Harnessing the bonanza: economic liberalization and capacity building in the mineral sector

Over the past decade many developing and transition economies have liberalized their investment regimes for mining and privatized formerly state-owned mineral assets. In response, these economies have witnessed increased foreign investment in exploration and development, growth in the number and diversity of mineral projects, and the opening up of new channels for harnessing increased economic and social benefits from development in the minerals sector. The restructuring of fiscal and regulatory regimes to encourage foreign investment, and the associated influx of mining capital, technology and skills, is transforming traditional relationships between mining firms, local communities and the government. This transformation necessitates a re-evaluation of the most effective policy approaches to capture increased economic and social benefits from mineral production. This article considers effective mechanisms for improving the capacity of developing and transition countries to maximize the economic and social benefits of mineral production. Common challenges associated with minerals economies are reviewed. Consideration is given to the opportunities for harnessing foreign direct investment and the possibilities for creating new partnerships between local communities, industry, government, and multilateral development agencies through social investment projects. The article concludes with a series of recommendations for the design and implementation of policy approaches towards harnessing mineral production for economic and social benefit following the liberalization of investment regimes for mining.     

Ranking countries for minerals exploration

This paper presents the results of a survey of multinational mining companies pertaining to the ranking of countries for non-fuel minerals exploration in the early 1990s. It ranks countries in order of greatest exploration interest in the early 1990s, as well as countries that have geologic potential but unacceptable investment climates. It provides a list of priority commodities for exploration, the criteria for exploration levels, critical and negotiable factors in selecting countries for exploration, and the investment climate ratings of countries where exploration is probable in the early 1990s. The results of the survey indicate that major minerals exploration activities are concentrated in a small number of countries. Political and economic reforms around the world should increase the number of countries receiving active private sector minerals exploration in the 1990s.     

The illegal trading of high unit value minerals in developing countries

Attracted by the high unit value and low barriers to entry in terms of capital requirements, technology, infrastructure, minimum reserves and implementation time, the artisanal and small-scale mining of high unit value minerals, such as gemstones, diamonds and gold, has grown to significant proportions in developing countries. This is manifested by the value of output and large numbers of miners engaged in this activity. Despite the expansion of the subsector, its national economic role in many developing countries has largely been disappointing, primarily due to high levels of illegal trading activity. The objectives of this paper are to identify major factors responsible for the declaration problem. The economic impact of such activities is pointed out. To conclude the discussion, options are presented that provide a basis for eliminating illegal marketing practices and thereby strengthening the economic role of the subsector in meeting national development objectives of developing countries .     

State mineral production taxes and mining law reform

Fuel and leasable minerals mined in the United States have historically been subject to federal royalties while locatable minerals have not. In recent years there have been multiple attempts to alter this policy and subject locatable minerals to federal royalties as well; most recently the preliminary 2012 Obama budget included a gross royalty on hard-rock mining on public lands. This paper analyzes the issue of imposing such federal royalties from both a legal and economic perspective. From a legal perspective, it is argued that the state of western property rights precludes royalties on currently extant claims so revenues from a royalty would not be realized for many years. From an economic perspective, it is argued that the effect on revenue would be smaller than one might anticipate due to such a royalty crowding out state levies or encouraging vertical disintegration on the part of mining firms to avoid much of the burden of the royalty.     

China's Minerals Future: 1985–2005

China has embarked on major economic and social changes to revitalize the Chinese economy, increase labor productivity, and improve the material standard of living of the Chinese people. This paper assumes that China will achieve its goal of a per capita income of US$800 in 2000, open-door policies will be maintained, and nonfuel mineral commodity consumption will increase as GDP per capita increases. Projections are made of production, trade and consumption of 14 nonfuel minerals for the period 1985–2005. China is projected to increase its net imports to these 14 minerals from about US$5000 million in 1985 to about US$12000 million in constant dollars in 2005. China's investment climate will become more favorable for those multinational companies that bring with them clear comparative advantages in minerals exploration, mining and processing technologies and marketing, and are prepared to develop in-depth Chinese expertise.     

Implementation of US Surface Mine and Reclamation Act

The US Congress is currently studying various ways through which legislation similar to that of the Surface Mining Control and Reclamation Act of 1977— which is concerned mainly with coal, can be applied to all minerals other than coal. This study analyses three US mineral industries—copper, iron ore, and phosphate rock - and identifies a number of areas which Congress and other decision makers ought to consider in arriving at such legislation. The author concludes that reclamation costs may affect the economic and financial performance of each of these industries in a different manner; furthermore, their economic behaviour is significantly different from that of coal. The author's main recommendation is that if surface mining regulations are to be legislated, they should be industry- and commodity-specific rather than umbrella legislation for all non-coal minerals.     

