0

JAPAN’s Metal Mining Policy and the Role of JOGMEC

Hirotoshi KUNITOMODirector General

Metals Strategy Group

1

Contents

1. Outline of the Japanese Metal Industrial Structure2. Outline of Japan’s Metal Mining Policy3. Outcome of Japan’s Mining Policy and JOGMEC support project4. JOGMEC’s Present Strategy for Overseas Exploration Project 5. Scheme of Japan’s Policy of Mine Pollution Control 6. JOGMEC’s Technical Cooperation Projects　　　　　　　　　　　　　　　　　　　　　　　　　　 with Chile and Argentina7. Future Japanese Partnership with Chile and Argentine 8. Conclusion

2

History of Production of Cu Concentrate in Japan

○ History of the Mining Industry in JapanIn the early 20th Century, Japan was one of the world-largest producers of Copper Concentrate along with US and Chile. However, Japanese Domestic potentiality of Mineral Resource has not been competitive in the world market. Therefore, after the peak of copper concentrate Production 121×10³ t/y in 1971, it has continuously declined to almost zero because of the exchange rate, environmental issues, increased development cost and low metal price in the world.

○ The Days of Japan’s Metal Mining In 1970’s, Japan had over 350 Metal Mines such as Cu, Pb, Zn and Au-Ag.

Kuroko-Type 30, Skara-type 60Kies lager-Type 80 Vein-Type 150 etc

○ Present operating Metal Mine-Toyoha-Mine (Hokkaido) Pb, Zn

　　Nikko 484×10³t-Hishikari-Mine(Kagoshima) Au, Ag

　　Sumitomo161×103t

Source:METI

0

20

40

60

80

100

120

140

1870 1880 1890 1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 2000

Cu

in c

once

ntra

te (×

103 t)

1. Outline of the Japanese Metal Industrial Structure

3

History of Demand

Source: Kozan, Bulletin of Japan Mining Industry Association

World Consumption

Source: World Metal Statistics, WBMS

○ History of Copper Consumption and Demand in JapanAfter World War Ⅱ, the Japanese Economy has been rapidly progressing and has expanded Domestic Copper consumption constantly. The last 10 years, Japanese Copper Demand has been Saturated. From 2003 to 2004, Japanese Copper Demand increased, because of the progressing IT industry and Export to China. As a breakdown of Japanese Cu Demand, wire & Cables is 48%, Wrought Cupper 27% and Export 23%.

0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

2,000

1955 1965 1975 1985 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002

（×103 t） Wire & Cables Wrought Copper Others Exports

（×103 t）

2002 WorldShare 2003 World

Share1 China 2,737 18% 3,065 20%2 U.S.A. 2,370 16% 2,300 15%3 Japan 1,164 8% 1,202 8%4 Germany 1,067 7% 1,009 7%5 South Korea 936 6% 901 6% Others 6,791 45% 6,980 45%

World Total 15,065 15,457

Source: Copper Bulletin, ICSG

2004 Cu Consumption Monthly (Jan-Sep) （×103t）

2004 Jan-Sepas compared with

same period in 20031 China 2,404.4 5.6%UP2 U.S.A. 1,867.0 9.4%UP3 Japan 947.7 6.6%UP4 Germany 830.0 3.0%UP5 South Korea 718.1 5.8%UP

World Total 12,423.3 6.1%UP

4

Refined Cu Production & Capacity

Source:METI

Location of Major Primary Nonferrous Metals Smelters & Refineries

Hachinohe (Hachinohe) Pb, Zn

Onahama (Onahama) Cu

Annaka (Toho) Zn

Naoshima (Mitsubishi) Cu

Besshi (Sumitomo) Cu, Ni

Saganoseki(Nikko) Cu

Chigirishima (Toho) Pb

Takehara (Mitsui)Cu, Pb

Iijima (Akita) Zn

Hitachi (Nikko) Cu

Tamano (Hibi) Cu

○ History of Metals Smelters and Refineries in JapanJapan had Metal Mine-site Smelters and refineries for the domestic Metal concentrates produced by domestic Mines. According to the increase of domestic demand of Cu, Pb and Zn, Japanese Industries has been expanding the capacity of Metals Smelters and Refineries, and importing the metal concentrates from overseas countries such as Chile and Indonesia. Therefore, Japanese Smelting Industry has been “custom smelters” to the Domestic Market and Export Needs.

