Assessment of Economic Contribution of Mineral Exploration and Mining in Ireland

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Assessment of Economic Contribution of Mineral Exploration and Mining in Ireland Report Submitted to Department of Communications, Energy and Natural Resources Prepared by Indecon International Economic
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Assessment of Economic Contribution of Mineral Exploration and Mining in Ireland Report Submitted to Department of Communications, Energy and Natural Resources Prepared by Indecon International Economic Consultants July 2013 Contents Page Glossary of Terms and Abbreviations Executive Summary i ii 1 Introduction, Background and Approach Introduction Background and Context Scope and Terms of Reference Methodology Report Structure Acknowledgments and Disclaimer 6 2 Overview of Mining and Exploration Industry in Ireland Introduction Legislative Context and Definition of Sector Overview of Current Mineral Exploration and Mining Activity Trends in Mining Output in Ireland Trends in Exploration Global Mining Trends 18 3 Assessment of Direct Economic Impacts Introduction Output Employment Expenditures Gross Value Added Contribution Exchequer Contribution Contributions to Local Communities Summary of Findings 37 4 Assessment of Indirect and Economy-wide Impacts Introduction Approach to Measurement Expenditure Impacts Employment Impacts Income Impacts Summary of Findings 49 5 Conclusions Summary of Findings from Assessment Views on the Future Outlook of the Mining Industry Overall Conclusions 52 Annex 1 Copy of Survey Questionnaires 53 i Tables and Figures Page Table 1.1: Breakdown of Survey Respondents by Type of Licence Held 5 Table 2.1: Applications for Prospecting Licences Received, Table 2.2: Prospecting Licences Granted, Table 2.3: Prospecting Licences Held, Table 2.4: List of Minerals included in Prospecting Licences, June Table 2.5: Number of State Mining Licences/Leases Held Table 2.6: Number of Major Operating Mines in Ireland Table 2.7: Main Operational Mines in Ireland 14 Table 2.8: Ireland s share of World and European Output of Metal Concentrates from Mining Activity Table 2.9: Zinc, Lead and Gypsum Output 15 Table 2.10: Ore and Grade of Zinc and Lead by Mine, Table 2.11: Gross Value of Lead and Zinc Production in Ireland Million 17 Table 2.12: Recent Exploration Highlights 17 Table 2.13: World Zinc and Lead Output, Table 3.1: Total Sales Turnover in Mining Sector 23 Table 3.2: Total Export Sales Turnover of the Mining Sector and Export Sales Revenue as % of Total Sales Revenue 24 Table 3.3: Overview of Industry Labour Force in Mining-related Occupations 24 Table 3.4: Employment in Mining by Region in Ireland 25 Table 3.5: Direct Employment Supported in Mining 26 Table 3.6: Skills Profile of Employment in the Mining Sector Table 3.7: Direct Employment Supported in Exploration 28 Table 3.8: Skills Profile of Employment in Exploration Table 3.9: Direct Employment Supported in Mining and Exploration 29 Table 3.10: Total Direct Expenditure on Wages & Salaries in Mining 29 Table 3.11: Wages and Salaries in Exploration Activities 30 Table 3.12: Total Direct Expenditure on Wages and Salaries in Mining and Exploration 30 Table 3.13: Capital Expenditure associated with Mining Activities 31 Table 3.14: Total Direct Expenditure in Mining 32 Table 3.15: Recent Trend in Total Exploration Expenditure 32 Table 3.16: Total Direct Expenditure in Mining and Exploration 32 Table 3.17: Gross Value Added of Mining to the Irish Economy Table 3.18: Total Direct Exchequer Contributions of Mining 2011 & Table 3.19: Exchequer Contributions in Exploration 34 Table 3.20: Total Direct Exchequer Contribution of Mining and Exploration 2011 & Table 3.21: State Receipts from Mining Licence/Lease Holders 35 Table 3.22: State Receipts from Prospecting Licence Holders 35 Table 3.23: Overal State Receipts from Mining Licence/Lease and Prospecting Licence Holders 36 Table 3.24: Total Financial Contributions to Local Communities by Mining and Exploration Companies 36 ii Tables and Figures Page Table 4.1: Modelling of Economic Impacts of Mining Sector Economy-wide Impacts of Mining Expenditures 39 Table 4.2: Modelling of Economic Impacts of Exploration Economy-wide Impacts of Exploration Expenditures 40 Table 4.3: Modelling of Economic Impacts of Mining and Exploration Economy-wide Impacts of Mining and Exploration Expenditures 41 Table 4.4: Modelling of Economic Impacts of Mining Sector Economy-wide Employment Impacts 42 Table 4.5: Modelling of Economic Impacts of Exploration Economy-wide Employment Impacts 43 Table 4.6: Modelling of Economic Impacts of Mining and Exploration Economy-wide Employment Impacts 44 Table 4.7: Modelling of Economic Impacts of Mining Sector Income Multiplier Impacts 46 Table 4.8: Modelling of Economic Impacts of Exploration Income Multiplier Impacts 47 Table 4.9: Modelling of Economic Impacts of Mining and Exploration Income Multiplier Impacts 48 Table 5.1: Summary of Components of Economic Impacts of Mineral Exploration and Mining Sector