In the first half of 2016, global economic growth fell short of expectations, and demand for traditional minerals reached a temporary “ceiling.” As a result, the fundamental factors supporting higher prices for bulk mineral commodities and robust performance in mining financial markets weakened, and the momentum for the recovery of the mining sector began to wane. Meanwhile, China’s economic transformation continued to deepen, with the economy undergoing a comprehensive shift in growth rate. Consequently, demand for major mineral products and production volumes declined collectively, and enthusiasm for mining continued to cool down. To address the new crisis facing the mining industry, embrace a new exploration cycle, win the tough battle against overcapacity, and promote the development of the mining sector under the “new normal,” we need fresh impetus and innovative approaches.
　　
　　I. Global economic growth has fallen short of expectations, and the momentum supporting the recovery of the mining sector is gradually waning. (1) Global economic growth continues to remain weak, and demand for traditional minerals has reached a temporary “ceiling.” First, affected by factors such as the U.S. tightening monetary policy and the increasing debt burden in emerging economies, major institutions have generally lowered their forecasts for global economic growth this year. Specifically, the World Bank has revised its initial forecast for global economic growth from 2.9% to 2.4%, while the IMF has lowered its initial forecast from 3.4% to 3.2%. Second, in developed countries such as the U.S. and Europe, the intensity of resource use per unit of GDP has already entered a low-level plateau. Consumption of traditional minerals—such as coal, crude steel, and copper—is decoupling from economic development, and overall demand has stabilized at a relatively steady level. China has been the primary contributor to the “golden decade” of the mining sector; the intensity of resource use per unit of GDP for traditional minerals in China has either reached or is about to reach a peak plateau, meaning its contribution to driving resource demand is essentially complete. Third, other emerging economies and developing countries—such as Brazil, India, and South Africa—are facing significant structural adjustments and mounting debt burdens, further intensifying downward economic pressures and directly constraining the expansion of consumption of traditional minerals. Judging from the current state of the global economy and major countries’ economic performance, the total global demand for traditional minerals—such as coal, crude steel, and copper—has essentially hit “ceiling” levels of approximately 3.8 to 3.9 billion tons of oil equivalent, 1.6 to 1.7 billion tons, and 22 to 23 million tons, respectively.
　　
　　(2) Prices of bulk mineral commodities and the mining finance market have shown some improvement, but the underlying fundamentals remain weak. First, prices of bulk mineral commodities have generally rebounded. As of June 27, 2016, the spot price of Richard RB thermal coal was $56.9 per ton, up 15.2% from the beginning of the year (January 4, same below); the spot price of Brent crude oil was $45.9 per barrel, up 25.6% from the start of the year; the price of iron ore (66% iron concentrate powder from Qian'an, dry basis, inclusive of tax) was 490 yuan per ton, up 21.0% from the start of the year; and the LME spot settlement prices for zinc, tin, aluminum, nickel, and copper were US$2,001 per ton, US$17,005 per ton, US$1,592 per ton, US$8,960 per ton, and US$4,692 per ton, respectively—up 28.8%, 16.8%, 8.6%, 5.2%, and 1.0% from the start of the year. Second, the mining securities market has shown some signs of recovery. In the first half of the year, the global mining index, represented by 110 listed mining companies on the Toronto Stock Exchange, exhibited a volatile upward trend. As of June 29, the index stood at 60.73, up 36.3% from the beginning of the year. Third, the continued rebound in bulk mineral commodity prices lacks fundamental support. The rebound in bulk commodity prices in the first half of the year was mainly driven by factors such as cyclical restocking demand, the decline of the U.S. dollar index from its high levels prompting asset reallocation, and the intrinsic need for recovery following the sharp drop in commodity prices earlier in the period. Looking ahead in the long term, economic structural adjustments will make it impossible for the growth rate of mineral demand to remain as strong as in the past. Moreover, capacity reduction and supply-side reforms will continue to put downward pressure on bulk mineral commodity prices.
