Mining executives rate the investment climate of jurisdictions around the worldPublished by MAC on 2005-03-07
If you're a Canadian or Australian mining company, once again this year you're advised to stay at home for the best prospects and most pliant regulatory regimes.
Should you venture abroad, Peru and Chile are still good prospects, but Indonesia and the Philippines - despite recent frantic attempts to gild their respective lilies - leave a lot to be desired.
As for Congo and Zimbabawe - forget it!
Mining executives rate the investment climate of jurisdictions around the world
The Fraser Institute
March 7 2005
Vancouver - Attractive geology does not guarantee mining investment if a region's policies are bad, say mining executives surveyed in the eighth Annual Survey of Mining Companies, released today by The Fraser Institute.
In this year's survey, companies responsible for a combined total of US$798 million in international exploration (expected in 2005) rate the policy attractiveness and mineral potential of mining jurisdictions in North America and internationally.
Companies are asked to provide their opinions about the investment attractiveness of 64 jurisdictions, up from 53 last year. The jurisdictions include the Canadian provinces and territories, the Australian states, selected US states, and jurisdictions across Europe, Asia, and Africa.
British Columbia as a Case Study
For the first time in the mining survey's eight-year history, British Columbia has moved out of the bottom 10 jurisdictions in the policy potential index. Three years ago, British Columbia was dead last. Last year, it was seven from the bottom: this year, 20th from the bottom.
"British Columbia has lessons for the world," said Fred McMahon, the survey's co-coordinator. "It boasts immense mineral potential, but inconsistent, poorly administered, and badly structured regulations, federally and provincially, have deprived British Columbia of needed investment and well-paying jobs.
"A bad reputation lasts a long time," McMahon added. "British Columbia has made real efforts to reform, but companies need to have confidence that a good policy climate when they start exploration will be in place when the mine enters production many years in the future. That's a key reason British Columbia remains in the bottom half of the rankings."
The results of the survey were used to create several indices that gauge a region's general attractiveness.
Policy Potential Index
The Policy Potential Index is a composite index that measures the effects on exploration of government policies including: uncertainty concerning the administration, interpretation, and enforcement of existing regulations; environmental regulations, and regulatory duplication and inconsistencies.
Taxation, uncertainty concerning native land claims and protected areas; infrastructure; socioeconomic agreements; political stability; labour issues; geological database; and, finally, security, are also included.
"The question of security is new this year and was added because of increased awareness of terrorism, banditry, and other security threats," said McMahon.
This is the fifth straight year Nevada is rated as having the best mineral policies. Other top-rated policy jurisdictions include Ireland, Manitoba, Utah, Saskatchewan, Spain, Quebec, Ontario, Alberta, and Tasmania. Chile, which held last year's number 2 spot, fell to 14, perhaps due to the controversy over mining royalties in that nation. Both Ontario and Utah improved substantially over last year.
Zimbabwe's last place score of 7.6 out of 100 is the lowest score recorded in the last four years. Other jurisdictions at the bottom of the list were DRC Congo, Indonesia, Russia, Bolivia, Venezuela, the Philippines, Papua New Guinea, Wisconsin, and California. All were at or near the bottom last year except for Bolivia, which is facing a number of internal problems and has steadily fallen in Policy Potential rankings.
Both Russia and DRC Congo scored poorly last year but still fell substantially this year, in the case of Russia likely due to doubts about the future of market reforms and in DRC Congo by increasing chaos and civil strife.
Current Mineral Potential Index
Current Mineral Potential is based on respondents' answer to the question on whether a jurisdiction's mineral potential under the current policy environment encourages or discourages exploration. Nevada, Chile, Quebec, Mexico, Tasmania, Finland, Australia's Northern Territory, Brazil, and Ontario hold the top 10 slots. All scored strongly last year except for Finland, which is a new addition to the mining survey this year.
Not surprisingly, the jurisdictions at the bottom of the list are also consistent with last year's poor performers-and with poor performers in the policy potential index. California comes in last and is joined by Washington, Montana, Zimbabwe, Colorado, Wisconsin, Minnesota, South Dakota, Venezuela, and Alaska. These jurisdictions all scored near the bottom last year, with the partial exception of Alaska (29 out of 53 last year), which has consistently fallen since the 2002/03 edition of the survey.
Best Practices Mineral Potential Index
From a purely mineral perspective, the most appealing jurisdictions are Tasmania, Nevada, Alaska, Canada's Northwest Territories, Western Australia, Indonesia, Peru, Queensland, and Papua New Guinea.
Room for Improvement
The survey also calculates which jurisdictions have room to improve their regulatory environments.
Many of the jurisdictions with the greatest room to improve are developing countries, where additional investment, and job, wealth, and capital creation are most needed. This includes the Philippines, Indonesia, DRC Congo, Russia, Zimbabwe, and Zambia.
However, the worst performers are from the developed world and include Montana, California, Colorado, British Columbia, Arizona, and the Yukon.
"Mining executives are becoming increasingly willing to invest their exploration dollars around the globe. 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," said McMahon.
Established in 1974, The Fraser Institute is an independent public policy organization with offices in Vancouver, Calgary, and Toronto. The media release and survey (in PDF) are available at www.fraserinstitute.ca
For further information: Fred McMahon,
Director of Trade & Globalization Studies,
The Fraser Institute,
Telephone: (604) 714-4569;
Suzanne Walters, Director of Communications,
The Fraser Institute,
Telephone (604) 714-4582,