Archive | Resource Nationalism

Countries Push to Extract More Cash from Big Mining Companies – by Rhiannon Hoyle and Alexandra Wexler (Wall Street Journal – November 18, 2018)

Jakarta/Kalumbila – From Congolese jungles to Indonesian highlands, a struggle is raging between governments and major mining companies over control of commodities vital to the production of everything from steel to electric cars to smartphones.

Developing-world leaders, spurred by rising mineral prices, are making their toughest demands on Western mining companies in years, squeezing them to pay higher royalties and taxes, process commodities locally and cede control of mines.

In Indonesia, Rio Tinto RIO 1.76% PLC and Freeport-McMoRan Inc. were pressed to sell majority control of the world’s second-largest copper mine, Grasberg, to a government that aims to transform its state-owned resources companies into industry behemoths. Continue Reading →

[Afghanistan Mining] How to Avoid the Resource Curse? Take Six Years to Approve Deals – by Eltaf Najafizada (Bloomberg News – November 7, 2018)

Afghanistan selected preferred bidders for three gold and copper mines in 2012. It took the war-torn nation six years to finally sign the contracts.

Afghan President Ashraf Ghani announced the deals in the past few weeks. The government took time to finalize the agreements because it wanted to ensure they were transparent and will help eliminate corruption in awarding contracts, Ghani said in an interview in his office in Kabul. After his election, Ghani ordered his administration to review 14 mineral and oil contracts that had stalled.

Harnessing “natural wealth around the world has been rarely successful. Most of the time it’s been called the curse of the natural resources,” Ghani, 69, said. “We were focused on avoiding this.” Continue Reading →

Hands off Brazil’s niobium: Bolsonaro sees China as threat to utopian vision – by Jake Spring (Reuters U.S. – October 25, 2018)

CATALÃO, Brazil (Reuters) – Jair Bolsonaro, the far-right candidate favored to win Brazil’s presidential election this Sunday, has a vision for his nation’s economy: niobium.

This mineral is used as an additive to steel to make the metal stronger and lighter. Niobium is in high demand by automakers, aerospace companies and a host of other industries. Brazil accounts for about 85 percent of the world’s supply. And Bolsonaro wants to keep it that way.

China’s purchase two years ago of a small Brazilian niobium mine has the candidate agitating to block other foreign purchases of assets deemed strategic. So smitten is Bolsonaro with niobium – and Brazil’s potential to capitalize on its production – that he produced a 20-minute YouTube video touting its virtues. Continue Reading →

Growing government control over resources sounds alarm bells – by Lisa Steyn (Business Day – October 12, 2018)

Resource nationalism takes various forms including higher royalties and taxes imposed on companies

Alarm bells are sounding for the mining industry over growing government control of resources in Sub-Saharan Africa, as states try to cash in on higher commodity prices and secure votes ahead of elections.

This phenomenon — dubbed resource nationalism — is unlike outright nationalisation seen in the 1960s and 1970s when governments took full control of mines. Instead it takes various forms, including higher royalties and taxes imposed by states on companies, and the introduction or increase of compulsory minimum quotas for ownership. An emphasis is also placed on aspects such as local beneficiation and procurement of local goods and services.

It has taken hold in Tanzania, the Democratic Republic of Congo and even SA, according to Peter Leon, partner and Africa cochair at law firm Herbert Smith Freehills, who presented at the International Bar Association Annual Conference in Rome from October 7-12. Continue Reading →

“It is not clear to me that geopolitical risk has increased” – by Staff (Mining Journal – October 3, 2018)

Rule, the president and CEO of Sprott US Holdings, says in an interview with mining risk advisory firm Critical Resource that miners must be prepared to take a stronger stand and not allow politicians and bureaucrats to shun rational economic and social debate.

“The industry needs to be much more proactive on … the issue of resource nationalism and resource rent,” he said.