in Ireland 50 Table 5.2: Views of Mining Facility Holders and Prospecting Licence Holders on Future Outlook of Mining and Exploration Industry 52 Figure 1.1: Schematic Description of Methodology and Work Programme for Assessment 2 Figure 1.2: Components of Macro-Economic Impact of Mining and Mineral Exploration 3 Figure 2.1: State Mining and Prospecting Areas in Ireland Figure 2.2: Trend in Lead, Zinc and Gypsum Output Figure 2.3: Recent Developments in World Zinc Prices Figure 2.4: Recent Developments in World Lead Prices Figure 3.1: Employment in Mining by Region in Ireland 26 Figure 4.1: Components of Economy-wide Employment Impacts Mining and Exploration 45 iii Glossary of Terms and Abbreviations Glossary of Terms and Abbreviations Exploration Mineral exploration is the process of finding ore (commercially viable concentrations of minerals) to mine. Prospecting is the first stage of search for such minerals. FTE Full-Time Equivalent. This is a measure of employment supported which takes into account both persons engaged on a full-time basis and those employed on a part-time basis. GVA Gross Value Added. This is a measure equivalent conceptually to Gross Domestic Product (GDP) at national economic level and measures the difference between the value of a firm s output or sales turnover and its expenditures on production inputs. Mining Mining is the act, process, or industry of extracting minerals from the earth. Multiplier A multiplier is a factor applied in estimating the wider economic impacts of a sector or organisation s activity. This considers the indirect and induced impacts of the sector or organisation. Indirect impacts relate to the additional economic activity supported in subsupply of input to the sector or organisation. As these indirect impacts supported employment and associated incomes, the re-spending of these incomes elsewhere in the economy gives rise to induced impacts, thereby supporting additional activity and employment. Multipliers are calculated using detailed sectoral data from the Central Statistics Office s National Income Accounts for the Irish economy and input-output analysis of the relationships between economic sectors. i Executive Summary Executive Summary Introduction and Background This report is submitted to the Minister for Communications, Energy and Natural Resources by Indecon International Economic Consultants. The report concerns an independent assessment of the impact of the mineral exploration and mining sector on the Irish economy. The background to this study is the need to have independent sectoral information to support minerals policy. The Minerals Development Acts 1940 to 1999 govern mineral exploration and development in Ireland. Exploration and extraction in the sector are regulated by the Exploration and Mining Division of the Department of Communications, Energy and Natural Resources. A new Minerals Development Bill is currently being drafted, which will consolidate existing exploration and mining legislation as well as updating certain aspects to ensure legislation is in line with best practice. It is within this context that this review is timely in evaluating the economic impact of the sector and to assist in maximising the contribution of the mining and exploration sector, which is an objective set out as part of the Department s overall Statement of Strategy. Scope of Assessment The overall objective of this study was to undertake research to independently establish the overall economic contribution of the mining and mineral exploration sector to the Irish economy. This assessment addresses the following aspects: The level of activity/output and Irish economy expenditures in mining and exploration; The extent to which the sector supports Irish jobs and how each job within the sector supports other non-mineral exploration and mining jobs; The tax and other revenues generated for the Exchequer from this sector; The impact of minerals exploration and mining on the wider economy that may not be readily recognisable, including the indirect/multiplier impacts of the sector across the economy; and The direct contribution to GDP and the link to direct value added. A rigorous methodology was applied in undertaking this assessment, informed by international best practice approaches to economic impact assessment. Overview of Sector Mining and exploration in Ireland are currently governed by the Minerals Development Acts 1940 to These comprise the Minerals Development Act 1940 (the Principal Act) and amending Acts of 1960, 1979, 1995 and The combined Acts (and regulations made thereunder) outline the definitions of mining and minerals in Ireland, as well as laws governing mining and exploration enterprises. The wider industry in Ireland is divided into two sections: mining and exploration. Mineral exploration, or prospecting, is controlled via Prospecting Licences, which give the holder exploration rights for an area of approximately 35 km 2 on average and are valid for six years with the possibility of renewal. Mining relates to the extraction of minerals, both on the