Environmental issues for developing countries arising from liberalized trade in the mining industry

This review analyses some of the environmental and economic implications of current trade policies and changes in the world trading system for mineral producers and consumers. A principal factor which determines environmental performance is whether firms have the resources and capabilities to undertake innovation. We therefore place particular emphasis on the anticipated effects of liberalized trade on innovation and competitiveness at the firm level. Evidence indicates that improvements in environmental management would be expected to occur irrespective of the country hosting the investment. Due to the opening investment climate and relatively large quantities of mineral reserves, we expect these effects to be positive for many mineral producing developing countries. One difficulty which may arise is whether policy measures to promote production efficiency and develop innovation in mining and mineral processing operations could be interpreted as protectionism. The creation of new lines of credit, to promote, but not subsidize, technological and organizational innovation, may be the best way forward for developing countries .     

Mining during the next 25 years: issues and challenges

This article examines possible future trends in the mining industry in the light of past developments. After a preliminary discussion, the article considers various aspects of demand, supply, corporate structures, geographic distribution of investment, and social and environmental factors influencing the minerals industry. Scepticism is expressed about the smooth, exponential growth envisaged by many commentators. Some risks are elaborated, and a digression about gold is included.
The article argues that, while the minerals industry has concentrated on reducing cash costs through technical innovation and productivity improvement, new approaches may be needed in future that are not directly linked to economies of scale. Contracting out is an interesting trend with major implications.
The view that the mineral industry's corporate structure is becoming increasingly concentrated is challenged. Developments in consumer countries as well as historical precedents strongly suggest a more diverse structure.
The spread of minerals investment from North America and Australasia, and the resurgence of foreign direct investment in minerals projects, are placed in context and discussed from the viewpoints of both companies and host countries.
Although the appropriate responses to many of these issues can only properly be made by governments at all levels, the industry has to play its part.     

‘Reserves’ as a leading indicator to future mineral production

The factors which influence the size and value of mineral reserves are discussed and an example is given of a more rigorous system for measuring supplies of non-renewable resources.The extent to which reserves and resources of minerals can be used as leading indicators of future mineral production is examined and examples of the dangers of over-reliance on this factor are described.Key aspects, such as confidence limits, differences in the economic exploitability, the dynamic nature of reserves, and their variability in grade, are examined in some detail using the South African coal industry as an example.     

The Contribution of Small-Scale Mining to World Mineral Production

There is no agreement as to the definition of a small-scale mine. It is proposed that for a developing country a small-scale mine be defined as a producer (often sporadically) of limited amounts of minerals for deposits with a few known ore reserves, and of a character not readily amenable to mass mining. Output is won without appreciable use of mechanical energy and by exploitation of labor under leadership which sometimes lacks technical, managerial or entrepreneurial skills. A mine producing less than 100 000 tons of ore is considered to be a small-scale mine. Using these criteria and worldwide production data, an estimate of the contribution of small-scale mining to world mineral output is made. The estimate is 16%.     

Marine mineral resources: Effect of the low of the sea convention

The degree of security of investment afforded by the applicable legal regime is one of the most important factors affecting minerals projects. This article outlines the deep-sea mining regime contained in the recently adopted Law of the Sea Convention. A history of subsea mining, including petroleum mining, is presented and the events leading to adoption of the Convention are described. Those parts of the Convention relating to deep-sea mining are analysed, and the International Sea-Bed Authority is examined. It is concluded that deep-sea mining on a commercial scale is unlikely before the end of the decade.     

Geological supply and economic demand: The unresolved equation

Whereas the ultimate world supply of minerals is controlled by geological factors, the actual supply at any particular time is controlled by economic factors. Mineral production is a function of investment in exploration, mining, and processing - and research in these fields. Given the long lead time between a decision to explore and actual production from any deposit found, the increasing difficulty of finding deposits in the well prospected parts of the world, the political barriers to exploration in the less developed countries, the energy barriers to mining and processing ever lower grade ores, and the lengthy time required to develop new exploration, extraction, and processing techniques, adjustments in supply in response to changes in demand cannot be assumed to be automatic.     

International mining taxation issues and comparisons

This paper presents the quantitative results of recent research on Canada's minerals and metals industry, and its international competitiveness for mineral investment. The information and analysis presented are derived from the work of a Canadian government-industry task force that was created in 1991, under the auspices of the Intergovernmental Working Group on the Mineral Industry (IGWG). Much of this work deals with mining taxation in several Canadian provinces. More importantly, an attempt is made to evaluate the total tax burden that the mining industry must bear, on a project basis, at all levels from exploration through refining operations in many important competitor countries. While the focus of the paper is on an international comparison of mining taxation, some non-tax issues relating to Canada's competitiveness for mineral investment are addressed .     

