Attitudes becoming 'More Hostile' To Mining - Fraser Institute

| Monday August 23, 2010 00:00

No fewer than 41 of the 51 jurisdictions surveyed - some 80% - made that point.The institute conducted an update to its annual survey during the month of June, 'following the global recovery in commodity prices and the introduction of new regulatory hurdles and taxation in many jurisdictions'.

The survey is based on the opinions of mining executives from 429 mineral exploration and development companies.Unexpectedly, South Africa moved 13 places up the institute's ladder, to position 31 in the overall rankings. In April, South Africa came in at number 44.

The improvement in South Africa's ranking was a bit of a surprise, the survey's coordinator and the institute's vice-president of international policy research, Fred McMahon, said in an interview with Mining Weekly.

The Fraser Institute survey was peppered with comments on negativity that exploration companies, in particular, are experiencing.

While Botswana was lauded for being 'excellent and forward looking', Tanzania, one respondent claimed, was sliding back into 'old communist political rhetoric', a far cry from Tanzania Chamber of Minerals and Energy executive secretary executive Emmanuel Jengo's call, made in Johannesburg last month, for African governments to create stock-exchange enabling legislation for the African public to participate more widely in investment.

Australia, a miner told the institute's survey team, had shown its remoteness from the crucial workings of the mining industry.Canada's Quebec province, an exploration company president said, was fast declining as a place to do business, because its government had no clear policy and was guided by the flow of public opinion rather than common sense.

Canada, an exploration company president said, had serious issues with new aboriginal regulations: 'It's a nightmare. We're thinking of getting out of mining.'

Of Manitoba, another said: 'It's becoming bad news for miners. We're battling not only the environmentalists but also First Nations and now Manitoba Hydro.'

Latin America's antimining groups were said to be 'problematic' in continuing to extort mining companies and making company- damaging false claims in the media.

'Mexico is becoming increasingly more dangerous and the drug cartel activities continue to increase and spread the violence to historically nonviolent areas,' a producer company executive said.

Peru, an exploration company said, had deteriorated dramatically, with tenure no longer secure and government policy being dictated by nongovernmental groups.

Argentina politicians and government officers, said a legal adviser, were the main culprits when it came to engendering negative mining attitudes.

New taxes in Nevada, in the US, a producer said, would be introduced for exploration.

A consultant told the Fraser Institute surveyors that he anticipated universal uncertainty for mining investors and another added that all Australian jurisdictions were no longer worth exploring because of tax uncertainty.

New Zealand was condemned as being a basket case.

Models to FollowWebber Wentzel resources lawyer Peter Leon has expressed the view that South Africa's Mineral Resources Minister, Susan Shabangu, has taken 'a very important first step in the right direction' in presiding over the historic 13-point government, labour and business declaration.

Leon, who coheads law firm Webber Wentzel's mining practice group, sees the major change as being government's new joint approach.

Labour recognises that the transformation of South Africa's mining industry cannot take place without mining industry growth and there is certainly growth potential.

Citibank has identified South Africa as having the largest in situ resource value of any country in the world, with mineral deposits estimated at $2,5-trillion. Australia and Russia fade into a distant second place, each lagging by a trillion dollars.

The prize is thus sizeable and the first commitment of the joint South African declaration ties the three mining stakeholders - government, business and labour - to the enhancement of South Africa's competitiveness.

Yet, the country has allowed itself to lose ground.

Leon's strongest point on the declaration is that it confirms that the Mineral and Petroleum Resources Development Act (MPRDA) is fundamentally flawed and that it will be 'significantly amended' during the Parlia-mentary session next year to give effect to the joint agreement.

'One of the very important things that this document recognises is that the architecture of the MPRDA, and not just its implementation, is defective. 'There is now an [acknowledgement] by everybody, including government, of the need to go back to the drawing board and fix the issues in the Act, like Ministerial discretion and lack of compulsory time periods for licensing,' Leon says.

Leon has been advocating that South Africa should emulate rising stars like Botswana and Ghana by removing excessive administrative discretion from its mining laws.

Ghana's mining laws have been depoliticised and Botswana's mining laws regularly come in for praise.'If you apply for a licence and meet the requirements of the law, you should not be put through 100 hoops. That's the lesson from Botswana and Ghana,' he says.

Leon is in favour of mining regimes that balance the interests of private investors, government, communities and the environment.

A key feature of the Botswana Mines and Minerals Act is that its licensing process is predictable and automatic, with the Minister having little administrative discretion and the licensing process being transparent.

The Fraser Institute has conducted an annual survey of metal mining and exploration companies since 1997 in order to assess how mineral endowments and public policy factors, such as taxation and regulation, affect exploration investment. The survey results represent the opinions of executives and explor-ation managers in mining and mining consulting companies operating around the world.

The Fraser Institute Survey of Mining Companies: 2010 Mid-Year Update was sent to 3 000 exploration, development and other mining-related companies around the world.

The Fraser Institute's vision is a free and prosperous world where individuals benefit from greater choice, competitive markets and personal responsibility. Its mission is to measure, study and communicate the impact of competitive markets and government interventions on the welfare of individuals.

It was founded in 1974 as an independent Canadian research and educational organisation with locations throughout North America, and international partners in 70 countries.

The institute says that, as commodity prices recovered after the global meltdown, several of the jurisdictions it surveys took steps that could increase both regulatory hurdles and taxation, and thus make mining more difficult and costly.

By contrast, South Africa's northern neighbour, Botswana, came in second to Finland on this survey question, and ranked a creditable eighth overall, after Alberta, Canada, Finland, Quebec, Yukon and Saskatchewan, all of Canada, Chile, and Newfoundland and Labrador, also in Canada.

'In order to attract mining investment, jurisdictions must uphold the rule of law and respect negotiated contracts and property rights.

Jurisdictions that fail to do so cannot compete successfully on a global scale,' McMahon swwaid. (Miningweekly)