Responsible Mining 101: Mining in the Tropics 2 - Part 3

As I have shared with you, mineral extraction is gearing towards the tropics or the developing countries for numerous reasons.

Incentives for investments

While technological advancements and economic changes makes it feasible to discover new resources in the developing world, it is pertinent that their government offer not only their abundant mineral resource but they also need to provide security of tenure, free markets, clear fiscal and legislative incentives and competitive tax and regulatory policies. In a study conducted by the United Nations, it was found that the most important non-geological criteria for investment were the fiscal policies and mining codes of the prospective country. As a result, the trend among developing countries has been leaning to liberalization and deregulation of their economies, privatization of state-owned mining companies, and an acceptance and encouragement of foreign direct investment.

Mineral extraction regional trends

Latin America is the hottest spot for the increased mining activity as they have experienced the highest recent growth in foreign direct investment in mining. Large mining companies from the United States, Canada and South Africa are returning to mine in Peru after two decades of absence due to the political unrest in the country. To help spur the growth of the mining industry in Ecuador, they introduced a new Ecuadorian Mining Law that offers:

a. Incentives to private investors;

b. Lower taxes;

c. 100 percent foreign ownership of mining properties;

d. Exemptions from duties for imported equipment; and

e. Unlimited tax- and duty-free export of minerals.

In Suriname, they sought to attract more foreign investments into both bauxite mining and the nascent gold and diamond mining through the Standard Mineral Agreement which provides for incentives and support for investments. While in Guyana, west of Suriname, the government nationalized the bauxite industry and threw American and Canadian companies out of the country which led to Guyana’s share of the bauxite market drop to below 15 percent from their form 90 percent production.

Venezuela experienced significant increase in exploration in the last decade. Mining in said country is supported by a number of laws that provides incentives for investment and the government decreed to open half of the Imataca Forest Reserve to mining.

60 percent of private investment in Africa is in the mining sector. Large areas of Africa remain unexplored and unattractive to mining companies because of civil wars and social violence. South African gold production hit a 40-year low of 473.7 metric tons in 1998. West Africa is now a center of investment in African mining. Although they were producing gold for thousands of years, because of the improved political stability combined with modern technology there has been an increase of profits.

Asia Pacific regions is another important new area for mineral exploration. Vast mineral riches and huge stores of tropical biodiversity can be found in the Philippines, Indonesia and Papua New Guinea. These countries are following the global trend in increasing economic liberalization and offering a wide array of incentives for foreign investments to earn needed foreign capital for their state development.

The Philippines has been known for centuries as the “Isles of Gold”. In the 1980’s, the country was the eighth largest producer of gold in the world. After the decline of the mining sector, the Philippine government rewrote its mining law to allow a favourable situation for mineral extraction.