400

600

800

1000

1200

1400

1600

1967

1968

1969

1970

1971

1972

1973

1974

1975

1976

1977

1978

1979

1980

1981

1982

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

(×103t)

Production Capacity

5

Japanese Copper Production by Source

Source:METI

0

200

400

600

800

1,000

1,200

1,400

1,600

1946 1951 1956 1961 1966 1971 1976 1981 1986 1991 1996 2001

×10

3 t

OthersScrapImported oreＤomestic ore

○ History of Refined Copper Production by Source in JapanJapan has been Importing Copper Ore　from 1950s. Japanese Imported Ore has been increasing constantly. In this situation, it had been a political issue that metal supply from overseas to the Domestic Market should be stabilized and Japanese Metal Producing Industries should be strongthened in terms of Competitiveness in the international market.

Japanese Main Metal Producers, such as Sumitomo, Mitsui, Mitsubishi, Dowa, Nittetsu and Nikko, had been a owners of domestic Mines and MinesiteSmelters and Refineries. These Companies had Metal Mining Technology and shifted there Mining activities from Domestic to Overseas.

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2. Outline of Japan’s Metal Mining Policy

- According to the increase of Imported Ore, stable supply from overseas has been needed. Japanese Metal Producing Industries should be activated, as Overseas Exploration and Production has shifted from Domestic Mining.

- Domestic Metal Mines has been closing because of International Competitiveness and Domestic Mine Pollution Issues have become Social Problems, specifically mine pollution causing serious problems to the human health. For example poisoning waters damaging the rice fields, or Acid Mine drainage polluting the river.

• Background

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- Secure a stable supply of base-Metals ( Cu, Pb, Zn etc ) and Rare-Metals from overseas to Japan by supporting the private Investment to overseas Exploration and Development for Metal Mineral Resources and National Rare Metals stockpiling.

- Technical Support for the Local Governments to manage the mine pollution control of abundant mine and no-owner’s mines after mine closed.

• Basic Policy of Japan’s Metal Mining

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○ Roll of JOGMEC in Metal Mining Fields

- Establishment of JOGMEC　　　

　　　Japan Oil, Gas and Metals National Corporation (JOGMEC) was established on February 29, 2004, integrating Metal Mining Agency of Japan (MMAJ) and Japan National Oil Cooperation (JNOC), with themission to ensure a stable supply of energy and nonferrous metals for Japan.

Ministry of Economy, Trade, and Industry (METI)

Agency of Industrial Science and Technology (AIST)

Geological Survey of Japan (GSJ)

Japan National Oil （1967～）Corporation (JNOC)

Metal Mining Agency of Japan (MMAJ) （1963～）

New Energy Development Organization (NEDO)

JOGMEC 2004 February

integratedAgency for Natural Resources and Energy -Mineral and NaturalResources Division

Nuclear and Industrial safety Agency -Mine Safety Division

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○ Function of JOGMEC in Metals Mining Fields

Strategy Making and Metal Resource Information Center (MRIC)

• National Stockpiling of Rare Metals

7 comoditiesNi, Cr, Mn, Co, W, Mo, V

• Release and Selling of stock piled Rare Metals

In 2004, JOGMEC released Mn, Mo, V in Japanese Market.

• Implementation of Geological Survey and Exploration

• Financial Support by low Interest Loan and Guarantees for Development

• Technical Support for mine pollution control by Local Government

• Engineering Service in management of Facility for Local Government

Research and Development ( Technical Research Center )

10Source: METI

0

250

500

750

1000

1250

1500

1966 1971 1976 1981 1986 1991 1996 2001

×10

3 t

0

10

20

30

40

50

60

Percentage

Invested Mines Financed Mines Others Percentage of Invested Mines

Escondida (Chile)

Los Pelambres (Chile)

Antamina (Peru)

La Candelaria (Chile)Northparks (Australia)

Collahuasi (Chile)Batu Hijau (Indonesia)

Huckleberry (Canada)

Ore Imports from the mine contributed by JOGMEC

Source of Imported Copper Concentrate by Japan

3. Outcome of Japan’s Mining Policy and JOGMEC support projectJapan’s Mining Policy and JOGMEC’s Functions, such as Geological Survey, Financial Support and Subsidy for private company’s Exploration implemented by financial support from Japanese Government, have contributed the 28 Overseas Mining Developments based on the private investment. Accordingly Imported Concentrate from Japanese Invested mines, which is evaluated as stable supply source by Japanese Government, has been increased gradually.

