Teck Resources Ord Shs Class A T.TECK.A

Resource nationalism

[Oldnicknor]

Own companies with long lived resources in secure regions of the world (Don Coxe)

From Metal Bulletin

https://www.metalbulletin.com/Article/2988484/Copper/SPOTLIGHT-Competition-for-assets-gives-African-governments-a-stronger-hand-in-resource-negotiations.html

Competition for assets gives African governments a stronger hand in resource negotiations

March 02, 2012 - 15:26 GMT Location: Windhoek

KEYWORDS:Africa , mining , mineral assets , DRC , Zambia , Guinea , Zimbabwe , South Africa , Thomas Wilson

Fierce competition for Africa’s mineral assets has strengthened its governments’ bargaining positions with western investors, according to market analysts.

Fierce competition for Africa’s mineral assets has strengthened its governments’ bargaining positions with western investors, according to market analysts.
International investors in mineral-rich countries, such as the Democratic Republic of Congo (DRC), Zambia, Guinea and Zimbabwe, have been slow to understand Africa’s changing commercial environment, the analysts told Metal Bulletin.

Western investors must tread much more carefully as they face rising competition for investments in African minerals from China, India, Russia, Malaysia, South Korea and Brazil, which is allowing African governments to push for increased control of mining projects within their borders.

African governments are demanding more revenue from mining projects, and in many countries, legislation has been changed or is being enacted to enable government shareholdings in such ventures.

A South Africa-based mining analyst told Metal Bulletin that African governments are no longer afraid of “scaring investors”.

“African governments are going to try and make as much money as possible,” the analyst said. “They don’t care whether they scare off investors – they realise it is the investors who have much to lose.”

Mine ownership and operations across Africa are still largely in the hands of foreign companies, and these still mostly export minerals in their raw forms. And some international mining companies domiciled in tax havens have successfully negotiated huge tax exemptions.

In the DRC, for example, where the mining code is currently being amended, companies have enjoyed tax holidays for more than a decade.

African governments broadly agree that they are not reaping the benefits of their mineral wealth.

This view is bolstered by the African Mining Vision (AMV), which was adopted by African governments in 2011 and urges the continent’s governments to raise taxes on mining.

“The adequacy of revenue obtained by African governments from mineral exploitation is a subject of controversy,” it said.

“No precise or uncontested measure for determining adequacy exists, but the widespread sense that Africa has not obtained commensurate compensation from exploitation of its mineral resources is impossible to ignore,” it added.

“This sentiment has become particularly pronounced since the early years of the mineral commodity price boom, which has substantially lifted profits for mining companies,” the AMV argued.

Deloitte, in its report Tracking the Trends 2012, also recommended that mining companies should “broaden their purview by fostering improved collaboration – across their own organisations, among industry players and with communities and governments around the world”.

Thomas Wilson, an analyst with markets advisory firm AfricaPractice, told Metal Bulletin that investors into Africa could be confronted with a scenario in which governments collaborate on mining policies.

“The arrival of capital and investment from China, India, Korea and Latin America over the past ten years has strengthened the negotiating position of African governments,” he said.

“Where they used to be dealing with one or two investors, they now have up to 20 or 30 different companies after one asset. That increased competition has made them more bullish, particularly against western mining companies,” he added.

While mining majors, such as Anglo American, BHP Billiton, Rio Tinto and others, are still active on the continent, African governments give preference to “friendly” investors from Asia and Latin America, Wilson said.

“Even though the mining majors can still make their presence felt, there is now a realisation that they are not the only players in the game,” he said.

The DRC is amending its mining code to raise taxes and state participation in mining projects to 35%.

In 2011, Zambia doubled the royalty payments demanded from miners to 6% for base metals and raised them to 5% from 3% for precious minerals. Zambia has also introduced a raft of new export measures and is also angling for a 35% shareholding in mining projects.

Guinea has passed a law which allows the state to own a 35% shareholding in mining projects.

There is scope for the DRC and Zambia, which share a common border, to collaborate on mining policies, particularly where copper is concerned.

Some of the copper mined in DRC’s Katanga province is refined in Zambia, and companies such as Glencore International own and operate copper and cobalt mines on both sides of the border.

“There are lots of linkages between the two markets, but right now I doubt there is any collusion… But it would make it easier if they agreed, which is potentially a trend we might see continent-wide,” Wilson said.

“Collaboration might place African governments in a much stronger position to negotiate for more equitable mineral production agreements,” he added.

European and North American investors have been slow to recognise the shift in commercial dynamics and international opinion on resources, he said.

“You need to strike a relationship that is fair and provides for an equitable mineral wealth distribution through community ownership and other forms,” Wilson warns.

“They are realising it, but slowly, and failure to come to terms will have consequences.”