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Introduction to the Mining Industry

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Introduction to the Mining Industry

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The mining sector is made up of organisations whose primary activity is the extraction of naturally occurring mineral solids or natural resources. Examples of these types of minerals are coal, ores and precious stones. The mining industry also broadly covers quarrying and well operations. The sector comprises two basic activities: mine operations and mining support activities. "Mine operations" involve setting up the mine, quarry or well for the organization, or on behalf of another organization for a small fee. "Mining support activities" are those operations that must be carried out before mining begins; exploration and other services (except site preparation and construction of oil/gas pipelines).

The mining and metal industry is made up of six categories: aluminum, gold, precious metals, other metal extraction, coal mining and steel. Steel (and iron) is the biggest segment, as it makes up more than half the market in terms of volume, followed by aluminum in terms of the global metal market which is focused more in the Asia-Pacific region, followed by Europe.

The metal extracted is used in industries such as automobiles and consumer durables, in particular computers which require aluminum, steel and precious metals. Therefore the market remains strong even in economic decline as demand stays high.

Porters 5 Forces Model
Michael Porter provided a framework that models an industry as being influenced by 5 forces. The model enables managers to understand the industry context in which a firm operates. The forces that the model is based on are: •Rivalry

•Substitutes
•Buyer power
•Supplier power
•Threat of entry

Each of the above will be discussed in detail.

Rivalry
There is a certain degree of rivalry among firms operating in the same industry. The degree of rivalry, however, depends on various factors. Some of these factors are industry growth, diversity of rivals and industry concentration. Competitive rivalry is actually very strong...