CHARTS: The coming critical minerals trade war is BRICS short of a load
"While a large number of countries around the world continue to talk about securing raw material supply, China is actually doing something about it."
Last year according to an Ernst & Young survey of the world’s 30 largest miners, resource nationalism jumped to the top of the risk list after 25 countries announced their intentions to increase their take of the mining industry’s profits and others contemplate outright nationalization.
A growing list of nations – and not just radical fringe territories such as Zimbabwe or Venezuela – but stable jurisdictions including Poland, Ghana and Botswana have been pushing for greater control and ownership of the resource sector on top of higher taxes and royalties as cash-rich mining companies become easy targets for politicians.
South Africa recently stepped back from nationalization, but is nevertheless tightening its grip on the industry. Although it has since backtracked in the run-up to elections in Mongolia set for the end of the month draft legislation put forward new provisions to cap foreign ownership of domestic companies at 49%.
Zambia has publicly acknowledged that the period of state-controlled copper mining was disastrous, but is also looking at ways to increase state ownership and intervention in its resource industry.
Indonesia surprised the global mining community in March after a new rule – Government Regulation No. 24 of 2012 – was quietly announced on the mining ministry’s website which requires all foreign mining companies to sell majority stakes in their mining operations to locals. That news was in addition to new export duties levied on minerals.
The tide of resource nationalism may now be turning however argues the Financial Times because the world’s biggest miniers “are slowing down – or even talking about cancelling – their investment programme, allowing them to play country against country“.
Natural resources companies with a pipeline of, say, five projects in five different countries are now likely to build just two or three of those. Thus, executives have the power to cherry pick which combination of country and project offers the best returns.
The threat of a cancellation – or long delays – could be a powerful incentive for politicians to offer better terms to companies, executives mutter.
In particular, local and regional politicians will be particularly prone to lobby in companies’ favour in the hope of securing jobs and investments.
The paper says Australia appears to be leading the way in backing off from placing too onerous demands on resource investors and African countries are also taking a softer stance.
Changes in South American governments’ attitude towards greater state control and revenue from mining are less evident, with a country like Peru struggling to contain protests against new mega-mines and Argentina seizing outright control of energy assets.
As attractive deposits become harder and harder to find in traditional markets, miners – especially those exploring for gold – are also pushing the limits of the political risk they are willing to take on.
4 Comments
Dkmcg
US Code of Regulations published annually has 160,000 pages. Indonesia, with regulation 24 of 2012 may be far behind, but if they continue, they will succeed in crippling attitudes toward mining. This is right in line with Ben Bernanke’s public lecturing.
Farai Karonga
What’s new? There will always be this tug of war between multis and local (speak national) interests. Fact is most ‘not well developed’ jurisdictions have been and are still rapaciously exploited by the multis. Every so often local politics of these countries will spew up one with the guts and integrity to tackle the issue in the national interests. The so called reasonable countries are in the most surrogate nations. Those that dare to stand up are subjected to massive pressure (speak blackmail) of the worst type. Although not directly mining, look at what greek voters have been subjected to in the past days. The fear factor was exploited to the hitch by the west.
Far-cough
What a load of Socialist crap you write. Have’s & Have-NOTS. If the have’s have nothing then we’ll ALL end up with zilch. 😀
Eyeseeyou25
You do realize, you have strung together a bunch of nonsense. Albeit well worded, it’s nonsensical none the less.