　　
　　(3) Mining companies’ operating performance continues to decline, and the mining market remains sluggish. First, declining profits have prompted mining companies to “slim down and weather the cold.” Although prices of major mineral products rebounded somewhat in the first half of the year, they generally remained below the levels of the same period last year, leading to a sharp drop in mining sector profits and spurring large multinational mining firms to continue divesting assets. For example, Anglo American has made the sale of its Moranbah and Grosvenor coal mines a key component of its debt-reduction plan; Glencore announced that it would increase its asset-disposal volume in 2016 to between US$4 billion and US$5 billion and has already reached agreement in principle to sell assets worth US$1.6 billion. Second, mining investment has shrunk, and major mining companies have scaled back their production plans. Affected by poor operating performance, upstream investments by the five major international oil companies fell by an average of 25.9% in the first quarter, and Rio Tinto cut its 2016 investment to US$5 billion. Along with shrinking investment, major mining companies have continuously announced production-cutting plans. For instance, BHP Billiton announced in the first quarter that it would reduce its iron-ore output for fiscal year 2016 by 10 million tons, bringing its projected output for this fiscal year down to 260 million tons; Vale reduced its 2016 iron-ore output forecast by about 10% to between 340 million and 350 million tons. As the world’s largest producer of mined copper, Chile saw its copper output from January to May reach approximately 2.3 million tons, a decrease of 5.3% year-on-year. Third, inventories of major nonferrous metals are trending downward. As of June 28, 2016, total LME futures inventories for copper, aluminum, lead, zinc, tin, and nickel stood at 193,000 tons, 2.400 million tons, 429,000 tons, 185,000 tons, 6,000 tons, and 381,000 tons, respectively—down 18.2%, 16.9%, 7.4%, 3.3%, 0.9%, and 13.7% from the beginning of the year. Fourth, the exploration market is subdued. Although the exploration activity index continued to show a slight recovery, significant drilling results in May basically returned to the level of 113 reported at the beginning of the year, and the number of newly announced resource discoveries also declined from 8 in April to 5 in May, with the corresponding resource value dropping to US$288 million.
　　
　　(4) The world may be entering a new cycle of mineral exploration. First, the patterns of international gold prices and global mineral exploration investment, along with this year’s gold price trend, suggest that a new exploration cycle is imminent. Global mineral exploration is an industry characterized by cyclical fluctuations—particularly commercial mineral exploration, whose ups and downs closely mirror the trends in gold prices. Data on international gold prices and global solid-mineral exploration investment from 1975 to 2015 show that the two series not only exhibit multi-period “synchronous” patterns but also that exploration investment lags behind changes in the gold price index by about one year. For example, from 1997 to 2001, international gold prices continued to decline, reaching their lowest point in 2001 (according to London Exchange data, the average spot price in 2001 was $271.08 per ounce); yet the corresponding period of lowest global solid-mineral exploration investment occurred in 2002 (according to data from the Canadian Mineral Economics Group, global solid-mineral exploration investment in 2002 was approximately $2 billion). Conversely, the highest international gold prices were recorded in 2011 (according to London Exchange data, the average spot price in 2011 was $1,571.68 per ounce), while the peak in global solid-mineral exploration investment occurred in 2012 (according to data from the Canadian Mineral Economics Group, global solid-mineral exploration investment in 2012 reached approximately $21.5 billion). These data clearly indicate that there is indeed a lag of about one year between the peaks and troughs of global solid-mineral exploration investment and those of gold prices.
　　
　　After reaching its peak in 2012, global exploration investment in solid minerals began to decline again, accompanied by a drop in gold prices. Following the bottom reached in December 2015, international gold prices have been steadily fluctuating and rising since 2016. As of July 15, the spot price of gold on the London Exchange stood at $1,327 per ounce, representing an increase of nearly 25% compared to the beginning of the year. Based on this sustained upward trend in gold prices—a “small rebound” that aligns with historical patterns—it appears that the global exploration market is showing signs of recovery, and now may be the right time to embrace a new exploration cycle. Second, the recovery of overseas exploration markets also signals the imminent arrival of a new exploration cycle. With the rebound in international gold prices, the overseas exploration market showed positive signs of recovery in the first half of 2016. The number of exploration license blocks registered in countries such as Australia and Canada both increased. Meanwhile, stock prices of junior exploration companies rose sharply, particularly those of precious metals like gold and silver, with Silvercorp, SilverWheaton, MincoSilver, and FirstMajesticSilver—the four leading silver exploration companies—experiencing average stock price increases of 269% in the first half of the year. In addition, merger and acquisition activity among mining companies has picked up. Each time the mining industry enters a downturn, the market undergoes a significant adjustment, and mining companies take advantage of these low-price conditions to engage in M&A activities. For example, in early May, U.S. mining giant Freeport-McMoRan announced that it had agreed to sell all equity interests in Tenke Fungurume, Congo’s largest copper-cobalt mine, to Luoyang Luanchuan Molybdenum Industry Group Co., Ltd., at a transaction price of US$2.65 billion.