surface and underground, and is controlled via mining licences and leases, collectively State Mining Facilities (referred to hereafter in the document as mining facilities). In Ireland, the mining industry is predominantly focused on the mining of zinc and lead. In 2012, Ireland was Europe s largest producer of zinc metal in concentrate (32% of all European zinc mine output, inclusive of the Russian Federation) and the 10 th largest producer in the world (2.5% of world output). Ireland was similarly Europe s 3 rd largest producer of lead metal in concentrate (13% of European lead mine output, inclusive of the Russian Federation) and 12 th largest in the world (1% of world output). ii Executive Summary The table below highlights the recent trends in Ireland s output from metal concentrates (zinc and lead) as a percentage of global output and European output. Ireland also produces a significant tonnage of gypsum (approximately 300,000 tonnes in 2012). Ireland s share of Global and European Output of Metal Concentrates from Mining Activity Zinc Percentage Share of Global Zinc Output 3.5% 4.0% 3.4% 3.0% 2.6% 2.5% Percentage Share of European Zinc Output 38.0% 38.0% 38.0% 32.0% 32.0% 32.0% Lead Percentage Share of Global Lead Output 1.5% 1.2% 1.3% 1.0% 1.0% 1.0% Percentage Share of European Lead Output 19.7% 16.0% 15.0% 11.0% 14.0% 13.0% Source: Data from Department of Communications, Energy and Natural Resources (EMD) Annual Report Components of economic impact Prior to undertaking analysis of the impacts of mining and exploration activity on the Irish economy, consideration must be given to the linkages and channels through which the direct and indirect impacts take place and how they are measured. The schematic overleaf provides a description of the components of the direct and indirect impacts which are captured in this assessment. The key measurable outcomes of the direct and indirect impacts are as follows: Mining sales turnover as a value of mining production / output; Persons employed in mining and exploration as a measure of Irish employment supported by the sector; Wages and salaries earned in mining and exploration as a measure of Irish economy labour expenditures of mining and exploration firms; Gross value added of mining output as a measure of the GVA contribution of mining; and Tax payments as a measure of the exchequer contribution of the sector. Indecon s estimates for each of the above components are summarised overleaf and are examined in detail in Sections 3 and 4 of this report. iii Executive Summary Components of Macro-Economic Impact of Mining and Mineral Exploration Direct Impacts Value of Sales/Turnover in Mining Value of Mining Production/ Output Exports of Mining Products Direct Employment in (a) Mining and (b) Exploration Irish Employment Supported Expenditures on Wages & Salaries Purchases of Irish-produced Goods for Re-sale Purchases of Irish-produced Business Inputs Capital Expenditures - Irishproduced materials Irish Economy Labour Expenditures of Mining and Exploration Firms Irish Economy Non-Labour Expenditures of Mining and Exploration Firms (Irish and Foreign-owned) Value of Output less Value of Production Inputs = Gross Value Added/GDP Contribution of Mining Activity PAYE, PRSI and levies, net VAT, import duties and Corporation Tax Exchequer Contribution (Tax Payments) Economy-wide Impacts (Overall Impact) Multiplier Impacts: (a) Indirect and Induced Output Impacts (b) Indirect and Induced Employment Impacts (c) Indirect and Induced Income Impacts Source: Indecon Summary of Findings from Assessment The table overleaf presents an overall summary of the main components of the overall economic impact of the mineral exploration and mining sector in Ireland, showing the direct as well as economy-wide impacts. The key areas of impact of the sector across the economy are employment, sales turnover, expenditure, gross value added, as well as contributions to the Exchequer and to local communities. The following are the key findings from the assessment: Output in mining, as measured by sales turnover, amounted to million in 2012; The activities of exploration and mining companies supported 1,373 full-time equivalent persons during 2012, while an additional 1,933 FTEs were supported indirectly as a result of multiplier impacts throughout the economy; One of the features of the industry is the broad regional distribution of its workforce, with significant numbers of people employed in the Mid-East, Mid-West and South-East, as well as across other regions in the West and South-West; Total direct expenditure on wages and salaries for workers in exploration and mining amounted to million in These expenditures also result in multiplier impacts throughout the economy, bringing the overall income impacts in the wider economy to an estimated 341 million in 2012; iv Executive Summary Total expenditures by exploration and mining companies amounted to an estimated million during The combined direct, indirect and induced impacts of these expenditures is estimated at million; The overall Gross Value Added