Archive | Resource Nationalism

COLUMN-Indonesia’s Freeport-Rio plan masks longer-term issues – by Clyde Russell (Reuters U.K. – December 7, 2017)

https://uk.reuters.com/

LAUNCESTON, Australia, Dec 7 (Reuters) – A proposed three-way deal between the Indonesian government, Rio Tinto and Freeport-McMoRan to clean up the ownership of the giant Grasberg copper-gold mine looks like one of those rare situations where everybody wins.

Except that it isn‘t. Certainly all parties may walk away feeling that they have achieved the best outcome, assuming the complicated deal can be pulled off at a price acceptable to all three.

But this ignores the wider picture in which any short-term advantage is likely to be offset by compounding longer-term problems. First, a brief re-cap of what’s at stake. Grasberg is the world’s second-largest copper mine, as well as being one of the five-biggest gold mines, and is further advantaged by having high grades and low costs. Continue Reading →

Indonesia plans to buy out Rio’s share of Grasberg copper mine – by Wilda Asmarini and Fergus Jensen (Reuters U.K. – December 5, 2017)

https://uk.reuters.com/

JAKARTA (Reuters) – Indonesia plans to acquire Rio Tinto’s 40 percent participating stake in the Grasberg copper mine operated by the local division of Freeport-McMoRan Inc, part of government plans to control more of the country’s resources.

Under a joint venture formed in 1996, Rio has a 40 percent interest in Freeport’s Grasberg contract, entitling it to 40 percent of production above specific levels until 2021 and 40 percent of all production after 2022. Phoenix, Arizona-based Freeport said in August it would divest 51 percent of PT Freeport Indonesia to the Indonesian government, to meet local ownership rules.

Indonesia plans to complete the acquisition of Rio’s interest in the mine in 2018, as part of a purchase of a 51 percent stake in Freeport Indonesia by the Ministry of State-Owned Enterprises (SOE) and other government units, Energy and Mineral Resources Minister Ignasius Jonan said on Tuesday. Continue Reading →

Zambia’s state-controlled investment firm wants bigger stake in copper mines – by Zandi Shabalala (Reuters U.S. – November 29, 2017)

https://www.reuters.com/

LONDON, Nov 29 (Reuters) – Following the sharp rise in copper prices this year Zambia’s state-controlled firm ZCCM Investments Holdings wants to increase its stakes in the country’s mines and also expects higher dividend payments, its chief executive said on Wednesday.

ZCCM-IH, which was formerly called Zambia Consolidated Copper Mines Investment Holdings, has assets of about $1 billion with minority stakes held in the local mine operating subsidiaries of foreign miners including Glencore, First Quantum Minerals, Vedanta and Jinchuan Group International Resources.

Zambia is Africa’s second largest copper producer behind the Democratic Republic of Congo and a 22 percent rise in prices this year has boosted profits for the miners. Continue Reading →

Mining mire spreads in Indonesia – by John McBeth (Asia Times – November 28, 2017)

http://www.atimes.com/

While US mining giant Freeport McMoran’s contract dispute has hogged headlines, smaller foreign miners are next in the government’s nationalistic sights

American mining giant Freeport McMoRan Copper & Gold may dominate headlines for its endless negotiations with the Indonesian government over the fate of its rich Grasberg mine, but spare a thought for the small foreign mining firms who are getting trampled in the process.

The Ministry of Energy and Mineral Resources has recently sent an ultimatum to eight Contract of Work (CoW) holders that it will be “unable to provide any services to company activities” if the hold-outs fail to sign a 37-page amended contract by the end of the year.

Riding a wave of resource nationalism that began at the start of the commodity boom in the mid-2000s, the ministry has already rejected one firm’s request for an extended feasibility study and turned down another’s 2018 work program, both of which are needed to raise additional finance. Continue Reading →

Tanzania: Dar Posts Biggest Coup in Mineral Wealth War (All Africa.com – October 24, 2017)

http://allafrica.com/

TANZANIA is on course to register the biggest coup in an economic war over its mineral resources after striking a deal with Barrick Gold Corp, to settle a tax and revenue sharing disputes over three gold mines in the country operated by its African subsidiary group, Acacia Mining.

After three months of painstaking negotiations, the Toronto-based company said it will pay the government 300 million US dollars (about 700bn/-) as part of the deal, give the government a 16 per cent stake in its mines, and will equally split “economic benefits” from the mining operations.

