Local mining investment ranks higher
Namibia has been ranked as one of the best countries to invest in mining, according to Behre Dolbear’s annually compiled political-risk assessment.
The country ranking improved from 14th place in 2013 to 7th place in 2015. The 25 countries considered in the survey are ranked based on seven criteria. Each criterion is rated on a numeric scale that reflects the relative conditions that impact investment growth.
Political system, economic system, currency stability, competitive tax, corruption, permitting and social license issues, are the main criteria used by the Behre Dolbear Group to compile their rankings. The Group said it is one of the longest continuously operating mineral industry advisory firms in the world.
According to the report, markets have taken a volatile downward trend in recent months, creating concern for host country governments and miners alike. Mineral prices have dropped over the last year. “For example, iron ore and coal prices have fallen by half. The market correction has led to a sharp decline in foreign direct investment, forcing the governments of countries hosting new production to reassess their recent goals of extracting more benefit from industry.”
“There is now a realization that governments must be more accommodating to remain competitive internationally,” according to Behre Dolbear.
Large mining projects typically take ten years from discovery to scoping in defining and determining its feasibility. Long lead times heighten a project’s overall risk profile, making it difficult for companies to achieve the level of return required to compete with alternative asset classes for investment.
Currently, it takes six years or more until investors can expect returns from a greenfield mining construction project.
Increasingly, governments are focusing on the strategic significance of non-renewable resources as governments of resource-rich countries continue to question foreign investment precedents, risking investor confidence given the increasingly strategic significance of non-renewable mineral resources.
Behre Dolbear believes that a sustainable minerals industry requires a considerable amount of on-going, as well as new capital investments. “The opportunity cost incurred by countries that want greater participation in the returns of internationally financed mining development grew throughout the commodity super cycle.”
This exacerbated political risk concerns and limits investment demand, the report states. “We believe that political stability is derived form personal freedom and quality of life. Political stability is essential to assure the availability of affordable mineral resources – a key requirement to improve the world’s standard of living.”
The past surveys on Canada, Australia, the United States, Chile, Mexico as well as a few others, share a common high ranking. “These countries, with the exception of the USA, rose to the occasion as their mining sectors represent a relatively large component of their overall economies. They have long mining histories and they have leading expertise within both the private and government sectors”.