Commodity

Ore Importsfrom the minecontributed by

JOGMEC

Total Ore Imports Share

Cu 43,000t　　　 1,206,000t　　　 4%

Zn 108,000t　　　 541,000t　　　 20%

Ni 82,000t　　　 223,000t　　　 37%

U 1,000t　　　　　　9,500t

（annual demand）11%

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JOGMEC（MMAJ） contributed Overseas Mines

0゜ 0゜

Chile：Atacama（GS）Sagasca（LG）Cerro Colorado（GS）

Bolovia：San Vicente（GG）

Argentina：　　Alto de la Blenda（GG）

Peru：Huanzala（GS･LG）Tintaya（GG）

　　Iscaycrus（GG）　　Gran-bratana（LG）　　　　

Niger：Akouta（LG）

Congo(Dem Rep)：Musoshi（GS･LG）Brazil：Jacobina　　　（GS･LG）

Colombia：El Roble（GS･LG）

Australia：MacArthur River（SB）　　　　　　Gunpowder（FI）

Mexico：Tizapa（GG･LG）　　Rey de plata（SB･LG）

Indonesia：Soroako（LG）

Malaysia：Mamut（GS･LG）

China：Anqing (GG）

Turkey：Azan（GG）

Uzbekistan：Bulutkan（GG）

Myanmer：Monywa（GG）

Philippines：Rio Tuba（LG）

Oman：Rakah（GG）

Honduras：Vueltas del Rio（GG）

U.S.A.：Greens Creek（FI）

Contributed Project　GS：Overseas Gelogical Survey　SB：Subsidy for Japanese companies that 　　　 carry out joint exploration with foreign companies　FI：Finance, Investment　LG：Loan Guarantees　GG：Official Development Assistance（GG）

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Nippon Mining, Mitsui Corp, Marubeni25%1995Australia Pb, ZnMacArthur River

Dowa Mining, Sumitomo Corp.49%1994MexicoPb, ZnTizapa

Toho Zinc25%1983AustraliaPb, ZnEndeavor (Elura)

Mitsui Corp, Mitsui Mining100%1968PeruPb, ZnHuanzala

*: MMAJ Related Projects

Nittetsu Mining60%2003Chile CuAtakama Kozan*

Mitsubishi Corp.10%2001Peru Cu, Pb, ZnAntamina

Nippon Mining, Mitsubishi Materials, Marubeni, others40%2000Chile CuLos Pelambres

Sumitomo Metal Mining, Mitsubishi Materials, others35%1999Indonesia CuBatu Hijau

Mitsui Corp, Nippon Mining, Mitsui Mining12%1999Chile CuCollahuashi

Mitsubishi Materials, Furukawa, Dowa Mining, Marubeni40%1997Canada CuHuckleberry

Sumitomo Metal Mining, Sumitomo Corp.20%1995Australia CuNorthparkes

Nippon Mining30%1995Australia CuMcArthur River*

Sumitomo Metal Mining, Sumitomo Corp.20%1995Chile CuLa Candelaria

Mitsubishi Corp., Mitsubishi Materials, Nippon Mining, others10%1994Chile CuEscondida

Sumitomo Metal Mining, Sumitomo Corp.15%1986USA CuMorenci

Japanese CompaniesJapanese

Equity Interest

Production or Farm-inCountryMajor

ProductsMine

Japanese Companies Involvement in Overseas Copper, Lead, Zinc Mines

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4.JOGMEC’s Present Strategy for Overseas Exploration Project

・ Two Primary Objectives　：　

　 - accelerating mineral production and　　　resultant economic growth in　

　　　developing countries - contributing to a stable supply of

　　　mineral resources to Japan.

・ Major Target　　　 ：　Copper

・　Target　Country　：　Asia, Latin America.

・ JV Partner　　：　Governmental organizations　　　　　or private companies which hold mineral 　　　　　properties in developing countries.

JOGMEC has been conducting the JICA-JOGMEC government-to-government technicalcooperation program in developing countries since 1970. JOGMEC intends to shift itsresources from the old technical cooperation program to the operation of the new program. JOGMEC started a new cooperation program for mineral resources development in the2003 fiscal year, which is referred to as the Joint Basic Exploration Scheme in DevelopingCountries (JBES).

・ JV Agreement　 　：　- Ordinary joint venture exploration

　　　 agreement (Farm-in agreement), 　　　 i.e. JOGMEC 　acquires an option of　　　　　 equity interest of the Property 　　　 expending exploration fee.

- An option acquired by JOGMEC will be 　　　 transferred to a Japanese company with 　　　 the first priority, if　exploration results 　　　 are positive and a Japanese company 　　　 wishes a further exploration.