Barrick owns 63.9 per cent equity interest in Acacia Mining which is the country’s largest gold miner. As part of the agreement, Barrick Gold Corp said the government will participate in decisions related to operations, investment, planning, procurement, and marketing. Continue Reading →

Surprise, you owe Tanzania $300 million and 50% of what your gold mine makes – by Tom Wilson and Omar Mohammed (Financial Post/Bloomberg – October 20, 2017)

http://business.financialpost.com/

Acacia Mining Plc’s tumultuous year doesn’t seem likely to ease up any time soon. The gold miner’s shares surged as much as 41 per cent Thursday, after controlling shareholder Barrick Gold Corp. said it moved closer to resolving a crippling dispute with Tanzanian authorities.

Yet it seems Acacia itself — which must approve any deals Barrick negotiates with the government — was left out of the loop. Tanzania banned exports of unprocessed gold in March and hit Acacia with a US$190 billion tax bill in July, claiming the company had under-declared export revenue since 2000.

The ban meant the London-based company was forced to stockpile output and curb mining at its flagship operation. Third-quarter earnings plunged 70 per cent from a year ago, the company said Friday. Continue Reading →

Special Report: Grasberg mine talks signal Indonesia’s strengthening resolve – by Alexander Macleod (Global Risk Insights – October 21, 2017)

Despite some issues concerning the Indonesian government’s divestment plans for the province of Papua’s Grasberg mine, there are growing signs that Indonesia will get its way. Nevertheless, Indonesia’s ruthless treatment of Freeport will alert future investors.

This year has been unforgiving to Freeport McMoRan Inc, an invaluable player in Indonesia’s mining sector. On August 29, after months of tense negotiations, Freeport agreed to relinquish a 51% share in Grasberg, the world’s second-largest gold and copper mine, to the Indonesian government.

Having acquired Grasberg early in the Suharto era, American corporation Freeport has since transformed it into a ‘super mine’. Grasberg produced 500,000 tonnes of copper and 1.1m ounces of gold in 2016 – over 25% of Freeport’s worldwide output. Continue Reading →

Resource nationalism as imperialism – by Arianto Sangadji (Inside Indonesia – Oct/Dec 2017)

http://www.insideindonesia.org/

Foreign investment in large-scale mining has encountered serious obstacles

Over the past decade, foreign investment in large-scale mining has been hampered by the enactment of Law No. 4/2009 concerning mineral and coal, which replaced the more liberal Law No. 11/1967. The replacement act and its subsequent regulations have been the subject of intense national policy debate.

Apart from a host of uncertainties due to regulatory changes, some argue that the new law substantially undermines favourable conditions for foreign mining investment. Initially, at least, the policies restricted the inflow of transnational mining capital.

Most criticism of the current development of mining investment is directed at government policy for being heavily nationalistic, for example the prohibition on exporting unprocessed ores in the 2009 law; the mandatory requirement for in-country processing and refining; and the imposition of partial but significant divestiture of foreign mining capital on domestic mining firms, both-state owned and private. Continue Reading →

Tanzania edges towards total mine nationalization – by Sebastian Spio-Garbrah and Mark Willms (DaMina Advisors – October 2017)

www.daminaadvisors.com

Sebastian Spio-Garbrah, JD, Chief Frontier Markets Analyst; with Mark Willms, LLB, LLM, Co-Head DaMina Advisors. DaMina Advisors is a preeminent Africa-focused independent frontier markets risk research, due diligence and Africa M&A transactions consulting and strategic advisory firm.

Tanzania is edging closer and closer to a total nationalization of the country’s mining sector. The spirit of recent laws passed by the Parliament of Tanzania signals that the ongoing disputes between the government of Tanzania and foreign mining companies is moving towards nationalization and the non-enforcement of any international arbitration awards in local Tanzanian courts.

The textual essence of these new laws revolve around the notion that Tanzania’s domestic law is to be supreme over any international dispute or arbitration decision, as Tanzanian sovereignty is considered to be of utmost importance. The laws also take retroactive effect on existing mining contracts.

There are many provisions in the new laws that express the government’s statist anti-foreign investor bias. Continue Reading →

Investors wary as Tanzania moves to assert more control over mines – by Katharine Houreld and Zandi Shabalala (Reuters U.S. – September 24, 2017)

https://www.reuters.com/

NAIROBI/LONDON (Reuters) – New laws and a crackdown on mining firms in Tanzania has slowed fresh investment in what has long been seen as one of Africa’s brightest mining prospects as companies assess the consequences of government efforts to claim a bigger slice of the pie.

Takeover bids and exploration plans have been canceled and workers laid off. The share prices of many firms listed in Australia, Britain, South Africa and Canada with interests in Tanzania have halved as the value of their investments tumble.

