2010 Ranking of Countries
for Mining Investment
Where "Not to Invest"
Since 1999, Behre Dolbear has compiled a political risk assessment of countries of import to the mining industry. Behre Dolbear feels that the mining industry is vital to the creation of wealth and prosperity in any country and that countries that stifle it with detrimental political, economic, and financial policies should be challenged to make changes more accommodative to its success.
This year's survey concentrates on specific countries and some regional issues. Only factors relevant to "political risk" have been considered. Geology and mineral potential were not considered, as the fact that exploration, development, and mining activity are occurring confirms the existence of such potential. Behre Dolbear recognizes that if a major mineral deposit exists in a high-risk country, a mining company might well decide that the financial incentive exceeds the political risk; e.g., Barrick's Reko Diq project in Pakistan and Banro Corporation in the eastern Democratic Republic of the Congo (D.R.C.).
Behre Dolbear is cautiously optimistic about the future for the mining industry. During 2009, the instability of the credit, debt, and equity markets posed unprecedented challenges for virtually all industry players. Most have emerged from the crisis in reasonable condition. Buying and acquisition opportunities will continue for those private or state firms with healthy balance sheets and access to financing. Chinese and other Asian firms will continue their acquisitions to secure access to vital mineral commodities.
Canada, Australia, and Chile will remain the three best jurisdictions in which to develop mining projects. The United States will remain a difficult country in which to develop new projects and could deteriorate further, depending on additional new regulations and taxes.
Mexico will also continue to see significant exploration and mining investment. Progress in the war against the drug cartels needs to be maintained to minimize its effect on the investment climate. These anti-drug efforts are supported actively by the United States, and Behre Dolbear feels that Mexico will manage this problem, but not without significant costs.
India and Brazil will continue to develop in a positive direction. Brazil will continue its development into a regional leader and power, and India will act as a relative counterweight to China. The United States and India will continue to draw together as their democratic traditions provide a common ground to expand their economic relationship.
China will remain an aggressive acquirer of minerals assets. The wild card is how the Chinese economy will react as the excess liquidity injected by the central government is withdrawn. Behre Dolbear predicts that the Chinese government will not reduce its infrastructure spending or economic stimulus, as it fears social unrest more than asset bubbles or inflation.
Bolivia and Venezuela will remain very risky jurisdictions, and Argentina will be a question mark until its 2010 election results are known. No regime change is predicted in either Bolivia or Venezuela. The rest of South America (except Ecuador and Paraguay) will remain reasonably stable, with populist sentiment tempered and good economic growth developing.
Zimbabwe will remain in limbo until Mugabe departs the scene. Behre Dolbear predicts that many junior players will begin to scout a return to the country to be "on the ground running" when regime change occurs. Caution needs to be employed, however, as the manner in which regime change might occur remains a big question mark.
South Africa will remain a concern in 2010, but the stability of 2009 should continue. The ongoing debate over new electricity rates or taxation to fund societal projects is a concern, as is the far left wing of the ANC influencing the current government. There is continued hope that Mr. Zuma is following the path of President Lula in Brazil in charting a direction for his government. Similar to Mr. Zuma, President Lula came to power with pledges to nationalize large elements of the economy and wealth redistribution, but once in power, he followed more moderate policies. These policies have resulted in sustained economic growth in Brazil. Behre Dolbear cautions that all investments in South Africa need to be evaluated very carefully and continually reviewed as the picture develops in 2010.
Sub-Saharan Africa will continue to be relatively stable, and the nations of the region all have the ability to continue to evolve in a positive direction. This is predicated on their respective governments avoiding the traditional trap of evolving into despotic or totalitarian regimes. Behre Dolbear predicts that investments will continue to pour into this region, and incremental regional improvement will continue.
Russia will continue to chart its own course, and confrontations with the West will continue. It will continue to use its natural resource wealth (especially natural gas) to exert pressure on its neighbors and Western Europe. Russia will continue to test the United States on a number of fronts. These include its relationship to its allies in Eastern Europe, the Iranian nuclear program, Central Asian alliances, and oil pipeline routes.
NGOs will continue their anti-mining actions using proxies and will continue to use almost any method at their disposal to stop mining and other development. Increasingly, the new home of failed communism is within the radical environmental movements. Regulatory issues in developed nations will slow new projects in these politically stable countries due to the general populace's ignorance of the need for adequate minerals supplies for continued economic development.
The Middle East region will enjoy mining, minerals, and metals investments in the coming year. The region's nations will continue to seek to diversify and expand their economies. Low-cost energy will continue to encourage development of energy intensive industries, such as aluminum smelters and steel mills in the middle to long term.
The continued printing and injection into the economy of trillions of dollars and other currencies is potentially sowing the seeds of large-scale inflation. Gold should remain at high levels or experience additional increases in value as investors seek a safe haven to preserve wealth.
Behre Dolbear's advice remains to be very cautious as to where large sums of capital are invested. Ongoing world turmoil and political risks make the overall situation fluid and in many cases difficult to predict.
Editor's Note: Founded in 1911, Behre Dolbear is one of the oldest, continually operating minerals industry consulting firms in the world. Since its founding, the company has spanned the industry from the primitive pick and shovel days of mining to the computer age of geostatistics. The company specializes in performing studies and consulting for a wide range of businesses with interests in the minerals industry.
From offices around the world, the firm has performed assignments across the whole spectrum of commodities including base and precious metals, coal and lignite, ferrous metals, uranium, industrial minerals and gemstones.
To download the report, Country Ranks for Mineral Investment 2010, go to http://www.dolbear.com/Publications/CountryRankings.pdf
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