This page has been archived and commenting is disabled.

The 15 Best and 15 Worst Mining Jurisdictions in the World

smartknowledgeu's picture




 

With the announcement yesterday that Bolivia President Evo Morales will announce a decree on May 1st to dismantle the privatization model of the mining industry and expropriate all assets owned by private mining companies, is this just an isolated example or will this be the start of a trend that many other governments will follow? As a result of this announcement, Coeur d'Alene Mines (NYSE:CDE) and Pan American Silver's (NASDAQ:PAAS) shareprices plummeted yesterday. Since gold and silver mining companies will exhibit the fastest earnings growth rate among any industry for the next several years, one should consider political risk as a much greater component of the decision-making equation when investing in mining stocks in coming years.

 

So where are the riskiest mining jurisdictions in the world and where are the safest? According to the most recent Fraser Institute survey, here are the mining jurisdictions that graded the best and the worst for “encouraging mining investment” and granting “legal processes that are fair, transparent, non-corrupt, timely, and efficiently administered”. In order to rank these mining jurisdictions from top to bottom, the Fraser Institute asked mining executives and exploration managers in 79 mining jurisdictions around the world to grade the effect of government policies on mining operations (including restrictive regulations, uncertainties about land use, and the ever looming issue of restrictive taxes), the nature of trade, environmental, and operational barriers, and the effect of mineral potential on additional exploration investment. Furthermore, to encourage objective responses to the survey questions, the Fraser Institute surveyed all mining executives anonymously.

 

By comparing the grades of the jurisdictions below, you should be able to assess the risk and future probability of an Evo Morales type event happening to a mining company whose shares you own.

 

The Best 15 Mining Jurisdictions in the World, 2011

 

(1) Quebec

(2) Chile

(3) Nevada

(4) Ontario

(5) Yukon

(6) Western Australia

(7) Saskatchewan

(8) Alberta

(9) Newfoundland and Labrador

(10) Mexico

(11) Peru

(12) Manitoba

(13) Brazil

(14) Alaska

(15) Botswana

 

The 15 Worst Mining Jurisdictions in the World, 2011

 

(1) Venezuela

(2) Zimbabwe

(3) California

(4) Democratic Republic of Congo

(5) Russia

(6) Colorado

(7) Bolivia

(8) Montana

(9) Ecuador

(10) Honduras

(11) British Columbia

(12) Wisconsin

(13) South Africa

(14) Niger

(15) Michigan

 

In addition to inevitable increasing nationalization efforts of mining assets by more and more countries in the future (i.e. Venezuela), we can also expect governments, as it is inherently in their nature to gravitate towards extortion whenever possible, to attempt to significantly increase tax rates upon mining industry profits in future years. As an interesting side note, 1/3 of the 15 worst mining jurisdictions in the world as voted by mining executives are currently located within the United States.

 

As demonstrated in Australia, the mining industry, when subjected to unfavorable legislation, are quite capable of mobilizing and fighting back. When Prime Minister Kevin Rudd proposed a 40% “super” tax on all mining industry profits in excess of the long-term government bond rate in Australia, mega-mining corporations Rio Tinto, Xstrata and BHP Billiton joined forces to oust him and replace him with a new Prime Minister more favorable to their concerns, Julia Gillard. Eventually Gillard reduced the super tax rate from 40% to 30%.

 

In conclusion, all foreign mining companies that reap enormous profits from mineral interests should contribute to economic growth in the countries in which they operate through hiring local labor at fair wages and using profits to increase the standard of living of the nearby communities in some form, whether through the assistance of road or school construction, etc. Some mining companies perform quite admirably in this area while others perform quite atrociously. However, governments will have to carefully consider the negative consequences on future investment patterns and economic growth in their countries of expropriating mining assets and significantly increasing tax burdens, as mining companies will surely rank among the fastest growing profitable industries within many countries as the global monetary crisis ushered in by the global Ponzi banking system accelerates in future years.

 

On a final note, sometimes investors panic react much too strongly to news, that while negative, is not nearly as negative as the media projects it to be. I call this type or reaction, whether it manifests itself in negative impulse selling or positive impulse buying, the “prophet worship” syndrome. For those interested in exploring the psychology that causes investors to rashly swing the pendulum of rational behavior too far in either direction based upon media sound bites, check out this link.