The tumult follows the passage of three laws in July that, among other things, hike taxes on mineral exports, mandate a higher government stake in some mining operations and force the construction of local smelters to bring Tanzania higher up the mining food chain. Continue Reading →

Goldplat miner seeks to tame Africa risk – by Barbara Lewis (Reuters U.S. – September 19, 2017)

https://www.reuters.com/

LONDON (Reuters) – Upheaval in Tanzania, where the government has made huge tax demands and seized minerals, has triggered changes in neighboring Kenya, which should reassure the industry, said the CEO of Goldplat (GLDP.L), which operates a gold mine there.

Chief Executive Gerard Kisbey-Green said he was nevertheless seeking to diversify his portfolio to cover more African nations and to expand into platinum group metals as he strives to offset African risk.

This year, the mining industry has reeled from South Africa’s proposed new mining charter and changes in Tanzania, where the government is locked in a tax dispute with Barrick Gold (ABX.TO) subsidiary Acacia (ACAA.L). Continue Reading →

Resource nationalism: do the riches outweigh the risks? – by Sandra Rubin (Lexpert Business of Law – September 19, 2017)

http://www.lexpert.ca/

Canadian miners experiencing “increasing anxiety” over country risk

WITH A GROWING NUMBER of mining companies moving into higher-risk countries in recent years in the search of the next big deposit, they and their investors are increasingly grappling with a resurgence in resource nationalism that can badly buffet share prices.

There’s been a trend recently for foreign governments, especially in emerging-market countries, to target large producers and seek higher taxes, larger shares of the profits, new ownership arrangements or new kinds of payments from the same companies they once wooed with generous concessions.

And if they don’t get what they’re asking for? The companies may find their permits yanked, their income and personnel restricted from leaving the country, their tax regimes or legal obligations suddenly changed, or even be forced to give the government or state a larger stake in the project. Continue Reading →

Tanzanian Leader’s War for Taxes Puts Economy in Firing Line – by Omar Mohammed and Michael Cohen (Bloomberg News – September 18, 2017)

https://www.bloomberg.com/

Tanzanian President John Magufuli’s deepening dispute with companies he accuses of being tax cheats is rattling investors and dimming the allure of one of Africa’s fastest-growing economies.

Since taking office in late 2015, Magufuli has been on a drive to increase revenue from natural resources to help fund his industrialization plans. His administration has passed laws enabling it to renegotiate contracts and ordered foreign mining firms to sell stakes on the local stock exchange to increase transparency.

The authorities have hit Acacia Mining Plc with a $190 billion tax bill, curbed its exports and detained a senior employee, and seized gems and questioned staff from Petra Diamonds Ltd., alleging it hadn’t paid its dues. Continue Reading →

Fight for World’s Biggest Gold Mine Isn’t Over, Says Former CEO – by Karlis Salna and Yoga Rusmana (Bloomberg News – September 15, 2017)

https://www.bloomberg.com/

The landmark deal that forced Freeport-McMoRan Inc. to cede control of the world’s biggest gold mine and second-largest copper mine to Indonesia may not be the final outcome as both sides prepare for a politically charged fight over the price of the asset and how it will be run, according to the U.S. company’s former chief in Indonesia.

Chappy Hakim, who once led the nation’s air force and who remains an adviser to Freeport Indonesia after his resignation as chief executive in February, said the political nature of the negotiations, which have been going on for years, make it unpredictable as to what both sides will finally agree.

“They can go somewhere we don’t expect,” Hakim said in an interview in Jakarta. “There are a lot of side interests involving politicians. That’s why I don’t like it. Politicians are like golfers that have a lot of power but no direction.” Continue Reading →

Gold miners seek safety as political risks rise – by Nicole Mordant (Reuters U.S. – September 14, 2017)

https://www.reuters.com/

VANCOUVER (Reuters) – Canadian miner Eldorado Gold Corp’s threat this week to freeze investments in Greece after years of frustrating and costly permit delays highlighted the risks the industry faces when it strays away from mining-friendly countries.

After moving into higher-risk countries in recent years to mine new deposits, companies are being forced to seek safe havens during a rise in so-called resource nationalism and other political headwinds.

From Indonesia and Tanzania to South Africa and Zambia, governments are demanding greater control over mineral riches as metals prices rise, often seeking higher royalty payments. In Eldorado’s case, the company faces a leftist-led Greek government that publicly backs investment but has powerful insiders that oppose privately owned mining projects. Continue Reading →