Aussie miner supports increased African mining taxes

African focused Australian miner Perseus Mining says fears of African nationalisation of resources are overblown and African nations deserve a fair share.

The spectre of resource nationalism has been a growing one in Africa, as the majors warn of its increasing threat.

Earlier this year Ernst & Young listed resource nationalism as the number risk for miners globally.

It said that resource nationalism is now more a challenge than it was a year ago.

"Many governments around the world have now gone beyond taxation in seeking a great take from the sector, with a wave of requirements introduced such as mandated benefication, export levies, and limits on foreign ownerships."

The African challenge

Last year Rio Tinto chief Tom Albanese stepped into the African nationalisation debate,
saying royalties are better for countries than direct ownership.

The comments came as South Africa's African National Congress party considered a new policy to allow the country to own more than half of all mining operations in the state.

Albanese said the debate varies on whether it is best for governments to achieve returns via taxation and royalties, through partial ownership, or a combination.

In countries such as Tanzania, the International Monetary Fund has actually told the government to tax mining operations to meet its spending commitments, according to Grant Thornton.

Its National Assembly will consider proposals for a super profits tax on mining as part of the nation's five year development plan.

"One size doesn't fit all, but I would add … if you speak with a finance minister, someone from the treasury side of the country, they will recognise that the appropriate taxation royalty regime actually pays economic rent to the country in good times and bad," Albanese said at the Commonwealth Business forum in Perth.

"We're not saying how to run a country – obviously we can't – but again, we do recognise that it's a constructive debate to have."

Speaking to Grant Thornton, they told Australian Mining that nationalisation – where the state takes control, and indigenisation – where the people or native people are ceded control, are the largest issues affecting Africa's mining industry.

"With the ruling ANC part debating state participation, analysts agree that reform of some sort is needed, but most argue that full-blown nationalisation will be detrimental," they say.

Recently Zimbabwe enforced new laws in the country which will see it take a minimum of half of all mining operations; if miners refused to comply it said it would force them out of the country and take control of their operations.

Rio Tinto ceded control of its Murowa Diamonds operation earlier in the year.

Rising Asian challenge

Fears were also raised this week as Papua New Guinea makes moves to change its mining regulations.

PNG prime minister Peter O'Neill explained that the changes are being made as landowners feel they are missing out on the resources boom.

However he added that "it is going to be done in a fair and equitable manner.

On the Asian continent, China imposed a resource tax on oil and gas mining companies in November 2011.
The tax was imposed mainly to nullify the cost of environmental damage caused by mining and China's lacklustre rehabilitation record.

This tax may be extended to other resources also in the long term as China is facing serious environmental problems. The coking coal from China is already subjected to a resource tax of about USD 4 per metric ton.

Indonesia is also planning a number of new taxes on resources, but these taxes will be on the exports of resources rather than royalty rates for production or profits generated by mining.

The country wants to develop its own downstream industries for mining activities rather than exporting unprocessed raw material to either China or India.

The country, which is one of the leading exporters of thermal coal and nickel, is planning to impose the new export taxes in 2012, however the exact timing of the new legislation is yet to be decided.

Africa's slice of the pice

However Perseus' chief Mark Calderwood said the concerns are overblown, particularly in West Africa.

Speaking at the Melbourne Mining Club yesterday, Calderwood said African government deserved to get a decent stake from projects in the country, according to the Herald Sun.

The miner, which operates in Ghana and the Ivory Coast and dubs itself as "one of West Africa's most aggressive explorers" is currently negotiating with the Ivorian Governments.

Calderwood explained that "it's important that governments have got to have a reasonable take, otherwise socially it just doesn't work anywhere (including outside Africa) for that matter.

"But more so in those countries that are undeveloped.

"They will get less international funding. They have to because Europe are not going to give them so much anymore or the US," Calderwood told the Melbourne Mining Club.

He pointed to a rate of between 45 to 55 cents in the dollar, with any figures above unreasonable, and figures below unfair.

Calderwood went on to attack the notion of West Africa as risky, saying apart from the infamous case of Guinea and Rio Tinto's Simandou mine, there was not a single case of a company that didn't deserve it, losing its licence

The West African rush

West Africa has recently been hailed as the new Pilbara.

With troubled times in the Pilbara as Gina Rinehart's Roy Hill mine defers construction, BHP cuts its workforce and expansion plans, and Fortescue slashes costs and workers, many major miners are looking to the next hot iron ore region.

Some majors have already begun operations in the region, with Rio Tinto running the Simandou mine in Guinea, Vale in Liberia and Guinea, Arcelormittal and BHP Billiton in Guinea at the Nimba project, as well as BHP's interest in a mineral development agreement with the Liberian government,  and Xstrata carrying out feasibility studies at its El Aouj, Askaf, and Lebtheinia iron ore projects in Mauritania.

According to Vale the iron ore projects in Guinea are considered to be "one of the best underdeveloped iron ore deposits in the world in terms of size and quality".

With this increasing demand for metals and minerals, the relatively untapped West African region will draw more miners, and more investment.

Despite many issues with infrastructure, the increased development of mines will see the parallel development or road and rail.

A new resources boom in the nation will truly see the growth of West Africa as the new Pilbara, and the dawn of the African century.

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