EIS 12

Written evidence submitted by the Environmental Sustainability Knowledge Transfer Network (ESKTN)

  1. This submission is from the Environmental Sustainability Knowledge Transfer Network (ESKTN). It has been prepared by Tony Hartwell an extractive metallurgist with 35 years experience working across the mineral supply chain in more than 30 countries. The ESKTN recognises that more sustainable management of mineral resources will be an essential component of low carbon economies and that the Extractive Industries can play a vital role in the UK’s transition towards a more sustainable economy.

 

  1. The views expressed are those of the ESKTN but have been formed over the past 6 years whilst the ESKTN has engaged in discussions with a wide range of business representatives in the UK and with European and international programmes and organisations. The ESKTN is currently finalising a study on “Securing the Mineral and Metallurgical Capabilities to Support a strong Manufacturing Sector in the UK” which will be issued before the end of the year.

 

  1. The Extractive Industries should not be seen in isolation – they form an important part of the supply chain for most manufacturing businesses. Enhancement of the Extractive Industries must be recognised as a vital element for supporting the growth of the manufacturing sector in the UK because: -

 

      it supplies the materials that are essential for the growth of established and innovative manufacturing companies

      there is a large added value multiplier from the downstream processing of minerals

      the continued development of more sustainable practices by responsible extractive businesses is important from a national and global perspective

      many extractive businesses are important centres for the recovery and recycling of secondary materials

  1. Some of the direct contributions will be outlined below but it is important that the indirect benefits are also taken into consideration.  There are global supply chains for resources employed in the extractive industry including equipment for the discovery, development, extraction and refining of minerals. Although with the decline of coal mining and the consolidation of the businesses producing mineral processing equipment the direct sale of major plant and equipment manufactured in the UK has declined there are still significant global opportunities for manufacturers to sell into this sector such as drilling and blasting, tools (Atlas Copco, Boart Longyear, MDL, etc), mobile equipment suppliers such as JCB & Terex, crushers, screens, and processing plant (BJD, Finlay, FL Smidth, Joy, Metso, MMD, Mogensen, Powerscreen, Sandvik, Weir) conveyor drive systems (David Brown, Fenner, Radicon, Renold etc), power generation, distribution and control, pumps and piping and many others. Engineering and consultancy businesses provide expertise in system design and control, technical, managerial, legal, environmental and financial management (AMEC, Golders, SGS, SLR, SRK Wardell Armstrong, etc). The Agg-net website provides a comprehensive list of UK businesses engaged in the extractive industry.
  2. It is also important to recognise not just the value of the products of the extractive industry but the value added from the downstream industries that they enable. The UK aerospace industry competes in a global market – many of the components required are produced using special alloys.  The EU Study on Critical Materials in 2010 it was estimated that the total value-added by the nickel industry and its value chain was 80-100 billion Euros per year which suggests a multiplier of 20-25 times the actual value of the nickel metal. There is some direct employment in the European nickel extraction industry but the EU study suggests that in total the nickel value chain in Europe provides 1.25 – 1.5 million jobs.

 

  1. To secure access to the elements required it is important that the UK is engaged in the global supply chain for minerals – produced in the UK or anywhere in the world.  The development of the industrial economy in the UK was based on the extractive industries and there is renewed interest in the potential for development of mineral resources in the UK, as indicated by the following project examples: -

              Tungsten & Tin at the Hemerdon Mine in Devon              (Wolf Minerals)

              Potash              in North Yorkshire                                                        (Sirius Minerals)

              Zinc in the North Pennines                                                        (Minco)

              Gold in Scotland                                                                      (Scotgold)             

  1. A recent article on BBC News describes how a £10 million programme to move a road in Devon will protect 100 jobs and allow millions of tonnes of additional Ball Clay reserves to be accessed. UK production of Ball clay has declined from 2008 when it was above one million tonnes in 2008 when 83% was exported. Ball clays are mainly used to make ceramic ware and BGS estimated the value of Ball Clay production in the UK to be £82 million in 2008 and the British Ceramic Confederation estimated the value of ceramic products produced to be £340 million in 2009.

 

  1. The importance of engaging in the global supply chain is demonstrated by the Canadian owned Great Western Mining Group.  In order to secure supplies of the inputs for the expansion of the production at their UK operations at Birkenhead they have invested in the re-development of a mine in South Africa.

