By Andrew Symon
Asia Times (Hong Kong)
PHNOM PENH - War and political instability, uncertain legal and regulatory regimes, and the sheer difficulty of working in isolated mountainous and jungle terrain have long conspired against modern mining activities in Cambodia, Vietnam and Laos.
Now the combination of high global mineral prices and more market-friendly governments is propelling a wave of foreign mining investments and pushing exploration and production to levels never before seen in the Mekong region. In French colonial times, there was exploration in the region, but not on a large scale apart from coal operations in northern Vietnam.
Western mining companies made limited forays in the region in the early and mid-1990s, but the 1997-98 Asia financial crisis, flat global commodity prices and vacillating government policies toward foreign investment stymied most of those efforts. Now, small and medium-sized Australian, Canadian and New Zealand exploration companies are in growing numbers taking the regional plunge, most prominently on gold and copper, but also on bauxite, iron ore, nickel, zinc and lead.
Unexploded ordnance from the region's many wars still poses life-and-limb operational challenges to miners. Upon making discoveries, the companies now active in the region often either sell the rights to bigger multinational operators, possibly maintaining an interest, or after raising capital to transform themselves into full-blown operators themselves.
At the same time, the world's largest miner, Australia's BHP Billiton, is also in the regional hunt, including for bauxite in eastern Cambodia's Mondolkiri area in a joint venture with Japan's Mitsubishi. And consistent with China's growing commercial presence in the Mekong region, Chinese mining companies are also taking up positions.
One Western company leading the way is Australia's Oxiana Resources. Listed on the Australian stock exchange, the miner began operating the first of what promises to become a wide array of new mines in Laos run by foreign mining companies. Oxiana started producing gold in Savannakhet province's Sepon area in 2002 and in 2005 expanded into copper. At the time, the US$285 million open-pit mining and processing operation was the first large-scale foreign-invested project in the country.
Jointly developed with support from the World Bank and its private-sector financing arm, the International Finance Corp, last year the mine exported 173,000 ounces of gold dore and 61,000 tonnes of copper cathodes on to the global market. Gold and copper deposits already discovered in the Sepon district hold an estimated 3.9 million ounces of gold and 1.9 million tonnes of copper - and the company says it expects further discoveries.
Sepon's output now makes up a substantial part of Laos' total exports, strengthening the country's trade position and providing desperately needed revenues to the cash-strapped government. In 2005 and 2006, Oxiana paid the national government $50 million and the provincial government $21 million - a sizable amount considering that total central-government revenues from local sources and overseas development assistance is less than $400 million annually.
Oxiana's Vientiane-based Asia manager, Peter Albert, believes that Laos - and the wider largely unexplored Mekong region - have good long-term prospects. Oxiana recently entered an alliance with AngloGold Ashanti, the world's second-largest gold-mining company, to explore for gold throughout Laos. The company has also turned its attention since 2006 to Cambodia and is exploring in the east in the Mondolkiri province for both copper and gold.
Albert acknowledges that managing mining operations does not stop at the pit and plant. As with multinational petroleum companies, miners often find themselves in complex social and political situations, especially in economically underdeveloped countries such as Laos and Cambodia.
Albert emphasizes the benefits the project is providing for local communities, not only through employment and the use of local suppliers, but also through community-development projects provided under a trust fund set up by the mine. He says that of the mine's total 3,500 or so workers, about 2,000 come from the local area and the rest from other parts of Laos - excluding about 350 expatriate employees.
This is hardly surprising, as the social and environmental impact of mining projects are - and will be - scrutinized closely by governments, development assistance agencies, international and local non-governmental organizations and the media. The question of transparency of payments to governments - and the transparency in the use of revenues by governments themselves - is another major issue that has complicated operations in such places as Indonesia.
Oxiana, for its part, sees that its ability to operate long-term in Laos and elsewhere depends on its ability to achieve good relations not just with national governments, but also with communities and local governments in the vicinity of its projects. Albert said Oxiana's Sepon project is a model for both governments and mining companies.
"The project's success rests on four corners - macroeconomic benefits, direct benefits to government, indirect benefits to local communities, and flagship benefits stimulating more investment and setting good standards," said Albert.
