen short of consumption, leading to a steady decline in global metal inventories. From 1998 to 2002, global mineral exploration expenditures declined for five consecutive years, resulting in a current shortage of readily available successor mines for immediate exploitation. At the same time, global demand continues to rise steadily—particularly driven by strong demand from China—thus creating an insufficient market supply.
　　 As a major developing country with rapidly growing economy, China has a substantial demand for ferrous metals, nonferrous metals, and nonmetallic mineral resources. The volume of its mineral product imports and exports has been highly volatile, and its impact on the global mineral market has drawn close attention from the international mining industry—and rightly so, it deserves our own serious consideration as well. Take zinc ore, for example: in 2005, when prices rose most sharply, China shifted from being a net exporter of zinc ore for many years to becoming a net importer, triggering dramatic fluctuations in the global zinc market. In 2005, China’s zinc imports surged even further. According to statistics from the International Lead and Zinc Study Group, China’s refined zinc imports in 2005 increased by 165% year-on-year. It is projected that in 2006, China will continue to be the primary driver of global zinc demand growth.
　　 At the beginning of 2005, the price of iron ore rose by a remarkable 71.5%, far exceeding the previously anticipated 15% increase. This surge in prices was unprecedented. In its February 2005 issue, the internationally renowned mining publication "Mining Magazine" featured an article on its front page pointing out that the rapid growth in global steel consumption—especially in China—had significantly boosted demand for iron ore, serving as the primary driver behind this sharp price increase. According to statistics from China’s customs authorities, China’s iron ore imports in January 2005 totaled 20.8 million tons, representing a year-on-year increase of 61.7%.
　　 In November 2005, the three-month futures prices for major metal commodities on the London Metal Exchange were as follows: copper: $3,941 per ton, zinc: $1,565 per ton, nickel: $11,550 per ton, lead: $968 per ton, tin: $6,350 per ton, and aluminum: $2,014 per ton. Among these, the price of zinc reached its highest level in eight years. Compared to November 2004, zinc prices saw the largest increase—about 40%, followed by copper, with an increase of roughly 30%. Aluminum and lead prices rose by 10% and 2%, respectively. Meanwhile, the prices of nickel and tin declined by approximately 16% and 26%, respectively, year-on-year.
　　 II. Prices of precious metals have risen sharply.
　　 In 2005, the prices of precious metals such as gold and platinum bucked the previous year’s trend of relative price stability—or even slight declines—and instead surged dramatically. By year-end, gold prices across global markets generally broke through the $500 per ounce mark, while prices of other precious metals also showed a sharp upward trend. According to figures released by international precious metals analysis agencies, by the end of 2005, platinum prices on the London market had reached around $1,000 per ounce, hitting a 25-year high; silver prices climbed to $8.44 per ounce, marking an 18-year high; and prices of major platinum-group metals also rose sharply to a high of $260 per ounce.
　　 A London-based analysis firm pointed out that the primary driver behind the sharp rise in gold prices is increased demand, and the surge in oil prices has been a major factor fueling this heightened demand. Many countries in the Middle East have been using the “petrodollars” they’ve earned from the dramatic rise in oil prices to purchase gold. Moreover, the fear of inflation triggered by soaring oil prices has further intensified the market’s trend of buying gold as a hedge against currency devaluation. According to estimates, global gold supply has been falling short of demand for the third consecutive year. In 2005, the international gold supply-demand gap widened even further to 228 tons, a 54% increase from the previous year’s 148 tons. Additionally, large-scale purchases of gold by speculators have also played a role in driving up gold prices. According to data from the New York Mercantile Exchange, the amount of gold held by speculators reached as high as 708 tons by October. The average gold price in 2006 is expected to be around US$430 per ounce, though volatility will be significant, with the price potentially reaching—or even exceeding—US$500 per ounce within a relatively short period.