 

  1. There is potential for viable mineral resources in other parts of the UK such as Wales and the South West.  A new extension to the Tellus geological exploration programme, which resulted in significant interest in mineral developments in Northern Ireland, has recently begun in the South West.

 

  1. Japanese businesses and government seek to ensure long term access to minerals through engagement in the global mining business supported by their national agency JOGMEC which has offices around the world – including London.

 

  1. Extraction in the UK supplies local industrial needs, e.g. aggregates, sand & gravel for construction materials. The UK quarrying and industrial minerals sector is recognised as a world leader and although the benefits of its competency and competitiveness feed through to the UK economy in terms of the supply of competitively priced construction products (including cement and concrete products), a lot more could be made of this expertise on a global basis.

 

  1. The systems employed by extractive industries can also be used to facilitate the recovery and re-use of secondary materials.  The recycling of aggregates and metals in the UK play an important part in minimising the demand for primary resources and reducing energy consumption and greenhouse gas emissions.

 

  1. There are spin-off economic benefits from the competitive supply of the UK’s construction materials and industrial minerals.

 

  1. There are benefits to the UK in terms of being one of the major mining finance centres globally. The large number of UK listing on the LSE and on AIM bring the world’s miners, construction companies, government officials and financiers to and/or through London spending money, paying taxes and establishing London as one of the most important places in which to do business, especially given the symbiotic relationship between mine development and London’s position as a major financing centre.

 

  1. The British Geological Survey produces an annual summary of the Extractive Industries in the UK (Mineral Yearbook 2012). The following figures for 2011 were extracted from this source: -

              Mineral imports were £5.7 billion, which represented 1.45% of total imports

Whilst mineral based imports were £107 billion, 27% of all imports

Mineral exports were £5.6 billion, which represented 1.91% of total exports

              Whilst mineral based exports were £85 billion, 29% of all exports

  1. The total value of UK mineral production was £39.7 billion, mainly from oil and gas with the value of non-fossil minerals amounting to £2.9 billion. A reduction in mineral production would not only reduce employment opportunities it would also impact on the balance of trade. In 2011 the deficit in mineral based trade was £12.5 billion.

 

  1. It is important to note that the UK has been a net exporter of scrap metal. Annual exports of metal scrap averaged more than 7.5 million tonnes between 2004 and 2010, primarily made up of steel (6.6 million tonnes/year), Aluminium (546 thousand tonnes per year and Copper (354,000 tonnes per year). The average value of steel, aluminium, copper, lead, silver, magnesium and Platinum Group metal scrap exports between 2004 and 2010 was £2.5 billion per year. This indicates that exports of metal scrap from the UK account for almost 50% of mineral exports.
  1. There is considerable employment generated within the UK by the native industrial minerals mining industry which extracts construction and cement-making materials throughout the country. The CBI Minerals Group can provide details but in the BGS Mineral Yearbook 2012 the direct employment in the Extractive industry is given as about 49,000 in 2011 – with 32,000 of these in oil and gas.  However it was estimated that total employment in the oil and gas sector was 440,000.

 

  1. Most of the major multinational miners are either headquartered in London or have offices here employing British nationals or foreigners (hopefully) paying UK taxes. The smaller companies, mainly listed on the AIM exchange, also employ UK professionals or bring these to London with all three sectors also generating UK employment from associated services in terms of catering, entertainment, conferences, legal services and especially engineering, technical and environmental support.

 

  1. With decline of coal mining and metal production in the UK and the growth of these industries in resource rich countries such as Australia, Brazil, Canada and South Africa there has been a tendency for training and research programmes to migrate to those locations. However UK research is still widely respected and if programmes in this area are properly funded there is still good potential for the UK to provide innovations and expertise in this sector.