Golden opportunities
Other foreign companies in Laos include Pan Australia, which already has a large copper-mining operation in Thailand and began operating Laos' Phu Bia gold mine about 120 kilometers north of Vientiane in November 2005. The mine is also to produce copper beginning next year.
Australia's Rox Resources is developing the Pha Luang zinc-lead-silver zinc mine north of Vientiane and is reportedly looking at copper, gold, iron ore and coal prospects elsewhere in the country. Australian mining company Argonaut Resources is exploring for copper gold in southeastern and northwestern Laos.
In Cambodia, Australian explorer Southern Gold is looking for gold and base metals such as lead in the country's eastern regions, including in Mondolkiri and Kratie provinces.Chinese companies are also reported to be looking for coal in the area, while four Chinese state-owned steelmakers recently announced a joint venture to explore and develop iron-ore mines in the country. Wuhan Steel, China's fifth-biggest steel mill, is leading the project.
In Vietnam, New Zealand's Zedex and Canadian-run Olympus Pacific Minerals began operating in April 2006 the Bong Mieu gold mine at Phu Ninh in the central province of Quang Nam and are reportedly looking at other prospects. Elsewhere, Knight Piesald, of New Zealand, is developing a nickel mine at Ban Phuc in the mountainous northern province of Son La.
The legal and regulatory regimes are similar in Laos and Cambodia, where foreign mining firms pay royalties and corporate taxes under long-term mining licenses. Government or government entities commonly have minority partnership interests in the projects, with that equity carried and subsequently to be paid for through future project earnings.
In the case of Oxiana's Sepon project, the Laotian government has the option of taking up to a 10% interest by forgoing dividends, which it will likely take up this year, according to company sources. The central government receives corporate and other taxes and the provincial government production royalties and taxes. The project received a tax holiday on profits for the first two years, and then pays 16.6% tax for the next two years, and 33.3% for the remaining years of operation.
Vietnam runs on a different set of regulatory gears, because of various state-owned enterprises already active in the mining sector. The country already produces a range of minerals and coal, although far below levels that geologists and the international mining industry think is possible.
Hanoi is now encouraging expansion through the state-owned consortium, the Vietnam National Coal and Mineral Industries Group (Vincomin), which is embarking on several new projects under the government's 10-year mining master plan for the period 2006-15. These include lead and zinc mining and processing in the northern mountainous provinces, bauxite mining and aluminum production in the Central Highlands, and in partnership with China's Chalco for iron ore in the north-central province of Ha Tinh.
All of these are open to foreign investors up to a 30% stake, and foreign interest in Vietnamese ventures is strong. But some foreign miners tend to find Vietnam's legal and regulatory framework more cumbersome than those in Cambodia and Laos, where there is no competition from state-owned enterprises. Despite recent market-opening initiatives, the Vietnamese government still prefers to see national companies positioned strongly in project partnerships.
One important future project is the Nui Phau tungsten project, managed by Canadian miner Tiberon some 80km northwest of Hanoi; the open-cut mine is set to begin production in early 2009. Tiberon executives say Vietnam could become one of the world's largest tungsten producers. The operation is distinguished by the fact that ownership of Tiberon, currently listed on the Toronto Stock Exchange, was recently taken over through an equity buyout by a Vietnamese investment company, Dragon Capital.
Set up by young expatriates in 1994, the investment fund has grown quickly with Vietnam's rapidly rising fortunes in the past five years and has established a profile for institutional investors interested in Vietnam through, among other things, its Dublin-listed Vietnam Enterprise Investment Fund. Dragon's new commitment to mining is arguably a barometer of the momentum now building in the industry in Vietnam and the wider Mekong region.
Andrew Symon is a Singapore-based journalist and analyst specializing in energy and mining.
Now the combination of high global mineral prices and more market-friendly governments is propelling a wave of foreign mining investments and pushing exploration and production to levels never before seen in the Mekong region. In French colonial times, there was exploration in the region, but not on a large scale apart from coal operations in northern Vietnam.