　　 The two main drivers behind the rise in platinum prices are market supply shortages and speculative trading. Global platinum demand grew by 2% in 2005, reaching 6.71 million ounces. International analysis firms believe that it was the industrial sector—not the jewelry industry—that fueled the growth in platinum demand in 2005. The increased use of platinum in automotive catalytic converters for diesel vehicles, as well as the rising demand for hard disk drives used in computers and other portable devices, were the primary factors driving up platinum demand. This year, platinum consumption in the diesel catalytic converter industry has risen by 8%, reaching 3.86 million ounces. In contrast to the industrial sector, platinum usage in the jewelry manufacturing industry fell by nearly 6.5% in 2005 compared to the previous year’s 2.16 million ounces—mainly due to reduced demand in China and North America, where demand declined by approximately 10% each. Speculators have become bullish on the platinum market, and large-scale purchases by investment funds have further boosted platinum prices. In 2005, the supply-demand gap for platinum remained significant at 120,000 ounces, though slightly narrower than the 130,000-ounce gap in 2004. For 2006, platinum demand is expected to grow at a faster pace than in 2005, with platinum prices ranging between $890 and $1,030 per ounce in the first half of the year.
　　 III. Global mineral exploration expenditures continue to rise sharply.
　　 According to the latest survey results from Canada’s Metal Economics Group, in 2005, exploration expenditures by mining companies worldwide for non-fuel solid minerals (excluding iron) increased significantly by 34% over the 2004 level of $3.8 billion, reaching $5.1 billion—a figure that is nearing the historical high of $5.2 billion recorded in 1997. As in 2004, most of the global mineral exploration spending continued to be directed toward gold exploration; however, in 2005, expenditures on base-metal exploration also saw substantial growth, particularly for zinc and nickel, which rose by 90% and 65%, respectively.
　　 Latin America remains the region attracting the largest share of exploration investment, accounting for 23.1% of the global total in 2005. Canada ranks third, with exploration investments representing 19% of the global total. Following Canada are Africa (16.5%), Australia (12.6%), the United States (8.1%), and the Pacific and Southeast Asia regions (4.3%). Together, Europe, the former Soviet Union, Asia, and the Middle East accounted for 16.4% of the global total exploration investment.
　　 Latin America also saw the largest increase in exploration investment in 2005, with Mexico and Peru being the countries with the most significant growth in exploration investment in the region. In Asia and Europe, exploration investments in Russia, China, and Mongolia also showed notable growth. In Africa, exploration investments in Angola, the Democratic Republic of the Congo, and Gabon increased significantly.
　　 The continuous rise in metal prices has attracted substantial investment in mineral exploration to the international mining capital market, which is a major factor behind the sharp increase in global exploration investment over the past two years. It is expected that, as metal prices decline in 2006, the growth rate of global exploration investment will likely fall below the 10-15% range seen from 2003 to 2005.
　　 IV. Mineral exploration and development activities continue to achieve new progress.
　　 China’s robust demand has strongly boosted iron ore exploration and development activities worldwide, and currently, numerous new iron ore projects are underway. In 2002, investment in newly developed iron ore projects accounted for only 4% of the global mining industry’s total investment; by 2003, this figure had risen to 7%, and in 2004 it surged to 14%. The total global investment in iron ore development skyrocketed from $3 billion in 2002 to $14 billion in 2004. The world’s three largest iron ore producers—Vale, Rio Tinto (originally translated as Rio Tinto), and BHP Billiton (originally translated as BHPB)—are all expanding their iron ore production capacities. Currently, two major new iron ore development projects are being implemented in West Africa: one is Rio Tinto’s project in Simandou, Guinea, and the other is the project led by South African company Kubo Resources Ltd. in Falamé, Senegal. Mongolia also has several new iron ore projects under development. These projects are being undertaken by several Chinese steel companies as well as international firms that plan to sell the produced iron ore to the Chinese market.
　　 In Asia, exploration and development activities in Mongolia remain highly active. Several major international mining companies, numerous medium- and small-sized firms, and a significant number of Chinese companies are all conducting mineral exploration and development operations within Mongolia. It is estimated that Mongolia’s mineral exploration expenditures in 2005 will exceed 50 million U.S. dollars—excluding, however, the costs incurred by Canada’s Ivanhoe Mines in developing the massive Oyu Tolgoi copper-gold mine. Recently, as the global market has faced a tight supply of uranium and uranium prices have continued to rise, several Western companies have once again begun investing in Mongolia to explore and develop its abundant uranium resources.