　　
　　Based on historical patterns in international gold prices and global mineral exploration investment trends, as well as estimates of the lag period for exploration investments, and taking into account the many recent signs of recovery in the exploration market, we forecast that 2017 could usher in a new round of the global exploration cycle.
　　
　　II. China’s economic transformation is deepening, and the mining industry may be facing a new crisis.
　　
　　(1) China’s economic growth has undergone a comprehensive shift in gear, and demand for major mineral products has declined across the board. First, structural reforms have caused all three “locomotives” driving China’s economic development to slow down significantly. China has now entered the mid-to-late stage of industrialization, where the pressure of shifting economic growth rates and the pain of structural adjustments are intertwined, determining that China’s economy will face considerable downward pressure for a long period ahead. From January to May 2016, nationwide fixed-asset investment grew by 9.6% year-on-year, marking the lowest growth rate in 16 years. At the same time, the international competitiveness of “Made in China” has been steadily declining, and export volumes have begun to fall. From January to May, China’s total exports reached 5.3 trillion yuan, down 1.8% year-on-year. Moreover, more than two-thirds of urban residents in China hold mortgages, further weakening domestic demand. Second, after years of rapid growth, demand for bulk mineral products has begun to decline collectively. In 1973, the oil crisis hit the global economy, causing a sharp, collective drop in demand for mineral products in developed countries such as the United States and Europe. In particular, in the decade following the crisis, the U.S. saw stagnant or even declining consumption of primary energy sources, steel, copper, aluminum, lead, and zinc—major mineral commodities. Today, China’s era of rapid infrastructure construction has largely come to an end, and the pull of the “three locomotives” of the economy on resource demand is waning, leading to an unprecedented collective decline in China’s consumption of bulk minerals in 2015. Specifically, in 2015, primary energy consumption totaled approximately 2.87 billion tons of oil equivalent, down 3.4% from 2014. Steel consumption peaked in 2013 and, in 2014 and 2015 combined, fell by an amount nearly equal to South Korea’s total crude steel consumption in 2014 (57.83 million tons)—a decline far greater than expected. In 2015, refined copper, refined lead, and refined zinc consumption reached roughly 10.8 million tons, 3.8 million tons, and 6.3 million tons, respectively, down 4.3%, 9.0%, and 1.2% from 2014 levels.
　　
　　(2) The scale of traditional mineral production may have reached its peak, and import trade continues to show divergence. First, supply-side reforms in the mining sector have led to a collective decline in the scale of traditional mineral production. In 2015, the nation’s output of raw coal, crude steel, and copper concentrate (metal) was 3.75 billion tons, 800 million tons, and 1.667 million tons, respectively, down 3.3%, 2.3%, and 6.6% from the previous year. From January to May, the corresponding outputs were 1.34 billion tons, 330 million tons, and 711,000 tons, down 8.4%, 1.4%, and 3.9% year-on-year, respectively. For lead and zinc concentrates (metal), the 2015 output was 2.335 million tons and 4.749 million tons, respectively, down 13.9% and 10.5% from the previous year; from January to April, the corresponding outputs were 591,000 tons and 1.286 million tons, down 8.1% and 5.8% year-on-year, respectively. Second, among modern minerals, crude oil production has declined, while natural gas production has steadily increased. From January to May, the nation’s crude oil production totaled 85.01 million tons, down 3.7% year-on-year; conventional natural gas production reached 59 billion cubic meters, up 5.2% year-on-year; and coalbed methane production stood at 3.11 billion cubic meters, up 12.3% year-on-year. Third, import trade in mineral products has shown significant divergence. From January to May, the nation’s imports of coal, crude oil, iron ore, and copper concentrate were... Bauxite The physical import volumes of tin concentrate were 64 million tons, 156 million tons, 412 million tons, 6.696 million tons, 21.888 million tons, and 216,000 tons, representing year-on-year increases of 2.8%, 16.5%, 9.0%, 33.4%, 17.9%, and 90.8%, respectively. Correspondingly, the physical import volumes of natural gas, nickel concentrate, lead concentrate, and zinc concentrate were 31.57 billion cubic meters, 7.614 million tons, 533,000 tons, and 910,000 tons, respectively, showing year-on-year decreases of 21.4%, 25.2%, 19.7%, and 23.1%.
