Boston, MA -- (SBWIRE) -- 06/23/2012 -- As 2012 ushers in the second year of China's 12th Five-Year Plan (2011-2015), we expect the changes and reforms enacted in 2011 to continue. Smaller and more inefficient mines will be closed, mid-sized miners will be merged, and the restructuring of the country's mining industry to fit the Five-Year Plan's environmental standards will continue.

Nevertheless, the small production losses that will inevitably occur as smaller mines are closed will give way to production gains down the road due to the efficiency gains of bigger, more integrated mining companies. This comes as industry-wide energy efficiency and consolidation measures continue in 2012 as part of China's Five-Year Plan, further improving efficiency and boosting productivity across the industry.

Despite the efficiency gains, overall output growth in the mining sector is seen to be lower than previous years in line with the country's plan to halve metal consumption growth rates by 2015. China's Ministry of Industry and Information Technology plans to decrease annual average growth rates in metal consumption to 7.4% during the periods 2011-2015, as opposed to the 15.5% growth rate experienced between 2006 and 2010. We expect China's mining industry value to reach US$506bn by 2016, an annual average growth rate of 7.4% from 2011 to 2016. Production growth in the sector will be led by iron ore, coal, and copper mining.

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We also expect increasing tax burdens on the Chinese mining industry as part of the plan. Indeed, China's twice-delayed resource tax has already been implemented nationwide on November 1 2011. In February 2012 additional taxes were imposed on the mining of tin, iron ore and other minor metals. Significant progress has been made in the crackdown on illegal mining, with the government pledging to do more to improve safety. There is an increasing emphasis on the negative environmental impact of mining activities, with the imposition of an environmental tax on certain industries and the introduction of a 'green standard' for the rare earths sector to curb emissions. Cases of smelters, lead plants, or mines that are not up to environmental standards being closed are common place.

The government suspended new prospecting and mining licences for the coal and rare earths sectors to prevent over-mining. Additionally, the Institute of Geological Environmental Monitoring plans to build 10 state-level geological environment monitoring demonstration zones in the north east, north west, north and Yangtze River regions by the end of the 12th Five-Year Plan.

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