　　 Canada’s Ivanhoe Mines Ltd. has announced the resource estimates for the large coal deposit it discovered last year in Naun-Suhait, southern Mongolia. The deposit has a total thickness exceeding 60 meters and contains numerous coal seams, with total resources surpassing 70 million tons. High-volatile bituminous coal is hosted in three distinct ore bodies, and the confirmed resources already identified amount to 42.3 million tons. Ivanhoe plans to conduct a feasibility study for this mine in March 2006.
　　 In October 2005, Ivanhoe Mines also announced its development plan for the Oyu Tolgoi large porphyry copper-gold deposit, located in southern Mongolia near the China-Mongolia border. According to this plan, the mine is expected to be operational for 35 years, with an average annual production exceeding 454,000 tons of copper and 330,000 ounces of gold. Based on currently confirmed findings, the deposit consists of two major orebody clusters—the Southern Orebody Cluster and the Northern Orebody Cluster. The Southern Orebody Cluster has proven and probable ore reserves totaling 511 million tons, with a copper grade of 0.64% and a gold grade of 0.59 g/t. The Northern Orebody Cluster currently has inferred ore reserves estimated at 1.16 billion tons, with a copper grade of 1.29% and a gold grade of 0.23 g/t.
　　 China is also emerging as a hotspot for international mining investment. Many international mining companies have stepped up their exploration and investment activities in China. According to the latest statistics from 2005, approximately 50 international gold mining companies—most of which are small firms—are currently conducting gold exploration in China. According to a survey by the Canadian Mineral Economics Group, international mining companies’ investments in China have been on a steep upward trajectory in recent years. In 2003, 22 companies were engaged in gold exploration in China, with total investments amounting to US$19 million. By 2004, this number had surged to 47 companies, with total investments reaching roughly US$70 million—of which US$54 million (or 77%) was allocated to gold exploration.
　　 A noteworthy event in the global mining industry in 2005 was the commissioning of Canada’s Voisey’s Bay massive nickel mine in September, after nearly 10 years of delays. Owned by Inco Ltd. of Canada, this globally acclaimed large-scale nickel mine is expected to produce 50,000 tons of nickel in 2006 according to plan.
　　 V. Oil prices have broken through the $70 per barrel mark, prompting countries to seek diversification of energy supplies.
　　 In 2005, global oil prices continued to rise steadily. In March, the price of light sweet crude oil futures in New York rebounded to above $55 per barrel, reaching $60.54 by the end of June and even surging to $70.80 by the end of August—breaking the $70 mark for the first time in history. Although prices eased somewhat in the fourth quarter, they still fluctuated around a relatively high level of about $58 per barrel.
　　 The prolonged high prices of oil have prompted countries around the world to turn their attention to coal and uranium resources, as well as unconventional energy sources such as oil sands, and to step up efforts to develop and exploit these energy resources in an attempt to break free from dependence on petroleum and achieve diversification of energy supplies.
　　 The global coal industry began to recover in 2003. In 2004, global coal production increased, and coal prices rose sharply. Contract prices hovered around $45 per ton, while spot prices reached a historic high of $63 per ton in July. Although prices have since begun to decline, they have remained at a historically high level of around $50 per ton.
　　 In 2005, the global coal industry once again experienced a year of robust growth. Coking coal prices reached as high as US$125 per ton starting in April. According to a report by Petroleum Economist, a renowned international oil and gas publication, the main reasons behind the rapid recovery of the global coal industry include: 1. Strong economic growth across Asia—especially in China—has led to a rapid expansion of capacity in the steel production and thermal power generation sectors, thereby sharply increasing demand for coal. 2. A significant rise in international oil and gas prices has prompted some utility companies to shift from oil to coal, while many national governments have also adopted coal use as one of their strategic initiatives to diversify energy supplies.
