THERE are tough lessons being learned by governments in many Asia Pacific countries which have been changing mining industry regulations to garner more revenue. By and large these changes could not have come at a worse time for an industry suffering from economic forces largely beyond its control – forces that have brought about volatile commodity prices, lack of ability to raise capital for exploration, development or expansion and a lack of investor confidence.
In Australia’s case changes imposed by the previous government are being reversed but recovery will take quite some time as Australia’s mining industry has been hit very hard by current economic circumstances and miners need all the encouragement they can get from elected representatives. Some promising signs are emerging aided by slowly improving global economic conditions, continuing demand from developing economies and moves in the right direction by government but there is a lot of ground to make up.
Mongolia was starting to emerge as a mining investment hotspot with global investment attention turned firmly at the resource-rich, landlocked northern Asian country but resource nationalism raised its head in a major way during 2013 and foreign investment dried up overnight. The new year is young, however there are some promising noises coming from the government and some recent decisions that have potential to turn the foreign investment tap back on. Again, it is going to take a long time to repair the damage done and the government has to first show its support of a number of major mining projects, as stated by Business Council of Mongolia executive chairman Jim Dwyer in an article on page 10 of this edition.
While the Indonesian Government’s intentions with its ban on exports of unprocessed mineral ore are worthy by the creation of in-country value-adding leading to more economic benefits, it has been imposed far too hastily, not giving mining companies nearly enough time to develop new processing facilities. The result has been a major economic hit to the economy and to the vast majority of mining companies operating in the archipelago, again at a time when the companies can least afford it.
The ban has been watered down but the government has introduced a new progressive export tax on those companies allowed to continue mineral concentrate exports, causing further confusion and long delays in approving export permits. Around $500 million worth of copper concentrate, nickel ore, iron ore, bauxite and other mineral exports have ground to a halt due to confusion over implementation of the export ban on January 12.
There are concerns that a prolonged halt in mineral ore and concentrate exports could cause the current account deficit to blow out again, after narrowing to 1.98% of gross domestic product in the fourth quarter. The G20 economy is among the most vulnerable to the risk of outflows due to its current account deficit, which hit a record of 4.4% of GDP in the second quarter of 2013.
The ban is benefiting other Asia Pacific countries with large reserves of minerals Indonesia exports to major demand sources, particularly nickel and bauxite. The Philippines and Australia are likely to benefit most although other countries such as Vietnam, Papua New Guinea and those in Central Asia are seeking ways to exploit the ban.
That is not to say these countries aren’t without their own government-induced problems for mining. The Philippines has huge potential but it is difficult to see it being reached owing to inconsistently in regulations at local, regional and national levels, the national government’s inability to change this and entrenched problems with anti-mining groups. Emerging mining industries in Vietnam, Laos, Cambodia, Papua New Guinea, Myanmar, Kazakhstan and the Kyrgyz Republic also have difficulties attracting suitable foreign investment owing to the inabilities of governments to effectively and fairly manage rules and regulations to encourage mining while also benefiting local populations.
Networking has never been more important for the mining industry and the Mining Vietnam exhibition and associated conferences from March 11-13 will be suitable forums which can only help the industry’s bid for recovery (see page 48).