Western mining companies made limited forays in the region in the early and mid-1990s, but the 1997-98 Asia financial crisis, flat global commodity prices and vacillating government policies toward foreign investment stymied most of those efforts. Now, small and medium-sized Australian, Canadian and New Zealand exploration companies are in growing numbers taking the regional plunge, most prominently on gold and copper, but also on bauxite, iron ore, nickel, zinc and lead.
Unexploded ordnance from the region's many wars still poses life-and-limb operational challenges to miners. Upon making discoveries, the companies now active in the region often either sell the rights to bigger multinational operators, possibly maintaining an interest, or after raising capital to transform themselves into full-blown operators themselves.
At the same time, the world's largest miner, Australia's BHP Billiton, is also in the regional hunt, including for bauxite in eastern Cambodia's Mondolkiri area in a joint venture with Japan's Mitsubishi. And consistent with China's growing commercial presence in the Mekong region, Chinese mining companies are also taking up positions.
One Western company leading the way is Australia's Oxiana Resources. Listed on the Australian stock exchange, the miner began operating the first of what promises to become a wide array of new mines in Laos run by foreign mining companies. Oxiana started producing gold in Savannakhet province's Sepon area in 2002 and in 2005 expanded into copper. At the time, the US$285 million open-pit mining and processing operation was the first large-scale foreign-invested project in the country.
Jointly developed with support from the World Bank and its private-sector financing arm, the International Finance Corp, last year the mine exported 173,000 ounces of gold dore and 61,000 tonnes of copper cathodes on to the global market. Gold and copper deposits already discovered in the Sepon district hold an estimated 3.9 million ounces of gold and 1.9 million tonnes of copper - and the company says it expects further discoveries.
Sepon's output now makes up a substantial part of Laos' total exports, strengthening the country's trade position and providing desperately needed revenues to the cash-strapped government. In 2005 and 2006, Oxiana paid the national government $50 million and the provincial government $21 million - a sizable amount considering that total central-government revenues from local sources and overseas development assistance is less than $400 million annually.
Oxiana's Vientiane-based Asia manager, Peter Albert, believes that Laos - and the wider largely unexplored Mekong region - have good long-term prospects. Oxiana recently entered an alliance with AngloGold Ashanti, the world's second-largest gold-mining company, to explore for gold throughout Laos. The company has also turned its attention since 2006 to Cambodia and is exploring in the east in the Mondolkiri province for both copper and gold.
Albert acknowledges that managing mining operations does not stop at the pit and plant. As with multinational petroleum companies, miners often find themselves in complex social and political situations, especially in economically underdeveloped countries such as Laos and Cambodia.
Albert emphasizes the benefits the project is providing for local communities, not only through employment and the use of local suppliers, but also through community-development projects provided under a trust fund set up by the mine. He says that of the mine's total 3,500 or so workers, about 2,000 come from the local area and the rest from other parts of Laos - excluding about 350 expatriate employees.
This is hardly surprising, as the social and environmental impact of mining projects are - and will be - scrutinized closely by governments, development assistance agencies, international and local non-governmental organizations and the media. The question of transparency of payments to governments - and the transparency in the use of revenues by governments themselves - is another major issue that has complicated operations in such places as Indonesia.
Oxiana, for its part, sees that its ability to operate long-term in Laos and elsewhere depends on its ability to achieve good relations not just with national governments, but also with communities and local governments in the vicinity of its projects. Albert said Oxiana's Sepon project is a model for both governments and mining companies.
"The project's success rests on four corners - macroeconomic benefits, direct benefits to government, indirect benefits to local communities, and flagship benefits stimulating more investment and setting good standards," said Albert.
Golden opportunities
Other foreign companies in Laos include Pan Australia, which already has a large copper-mining operation in Thailand and began operating Laos' Phu Bia gold mine about 120 kilometers north of Vientiane in November 2005. The mine is also to produce copper beginning next year.
Australia's Rox Resources is developing the Pha Luang zinc-lead-silver zinc mine north of Vientiane and is reportedly looking at copper, gold, iron ore and coal prospects elsewhere in the country. Australian mining company Argonaut Resources is exploring for copper gold in southeastern and northwestern Laos.
