Archive | Resource Nationalism

Risky business: managing political instability in the mining industry – by Julian Turner (Mining-Technology.com – March 27, 2018)

https://www.mining-technology.com/

Managing political and regulatory risks while operating abroad is now a business imperative for mining operators. Julian Turner talks to Rob Foulkes and Charlie Pembroke of consultancy Critical Resource about sustainability, licence to operate issues and avoiding mistakes of the past.

Anyone in search of a cautionary tale about the myriad risks faced by energy and mining companies operating abroad need look no further than Acacia Mining and its ongoing travails in Tanzania.

In 2017, the East African nation accused the London-listed gold miner of under-reporting output at its three mines and banned it from exporting powdered gold concentrate. The embargo cost Acacia’s chief executive and chief financial officer their jobs, and the company around $1m (£760,000) a day. Continue Reading →

As Commodities Roar, Africa Wants Bigger Slice of Mining Pie -by Thomas Biesheuvel and Thomas Wilson (Bloomberg News – March 22, 2018)

https://www.bloomberg.com/

One by one, the biggest names in African mining are getting squeezed. The tactics might be blunt, but the message is clear: the countries where they operate want a bigger share of the proceeds.

The collapse in commodities through 2015 hobbled some of Africa’s biggest resource economies, stunting growth and leaving budgets short. Since then a recovery in prices has sent the continent’s biggest miners soaring, boosted profits and rewarded shareholders with bumper payouts. But a lack of returns to governments is drawing a backlash from Mali in the Sahara to Tanzania on the Indian Ocean.

Zambia is the latest flash point. Africa’s second-biggest copper producer slapped a $7.9 billion tax assessment on First Quantum Minerals Ltd. and said it’s planning an audit of other miners in the country. Companies operating in Zambia include units of Glencore Plc and Vedanta Resources Plc. Continue Reading →

Canadian miners struggle with wave of African tax increases – by Niall McGee and Geoffrey York (Globe and Mail – March 22, 2018)

https://www.theglobeandmail.com/

A wave of African tax increases is engulfing some of Canada’s biggest mining companies, leaving them scrambling to negotiate with newly assertive governments that have lost patience with traditional tax deals.

First Quantum Minerals Ltd. is the latest Canadian company to be hit with a massive tax bill. Zambian authorities have told the company to pay an additional US$8-billion in taxes and penalties for failing to pay proper duties on imported supplies over the past five years.

First Quantum’s chief executive, Philip Pascall, admitted on Wednesday that he had been completely blindsided by the shock announcement. “I literally heard about this the day before yesterday,” he told investors in a conference call as he tried to mollify their concerns. Continue Reading →

Guatemala Mines a Mother Lode of Trouble – by Mac Margolis (Bloomberg News – March 1, 2018)

https://www.bloomberg.com/

A bitter fight over a silver mine points to the pitfalls of Latin America’s new resource nationalism.

Although it’s small and mostly poor, Guatemala sits on a heap of treasure. Last year, it ranked as the world’s 15th-largest producer of silver, a nest egg that could yield economic growth and taxes and royalties, helping to hoist millions from misery.

So why is the Escobal silver mine, one of the world’s largest, idle? In 2014, when the Canadian-owned Tahoe Resources Inc. started production, corporate touts projected a two-decade bonanza. Now they’re facing a shuttered mine, protesters, and a lode of legal troubles.

To hear tell from the mine’s backers, including U.S. legislators in a letter to President Jimmy Morales and Guatemalan industrialists, Escobal is the victim of choleric political activists, and even “criminal groups,” as one company official told me, who are using the courts as a fig leaf to thwart foreign investors. Continue Reading →

Tanzania’s new mining law will compel foreign companies to boost local financial firms – by Abdi Latif Dahir (Quartz Africa – February 2, 2018)

https://qz.com/

Tanzania is set to overhaul its extractive industry after the government passed a new law that posits strict guidelines for foreign companies.

The new law gives companies three months to comply with the regulations, while also making them apprise the government of how they are enacting these changes.

As part of reform, the government wants to enhance the competitiveness of local mining and financial institutions by setting minimum employment levels and in-country spend for foreign firms, while also providing a structural monitoring and reporting system that ensures companies deliver on these objectives. Continue Reading →

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 →