 

  1. UK expertise developed in the off-shore oil and gas sector and the engagement of leading businesses provide the UK with an opportunity to play a leading role in the sustainable development of marine mineral resources.
  1. The main benefit is probably to UK-based service providers rather than to equipment manufacturers which in the main are globally sourced from the country that can produce them at the lowest cost. However there are opportunities for the supply of high quality equipment and systems that can be demonstrated to be competitive over the service life. For example reliable generators, efficient and robust gearboxes, hard wearing pumps. Companies such as AMEC and Weir provide a wide range of services for the extraction industry and are based in the UK and many of the other global engineering groups have offices in the UK. 
  1. Certainly - London and areas around London have emerged as a preferred location to site businesses which in turn has led to the development of ancillary services in the same places. There needs to be additional resources provided for training and research in this sector to provide the human resources to support additional growth.
  1. There are risks. There has been a recent high profile example where confidence in the scrutiny exerted by the LSE and UK regulatory bodies was questioned. However most of the major mining groups are engaged in programmes to promote sustainable development through the International Council for Mining and Metals and support initiatives like the EITI. For example note the following ICMM programmes: -

 

     Cross-Sector Biodiversity Initiative 

     Sustainable Development Framework

     ICMM supports G8 position on transparency

  1. This is highly variable but with a number of examples of best practice available among UK-based and UK-listed miners. The websites of any of the major multinational miners and the ICMM will provide examples of how these organisations are collaborating with NGOs to protect biodiversity and minimise impact on the local communities.
  1. The perception of the Extractive Industry is that there was a rapidly diminishing level of government support for funding university departments in terms of metallurgy, mining engineering and economic geology (in fact it could quite possibly been close to zero). The ESKTN facilitated discussions between the Natural Environment Research Council and industry representatives and a new £7 million programme was launched this year. There are current efforts by NERC to re-engage with the sector and the UKTI is also looking to provide support but to be competitive on a global scale better co-ordination of effort and more resources will be required.
  2. In terms of shale gas, the problem is not with professional skills, it is a lack of a vibrant support industry and investment in infrastructure that are the issues that need to be addressed.
  1. A senior representative from a leading business organisation believes this to be highly positive. All leading Extractive Industry businesses are aiming to develop situation where they are recognised to have a social licence to operate. For this to happen it is important that all stakeholders recognise the potential risks and rewards involved in extraction programmes.
  1. The latter without a doubt is the view of a representative from a leading business organisation. There are many small operations in remote regions that are unregulated or have little supervision but few of these pay proper regard to the safety of their workers or protection of the environment. Large regulated corporations with the resources to strive for continuous improvements are best placed to ensure the safety of their workforce and effective environmental management.
  1. There is increasing competition in the global market as demand for minerals grows in the developing economies. The global distribution of minerals is governed by geology not demand and so some economies have grown on the basis of mineral exports. UK based businesses are engaged in mineral developments worldwide and are in a position to apply best practices.  Increased support for training and research in this sector would ensure that more UK nationals were qualified to support these important global developments.

 

  1. Mining has moved from a sector of minor interest to the wider investment community to one of its most heated sectors on the back of a real and perceived view of the future commodities market. Fifteen years ago, the FT would not have carried stories about the major miners more than once or twice a year (excluding South African gold operations) outside of a humdrum reporting of the AGMs, the resource sector is now widely reported on a daily basis with an extensive network of digital reporting networks reporting frequently on new developments from around the world.

 

  1. It is in the UK’s interest to remain as a centre for international mining investment given its spin off wealth creation value to the UK.

 

 

 

  1. A single Government representative should be given the responsibility for the oversight of the development of the Extractive Industries in the UK to ensure close co-ordination of the activities of all relevant departments.

 

  1. There needs to be an enhanced recognition of the important role that minerals play in the economy. A long term programme should be established to ensure that the UK has the appropriate policies, training and research infrastructure in place so that the UK can continue to play a significant role a sector that is vital to future developments in the manufacturing industry (see for example the recent report on a new programme in Germany).

 

  1. The development of mineral resources is a lengthy and risky business. The British Geological Survey (BGS) has played a historic role in developing a better understanding of geological processes and the development of mineral resources. With the appropriate resources BGS could continue to play a significant role in the growth of UK engagement in this sector.

 

  1. The UK Government should consider how it can facilitate an extension of the engagement of British businesses in this large global market sector.

 

  1. Winston Churchill once said “Give us the tools and we will finish the job”.  It is important that the UK recognises that minerals are required to produce those tools. Programmes must be put in place to ensure that the UK retains the skill base and the infrastructural capacity to produce, or have access to, the materials required to produce, power and service the machinery and equipment that are essential in a modern economy.