　　 3. The development of clean coal technologies has reduced the pollution associated with coal, making it a more popular energy source. 4. The United States has become an importer of thermal coal. In 2005, the contract price for coal supplies between Australian suppliers and Japanese utilities reached a historic high of US$52 per ton. This contract price between Australia and Japan is considered a benchmark price in the global coal market.
　　 In the face of energy shortages and repeatedly record-high oil prices, nuclear energy—after years of dormancy—is once again gaining global attention. Since the second half of 2004, world uranium prices have risen sharply, with the pace of price increases accelerating further in 2005. By May, prices had nearly reached $30 per pound, almost three times the level seen in mid-2003. World uranium production has also surged accordingly, reaching 40,248 tons in 2004—a 13% increase over 2003 and the largest annual growth since 1996. Since 2004, many countries have either resumed production at some previously shut-down uranium mines or significantly increased their uranium output.
　　 Finally, at the end of 2004, uranium prices exceeded the marginal production costs of most uranium mines, thereby boosting mining companies' enthusiasm for exploring and developing new mining areas and increasing their output. Given the substantial proven uranium reserves already identified around the world, the current focus of uranium exploration is on high-grade uranium deposits that are suitable for low-cost extraction. It is projected that, over the next three to five years, global uranium production will steadily rise to 50,000 tons.
　　 In 2005, China National Petroleum Corporation engaged in active discussions and reached several agreements with Canadian oil sands and heavy oil companies on cooperation arrangements such as equity investments, joint ventures, and long-term supply-and-purchase contracts. Driven by demand from Asian countries including China, Canadian companies have decided to build the Gateway pipeline, which is specifically designed to serve Asian markets. China National Petroleum Corporation (CNPC) has reached an agreement with Canada’s Enbridge Inc. for the Chinese side to purchase 200,000 barrels per day of crude oil transported via the Gateway pipeline, which Enbridge is set to construct. Enbridge plans to invest C$2.5 billion in building the Gateway pipeline, and CNPC’s acquisition of a portion of the crude oil transported through this pipeline will make it a “pillar” customer of the pipeline. Meanwhile, China National Offshore Oil Corporation (CNOOC) has already invested C$150 million to acquire a 16.7% stake in a certain oil sands project operated by MEG Energy.
　　 6. Some countries have strengthened their mining management systems.
　　 In 2005, several countries amended their existing mining regulations to safeguard their national interests and promote downstream mining activities within their borders. Among these changes, the one that attracted the most attention from the international mining community was South Africa’s “Diamond Act Amendment,” which was passed by the South African Parliament in November 2005 amid considerable controversy. According to this amendment, a “National Diamond Trading Company”—funded primarily by the South African government—is authorized to give priority purchase to all diamond mines in South Africa with monthly production exceeding 1,000 carats, based on national needs. The South African government stated that the purpose of enacting this regulation is to boost the development of South Africa’s domestic diamond-processing industry and protect the interests of local diamond processors. In addition, the South African Parliament is set to pass another bill imposing a 15% export tariff on rough diamonds, thereby controlling the export of domestically produced rough diamonds. Both of these bills are expected to become law officially in the first half of 2006. This move represents yet another step taken by the South African government—following last year’s enactment of the new “Mineral and Petroleum Resources Development Act”—to protect the interests of South Africa’s black population.
　　In February 2005, the Venezuelan government also announced publicly its intention to review all foreign investment projects operating within the country. The Venezuelan Minister of Basic Industries pointed out that this measure was aimed at ensuring that the country’s mineral resources would serve its own economic development. Foreign investment projects should make further efforts in areas such as technology transfer, technical training, and the active involvement of Venezuelans in project implementation. He announced that henceforth, all new foreign investment contracts must include commitments to transfer advanced technologies, create more employment opportunities, and support the development of downstream manufacturing industries that benefit local communities. He also noted that this initiative is an integral part of the Venezuelan government’s strategic goal of transforming the country from a raw-material-exporting nation into a more prosperous, industrialized economy.