Who would want to own a mine? Possibly only a government
Who'd have sympathy for a mining company? Their record in the environment, in helping the communities on which they depend, and in making money for shareholders, has been poor for years. So few people will shed tears for the mining companies that are getting it in the neck, left, right and centre. From Africa to the Far East, governments are on the march — and the miners are in retreat.
This year, the Philippines shut half its mines in one fell swoop, blaming environmental violations. In Indonesia, US giant Freeport is battling to hold onto its Grasberg copper mine. In South Africa, the proposed punitive new Mining Charter could drive through strict black empowerment targets for miners and freeze foreign investment in the process. And in Tanzania, the government is turning the screws on London-listed Acacia, hitting it for back taxes amid claims it has underreported how much gold it exports.
While the circumstances differ in each country, a couple of themes are clear.
First, governments are not above whipping their biggest taxpayers when it is convenient to do so. Kicking the mining companies — whether they deserve it or not — is always a handy, populist move.
For multinational miners, this might be considered the price of admission, although some will argue that they are the victim of shifting goalposts. In some cases, mining companies have set themselves up for a fall by negotiating generous tax arrangements at the outset. It only takes a change of government and the rise of a more hardline leader for those deals to become a lightning rod of criticism — never mind that it can take years for a mine to generate profit. The flipside is that governments may feel they have no choice but to offer tax breaks in the beginning because it is the only way to attract foreign investment to places that may be lacking roads, secure energy supplies and a trained workforce.
What if the
taken out of
Second, the wave of anti-mining sentiment highlights the way in which the benefits of the industry have failed to filter down to people. Despite governments typically taking minority stakes in big mining projects, and imposing layers of royalties and taxes on top, the trickle-down effect is perceived to be lacking. For the miners, it is a critical problem. Yes, they can point to the billions they pay in taxes. Yes, they can highlight the corporate social responsibility projects they undertake, and the indirect jobs their mines create. And yes, they can mutter about how it is not their fault if governments don't do a very good job of redistributing the taxes they collect.
But if people don't feel better off, and if they see the environment being chewed up and improperly restored after foreign companies have gone, miners surrender the high ground in the blink of an eye.
Now some in the mining industry are wondering how to do things differently.
Time and again, ownership of mines has become a bone of contention. What if, some argue, the ownership problem was taken out of the equation? A new type of mining contract could have governments retaining whole ownership of their natural resource assets, with mining companies becoming the contractors that apply their expertise to extract the ore for a fixed fee over a fixed time, and possibly a share in the resulting profits. This form of "mining-as-a-service" would be closer to the oilfield services sector, which often operates assets on behalf of national companies.
No system is perfect, and developing countries would still need help raising the finance to build a mine.
Greater policing from the likes of the World Bank would be required to ensure funds are flowing where they need to go. But partnerships that promote trust and reassure companies that their investments aren't going to be stripped from them at a later date are clearly necessary. And keeping mineral resources in the hands of the people who have felt bypassed by the industry may engender that trust.
As more and more countries make life difficult for miners, companies will find themselves scrapping over assets in fewer and fewer jurisdictions, shutting off avenues for growth.
Until we can find a way of synthesising all our materials, mining will be a fact of life. It may be time — to borrow one miner's new catchphrase — to think big.
© The Daily Telegraph, London
• Ron Derby is away