Joint mineral ventures in the former Soviet Union: prospects, problems and realities

This paper traces the gradual opening up to foreign investment of the rich mineral endowment of the vast territory of the former Soviet Union, containing the world's largest mineral industry. It analyzes the current status of mineral joint ventures in some of the new Republics, including Russia, Kazakhstan, Tajikistan and the Ukraine, including new legislation and other measures taken by individual states to facilitate foreign investment, as well as prospects, risks and uncertainties associated with investment in FSU mining activities that may be encountered by foreign companies. A successful gold joint venture in Tajikistan is described and evaluated to provide an understanding of the many aspects of an operational FSU project.     

The USSR, China, India and the world metals industry to 2010

Remarkable changes are occurring within the economies of the USSR, China and India that are influencing mineral industry activities. These three countries account for a major share of world minerals production and consumption. Their domestic reforms may ultimately have a serious impact on the global mining industry. This paper examines the present status of the Soviet, Chinese and Indian mineral industries, and forecasts conditions to 2010. Long-term characteristics analysed include industrial production, intensity of use, consumption, mine and plant expansion and trade policy. Six metals are highlighted in the study – aluminium, copper, lead, nickel, steel and zinc.     

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.     

Mineral wealth and the economic transition: Kazakstan

The exploitation of mineral wealth can amplify the problems of the transition economies in three basic ways. First, the rebound of the real exchange rate that characterises a successful transition may be augmented by the capital inflow required to expand mineral production. This can cause both recession in the short-run and lower growth in the medium-term. Second, when the mineral revenues expand, the Dutch Disease effects may intensify the transition-related shrinkage of the non-mining tradeable sector, thereby retarding economic diversification and rendering the economy vulnerable to external shocks. Third, a mineral boom tends to concentrate revenue on the government, which may use it to postpone difficult decisions on economic reform and/or dissipate the revenue due to weak financial markets and inadequate public accountability. Kazakstan, like oil-rich Azerbaijan, is a late reformer and displays evidence of a faster transition rebound than other less resource-rich countries in the CIS do. However, Kazakstan has two advantages over Azerbaijan. First, Kazakstan has a more diversified mineral endowment with which to counter any trend towards single commodity specialization. Second, Kazakstan is making a later start on oil expansion so that it can learn from the experience of Azerbaijan. Priorities for Kazakstan are the continuation of prudent economic policies, the creation of institutions to enhance the transparency of the revenue flows, and the use of environmental accounting to provide a rationale for the deployment of the oil rents.     

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.     

Mining and sustainable development: considerations for minerals supply

Sustainable development involves meeting the needs of human societies while maintaining viable biological and physical Earth systems. The needs include minerals: metals, fuels, industrial and construction materials. There will continue to be considerable demand for virgin mineral resources, even if levels of recycling and efficiency of use are optimal, and rates of population growth and globalisation decrease significantly. This article aims to stimulate debate on strategic issues for minerals supply. While the world has considerable stocks of mineral resources overall, international considerations of the environmental and social aspects of sustainable development are beginning to result in limitations on where mining will be conducted and what types of deposits will be mined. Current and emerging trends favour large mines in parts of the world where mining can be conducted within acceptable limits of environmental and social impact. Finding new deposits that meet such criteria will be all the more challenging given a disturbing global decline in the rate of discovery of major economic resources over the last decade, and the decreasing land area available for exploration and mining.
To attract responsible exploration and mining, governments of mining nations will need to provide: regional-scale geo-scientific datasets as required to attract and guide future generations of exploration; resource access through multiple and sequential land use regimes, and frameworks for dealing with indigenous peoples' issues; and arrangements for consideration of mining proposals and regulation of mines that ensure responsible management of environmental and social issues.
The minerals industry will need to continue to pursue advances in technologies for exploration, mining, processing, waste management and rehabilitation, and in public reporting of environmental and social performance.     

Mineral development prospects of the Indochina area

Reform is under way in several nations within the Indochina area to stimulate economic growth and foreign investment. Though once forbidden, participation by foreign companies in mining exploration and development activities in Myanmar, Kampuchea, Laos, Thailand and Vietnam is now being solicited by the respective governments. This paper presents a preliminary evaluation of mineral and energy resources in the region and outlines possible development scenarios based on economic policies, financial and infrastructural constraints and industry interest. The investment climates for resource-related projects are assessed qualitatively by country. Clearly, the long-term development potential of mineral and energy resources in the Indochina area is large, and the potential gains outweigh any of today's problems.     