・ Budget　：　US$100,000 to $1million 　　　　　　　　　is envisaged

・　Period 　：　1 to 5 years

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Framework of New JOGMEC Exploration Projects（　Joint Basic Exploration Scheme (JBES)　）

Exploration

JOGMECOperatorExploration ExpenditureAcquiring Option of Equity

METIConsignment

Partner（ Governmental organizations ・

private companies ）Providing Property(opportunity to exploration)

Receiving exploration results

JV Agreement（Farm-in Agreement）

Unincorporated JV

Additional and Detailed ExplorationJapanese Company

Transfer

ODA Budget

(if exploration results are positiveand a Japanese company wishes a further exploration,)

Budget　：　US$100,000 to US$1millionPeriod 　：　1 to 5 years

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5.Scheme of Japan’s Policy of Mine Pollution Control Japanese Government ( METI ) set up the basic laws in terms of mining safety environmental Protection and mining pollution control. Based on these laws, METI has decided the basic initiative concerning the Mine Pollution control works every 5 or 10 years. According to these initiatives, mine equity holders have to implement the proper constructive works for controlling mine pollution. Without mine equity holders, these no-owner’s abandoned mine must be controlled by Local Government in termsof mine-site environmental protection under the financial Support by METI’s Subsidy and Technical Support by JOGMEC.

Number of Abandoned Mines without Responsible Body where preventive measures were applied

1111111

010鉱山数

503353

39

45303045

37379

22

361935

10

1616

0

50

100

150

200

1st -1

Not startedNo work necessarycontinuedcompleted

84 75 55 40

Number of mines

evaluated by

JOGMEC

（mines）

1st -2 3rd 4th2nd

1st -1（1973～1977）

1st -2（1978-1982）

2nd

（1983～1992）3rd

（1993～2002）4th

（2003～2012）

330 460 220

18

115228

16

Projected Amount

Mine Pollution Control

The basic Initiative of the mining pollution control Budget Plan by Japanese Government

　（100m.yen）

Mine water processing

Operating Mines

Special Extention of Mine Safety LawMine Safety Law

　　　　　Abandoned Mine Sites　

with responsible body

Without responsible body

Conmpanies（Mining Licence Holder／

Responsible Body）

LocallGovernment

Ministry of Economy, Trade, and Industry , Mine Safety Division

JOGMEC

Mine Pollution Control UnitMine safety and Inspection Department

（9 Departments in Japanese Local Area）

Direction and

Supervision

SubsidyTechnical Support

Financial Support

Fina

ncia

l S

uppo

rt

Operation and care

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Underground Stopping area

Waste/tailing dam

Open working

Mine Drainage

Filtered Water

Water UtilizationDischarge

Neutralizing Operation

Neutralizing Precipitates

Measures against

Sources of PollutionM

easures of Mine

Drainage treatm

ent

DumpingDam

Sealing

Flow Chart of Mine Pollution Control Work at Abandoned Mine without Licensed Miner

Basic Planning by Researchand Consultation

Detailed Planning by Consul-tation and Management

Step 1Step 1 Request of Research and Consultation

Supervision of Constructionby Consultation and Manage-ment

Trust of Design and Planning

Step 2Step 2

Trust of Supervisionof Construction

Step 3Step 3

○ Outline of Mine Pollution Control Work and JOGMEC’s Technical Support Activity

Based on the Local Government’s request for technical Support by JOGMEC, JOGMEC implement the basic planning by research and consultation for pollution control work of the specific abandoned mine. When the Local Government make a decision to carry out the construction work for mine pollution control, JOGMEC accept the trust of design and supervision of constructor.

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6-1.Joint Survey and Demonstration Project of SQUID in Chile• Teck-Cominco and JOGMEC are carrying out copper exploration in Chile as a JV project.• JOGMEC has been developing TDEM (time domain electromagnetic method) data

acquisition system using SQUID magnetic sensor since 2001.• Exploration Technical R&D Team of JOGMEC conducted a field test using SQUID

magnetic sensor at Espino property in Sep. 2004.

Location of Espino property

6. JOGMEC’s Technical Cooperation Projects with Chile and Argentina

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Schedule for This ProjectFlue Dust

Teniente Converter

Lixiviation

As

Immobilization

Extraction

of Cu/Zn

Flotation

Decontamination (No As Leachability)

Crystallized Ferric Arsenate（FeAsO4・2H2O)

Scorodite

Sulfuric Acid

(Waste Acid)

Lixivium

Solvent Extraction

Residue

Recover Cu/Zn

2001 2002 2003 2004 2005

1.Investigation in Chile

2.The Lab. Tests in Japan

3.The Pilot Plant

　a. Design

　b. Production

　c. Transformation/Construction

　d. Completion ceremony

　e. Operation/Assessment

4.Chilean Exparts Invitation

5.Report

6-2. Development of Technologies to Recover Valuable Metalsfrom Smelter Flue Dust