 

 

About the author: JS Kim is the Founder & Managing Director of SmartKnowledgeU, a fiercely independent investment research and consulting firm whose objective is to help Main Street beat the fraud of Wall Street. Follow his daily thoughts (sometimes weekly) on Twitter at this link.

 

 

 

 

- advertisements -

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Fri, 04/15/2011 - 18:25 | 1174502 litoralkey
litoralkey's picture

This list is ridiculous.

Is there no editorial oversight amongst the Tyler braintrust on Friday afternoons?

Fri, 04/15/2011 - 12:49 | 1172939 pasttense
pasttense's picture

It's just nonsense that some US states could be the best jurisdictions and some the worst jurisdictions in the world, simply because 80% of the legal environment  is federal and thus the same for all states (think EPA, mine safety, SEC, federal taxation...)

Fri, 04/15/2011 - 13:13 | 1173033 Boxed Merlot
Boxed Merlot's picture

And the 80-20 rule lives on.

Personally, I believe a safe, profitable, environmentally responsible mining operation can exist in CA as Teichert Construction could attest to (if it were a publicly traded co).

Or it could be as much that Au as the kryptonite feared by the fed, the treasonry and bis brotherhood that they would just as soon these holes in the ground be used for spent fuel rod storage before being allowed to contribute to the world's supply of PMs.

Fri, 04/15/2011 - 13:08 | 1173000 Smokey1
Smokey1's picture

I agree, pasttense. His entire list eats shit.

Fri, 04/15/2011 - 12:14 | 1172780 swamp
swamp's picture

TANZANIA 

TANZANIA

TANZANIA

Should be on top of the list of favorable places. Author has NO idea.

Fri, 04/15/2011 - 12:09 | 1172769 B-rock
B-rock's picture

BC is BAD!

 

Wooo Hooo!

Fri, 04/15/2011 - 12:07 | 1172754 cpaspareil
cpaspareil's picture

Isn't it weird that Québec is the most socialiste "states" in Canada and is ranked #1?

Still true... 

But i can tell you that mining rights is becoming an issue in Québec lately. We have archaic laws so you don't even own what's under the land you bought. 

You can bet that it's gonna change in the next few years...  

 

Fri, 04/15/2011 - 12:12 | 1172771 cpaspareil
cpaspareil's picture

Sorry- the page froze and my reply appeared 4 times...

How to delete it?

Fri, 04/15/2011 - 12:08 | 1172752 cpaspareil
cpaspareil's picture

Isn't it weird that Québec is the most socialiste "states" in Canada and is ranked #1?

Still true... 

But i can tell you that mining rights is becoming an issue in Québec lately. We have archaic laws so you don't even own what's under the land you bought. 

You can bet that it's gonna change in the next few years...  

Fri, 04/15/2011 - 12:06 | 1172750 cpaspareil
cpaspareil's picture

Isn't it weird that Québec is the most socialiste "states" in Canada and is ranked #1?

Still true... 

But i can tell you that mining rights is becoming an issue in Québec lately. We have archaic laws so you don't even own what's under the land you bought. 

You can bet that it's gonna change in the next few years...  

Fri, 04/15/2011 - 12:08 | 1172749 cpaspareil
cpaspareil's picture

Isn't it weird that Québec is the most socialiste "states" in Canada and is ranked #1?

Still true... 

But i can tell you that mining rights is becoming an issue in Québec lately. We have archaic laws so you don't even own what's under the land you bought. 

You can bet that it's gonna change in the next few years...  

Fri, 04/15/2011 - 12:08 | 1172741 cpaspareil
cpaspareil's picture

Isn't it weird that Québec is the most socialiste "states" in Canada and is ranked #1?

Still true... 

But i can tell you that mining rights is becoming an issue in Québec lately. We have archaic laws so you don't even own what's under the land you bought. 

You can bet that it's gonna change in the next few years...  

Fri, 04/15/2011 - 11:38 | 1172412 michigan independant
michigan independant's picture

"Some mining companies perform quite admirably in this area while others perform quite atrociously."