Economic liberalisation, innovation, and technology transfer: opportunities for cleaner production in the minerals industry

The liberalisation of investment regimes for mining over the past decade is encouraging an inflow of foreign investment for mining and mineral processing projects in developing and former centrally-planned economies. This new investment is occurring at a time of technological change within the international mining industry as market and regulatory pressures lead the most dynamic firms to invest in the development or acquisition of new technologies and management practices. The effective transfer and assimilation of these technologies enable mining companies to combine gains in productivity with improvements in environmental management. Joint ventures and other strategic alliances between inwardly investing firms and the newly privatised or remnant state-owned mining enterprises may provide an effective vehicle for the transfer of the techniques for more productive and cleaner operations. Specific examples of innovative process and remediation technologies are analysed and it is suggested that the ability of innovative technologies to improve competitiveness and sustain best-practice environmental management in the recipient is linked to the transfer and effective acquisition of the capacity to manage the complex processes of technological and organisational change. The paper closes with some recommendations for further research directed towards a systematic examination of this hypothesis.     

Environmental regulation of exploration and mining operations in Asian countries

This paper offers a new perspective on the environmental laws in Asian nations affecting the exploration, mining, and reclamation activities of the mineral resource industry: the perspective of the senior government officials in those countries, whose job is to enforce these new environmental laws. The article presents the results of a 1998 survey of national environmental officials in Asia conducted by the Colorado School of Mines and the Metal Mining Agency of Japan. Officials in 10 diverse countries—Cambodia, China, Indonesia, Lao PDR, Malaysia, Myanmar, Mongolia, Philippines, Thailand and Vietnam—responded to a detailed questionnaire covering applicable laws, agencies, protected areas, covered mineral activities, financial assurance, environmental impact assessment, public involvement, environmental standards, permit and reclamation requirements.
The survey confirms that Asian nations are part of the global trend towards national government regulatory structures that balance mineral development objectives with environmental considerations. The survey also shows developing regulatory systems (some embryonic, some more mature) utilizing a combination of mining and environmental acts, and often an 'insider' perspective of the national officials administering the laws. While that perspective is not without its biases (not least the rigor of enforcement), it may nevertheless be of use in company planning. The emerging regulatory picture contradicts the conventional notion that it is the 'lower' level of regulation in Asia that is attracting foreign direct investment in mining.     

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.     

Managing mineral dependence: Papua New Guinea 1972–89

Papua New Guinea (PNG) managed the mineral booms of 1973–74, 1979–82 and 1987-89 well compared with other mineral exporting economies. Orthodox macroeconomic policies were one reason for this while the cushion afforded by the slow withdrawal of Australian aid was another. PNG also renegotiated MNC mining contracts in its favour without curbing foreign investment, but it managed its fragile political unity less well. Secession closed a large mine in 1989 while successful rent-seeking left wage indexation unreformed. Relatively high wages, exchange rate overvaluation and foreign investment controls in non-mining sectors retarded structural diversification: mineral dependence remains uncomfortably high a generation after the start-up of the first copper mine.     

Determinants of foreign direct investment in the mining sector in Asia: A comparison between China and India

The aim of this paper is to assess the conditions that influence foreign direct investment in the mineral industries of China and India. The paper first surveys literature on the determinants of foreign direct investment to identify key conditions, under which host countries attract mining FDI. It then builds an evaluative framework which allows for comparative analysis. The paper then comparatively evaluates the performance of foreign investment regimes that govern mineral industries in China and India. Its findings show that the overall conditions for foreign mining investment in China and India are not favourable and that substantial policy, regulatory and other changes in both countries need to be made if more investment is to flow.     

The resource curse

Countries that possess rich mineral deposits, it is widely assumed, are fortunate. Such deposits are assets, part of a country's natural capital. Mining is the key that converts dormant mineral wealth into schools, homes, ports, and other forms of capital that directly contribute to economic development. Over the past two decades, however, a more negative view of mining has emerged that questions the positive relationship between mineral extraction and economic development. The impetus for the alternative view came from empirical studies suggesting that countries where mining is important have not grown as rapidly as other countries. More recent studies have explored the possible reasons behind the disappointing performance of many mineral producing countries. While the central point of contention between the conventional and alternative views — namely, whether or not mining usually promotes economic development — remains unresolved, there is widespread agreement that rich mineral deposits provide developing countries with opportunities, which in some instances have been used wisely to promote development, and in other instances have been misused, hurting development. The consensus on this issue is important, for it means that one uniform policy toward all mining in the developing world is not desirable, despite the recent suggestions by some to the contrary. The appropriate public policy question is not should we or should we not promote mining in the developing countries, but rather where should we encourage it and how can we ensure that it contributes as much as possible to economic development and poverty alleviation.     