・　Research of Treatment for Flue Dust from Teniente Converter at Copper Smelter　　- Flue Dust Decontamination　= Establishment of Arsenic (As) Immobilization Method　　- Recovery of Valuable Metals (Cu, Zn)　= Cost Reduction for Flue Dust Treatment・　Pilot Plant Operation at Las Ventanas Smelter of Chile　　　　　　　　　　　　　　　　　　　　　　= Estimation for Real Operation and Cost Assessment・　Counter Part : CIMM

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6-3. JICA’s International Technical Cooperation Project between Japan and Chile

Strengthening Institutional Capacity of Mining Environmental Management (2002-2007)

• Counterpart: National Service of Geology and Mining (SERNAGEOMIN)

• Objective: Developing SERNAGEOMIN’scapacities to

　1) grasp the situation of mines including their potential impacts thorough compilation of a database and,

　2) plan for minimizing & monitoring environmental impacts

• Goal: Developing Chilean government’s capacity to manage mining environmental issues

JOGMEC has been contributing a project leader and an environmental expert to this project

Field trainingICP-MS donated

'02

Chemical Lab

Environmental Inspection

Mine Closure

Abandoned Mine

'072006200520042003Principal Issue

Installation & training

Improving database system

Planning of solution

Introducing JPN’sexperiences

Planning ofclosure works

ISO 17025

screening designingField investigation for

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◆ LOCATION

Argentina

6-4. JV Project in VICUNA of Argentina

• JV Partner　　　　Tenke Mining Corp.

　 (Vancouver, Canada )

• Period　　　2004-2008（ 4 years）

• Interest　JOGMEC 　　　　　： 40%　Tenke Mining 　： 60%

• Main Target:Porphyry Copper-Gold

• Eependiture　US$5.0million

Vicuna area

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6-5. JICA’s International Technical Cooperation Project between Japan and Argentina

• Name: The Project GEOSAT-AR• Main Tech: Remote Sensing Technology• Objective: Transferring program of

ASTER advanced satellite technology, applied to geological mapping in the Republic Argentina.

• Goal: The generation of new products for Geologic-mining exploration and for Geo-environmental study

• Term: Mar,2001-Feb,2005(4 Years)• Counterpart: The Geological and Mining

Survey of Argentina-SEGEMAR• Japanese experts: 4experts

　　JOGMEC has been contributing a Project Leader to this project

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2000

0 200 400 600 800

Chile

Indonesia

Canada

Australia

PNG

Peru

Philippines

Argentina

Zambia

South Africa

Others

×103t

Concentrate

Cathode

7. Future Japanese Partnership with Chile and Argentine Chile is the largest Exporter of Copper to Japan. Chile and Argentine are very important countries in terms of stable Supply of Mineral Resources. JOGMEC wishes to Expand the Exploration and Technological Demonstration Activities in these two Countries.

【data source : JETRO-Santiago】 (units : 1,000us$, %)2003 2002

Export from Chile　　　　 to Japan (FOB)

2,267,896 1,949,710 16.3 % 100.0 %

Copper 955,871 715,884 33.5 % 42.1 %Other Minerals 149,448 131,868 13.3 % 6.6 %Seafood 562,024 572,486 -1.8 % 24.8 %Others 600,553 529,472 13.4 % 26.5 %Import from Japan　　　　 to Chile (CIF)

634146 542604 16.9 % 100.0 %

Automobiles 343237 265404 29.3 % 54.1 %Machine 40721 47623 -14.5 % 6.4 %Rubber 42030 34442 22.0 % 6.6 %Electronics 21244 9893 114.7 % 3.4 %Vessel 10237 4891 109.3 % 1.6 %Chemicals 6846 6685 2.4 % 1.1 %Others 169831 173666 -2.2 % 26.8 %

Balance (Export-Import) 1,633,750 1,407,106 16.1 %

03/02 % in 03

E x p o r t a t i o n f r o m C h i l e

C o p p e r4 2 %

O t h e rM in e r a ls

7 %

S e a f o o d2 5 %

O t h e r s2 6 %

Cu Importation of Japan

Argentina : 2%

Chile : 50%

Source: METI

Export from Chile

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8. Conclusion

• JOGMEC invites the Overseas Partner for the Joint Venture Project of Exploration in JBES.

• JOGMEC Santiago Office is a Counter Part of South areas in Latin America such as Chile, Argentine and Brazil, etc.

◆　JOGMEC Santiago Office : 　　　 Tel 　 :　+56-2-228-4025　　　Fax　 :　+56-2-228-9722　　　e-mail : nakayama-ken@entelchile.net　　　　　　　　 feebrey@terra.cl