In Cambodia, Australian explorer Southern Gold is looking for gold and base metals such as lead in the country's eastern regions, including in Mondolkiri and Kratie provinces.Chinese companies are also reported to be looking for coal in the area, while four Chinese state-owned steelmakers recently announced a joint venture to explore and develop iron-ore mines in the country. Wuhan Steel, China's fifth-biggest steel mill, is leading the project.
In Vietnam, New Zealand's Zedex and Canadian-run Olympus Pacific Minerals began operating in April 2006 the Bong Mieu gold mine at Phu Ninh in the central province of Quang Nam and are reportedly looking at other prospects. Elsewhere, Knight Piesald, of New Zealand, is developing a nickel mine at Ban Phuc in the mountainous northern province of Son La.
The legal and regulatory regimes are similar in Laos and Cambodia, where foreign mining firms pay royalties and corporate taxes under long-term mining licenses. Government or government entities commonly have minority partnership interests in the projects, with that equity carried and subsequently to be paid for through future project earnings.
In the case of Oxiana's Sepon project, the Laotian government has the option of taking up to a 10% interest by forgoing dividends, which it will likely take up this year, according to company sources. The central government receives corporate and other taxes and the provincial government production royalties and taxes. The project received a tax holiday on profits for the first two years, and then pays 16.6% tax for the next two years, and 33.3% for the remaining years of operation.
Vietnam runs on a different set of regulatory gears, because of various state-owned enterprises already active in the mining sector. The country already produces a range of minerals and coal, although far below levels that geologists and the international mining industry think is possible.
Hanoi is now encouraging expansion through the state-owned consortium, the Vietnam National Coal and Mineral Industries Group (Vincomin), which is embarking on several new projects under the government's 10-year mining master plan for the period 2006-15. These include lead and zinc mining and processing in the northern mountainous provinces, bauxite mining and aluminum production in the Central Highlands, and in partnership with China's Chalco for iron ore in the north-central province of Ha Tinh.
All of these are open to foreign investors up to a 30% stake, and foreign interest in Vietnamese ventures is strong. But some foreign miners tend to find Vietnam's legal and regulatory framework more cumbersome than those in Cambodia and Laos, where there is no competition from state-owned enterprises. Despite recent market-opening initiatives, the Vietnamese government still prefers to see national companies positioned strongly in project partnerships.
One important future project is the Nui Phau tungsten project, managed by Canadian miner Tiberon some 80km northwest of Hanoi; the open-cut mine is set to begin production in early 2009. Tiberon executives say Vietnam could become one of the world's largest tungsten producers. The operation is distinguished by the fact that ownership of Tiberon, currently listed on the Toronto Stock Exchange, was recently taken over through an equity buyout by a Vietnamese investment company, Dragon Capital.
Set up by young expatriates in 1994, the investment fund has grown quickly with Vietnam's rapidly rising fortunes in the past five years and has established a profile for institutional investors interested in Vietnam through, among other things, its Dublin-listed Vietnam Enterprise Investment Fund. Dragon's new commitment to mining is arguably a barometer of the momentum now building in the industry in Vietnam and the wider Mekong region.
Andrew Symon is a Singapore-based journalist and analyst specializing in energy and mining.
4 comments:
Oh good, I see jobs, jobs, jobs,
relief, relief, and relief.
Keep it comming!!!
It is a big leap of faith to think there will be a lot of jobs created when multinational corporations come to exploit national resource. History showed that the biggest gainers are the foreign shareholders not the native populations.
I wonders how many jobs created in Africa and Latin America. It does not help those guys out of poverty.
There are many developing countries which are facing with environment contaminating from mineral minning....
So, Cambodia has to learn tose precios lessons too...
Gold, Gas or Mine are huge national income, but small group can has sufficient fund to control the country s totalitarian....lesson from Sudan..Shimbawe
Well, we can't just sit still and
expect poverty to dissapear on its
own. Furthermore, we got great
people to get us the best deal for
or resource. Hence, this is a
win-win for all, not a nightmare.
Post a Comment