　　
　　(3) The profitability of the mining industry continues to decline, and enthusiasm for mining activities keeps cooling down. First, profits in the mining sector have plummeted. From January to May 2016, the nationwide mining industry reported profits of 6.66 billion yuan, a year-on-year decrease of 94.0%. Among them, profits from coal mining and washing declined by 73.4% year-on-year, while profits from oil and gas extraction fell by as much as 175.8% year-on-year. Second, the number of valid exploration and mining rights continues to drop. Since 2012, investor interest in the mining sector has significantly waned. As of the end of May, the number of valid exploration rights nationwide decreased by 8.6% year-on-year, with the registered area declining by 10% year-on-year; the number of valid mining rights fell by 9.6% year-on-year. The number of exploration rights granted and the corresponding grant fees both declined by 7.1% and 23.9%, respectively, while the number of mining rights granted and their associated fees dropped by 19.8% and 14.2%, respectively, year-on-year. Third, fixed-asset investment in the mining industry continues to shrink. From January to May, the nationwide fixed-asset investment in the mining industry totaled 305.446 billion yuan, a year-on-year decrease of 16.40%. Among these, investments in coal, oil and gas extraction, and ferrous metal mining and beneficiation saw particularly sharp declines, falling by 32.90%, 16.90%, and 24.50% year-on-year, respectively.
　　
　　III. The mining industry is undergoing a reshuffle, redefining its structural landscape. Under the new normal, mining development requires new impetus.
　　
　　(1) Capacity reduction and management system reform have become crucial levers for advancing supply-side reform in the mining sector. First, capacity reduction efforts in the coal industry are actively underway, and debt resolution has emerged as a binding issue. Resolving excess capacity is, in essence, a continuation and deepening of the coal industry’s earlier efforts to overcome its difficulties. On February 1, the State Council issued the “Opinions on Resolving Excess Capacity and Achieving Restructuring and Development in the Coal Industry” (Guofa [2016] No. 7), which reaffirms the 16-character principle of market-driven pressure, enterprise responsibility, local organization, and central support. Starting from 2016, over a period of three to five years, the plan aims to phase out 500 million tons of capacity and reduce and restructure another 500 million tons. Since the document was released, relevant provinces, autonomous regions, and departments have worked closely together and have undertaken extensive efforts in areas such as establishing effective working mechanisms, ensuring complementary policies, breaking down targets into specific tasks, and promoting exemplary models. In particular, the implementation of an adjusted “working-day” system—redefining annual working days at 276—will play a positive role in accelerating capacity reduction. Although capacity reduction in the coal industry is progressing actively, coal enterprises generally face high asset-liability ratios, placing tremendous pressure on bank lending. At current coal prices, enterprises are simply unable to cope. Therefore, debt resolution has become one of the most significant obstacles to capacity reduction in the coal industry. Second, progress in capacity reduction among enterprises is uneven, potentially prolonging the timeline for supply-side reform in the mining sector. At present, the fundamental conditions underlying China’s mining supply-side reform have not undergone any fundamental changes. Under today’s market economy conditions, while private enterprises have largely completed their capacity reduction efforts, state-owned enterprises—whose role is dominant—have not only failed to take substantial action but have instead continued to expand through loan-supported development. Looking at the reform of state-owned enterprises in bulk commodity sectors such as coal, steel, and cement, their mergers and restructuring so far have amounted merely to simple corporate aggregations without any substantive transformation. These measures address immediate difficulties rather than achieving genuine reductions in capacity or meaningful industrial adjustments. The key to compressing capacity lies with state-owned enterprises, and it is essential to establish a new mechanism that ensures the decommissioned capacity will not be reinstated or expanded—a mechanism that truly addresses the core of mining supply-side reform.
　　
　　In addition, reforms to the system for granting mining rights and the system of state-owned equity fees for mineral resources are currently under study. The reform of the mining rights management system is being vigorously advanced, and by deepening the reform of the mining rights approval system, we are promoting the orderly devolution of mining rights approval authority. At present, a pilot program for reforming the exploration and exploitation system of oil and gas resources has been launched in Xinjiang, and the approval authority for coalbed methane exploration and exploitation has already been devolved to Shanxi.
