Developments in Mining & Barriers to Trade

Transcription

1 Developments in Mining & Barriers to Trade APEC Symposium Good Policy & Regulatory Practices for Facilitating Trade & Investment in Mining and Energy Services Tuesday 16 th June 2015 Presented by: Jeff Elliott Managing Director CSA Global

2 Contents CSA Global s role in the mining services sector Global trends & challenges in the mining industry Drivers & barriers to mining investment Some examples of regulatory change and impacts to mining investment The importance of gov t support for a growing and healthy mining industry 9/06/2014

3 CSA Global about us We are independent consultants to the global mining industry Local knowledge backed by global presence & expertise All mineral commodities All geological terranes & geographic regions Feasibility studies, mine development & operations Resource assessments, due diligence, expert reports Strategic & specialist advice, information, technologies Trusted advisors to public & private sectors for 30 years

4 Our role in the mining services sector One of Australia s largest mining industry consultancies Independent experts to majors & junior mining companies Advisory roles to governments & stock exchanges Estimation of Mineral Resource & Ore Reserves Mine planning, design, operational improvement Cradle to grave services (initial exploration to mine closure) Identify / Invest Explore Evaluate Develop Produce Close

5 Our experience in the APEC region Involved in the APEC region s mining industries since 1984 Established operations / commercial presence in: Australia (Perth, Darwin, Brisbane), Indonesia, Singapore, Russia & Canada. Growth aspirations in Latin America Significant cross-border consulting experience Asian (Aus & Asian offices) & American projects (Aus & Can offices) Technical training services to companies & individuals International reporting codes, exploration & mining practices On-ground, mining project experience globally CSA Global offices

6 Global trends in the mining industry Since 2012 the global mining industry has been in turmoil Volatile commodity prices affecting margins Tight capital, short termism & loss of confidence Lack of sustained investment in exploration Retrenchments reducing the pool of knowledge Government, community or environmental concerns

7 Global trends in the mining industry Challenges can create opportunities Focus on quality, productivity & investment returns Greater emphasis on social licence to operate Declining resource nationalism, more engagement Lower cost environment (energy prices, wages, equipment) Opportunities abound for those with vision

8 Drivers of MINEX investment Macro factors World economy growth, urbanisation, standard of living Commodity prices demand / supply issues Access to capital market sentiment driven Local factors Geological - well endowed in economic minerals Prospectivity track-record or under-explored Data - access to regional geological & exploration data Stability of laws, regulations & policy security of tenure, transparent & fair system for investment & development Security & health risks terrorism, civil unrest, disease

9 Exploration is a leading indicator Worldwide exploration budgets by country, % 21% 11% 19% 12% APEC share ~70%

10 Barriers to MINEX investment Macro factors reduced growth, lower prices, tight capital Local factors (higher to lower rating) High risk environment health, security, political - DPK Restrictive ownership or development laws - China Negative community views towards mining Solomon Is. Complex environmental or social issues - USA Land access / permitting issues Thailand Limited mineral potential Singapore / Hong Kong Lack of pre-competitive geoscience data - Malaysia Accessibility of tenement records / historical data Indo.

11 Health risks International SOS s Health Risk Map 2015

12 Security risks Controlled Risks Security Risk Map 2015

13 Political risks Controlled Risks Political Risk Map 2015 Body copy

14 Drivers of METS investment Macro factors World economy, commodity prices, capital markets Level of activity by MINEX (clients) Local factors Market opportunity open or competitive market place Ease & cost of establishing business Reasonable operating costs Supportive regulatory environment Availability of skilled personnel for training / development Ability to transfer resources between parent & subsidiaries

15 Barriers to METS investment Macro factors Poor outlook, tight capital, low activity levels Local factors (higher to lower rating) High risk environment health, security, political Restrictive foreign ownership Highly competitive or protected market for services co s Difficulty of establishment / setup registered capital, bank accounts, letters of domicile, visas, etc. Ongoing operational issues manpower limitations, restrictions on business activities, etc. Taxation / financial structure issues withholding taxes, lack of bilateral tax / trade agreements

16 Real examples - barriers Lack of investment in pre-competitive geoscience data South Africa s geoscience desperately underfunded Nedbank Capital JOHANNESBURG (miningweekly.com) Government geoscientists are desperately underfunded, which is depriving South Africa of the geological potential that is essential for minerals exploration. There is an absence of investment in large, regional geological exercises and masters students are not being trained in the countercyclical times, when the industry is not doing well.