Nothing can change the rules of profit or loss in the long run. The disorder and social acrimony will start with the word "fair" No Government is fair, and no Business with the information filters to maintain plausable denial are either. The speck in your eye is never going to leave since all is tbtf. Taylorism today is just another mask to absorb cruelty maintained by proxy.

http://www.thestreet.com/story/10876757/mines-michigan-regulators-reach-deal-on-cleanup.html

Im old enough to remember the ravages caused by whatever it takes to execute plan B. Rape the local resources and move on. Some Company's as above paid up on some issues but overall trust no one ever.

http://earthobservatory.nasa.gov/NaturalHazards/view.php?id=36352

Risk is a model no cares about anyway.

http://www.epakingstontva.com/Work%20Plan%20Approvals/Forms/AllItems.aspx?RootFolder=%2fWork%20Plan%20Approvals%2fOSC%20REPORT&FolderCTID=&View=%7bFD51B683%2dDA50%2d40E4%2dAFF8%2dA1C4757A0078%7d.

 Well yea it was alot but I do not live there anyway.

http://www.epakingstontva.com/Another%20one/2009_0804_Congressional%20Testimony.pdf

We are sorry we fucked your life up since we tax the shit out of you upfront and we will not send you a tee shirt.

EPA recognizes that the coal ash release in Kingston was a devastating event for the community and that many of its members are dealing with very difficult changes in their daily lives, their homes, and their property. EPA will use its authorities and expertise to continue oversight and technical assistance efforts to protect human health and the environment during the clean up of this catastrophic release and promote the restoration of the surrounding ecosystem.

Fri, 04/15/2011 - 10:38 | 1172338 Flakmeister
Flakmeister's picture

This is one reason why I really like the Canadian juniors with a resource base in Canada....

Fri, 04/15/2011 - 10:20 | 1172256 ATM
ATM's picture

Nationalized mines means slower production and rising prices. Couldn't be more bullish longterm. Governments can't run anything well and certainly can't run mining as efficiently as private companies.

Everytime I see a nationalization story I know that supply in whatever industry just got reduced.

Sat, 04/16/2011 - 03:15 | 1175440 Boxed Merlot
Boxed Merlot's picture

There have been lots of stories told about the mining activities here in the mother lode of CA back in the days before cameras, metal detectors and the irs.  While much of it is lore, there's truth in the stories.  As there are essentially no records kept at private holes in the ground, production, security and truthful / trustworthiness become sacred knowledge.  Old timers contend most Au left hard rock mines in lunchboxes, even from the holes owned by the likes of JPM and east coast "monied" interests.

 

That being said, privatization remains a much more effective way of increasing PM stocks, economic prosperity and positive growth than government ownership / intervention of the process itself.

 

Personally, I believe this sentiment is / was the impetus that foisted the privatized federal reserve model on the US nearly a hundred years ago.  Unfortunately, though Au is money, and it arrives at the governments coffers from the private sector, frns are not Au, and should've never been allowed to substitute for the US constitutional mandate to provide citizens with government issued legal tender.  imo.

 

 

Fri, 04/15/2011 - 12:07 | 1172753 hungrydweller
hungrydweller's picture

Yup.  Great if you own the physical - lousy if you own the stock of companies doing business in those jurisdictions.  I'll stick with physical and stocks of US/CAN/AUS companies doing business in US/CAN/AUS.

Fri, 04/15/2011 - 10:41 | 1172344 falak pema
falak pema's picture

It is understandable in a way...in this mad consumer rush to nowhere...now fueled by a risk asset bubble of gigantic proportions...world wide...debt and double debt is a wet dream of dry land lubber starved of real growth, adrift with phony liquidity, in dire need of inflationist prohibition. Maybe...assets conservation is the way...to a better tomorrow...tough shit on 'today-today, now-now' addicts.

Fri, 04/15/2011 - 10:10 | 1172221 Herbert_guthrie
Herbert_guthrie's picture

No need to punish here, I am sure these mining companies are going to "share the wealth" on their own. Especially since the "main driving force" of large scale mining operations happens to also be the one directing our printing press operations.

Fri, 04/15/2011 - 09:55 | 1172155 msjimmied
msjimmied's picture

Don't forget Mongolia where Ivanhoe mines are digging. A huge copper and gold deposit, but the yak herders...just a matter of time. Sold it some time ago knowing that this stage would come when countries will want to nationalize.

Fri, 04/15/2011 - 09:54 | 1172137 apberusdisvet
apberusdisvet's picture

Hard not to envision a possible future when the Mexican cartels demand "tribute" from the miners; just saying.  In addition, if Barry gets a 2nd term, there would be a possibility that he would nationalize the silver mining industry if the shortages impact the "national security" .  Note that the US military uses tons of the stuff.

Fri, 04/15/2011 - 10:24 | 1172277 InconvenientCou...
InconvenientCounterParty's picture

Mexico is a rising star.