The geographic concentration of world mineral supplies

Mineral reserves are unevenly and erratically distributed throughout the world; those countries which were intensively explored in the past — the USA, Canada, the USSR, Australia, South Africa, and a limited number of Asian, African, and Latin American countries — control a large share of many of the industrially important metallic minerals. Current attitudes towards exploration and the mining industry in both the developed and the less developed countries should clearly encourage rather than discourage new exploration. Given an increase in exploration, new reserves may well be found in previously unexplored areas, but any major increase in world mineral supplies will probably come from mining very low- grade deposits and developing new methods of mining and processing non-conventional ores. While it is vital to increase research and development in exploration techniques and mining and processing technology, it is also critical to maintain current levels of consumption and trade by reversing the trend towards trade restriction on the part of some of the less developed countries who are important mineral exporters.     

Private capital: What impedes its entry into China's minerals industry

The paper commences with an analysis of the nature and status of private capital investment in the minerals industry in China. Based on the analysis, the authors examine the main barriers in terms of the mineral rights market, industry access and investment security that impede the participation of private capital into exploration and development of China's mineral resources. The discussion addresses how to encourage the participation of private capital into mining investment and it concludes that it is of significant importance to ensure the soundness of mineral rights market, impartiality of industry access, and security of mineral rights.     

A review of mineral development and investment policies of Botswana

Botswana's mineral policy objective is primarily to maximize the national economic benefit from the development of mineral resources. In 1999, the government replaced the old mining code of 1977, which was out of tune with prevailing economic philosophies with a new mining code. Although, the old act had its shortcomings it served the country reasonably well for 20 years, during which time the country was transformed from being one of the poorest of the world's poor to a middle income country. One of the cornerstones of the new and old mining codes is that government does not subscribe to privately owned minerals rights. The Botswana government attempts to provide a fair balance between the various stakeholders. There are, however, areas in the mineral policy and mining codes that need to be critically reviewed as outlined in this paper.     

Australia's uranium

Australia's uranium comprises about 18% of the Western World's reasonably assured reserves. Mining, milling and export have been proceeding since the federal government's decision in August 1977. The timetable for development of several other projects involves matters such as environmental issues, approval by the aboriginal people and mining practice policies. The author discusses the background to present uranium mining in Australia and examines the industry's likely international significance.     

Mineral reserves: Projected lifetimes and security of supply

This article analyses the lifetimes of reserves of three dozen important minerals. Despite the high rate of their extraction in the past 30 years, the recorded reserves of these non-renewable materials were higher in 1981 than in 1950 and they seem to meet foreseeable demand for a long time to come, as indicated by the estimated static lifetime for each of the minerals covered. The dynamic nature of ‘reserves’ is emphasized: further exploration and scientific and technological advance will add to the present proven reserves, and at a higher price further resources will be ‘upgraded’ into commercially exploitable reserves. Apparent long-term security can be disturbed by natural disasters, political events or other factors, especially in the case of minerals whose reserves and production are highly concentrated in one country. However, any such interruption in the continuity of supply is likely to be short-lived.     

Capitalizing on energy supply: Western China's opportunity for development

Two kinds of disparities pervade China and threaten its well-being. The first, regional disparities focus on levels of economic development, which vary considerably across China. The second is largely a corollary of the first, referring to mismatch in energy supply and demand, with some places suffering severe shortages while others are blessed with significant surpluses. Western China enjoys the dubious distinction of recording the country's lowest levels of economic development while, paradoxically, being blessed with plentiful reserves of energy and non-energy minerals. Turning those surplus resources to good account through transferring them to minerals and energy-hungry Eastern China is seen by policy-makers as something of a panacea. Not only will such a strategy significantly boost Western China's economic prospects, but it will eliminate the resource shortages currently constraining the East's vibrant growth. The issues of regional disparities, energy mismatches and transfers of these resources are discussed, with attention given to both spatial and time perspectives. The paper concludes with a cautious endorsement of the policy initiatives that promote the strategy of mineral transfers.     

Economic impacts of mining

The mining industry can be critical to a nation's economic well-being. Impacts may be felt on a national or regional level, with their significance dependent in part on the resources under development as well as existing government policies. This paper examines typical economic consequences of mining and how such impacts are being felt in the so-called transitional economies of Asia and Europe. Clearly, while mining continues to play an important role in the economies of Russia, China, Vietnam and other transitional nations, the nature and impacts of mining are different by virtue of years of centralized planning in the industry and the use of non-economic measures of efficiency. The changing character of mining is today opening up new opportunities for foreign investment and technology assistance.