EU Raw Materials Initiative Implementation – Setting the Right Framework for European Economic Growth

On 24 June 2013, the European Commission adopted a Report on the implementation of the Raw Materials Initiative. The aim of this report is to present the current state of play with respect to the implementation of the Raw Materials Initiative and provide an overview of the ongoing initiatives while highlighting the joint interest for the EU and third countries rich in raw materials to work in partnership.

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Raw materials are essential for the sustainable functioning of modern societies. Access to and affordability of mineral raw materials are crucial for the sound functioning of the EU's economy and for it´s economic growth. With the EU Raw Materials Strategy in place, implementation is key and it is now being driven forward through national initiatives. The strategy aims at exchanging good practice in respect of national minerals and land use planning, so looking at how it is being used is important.

The European Commission called on EU member states to develop national strategies in support of the raw materials industry and fostering access to resources. Euromines collected these good national examples. Please click here in order to see them.

European Innovation Partnership on Raw Materials

As a follow-up of the RMI the European Commission launched in November 2012 the European Innovation Partnership on Raw Materials.

Following work of a High Level Group this EIP will adopt on 25th September a strategic implementation plan to improve EU´s access to resources.

The Innovation Partnership brings together, among others, EU countries, companies, researchers and NGOs to promote innovative solutions to Europe's raw materials challenge.

The Partnership will target non-energy, non-agricultural raw materials. Many of these are vital inputs for innovative technologies that offer environmentally-friendly, clean-technology applications. They are also essential for the manufacture of crucial alloys and new and innovative products required by our modern society, such as batteries for electric cars, photovoltaic systems and devices for wind turbines.

There are clear positive impacts on competitiveness, with about 30 million EU jobs depending on the availability of raw materials. The development of EU's high tech manufacturing industry including eco-technologies is also at stake. The Partnership aims at reducing the risk of undermining the EU's capacity to produce strategic products for its society.

WP1 - Sustainable and safe supply

WP2 - Substitution of scarce and critical raw materials

WP3 - Regulatory framework, knowledge and infrastructure base

WP4 - Collection, sorting and recycling

WP5 - International framework

New challenge for the Raw Materials Initiative and the EU´s Innovation Partnership on Raw Materials: Mining sector fund-raising drops 24%

Source: IntierraRMG database or quarterly State of the Market reports, visit www.intierraRMG.com or email marketing@intierraRMG.com

The first quarter of 2013 has been extremely challenging for the international mining industry, with the problematic combination of rising operating costs, falling metals prices, lower ore grades and a continued scarcity in the availability of funds. After an 18-month decline that started at the end of 2010, the second half of last year saw a gradual recovery in the mining industry’s overall market capitalisation. This improvement was helped by a strengthening gold price, but precious metals, and the industry’s valuation, have gone into reverse this year (see Market Capitalisation chart below).

As indicated in the latest State of the Market report, the price of most metals fell considerably during the last two months of the quarter, and this has had a particularly damaging effect on the valuations of the smaller companies. After what was a relatively optimistic last three months of 2012, this year looks like being especially difficult for raising exploration finance.

Hitherto, initial public offerings (IPOs) have played an important role in generating cash for mining projects. However, market confidence has been dented against a backdrop of volatile markets, political turbulence and fragile economic news. As a result, there has been little IPO activity in the past quarter for either the Toronto or London stock exchanges. Neither retail nor professional investors have the capacity, or appetite, to fund equity raisings, and so equity markets remain constrained. With their share prices so low, most explorers can’t realistically raise the necessary funds to bring themselves to the stage where they can generate cash flow from metals production.

According to the IntierraRMG database of almost 3,500 listed companies, funds raised by the mining sector in the quarter to end-March dropped to under US$5.2 billion from almost US$6.8 billion in the last three months of 2012. Moreover, there has been a particularly sharp fall in the funds raised by exploration companies; dropping to only US$1.5 billion in the quarter just ended from US$3.4 billion in the December quarter. Mining companies raised only US$0.2 billion during the quarter on the London Stock Exchange (LSE), which represents a slump of almost 80% from the previous quarter.

The Toronto Stock Exchange (TSX) and Australian Stock Exchange (ASX) also saw sharp falls. Almost 80% of funds raised during the quarter was by companies with individual market capitalisations of over US$100 million. There was also an improvement in the amount raised by the industry’s smallest companies (those valued at under US$10 million), following an especially sparse December quarter, but the amounts raised are still well below the funds secured in the year-ago quarter. This is particularly worrying because companies have typically raised most of the necessary funds for project development during the first quarter of the year. IntierraRMG’s global data suggests that the industry is in for a bleak year.