What do you have against tribute, socialist?

The Cartels are true entrepreneurs who's business accumen will wipe out the unions and increase the ratio of equivalent Ag oz/per pound of human muscle fibre.

 

Fri, 04/15/2011 - 09:50 | 1172123 falak pema
falak pema's picture

Private industry that helps main street.....?

Lol, where has this guy been living in the past thirty years?

On the moon.. I guess...he is Neil Armstrong's lost child...

Rip van Winkle of the moon...welcome home!

Fri, 04/15/2011 - 08:11 | 1171785 Ted K
Ted K's picture

SKU---

Yeah California and Wisconsin are going to socialize mines any day now---

Just for the record SKU, you're a fucking prick, and your brain should be socialized, stuck in a jar of horse glue and put on the podium of the next Republican convention as the new party mascot.

Your time would be better spent towards your true aims, in an unknown location creep cave plotting with the Koch Bros. on how you're going to fuck labor out of their next paycheck.

Fri, 04/15/2011 - 10:35 | 1172325 MrPike
MrPike's picture

Why so defensive Ted? Nationalization of industry is the first step to your centrally planned utopia you have been dreaming about.  One of the states closest to this paradigm is indeed California, and as a resident of Colorado, I can attest to the Socialist fervor here. 

Sat, 04/16/2011 - 21:42 | 1176976 Ted K
Ted K's picture

Mr. Pike---

You're full of shit the same as SKU.  Oh yeah, Colorado is just bursting at the seams with what you label "socialism".  That's why pricks like you listen to Jon Caldickface every night on 850koa, repeating whatever Republican mantra he just told you 10 seconds ago, with a couple of his beer bar jokes thrown in-between. 

Don't get me wrong though, I do think there is hope for losers like you to grow a couple brain cells and grow-up from your fantasies of revisionism of the true Reaganism legacy of federal budget destruction.  After all, they did kick off the wacky/kooky Mormon from FOX tv--you know, the hemorrhoid with big ears??? What was his name again???

 

Fri, 04/15/2011 - 09:49 | 1172116 LoneStarHog
LoneStarHog's picture

You do realize that California, Wisconsin and Colorado are already socialist states? DUH!

Fri, 04/15/2011 - 12:53 | 1172916 Boxed Merlot
Boxed Merlot's picture

I realize a deeded mineral right with a 165K oz Au hard rock deposit less than 300' from the surface is considered a minor find, but I can attest to the fact virtually zero interest in developing/marketing of this asset is encountered when it's disclosed the property is in CA.

This, despite the historical evidence of the property, existing infrastructure, (highways, power, water, labor, etc.) and an Au assessment approaching stratospheric frn valuations.

The footnote "CA" is a kiss of death. I wish it were not so, but it's certainly been mine and my family's experience.

If you don't believe this, please, make me an offer.

Fri, 04/15/2011 - 10:27 | 1172288 InconvenientCou...
InconvenientCounterParty's picture

take a break from killing things and travel a little bit. You might learn something.

Fri, 04/15/2011 - 11:04 | 1172465 4xaddict
4xaddict's picture

I think the author is narrow minded in expecting mining cos to invest in surrounding areas. This naturally happens when people are paid wages to spend on a discretionary basis.

Paying royalties to a national government in these countries (whilst they are rats themselves) at least makes for more meaningful distribution of funds.

Countries like Aus have their best young engineers and tradesmen/women being poached to go live in these holes and the wider national cost of living along with the delays and gross cost increases in national infrastructure projects that occurs across the rest of these countries has side effects that will be felt through the social fabric of these countries for decades to come.

These large miners definitely bring wealth it is absolutely without question however their localised impacts without making wider contributions to the development of the mine host countries as a whole leaves a mark akin more to a short term sugar fix than long term sustenance. Guess that is a side effect of the next quarter profit mentality in listed corporates and a whole other debate.

@I..C... this was not linked to your post but put here so it wasn't lost in the banter as I am interested in ZHers feelings about this issue. 

Hope to hear from a few of you with more than junkings :)

 

Fri, 04/15/2011 - 09:44 | 1172104 Global Hunter
Global Hunter's picture

by "labor" do you mean folks that actually build stuff for private enterprise or public sector union "labor"?  Because the latter and its leaders I hold in about as high as regard as Goldman Sachs executives, they're both corrupt undemocratic sponges.

Do NOT follow this link or you will be banned from the site!