“For example, we are confronted with cases like Zambia trying to tax First Quantum a sum that exceeds the company’s global sales during the period of the alleged infractions. Not only does the industry need to point out the absurdity of that, but it also needs to initiate a debate on what is the appropriate level of social rent. Continue Reading →

Rio Tinto pushes Grasberg deal closure into 2019 – by Peter Ker (Australian Financial Review – September 30, 2018)

Rio Tinto could be waiting up to nine months for the proceeds of its Grasberg copper divestment to flow through, despite clearing a significant hurdle on the transaction in recent days.

Indonesian state-owned company PT Indonesia Asahan Aluminium (Inalum) signed binding agreements with Rio and its partner Freeport McMoran to reshape the ownership structure of the mine, under a deal that will give Inalum majority ownership and Rio $US3.5 billion in cash proceeds.

But the “binding” deals were said to be conditional on further approvals, including from anti-trust regulators in several nations. Continue Reading →

Economic nationalism is back in Indonesia as election approaches – by (Straits Times – September 17, 2018)

JAKARTA (BLOOMBERG) – Nothing sells like economic nationalism in Indonesia’s election season. Facing a challenge from a self-proclaimed nationalist, President Joko Widodo has used speeches after his nomination for April’s vote to tout his success in wresting control of the nation’s prized natural resources from foreign companies.

Now the campaign in the lead up to the April 2019 poll is expected to develop into a battle built around economic nationalism. While it may risk a retreat by foreign investors from South-east Asia’s biggest economy, it’s still likely to be a vote winner, according to analysts.

Widodo, known as Jokowi, has carried forward the resource nationalism championed by his predecessor Susilo Bambang Yudhoyono by taking steps to take back assets managed by multinationals such as Freeport-McMoRan Inc., Total SA and Chevron Corp. His government recently ordered all oil producers to sell their crude to state refiner PT Pertamina as it sought to cut imports. Continue Reading →

‘Resource nationalism’ clouds China’s Africa ambitions – by MASANORI TOBITA and TETSUSHI TAKAHASHI (Nikkei Asian Review – June 23, 2018)

VIENNA/BEIJING — Rising nationalism in African nations over control of resources is starting to overshadow the efforts of Chinese and other foreign companies to develop their operations on the continent.

Some countries are demanding that foreign companies involved in mining invest in local companies, and plan to increase taxes on such foreign enterprises. These countries aim to fill their coffers by reclaiming ownership of mining concessions, anticipating a recovery in global resources prices.

On Wednesday, Chinese President Xi Jinping outlined plans for a tour of Africa in July in an apparent effort to shore up ties with various countries on the continent. The initiative comes as China’s relations with the U.S. have been strained by concerns over trade and security. Continue Reading →

Resource nationalism on the rise in sub-Saharan Africa – by Nadine James ( – June 15, 2018)

The seemingly increasing trend towards nationalist thinking, combined with and likely driven by growing economic inequality, has resulted in several changes in mining and tax legislation in sub-Saharan Africa countries.

Herbert Smith Freehills Africa Group co-chair and partner Peter Leon says the recent and significant changes to mining regulations in various African States have caused concern that a “regional trend of resource nationalism may be emerging”.

White & Case partner Rebecca Campbell notes that her firm’s yearly mining survey of 2018 found that about 45.1% of respondents believe that the heightened risk of resource nationalism across Africa makes it difficult to justify investment. Continue Reading →

Distraction or disaster? Freeport’s giant Indonesian mine haunted by audit report – by Bernadette Christina Munthe and Fergus Jensen (Reuters U.S. – May 24, 2018)

JAKARTA (Reuters) – A state audit of operations at Indonesia’s Grasberg mine has cast a cloud over the government’s multi-billion-dollar deal to take a majority stake in the mine from Freeport McMoRan Inc and its partner Rio Tinto, according to government and company officials.

In April, in follow-up action to the audit, the environment minister issued two decrees that gave Freeport six months to overhaul management of its mine waste, or tailings, at Grasberg, the world’s second-biggest copper mine. One of the decrees said Freeport would be barred from any activities in areas that lack environmental permits.

