Latin America Round Up. Global Mining Finance 2013
In this article, Paola Rojas, Vice president, Corporate Development of Rojas & Asociados, was interviewed about how global explorers increased budgets (and Tolerance) in risky jurisdictions. See below an excerpt of the article or see the full story here >>
Global Explorers Increased Budgets (and Tolerance) in Risky Jurisdictions
“Argentina must guarantee tax and legal stability in order to attract foreign investment. Recent international currency control has decreased investors’ confidence,” said Paola Rojas, corporate Development Vice President at Rojas & Asociados Mining Consulting Firm, during her opening remarks at the Argentina Mining event in Salta Province last September.
Worried statements like the above are often heard throughout the region, but global explorers seem to think differently and keep pouring the money into risky jurisdictions. According to the SNL Metals Economic Group (SNL-MEG), “He industry showed no sign of backing away from high – or medium – risk jurisdictions; exploration allocations for these destinations accounted for more than half of this year’s total, despite ongoing concerns and uncertainty about security, policy and resource nationalism.”
Two Latin American countries ranked among explorers’ sweethearts: Mexico and Chile are listed alongside mature mining jurisdictions such as Canada, Australia and the United States. The duo is also highly ranked in the 2011-2012 Fraser Institute Policy Potential Index (PPI), a survey that analyses the effects on exploration based on government policies.
Chile, which normally ranks in the top 10, fell to 18th place, while Mexico ranked 35th among 93 jurisdictions. Peru, Brazil and Colombia are next, in 53th, 57th and 64th place, respectively.
Sadly, the region is also home to the 10 bottom scorers: Bolivia, Guatemala, Venezuela and Honduras are considered the worst jurisdictions for explorers. According to Venezuela-based Norton Rose lawyer Rubén Eduardo Luján, Latin American countries offering legal and economic stability and open markets are successfully attracting mining investments. Mexico, Peru and Colombia are proof of it, he says. On the other hand, countries with restrictive laws and in which the state is heavily involved in mining activities receive scarce investment.
Glen Faass, also a lawyer at Norton Rose based in Colombia, adds another hook for investors, more tax-efficient structures. The countries where investors can keep a higher percentage of their investments’ revenue include Chile, Colombia, Panama and Peru. He states, “Those more practical and transparent countries also tend to be better aware that the State is not entitled to be a partner in management decisions, just as it is not a partner in risks or losses.”
In 2012, global explorers spent $21.5 billion, 19% higher than 2011. As a group, majors increased their exploration allocations to their highest point in almost a decade. In contrast, juniors spent just slightly more than in 2011. One fact leading to concern is the industry’s favoritism towards more advanced projects, leaving early-stage ones with all-time low exploration budgets.
The SNL-MEG study is based on a survey of 3,500 mining exploration companies in 129 countries, of which more than 2,550 had exploration budgets in 2012.
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Latin America Round Up Global Mining Finance 2013