17 Real examples policy impacts The real cost of Indonesia s commodity export restrictions The Indonesian government has geared up its efforts to limit raw commodity exports. The government s aspiration to move up the industry value chain and secure long-term supplies for the domestic market are the main drivers behind these initiatives. While policies may yield benefits for Indonesia in the longer term, they also bring many nearterm challenges. The trade balance could further deteriorate from shrinking export revenues. As a result, both investor confidence and economic growth could suffer. there is a clear urgency to develop domestic mineral-processing facilities. An export ban alone won t deliver this. Concerted efforts are also required to mobilize funding, simplify permit requirements and develop support infrastructure, such as port facilities and power supply. If this does not occur, activities in the mining sector will not recover.

18 Real examples adjusting policy Not proceeding with royalty increases & offering relief on iron ore royalties payments due to economic effects No mineral royalty hike for WA The WA government says it won t be increasing mineral royalty rates in this year s state budget. The responsible and most effective way to increase royalty revenue is to have policies which grow the size of the resources sector. Initiatives which keep the sector strong and prosperous will be welcomed by those Western Australians directly employed in the industry. Iron ore relief package backs jobs and industry The State Government will make temporary assistance available to junior iron ore miners on a case by case basis as they restructure operations in challenging market conditions This is not a handout, this is a deferral and is a good outcome for WA, Mr Marmion said.

19 Real examples incentive policies Tax / rebate incentives to encourage better practices Canada recognises green mining initiative The Canadian government has recognised an initiative that encourages mining companies to increase energy efficiency and reduce greenhouse gas emissions, with participants in the Towards Sustainable Mining (TSM) initiative to qualify for funding from the Canadian Industry Energy Conservation (CIPEC). Qualified mines can receive up to C$40, management/water-environment/ canada-recognises-green-mining- initiative/

20 Real examples incentive policies Proactive & positive policy to stimulate investment from mining industry and mining services Exploration Incentive Scheme The Exploration Incentive Scheme (EIS) is a State Government initiative that aims to encourage exploration in Western Australia for the long-term sustainability of the State s resources sector. The $130 million initiative, is to stimulate increased private sector resource exploration leading to new mineral and energy discoveries. modelling found that for every $1 million invested in the EIS the long run expected net benefit to the State is $23.7 million. Source: ACIL Allen

21 Real examples - incentive policies Exploration Incentive Scheme benefit summary Source: ACIL Allen

22 Real examples value of sector Pan-Ontario mining supply and services sector Economic Impact Study The Conference Board of Canada states that the Mining Supply and Services ( MSS ) sector is a multi-billion industry, yet it is a hidden sector that is not directly measured or tracked due to overlaps of serving other industries as well. the MSS sector is estimated to have contributed over $6.2 billion to Ontario s GDP and was a source of over 68,000 jobs in Given the above estimates and for comparative purposes, the direct economic impact of the MSS sector is larger than the size (GDP) of the information and communication technology manufacturing industry and the motion picture and sound recording industries in Ontario. Source: Canadian Association for Mining Equipment and Services for Export. October 22nd 2014

23 Real examples growth options Growth of mining services sector and increasing exports Chile faces Peru METS challenge A December 2012 study found Chile had 5,998 mining industry suppliers, up from the 4,643 in About 34% were classified as support services, 30% equipment and supplies, 27% contractors and 9% engineering and consulting service providers. Innovum Fundación Chile also reported the number of such companies exporting grew from 27% in 2007 to 34% five years later. But despite its strength and success, there are threats to its competitive position. "Chile has become expensive. Labour costs are increasing, which is compensated to a certain extent by the availability of people, but there are new regulations coming that are going to have an impact in the way that you hire people that you do not see in other countries in the region. "There is a gap between Chile and Peru but Peru is approaching Chile very fast. Peru has a wellprepared base of engineers and professionals, a well-established mining culture in the country and so it is a matter of time before it catches Chile.

24 Mining needs vision & gov t support Development of robust, sustainable mining & mining service industries takes time and requires Long-term government support Provision of pre-competitive geoscientific data Transparent and stable regulations & laws Collaboration with mining & service companies Commitment to education & training Pro-active strategies to stimulate investment It takes strong leadership with a clear vision for the future

25 What s your mining vision?

26 What s your mining vision?

27 Thank you for your attention For more information please contact: Jeff Elliott Managing Director