So which country is the best in the world to be a miner?
Not Australia, if you’d listened to mining companies or the opposition over the past two years. “Now it is safer to invest in Argentina, in Tanzania, in Zambia, in Ghana and in Botswana than it is to invest in Australia,” Tony Abbott said in 2010.
But a leading US mining consultancy has, for third year in a row, listed Australia as the best place to be a miner.
In its annual ranking of countries in terms of risks for mining investment, Denver-based mining business consultant Behre Dolbear has ranked Australia, Canada, Chile, Brazil and Mexico as the top five nations in which to locate mining projects. The ranking was unchanged from 2011, while in 2010, Australia again topped the rankings.
During the debate on the new mining and carbon taxes, we’ve had terms such as “sovereign risk” tossed about by people who don’t know what it means: not just the likes of Tony Abbot, but people who should know better, like Tom Albanese of Rio Tinto, any number of newspaper columnists and online chatterers (like Robert Gottliebsen at Business Spectator).
But all the while mining companies have continued to invest: groups such as BHP Billiton, Rio, Fortescue, and more: iron ore, coal, gold, copper, oil and gas, LNG. More than $300 billion worth of projects are planned or under way or on the table. And, despite that, we still get these strange comments about the threat to mining from this cast of know-alls (WA Premier Colin Barnett is the latest on 7.30 on ABC 1 last night: “for the first time in my career I’ve heard business people overseas, governments overseas, talk in terms of political risk and sovereign risk.”).
Mining stocks have also continued to perform well (asked why local miners’ share prices were outperforming the stockmarket and their foreign competitors after the announcement of the RSPT in 2010, Clive Palmer insisted it was because investors knew there’d never be a mining tax).
The 25 countries considered in this year’s survey from Behre Dolbear were ranked on seven criteria: economic system, political system, degree of social issues affecting mining, delays in receiving permits, degree of corruption, stability of the country’s currency, and the competitiveness of the nation’s tax policy. Each criterion was rated on a qualitative scale from one (worst) to 10 (best) with a maximum attainable score of 70 points.
In the economic system part of the survey, Australia, Canada and Chile were the highest-rated countries, while the lowest-rated countries were Russia, Bolivia, DRC, Kazakhstan and South Africa. Previously, the US led in the political category, but has now fallen one point “due to the continued stalemate in its Congress; the influence of powerful lobbying organisations and NGOs tilting the playing field.” The highest rated political systems are Canada, Chile, the US, Australia and Brazil, while the lowest-rated are Bolivia, China and Russia.
The countries ranked most effective at managing social issues are Australia, Chile and Columbia; Bolivia, PNG, India and South Africa were ranked the least effective. Australia and Canada continue to rate at 10 on corruption. Those with the greatest incidence of corruption are Kazakhstan, Russia, DRC, South Africa and PNG.
The highest-rated countries for currency stability are Canada, Australia and Brazil, while the lowest-rated countries are DRC, Russia, Zambia, Bolivia and Indonesia. The highest-rated countries for tax regime are Mexico and Canada. The lowest rated countries are South Africa, Bolivia and Zambia. Australia remained unchanged on five out of seven — higher than the US.
But the survey didn’t leave Australia unscathed. “Australia’s rating was almost lowered by one point due to continued government interference. The introduction of Strategic Cropping Land legislation in Queensland has removed some large tracts of land from potential coal mining in that state; although in New South Wales, the state government has intervened in the granting of title in some areas (e.g. Liverpool Plains) for open-cut coal mining.”
The dollar also concerned Behre Dolbear: “The Canadian and Australian dollars remained close to parity with the United States dollar with both countries ratings of nine. While not enough to change its rating, Australia’s inflation is beginning to be a concern.”
The only comment on the mining tax was in the context of a worldwide move toward greater taxation.
“The impact of increasing government debt combined with relatively recent rising commodity prices has inspired officials in almost every minerals-producing nation to consider raising mining-related taxes and fees … The inspiration for these efforts may have been bolstered by Australia’s actions over the past year to increase taxes both directly and indirectly on mining operations.”
How did those countries nominated by Tony Abbott as better places for mining investment than Australia fare in the survey? Zambia ranked 19th out of 25 (the three out of seven rating on tax didn’t help); Argentina 14th out of 25; Tanzania equal 12th; Ghana equal 9th; Botswana 8th.
And PNG was 22nd on the list, and persistently among the worst-rated countries across the board. PNG has a high level on investment by local companies (Newcrest, Oil Search, for example). There are already worrying reports of delays and other problems at the $US15 billion Hides LNG project in PNG.
What a shock facts don’t support Abbott’s claims, is there one policy area where they do?
A Jon.es was peddling the sovereign risk line on sunrise again this morning and the so called finance expert host just agreed with everything he said.
Doesn’t sovereign risk mean the possibility of miners being shot.
But I am sick of Australia being a quarry.
Nothing wrng with us being a quarry Marilyn – as long as we plan for the day the quarry hits the bottom and build a strong economy and society from the proceeds.
This is an interesting portion of that report on “Corruption” criteria
[quote] Australia and Canada continue to rate at 10, the highest in our survey in this criterion. The financial influence (through fund raising) of lobbyists and other purported public-interest groups on the legislative process in the United States was considered to be legal corruption resulting in the United States falling 1 point to a rating of 9. [/quote]
So these people have downgraded US rating on corruption criteria due to the influence of lobbyists on the legislative process, something that could have happened to Australia had LNP/NLP been in the government last 4 years
I thought the interviewer let Barnett walk a base on 7.30 last night. In one sentence Barnett spoke of “for the first time in my career I’ve heard business people overseas, governments overseas, talk in terms of political risk and sovereign risk.” but then said it was OK for them to change the royalty.
The question I would have insisted on getting an answer on is – Please explain to me the difference in the impact to mining companies (in terms of political/sovereign risk) whether it is a new tax imposed by the Federal Govt versus a new increase in the royalty by the state government?
The level of debate/insightful analysis on this topic is pathetically low.