　　
　　(2) China’s demand for traditional minerals has become relatively decoupled from economic development, while the social status of modern and emerging minerals continues to rise. First, consumption of traditional minerals has already or will soon become decoupled from economic growth. The transition from the early to the mid-to-late stages of industrialization also marks a shift in the consumption structure—from traditional minerals toward modern and emerging minerals. The decoupling index indicates that currently, coal and iron consumption in China have already reached a state of relative decoupling from economic development; as copper, lead, and zinc consumption steadily approach their peak levels, signs of decoupling will gradually become more apparent. Second, oil, gas, aluminum, and... Rare earth As for modern minerals, emerging minerals, and minerals closely linked to people’s livelihoods—such as gold and agricultural minerals—consumption remains firmly tied to economic development. Third, Chinese mining companies are actively pursuing mergers and acquisitions of modern and emerging minerals on a global scale. In April 2016, China Gold Group Corporation formally signed an agreement with Canada’s Eldorado Gold Corporation to acquire an 82% stake in the JinFeng Gold Mine in Guizhou Province. Meanwhile, Sichuan Road & Bridge Mining Investment & Development Co., Ltd. signed a share-transfer agreement with Canada’s SanRidge Gold Corporation in Asmara, the capital of Eritrea, officially acquiring a 60% stake in the Eritrean Asmara Mining Company held by SanRidge for US$65 million.
　　
　　(3) Under the new normal, it is necessary to implement two major strategic upgrades to effectively reduce demand for mineral resources. Under the new normal, China’s mining industry needs new impetus and must rely on the development of new business models to effectively lower its demand for minerals. First, we need to promote the upgrading of traditional industries toward emerging ones, thereby gradually reducing the consumption of bulk mineral products required by traditional sectors such as coal, steel, cement, and building materials (which account for more than 70% of total mineral resource consumption). Additionally, cobalt, niobium, tantalum, and... Graphite First, demand for emerging strategic minerals such as fluorite will continue to grow (the consumption of these minerals accounts for less than 10% of total mineral resource consumption). Second, we must promote the upgrading of traditional business models toward new ones. The mutual penetration and deep integration of information network technologies with traditional manufacturing are profoundly transforming industrial organizational structures. These new business models will bring revolutionary changes to conventional production methods, significantly enhancing the efficiency of mineral resource utilization and fundamentally altering resource demand patterns.
　　
　　IV. Reflections and Recommendations (1) Promote structural reform of the mining industry’s supply side through resource governance. For the mining industry, the key action to implement the Party Central Committee’s spirit of advancing supply-side structural reform is resource governance—focusing on increasing resource quantities, enhancing resource quality, and improving resource functionality. The primary task is to win the tough battle of resolving overcapacity. Resource-based cities bear significant responsibilities and tasks in the nationwide strategy for capacity reduction. It is recommended that resource-based cities carry out capacity reduction in a phased and planned manner, following the principle of addressing southern regions before northern ones and smaller cities (county-level cities) before larger ones (prefecture-level cities), thereby systematically adjusting the spatial structure of capacity distribution.
　　
　　(2) Make active preparations to welcome the new global exploration cycle. In response to the actual situation of declining investment in mineral exploration, we must adopt diversified measures to mobilize enthusiasm from all sectors. We should increase the intensity of investment in mineral exploration and collaborate with large enterprises to generate substantial investment. We must fully leverage the role of geological survey institutions, integrate their efforts with those of social capital, and encourage private capital to join the ranks of mineral exploration. We need to organize scientific and technological research efforts, seek breakthroughs in key mineral resources such as shale gas, and conduct thorough technical studies on the exploration and mining of these priority minerals.
　　
　　(3) The downturn in the mining industry presents an excellent opportunity for overseas mergers and acquisitions—and also a favorable chance for global resource governance. The growth of all major mining companies worldwide has been driven by mergers and acquisitions. At present, with low mining prices and depressed valuations, China’s mining sector is at the optimal juncture to go global and expand its operations. Under the current circumstances, bulk commodities such as steel and coal no longer offer attractive investment prospects; however, prices for certain minor metals and non-metallic minerals are gradually rising and remain at moderate levels, presenting potential investment opportunities. With regard to advantageous resources like tungsten and rare earths, we should remain committed to maintaining our existing resource base while pursuing mergers and acquisitions in advanced countries’ deep-processing industries.
　　
　　Developed countries—especially the United States, Canada, and Australia—are strongly pushing ahead with trade and investment liberalization. In contrast, Africa, including some Southeast Asian nations, continues to embrace trade and investment protectionism. Due to the recent downturn in the mining sector, developing countries have largely suspended their restrictive policies. As a result, international cooperation is becoming increasingly soft, encompassing policy dialogues between both developed and developing countries, as well as scientific and technological exchanges.