afrol News, 22 January - Mining executives rating the investment climate around the world agree that "attractive geology does not guarantee mining investment if a region's policies are bad." In Africa, South Africa gets the executives' best rating, followed by Ghana and Congo Kinshasa (DRC). Investors are more insecure on Zimbabwe, mostly due to political instability.

Mining executives surveyed in the seventh Annual Survey of Mining Companies - released today by the Canada-based Fraser Institute - in general give an above average rating to the four African countries mentioned in the survey. Chile ranks highest overall, obtaining 92 out of 100 possible points.

South Africa competes well among the 53 areas surveyed, which mostly include Canadian, US and Australian states. With 66 points, South Africa ranks highest among the four African nations, followed by Ghana and the Congo (58 points). Much lower on the list, one finds Zimbabwe (41 out of 100 points).

The survey - which gives far less weight to the geological potential of mining than policies and stability - is the major annual measurement of investment attractiveness of states and countries for mining companies. In this year's survey, companies responsible for a combined total of US$ 642.4 million in international exploration rated the policy and mineral attractiveness of mining jurisdictions around the world.

- Jurisdictions like Chile, Australia, Quebec, and Nevada, which bolster attractive geology with mining-friendly policies, do well on the overall investment attractiveness index, says Liv Fredricksen, the survey's coordinator. "Other jurisdictions like British Columbia and Indonesia, who also have excellent geology, are hurt by their policies which have lowered their score."

The results of the survey were used to create several indices. The Mineral Potential Index rates a region's attractiveness for new investment based on its geology. The Policy Potential Index is a composite index that measures the effects of government policies such as regulation and land use in attracting new investment. An overall Investment Attractiveness Index considers both mineral potential and policy factors.

Those regions most successful in competing with Africa in terms of miners' investments are mostly found in the Americas. Chile (92 points) is closely followed by the US state Nevada (91) and closely thereafter are the South American countries Brazil, Peru and Mexico. But the Americas also include the worst places for miners to invest, such as Bolivia (32) and California (12).

- Chile's ranking is the result of high scores on both the Mineral Potential Index (96) and Policy Potential Index (85), the Fraser Institute explains. "Attractive geology is necessary, but not enough. Governments who want to maintain viable mining industries in their jurisdictions must enact favourable policies to encourage investment," stresses Ms Fredricksen.

The four African countries surveyed all had higher values on their Mineral Potential Index than on their Policy Potential Index. The latter measures miners' uncertainty concerning the administration and enforcement of existing regulations, environmental and regulatory issues, taxation, native land claims and protected areas, infrastructure, socio-economic agreements, political stability and labour issues.

South Africa
South Africa during the last years increasingly has been seen to have a good mineral potential for mining, scoring 81 points on the mineral index. The policy index, with a 43 points score, however is below average. Land use and other restrictions gather many complaints from the surveyed.

One CEO at a junior mining company says that in "South Africa, mining title [is] unsure, empowerment, excessive royalties, [and] game rules changing. [They should] revert to the position that resulted in South Africa being an attractive mining investment country."

Also labour regulation and employment agreements in South Africa provoke comments from an Exploration Manager at a senior mining company. He lists: "The mining charter is not very well constructed [in South Africa]; obtaining prospecting licenses is virtually impossible; black empowerment is not clear-cut; employment equity goal posts are changing regularly; proposed royalty bill is discriminatory and outdated; corruption in provincial and national departments."

Another President of a junior mining company argues that South Africa has an unfavourable policy. "The Mining Charter - although the motives are correct, the implementation will be full of uncertainty. Add in the new Royalty Bill and you have a toxic mix." A colleague at a senior company adds that South Africa is in the process of introducing new mineral legislation which is likely to "alienate existing ownership rights."

Ghana
Ghana as a potential country for investments score lower on mineral potential (66) but higher on policy potential (47) than South Africa. "Ghana [has] good potential combined with transparent rules," comments one Company Secretary at a junior mining company.

Investors especially appreciate the political stability in Ghana, not only referring to the lack of military coups, but also the predictability of government policies. There is a low percentage of mining companies considering political stability in Ghana (22%) a strong deterrent to exploration investment. Here, Ghana beats South Africa (29%) and even the US state of California (32%).

Congo Kinshasa
The Congo has a much higher mineral potential (74 points) than Ghana, but scores very low on policy potential (34). Investors in general view it risky to get involved in Congolese projects. The Congo has a "fantastic mineral endowment but political risk is unacceptable," comments a Managing Director at a junior mining company.

In Congo Kinshasa, as in Zimbabwe, 0% of mining companies see "political stability" as a factor that could "encourage exploration investment." In fact, 89% of the mining companies say they are "discouraged" to invest in the Congo due to the political situation in the country.

Kinshasa however scores high on lax environmental regulations (94) and certainty areas will not be protected (100). The country's land use restrictions are generally seen as favourable.

Zimbabwe
Although Zimbabwe is the lowest scorer of the three African countries in the survey, it has actually become more attractive for mining investors during the last two year. Both when it comes to Zimbabwe's mineral potential (51 points, up from 29) and policy potential (26, up from 20), sceptical mining executives have started to see a potential.

One Vice President Exploration of a junior mining company however points out that Zimbabwe has an unfavourable indigenisation policy. Another employee at a junior mining company emphasises that in Zimbabwe, the "rules can change overnight" and there was "social chaos, lack of infrastructure, and necessities."

An overwhelming 97% of mining executives said they where "discourages" from investing in Zimbabwe due to "political instability". Further, they expressed concern over the regulatory framework. Almost all (88%), however, where content with lax environmental regulations.

Actual investments
While the survey revealed current trends in the perception of potential mining investment scenes, it however also demonstrated that mining companies didn't follow their own advises, at least when it comes to the primacy of a mining area's policy framework.

While applauding the policy framework in Ghana, many mining companies are currently decreasing the proportion of their budgets they spend in that country. Despite complaints over a worsening policy situation in South Africa, they are actually increasing the proportion of their exploration budgets they spend here - and in Zimbabwe.

By staff writer

© afrol News

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