contribution of the mining sector to the Irish economy is estimated at million in 2012; Exploration and mining companies contributed a total of 56.6 million in tax and other payments to the Exchequer and to local authorities during In addition, the State benefits from payments made by mining and prospecting licence holders in the form of royalties, licence fees and other payments. These receipts amounted to 10.6 million in 2011 and 9 million during 2012; and In addition to creating and supporting jobs and expenditures at local level in Ireland, exploration and mining companies also contribute to local communities in the form of financial supports to community sporting and other organisations. According to the findings of Indecon s research, mining and prospecting companies contributed a total of almost 460,000 to local community activities and organisations during Summary of Components of Economic Impacts of Mineral Exploration and Mining Sector in Ireland Estimates for 2012 Employment Supported (Mining and Exploration) Direct Employment Full-Time Equivalent Persons (FTEs) 1,373 Indirect and Induced Employment Supported (FTEs) 1,933 Economy-wide Employment Supported (FTEs*) 3,306 Sales Turnover (Mining) Value of Sales Turnover - Million Expenditures (Mining and Exploration) Direct Expenditure on Wages and Salaries - Million Total Mining and Exploration Expenditure - Million Economy-wide Expenditure Impact - Million* Gross Value Added (Mining) Gross Value Added - Mining - Million Exchequer, Local Authorities and Local Communities (Mining and Exploration) Exchequer Contributions (including Local Authority rates etc) - Million 56.6 Other Income to the State (Royalties, Licence Fees, etc.) - Million 9.0 Financial Contributions to Local Communities - Million Source: Indecon analysis * Economy-wide impacts represent the indirect and induced multiplier impacts arising from the estimated direct impacts. v Executive Summary Overall Conclusions The evidence suggests that the economic value added contribution of the mining and mineral exploration industry to the Irish economy is considerable and far-reaching. The nature of the impact of the sector was evaluated through examining components such as employment, wages and salaries, non-labour and capital expenditures, contributions to the Exchequer in the form of taxes and payments to local authorities, and local community contributions. Of particular importance is the substantial number of jobs supported both directly and indirectly by mining and exploration activities, especially in the context of the high unemployment rates prevailing across many sectors of the economy at this time. The workforce in the mining industry is broadly distributed across the regions, with significant numbers of people employed in the Mid-East, Mid-West and South-East, as well as across other regions in the West and South-West. vi 1 Introduction, Background and Approach 1 Introduction, Background and Approach 1.1 Introduction This report is submitted to the Minister for Communications, Energy and Natural Resources by. The report concerns an independent assessment of the impact of the mineral exploration and mining sector on the Irish economy. 1.2 Background and Context The background to this study is the need to have independent sectoral information to support minerals policy. The Minerals Development Acts , govern mineral exploration and mining in Ireland. Exploration and extraction in the sector is regulated by the Exploration and Mining Division of the Department of Communications, Energy and Natural Resources. The Minister of Communications, Energy and Natural Resources is also responsible for the development of mineral policy and the promotion of the sector. Exploration is carried out in licenced areas across Ireland and mining is undertaken under lease or licence (collectively State Mining Facilities or mining facilities) granted by the Minister over specific deposits. The Minerals Development Acts cover a range of minerals but exclude stone, sand, gravel, clay, and petroleum and natural gas, which are not part of this study. The purpose of this study is to analyse the economic contribution of the exploration and mining sector. A new Minerals Development Bill is currently being drafted, which will consolidate existing exploration and mining legislation as well as update certain aspects to ensure legislation is in line with best practice. It is within this context that this review is timely in evaluating the economic impact of the sector and assisting in maximising the contribution of the mining and exploration sector, which is an objective set out as part of the Department s overall Statement of Strategy. 1.3 Scope and Terms of Reference The overall objective of this study is to undertake research to independently establish the overall economic contribution of the mining and mineral exploration sector to the Irish economy. This assessment addresses the following aspects: The level of activity/output and Irish economy expenditures in mining a
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