And there may be more troubles to come for the Phoenix, Arizona-based company as the government has so far acted on only a part of the 2017 report by Indonesia’s Supreme Audit Agency (BPK) on Freeport’s decades-long operations at the mine in Indonesia’s remote easternmost province of Papua. Continue Reading →

Tanzanite miner gets bill as Tanzania cracks down on lost mineral revenues – by Omar Mohammed (Reuters U.S. – May 17, 2018)

NAIROBI (Reuters) – Tanzanian gemstone miner Tanzanite One has agreed to pay compensation and overdue taxes to the government after unspecified violations led to losses in public revenues, the president’s office said.

President John Magufuli’s government accuses mining firms of cheating Tanzania out of its fair share of mineral wealth through tax dodging and smuggling, allegations they deny.

Tanzanite One, which claims to be the biggest miner of tanzanite – a blue-violet gemstone found only in the East African nation – acknowledged mistakes but did not disclose what violations had been committed or how much it would pay in compensation. Continue Reading →

Rising Resource Nationalism Seen as ‘Fire Burning’ for Miners – by Danielle Bochove (Bloomberg News – May 16, 2018)

A rising tide of resource nationalism is causing miners to rethink where they invest and creating volatility for a sector already buffeted by brewing trade wars.

“A significant industry issue is resource nationalism,” Rio Tinto Group Chief Executive Officer Jean-Sebastien Jacques told investors at a conference in Miami this week. “From the DRC and South Africa to Mongolia and Australia, it is gaining momentum. As a result, the case for investment and FDI is clearly under threat.”

Among the most epic battles is Freeport-McMoRan Inc.’s fight to secure long-term rights to its flagship Grasberg copper-and-gold mine in Indonesia. Its joint venture partner, Rio Tinto, is in talks to extricate itself by selling its stake to local interests. Continue Reading →

Rio Tinto CEO calls for ‘United Nations of the mining world’ – by Barbara Lewis (Reuters U.S. – May 15, 2018)

LONDON (Reuters) – Rio Tinto (RIO.L) (RIO.AX) CEO Jean-Sebastien Jacques said resource companies needed to build “the United Nations of the mining industry” to tackle rising resource nationalism and cost inflation.

Rising commodity prices typically lead to resource nationalism as they inspire resource-holding nations to demand higher shares of international mining companies’ profits.

At the same time, the miners say increased energy prices and wage demands are driving cost-inflation and eroding profit margins. They also say their profits required years of investment throughout the commodities cycle and their projects provide jobs and tax revenues for host nations. Continue Reading →

Rio Tinto warns of threat from rising costs and resource nationalism – by Neil Hume (Financial Times – May 15, 2018)

The head of Rio Tinto has issued a stark warning to the mining industry, saying it will have to work hard to protect margins and generate cash against a backdrop of rising costs and increased political risk.

Rio chief executive Jean Sebastien-Jacques said cost inflation driven by near $80-a-barrel oil was affecting the entire sector and all commodities, while resource nationalism was gaining momentum.

“The outlook for global growth remains positive — but there are some significant risks. Volatility in markets . . . trade wars and resource nationalism are all sources of uncertainty,” Mr Jacques told investors at the Bank of America Merrill Lynch conference in Miami. Continue Reading →

Congo Finalizing Mining Rules After Company Concerns Ignored – by William Clowes (Bloomberg News – May 9, 2018)

The Democratic Republic of Congo’s Mines Ministry said it’s completing work on new regulations, as a draft document showed the government has so far ignored companies’ key concerns about the reforms.

Miners including Glencore Plc and Randgold Resources Ltd. have demanded the government dial back aspects of the legislation approved by President Joseph Kabila in March.

The ministry makes no mention of any of the major changes the companies seek, according to a draft document seen by Bloomberg that was verified by a member of a commission charged with revising the mining code and by a mining-company manager. Continue Reading →