Environmental assessment in countries in transition: evolution in a changing context

Over the last fifteen years, Environmental Assessment systems of transitional societies of Central and Eastern Europe and Central Asia have undergone dramatic change from appraisals integrated into centrally planned economies to formal procedures aimed to ensure interdisciplinary analysis of environmental impacts and linked to publicly accountable decision-making. In most Central European nations, EA systems have been radically reformed to approximate the procedures used in developed countries, particularly in the European Union. In contrast, EA in most of the former Soviet republics has been reformed more gradually and is still based on the so-called State Environmental Review procedure inherited from the USSR and substantially different from 'Western' EA. About one-third of the transitional countries (in the Balkans, the Caucasus and Central Asia) have, so far, failed to establish functioning EA systems. Throughout the region, there has been a gap between EA legislation and practice, especially concerning interdisciplinary analysis of environmental impacts, public participation, and utilisation of EA findings in decision-making. A key driving force in the reform of EA systems has been the change in their societal context, the so-called 'process of transition'. Three main policy agendas--environmental protection, reforms of decision-making, and conforming to international requirements--along with the institutional context of EA regulations and practice have influenced both the change of EA systems over time and the regional variations in the patterns of their evolution. This study suggests that an effective reform of an EA system should be context-sensitive, or be 'in gear' with the political and economic transition. Future EA research should consider their changing societal contexts and focused on practical effects of applying EA procedures.     

Mine size and the structure of costs

The number of operating mines has fallen sharply for most mineral products, and the average size of mine risen, with the changes gathering momentum during the 1990s. The paper looks at trends in copper, zinc and gold, and then explores the relationship between size and unit costs in copper mining, separately for underground and open-pit mines, in order to ascertain the existence and importance of economies of scale. Changes in mine size have been accompanied by major technological and geographical shifts. There is only a weak relationship between the scale of mines and overall unit costs per tonne of copper produced. The paper discusses the data and explores some of the reasons.     

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.     

A review of the PGM industry,deposit models and exploration practices: Implications for Australia's PGM potential

Australia is prospective for platinum group metal (PGM) mineralisation (in particular primary magmatic reef, primary magmatic by-product, late magmatic and hydrothermal, and alluvial placer type) but its known PGM endowment is negligible compared to that of South Africa, Russia, the USA and Canada. Most Australian PGM projects are operated by mid-cap or junior companies and form part of larger, more diverse project portfolios held by these explorers. Most projects were ‘hot’ while market conditions were favourable. However, as other metals became ‘fashionable’ and market conditions for PGM changed, so did the focus of these companies. Pure PGM companies are rare in Australia. The search for and development of PGM-only deposits in Australia are high risk business activities. No new primary PGM deposits have been discovered since the mid to late 1980s and none of the significant deposits that were discovered or evaluated in the 1980s have been mined. This review suggests that at least several A$10 million but more likely several A$100 million were sunk into PGM exploration and development projects but none advanced to the mining stage. The viability of Australian PGM projects is very sensitive to (1) metal prices, (2) the US$/A$ exchange rate, and (3) large capital expenditure requirements relative to the small size of Australian PGM-only deposits. Most PGM-only projects were initiated at times of high PGM prices. However, advanced exploration, feasibility studies and project development always lagged behind the price booms. South Africa, Russia and Canada contain approximately 98% of the known global PGM reserves. This situation has a very negative effect on the Australian PGM industry as the well-endowed nations continue to receive the lion's share of exploration spend and new projects.     

Energy wealth and tax reform in Russia and Kazakhstan

Resource-rich states throughout the developing world are prone to rent-seeking, excessive borrowing, wasteful spending, and unbalanced growth as well as states with weak institutions and authoritarian regimes. Are the five energy-rich Soviet successor states necessarily doomed to repeat this experience, often referred to as the “resource curse”? This paper advances and tests the hypothesis that Russia and Kazakhstan are more likely to avoid the “resource curse” than Uzbekistan, Turkmenistan, and Azerbaijan because they privatized their energy sectors. Specifically, we find that privatization offers a potential path out of the “resource curse” when it involves a transfer of ownership to domestic actors. Although Kazakhstan initially appeared to be developing a viable tax regime in response to foreign investors, over the long term Kazakhstan’s tax regime has become increasingly volatile and dependent upon these foreign investors. In contrast, domestic oil companies are helping to foster the development of an increasingly viable tax regime in Russia.     

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 .     

SOJUZKARTA offers geodesy and cartography services

SOJUZKARTA is the official Soviet foreign trade association that sells geodesy and cartography services to international markets. The organization inter alia provides remote sensing photographs, undertakes natural resource cadastresurveys, provides remote sensing for the exploration for oil, gas, ore and other natural deposits, provides consultancy and training services and prepares topographic maps. Many of these services are provided to developing countries and this paper gives several examples of the use of its services by such countries.