Wednesday, 07 Sep 2011
Many governments are looking at ways to get more money from miners as companies report record profits. The higher the returns and the higher the profits, the greedier governments become. As commodity prices rise governments try to boost their share of the proceeds from their countries energy and mining sectors.
Country risk
Where the political and economic stability of the host country is questionable and abrupt changes in the business environment could adversely affect profits or the value of the company’s assets.
Resource nationalism
The tendency of people and governments to assert control, for strategic and economic reasons, over natural resources located on their territory.
The major benefit for developing countries from natural resource development comes in the form of:
1. Employment/wages
2. Government revenues - taxes, royalties or dividends
There can also be indirect benefits such as knowledge and technology transfers. Foreign investments can also involve infrastructure investments, sometimes on a massive scale, like electricity, water supplies, roads, railways, bridges and ports.
The PricewaterhouseCoopers Mine 2011 survey highlights what governments across the globe are looking at in regards to the world’s top 40 miners:
1. Achieved net profits of USD 110 billion last year
2. Halved their debt
3. Built cash reserves of USD 105 billion
4. Announced capital programs of USD 300 billion for 2011
In 2011, resource nationalism became the number one risk for mining companies.
Miners are an easy target as mining is a long term investment and one that is especially capital intensive mines are also immobile, so miners are at the mercy of the countries in which they operate. Outright seizure of assets happens using the twin excuses of historical injustice and environmental/contractual misdeeds. There is no compensation offered and no recourse.
Mr Mike Elliott Ernst & Young Global Mining & Metals Leader said that “Resource nationalism is taking other forms as well, including greater controls on foreign participation, mandated beneficiation, use it or lose it demands and mandated government participation.”
The result is a spate of recent news regarding resource nationalism:
1. A government backed ouster of Brazilian mining giant Vale SA’s CEO, Roger Agnelli. Brazil’s government is considering a proposal that would make it easier to raise or lower mining royalties depending on economic conditions and minerals prices as part of a broad overhaul in Brazil’s mining sector which includes revamping the licensing process and boosting state income from mining companies.
2. Panamarecently repealed part of its mining code allowing investments from foreign governments.
3. A handful of African countries have also increased tax revenue from miners in recent years ie Ghana plans to double royalties on mining to increase government revenues.
4. South Africa is pushing to nationalize its mines and banks. The Youth League wants the government to take 60% of private mining assets without compensation to distribute wealth and create jobs. As part of an empowerment driveSouth Africa’s mining charter already calls for 26% of the mining industry in Africa’s largest economy to be transferred to black owners by 2014.
5. Papua New Guinea introduced a plan to hand state ownership of mineral and energy resources to landowners a move that may prove disastrous to foreign miners and their shareholders.
6. President Hugo Chavez nationalized Venezuela’s gold industry.
7. Peruvian president Humala (recently elected) promised, during his election campaign, to initiate windfall taxes on mine profits and to harden tax and royalty regimes.
8. AustraliaandChileare proposing fresh tax or royalty regimes.
9. In the past 12 to 18 months at least 25 countries have increased or announced intentions to increase their government take from resources via taxes or royalties.
10. Zimbabwenow requires foreign owned companies indigenize their operations in the country by transferring at least 51% ownership to locals. Youth Development, Indigenisation and Empowerment Minister Saviour Kasukuwere rejected a number of foreign companies plans and set a 14 day ultimatum for the submission of what he considers acceptable plans.
Mr Scott Jobin-Bevans president of Prospectors and Developers Association of Canada said that “We know it’s tempting, at a time when government debt is mounting and metal prices are rising, for some governments to try to grab an even higher proportion of the revenue from mining. But we urge governments to remember that the cumulative effect of these unreasonable tax hikes will be to push up world prices and slow global growth.”
(sourced from Resource Investor)
Many governments are looking at ways to get more money from miners as companies report record profits. The higher the returns and the higher the profits, the greedier governments become. As commodity prices rise governments try to boost their share of the proceeds from their countries energy and mining sectors.
Country risk
Where the political and economic stability of the host country is questionable and abrupt changes in the business environment could adversely affect profits or the value of the company’s assets.
Resource nationalism
The tendency of people and governments to assert control, for strategic and economic reasons, over natural resources located on their territory.
The major benefit for developing countries from natural resource development comes in the form of:
1. Employment/wages
2. Government revenues - taxes, royalties or dividends
There can also be indirect benefits such as knowledge and technology transfers. Foreign investments can also involve infrastructure investments, sometimes on a massive scale, like electricity, water supplies, roads, railways, bridges and ports.
The PricewaterhouseCoopers Mine 2011 survey highlights what governments across the globe are looking at in regards to the world’s top 40 miners:
1. Achieved net profits of USD 110 billion last year
2. Halved their debt
3. Built cash reserves of USD 105 billion
4. Announced capital programs of USD 300 billion for 2011
In 2011, resource nationalism became the number one risk for mining companies.
Miners are an easy target as mining is a long term investment and one that is especially capital intensive mines are also immobile, so miners are at the mercy of the countries in which they operate. Outright seizure of assets happens using the twin excuses of historical injustice and environmental/contractual misdeeds. There is no compensation offered and no recourse.
Mr Mike Elliott Ernst & Young Global Mining & Metals Leader said that “Resource nationalism is taking other forms as well, including greater controls on foreign participation, mandated beneficiation, use it or lose it demands and mandated government participation.”
The result is a spate of recent news regarding resource nationalism:
1. A government backed ouster of Brazilian mining giant Vale SA’s CEO, Roger Agnelli. Brazil’s government is considering a proposal that would make it easier to raise or lower mining royalties depending on economic conditions and minerals prices as part of a broad overhaul in Brazil’s mining sector which includes revamping the licensing process and boosting state income from mining companies.
2. Panamarecently repealed part of its mining code allowing investments from foreign governments.
3. A handful of African countries have also increased tax revenue from miners in recent years ie Ghana plans to double royalties on mining to increase government revenues.
4. South Africa is pushing to nationalize its mines and banks. The Youth League wants the government to take 60% of private mining assets without compensation to distribute wealth and create jobs. As part of an empowerment driveSouth Africa’s mining charter already calls for 26% of the mining industry in Africa’s largest economy to be transferred to black owners by 2014.
5. Papua New Guinea introduced a plan to hand state ownership of mineral and energy resources to landowners a move that may prove disastrous to foreign miners and their shareholders.
6. President Hugo Chavez nationalized Venezuela’s gold industry.
7. Peruvian president Humala (recently elected) promised, during his election campaign, to initiate windfall taxes on mine profits and to harden tax and royalty regimes.
8. AustraliaandChileare proposing fresh tax or royalty regimes.
9. In the past 12 to 18 months at least 25 countries have increased or announced intentions to increase their government take from resources via taxes or royalties.
10. Zimbabwenow requires foreign owned companies indigenize their operations in the country by transferring at least 51% ownership to locals. Youth Development, Indigenisation and Empowerment Minister Saviour Kasukuwere rejected a number of foreign companies plans and set a 14 day ultimatum for the submission of what he considers acceptable plans.
Mr Scott Jobin-Bevans president of Prospectors and Developers Association of Canada said that “We know it’s tempting, at a time when government debt is mounting and metal prices are rising, for some governments to try to grab an even higher proportion of the revenue from mining. But we urge governments to remember that the cumulative effect of these unreasonable tax hikes will be to push up world prices and slow global growth.”
(sourced from Resource Investor)
Posts
No comments:
Post a Comment