But, on balance, risk in the mining world as judged by the Investment Risk Index, the centrepiece of the Mining Journal World Risk Report (feat. MineHutte ratings), recorded a stable level of average risk from 2017 to 2018, with only one index-point of movement after adjusting for new entrants/exits.
The average score for the 85 jurisdictions covered by the 2017 Investment Risk Index was 61 out of 100. The average score year-on-year has remained flat at 61, however, new jurisdictions introduced to the index are riskier as reflected by a lower score on average of 57. Combined with the loss of jurisdictions (insufficient data) that as a group scored slightly above last year's average (62), there was a drag on the entirety of the 2018 index.
This means, for the 76 jurisdictions for which we have two years' of ratings, there has been a marginal drop in risk for a higher average score of 62.
Of the major regions covered, Australia/Oceania saw the largest departure from its 2017 ratings, with a fall of three index points to 67, which takes the average score for the region out of the A-ratings window. The decline can largely be attributed to a four-index-point and three-index-point drop in Legal and Governance ratings, respectively, which carry the greatest weighting in the overall index score.
Canada, another mining stronghold, recorded a one-point increase in score to 80, which pushed it into the AAA-rating bracket, while other developed-world regions, the US (74) and Europe (63), were flat.
Regions starting from the lowest bases and therefore in most need of improvement, generally saw positive numbers.
Africa went from a score of 50 to a 52, while Asia improved one index point to 49, approaching a re-rating to CCC. The improvement in Africa was almost exclusively down to better standards of governance, with the aggregate average for the region across the ‘ease of business' and ‘transparency' metrics improving 22% year-on-year. Of more concern is the continued decline of African infrastructure, which fell 13%.
Results in South America were flat, as a material drop in average Legal score was balanced by an improvement in Governance numbers.
Other regions where sample groups are smaller - and year-on-year changes to those sample groups saw significant turnover of constituents - naturally registered greater movement year-on-year. Namely, Central America/Caribbean and the Middle East showed a 6% and 10% change, respectively, both to the negative.
The Investment Risk Index has expanded its coverage by more than 10% in its second year to include 96 jurisdictions worldwide. The result is the net impact of data for collecting data for 20 new jurisdictions and nine jurisdictions from last year dropping out because of insufficient data.
Aspermont, the parent company for Mining Journal and Mining Journal Intelligence, has also recently committed further resources to its burgeoning research unit, which should ensure coverage is expanded again in 2019 to push the number of jurisdictions covered past 100.
The Investment Risk Index combines established and respected risk metrics (hard risk) with the results from our World Risk Survey (perceived risk) across five risk categories - Legal, Governance, Social, Fiscal and Infrastructure - to reflect the mining-biased security of investment for jurisdictions across the world.
The final number for each jurisdiction is defined by an 80:20 weighting of hard and perceived risk, and a weighting of categories so Legal (40%) has the greatest influence, followed by Governance (25%), then Social (15%), Fiscal (12.5%) and then Infrastructure (7.5%).
Access to the World Risk Report is available here. Premium subscribers are able to view the full report, while an excerpt including the overall Investment Risk Index ratings and methodology is available for free.