The United States is the worst ranked nation in terms of mining permitting delays, while South Africa mining projects may encounter more corruption and social risk factors.
To download the free survey report, “2012 Ranking of Countries for Mining Investment Where ‘Not to Invest'”, go to http://www.dolbear.com
RENO (MINEWEB) – In its annual ranking of countries in terms of political risks for mining investment, Denver-based mining business consultants, Behre Dolbear, has ranked Australia, Canada, Chile, Brazil and Mexico as the top five nations in which to locate mining projects.
The five lowest-scoring nations were Russia, Bolivia, the Democratic Republic and Kazakhstan with Papua New Guinea bringing up the rear as the worst in terms of political risk for mining projects.
The 25 nations considered in this year’s survey were ranked on seven criteria: economic system, political system, degree of social issues affecting mining, delays in receiving permits, degree of corruption, stability of the country’s currency, and the competitiveness of the nation’s tax policy.
Each criterion was rated on a qualitative scale from 1 (worst) to 10 (best) with a maximum attainable score of 70 points.
“Due to their inherently low ranking”, Behre Dolbear did not even bother to rank Venezuela and Zimbabwe on the list although both contain significant mineral wealth.
“Behre Dolbear advises clients to exercise notable caution when considering investments in these countries. The political and social situation in Zimbabwe continues to warrant exceptional consideration in risk mitigation while in Venezuela, Hugo Chavez’s nationalization of gold mines and other mineral resource assets severely limits investment return potential. Significant political reform must occur in both countries prior to the restoration of investor confidence.”
In their analysis, Behre Dolbear noted State-owned enterprises (SOE) and sovereign wealth funds (China, Korea, Russia, India, Singapore, Saudi Arabica, and elsewhere) are continuing to invest in mineral resource development and production as their parent countries consume more mineral products correlated to economic growth.
In China, SOE accounts for 80% of the Chinese stock market capitalization, 60% of Russia’s and 35% of Brazil’s.
Behre Dolbear observed that North America’s “well-defined mineral endowment continues to attract significant capital investment despite regulatory hindrances due to its competitive standing relative to the quality of its resources, the capability of its existing infrastructure enabling products to access markets, and through the capacity of its human capital resources.”
Capital available to many African projects continues to increase with more money from mineral development going into infrastructure, social services and better governments, the study observed. “Sub-Saharan Africa continues to be relatively stable by avoiding despotic or totalitarian regimes.” Nevertheless, Zimbabwe and South Africa “prove challenging to foreign and domestic investor alike as an uncertain political atmosphere detracts from mineral development.”
Low-cost energy in the Middle East region is continuing to promote the development of energy intensive industries such as fertilizers, aluminum and steel. These sectors consume aggregates, ferro and specialty alloys.
In Central and South America, the recent decline in mineral prices “combined with increased inflation and renewed nationalism is causing concern as producer’s margins are squeezed,” the survey noted. “Many countries throughout the region are increasing mineral taxes and imposing other requirements on mining operations.”
In Asia, China’s sphere of influence on its neighbors and their resources, such as Australia, although initially welcomed, “is coming under increasing scrutiny resulting in foreign ownership and export restrictions.”
ECONOMIC SYSTEMS
In the economic system portion of the survey, Australia, Canada and Chile were the highest-rated countries, while the lowest-rated countries were Russia, Bolivia, DRC, Kazakhstan and South Africa. There were no improved ratings in this year’s survey, as the ratings for five countries (United States, Mexico, Mongolia, China and India) declined.
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