Mining is a slow-moving industry. Tech companies can emerge, become giants, and sometimes evaporate along with investors' money, all in the time it takes a new project to go from discovery to production.
But as the past few years have proved, the risks that miners and developers face develop on a much shorter time frame. Wars, regime changes, and pandemics do not move at the same stately pace as project development. And even as the world grows more interconnected and global, mining remains a strictly local business. Mineral resources cannot be offshored. And unfortunately, many of the mining world's juiciest remaining plums are located highest up the tree, in jurisdictions that no other business would seek to operate in. So country risk remains the biggest and most intractable headache for the mining industry.
Veteran miners have learned to adopt a sanguine attitude to operating in unpredictable jurisdictions, at least where there are resources worth the risk. But as financiers grow every more cautious, it is necessary to be clear-eyed at the obstacles that lie between a project and reaching operation.
Mining Journal Intelligence' World Risk Report is an annual review of mining risk, including a jurisdiction-by-jurisdiction rating system and an assessment of general business and operating risks and trends across 109 mining jurisdictions.
The report includes the Mining Journal Intelligence's Investment Risk Index (IRI), an underwriting tool which provides jurisdiction-by-jurisdiction ratings across five core areas of mining-related risk: Legal, Governance, Social, Fiscal and Infrastructure. The report is weighted toward established risk-related indexes, but also includes a survey of perceived risks from the mining industry.
Canada remains a standout in the global mining industry. The three best-performing jurisdictions in the survey were all in Canada, with British Columbia, Ontario, and Saskatchewan all scoring AAA ratings for risk, while the DRC, Myanmar, and Thailand made up the bottom ranks, all of them scoring D.
Over the last six years, since the report was launched, the biggest riser in score has been Guinea. The country's score has risen 31% over the last six years, with a higher score meaning a more attractive risk profile for miners.
Guinea's improvements as a jurisdiction will be very welcome new to Rio Tinto, as it works to develop the massive Simandou iron ore project. The project has been tied up in red tape and political wrangling for years, with repeated allegations of corruption as miners vie for access.
Rio Tinto which is part of the Simandou development consortia along with Chinese partners, is pushing ahead with the development, which will involve constructing not just the mine but a massive amount of transport infrastructure, and has the potential to double Guinea's GDP.
Other big risers have been Greenland, up 28%, and Kenya and Indonesia up 15% each.
Meanwhile the worst-performing jurisdictions over the last six years have been Thailand and the DRC, down by 29% and 23%, respectively.
While Thailand's poor score will not be of much concern, the worsening situation in the DRC remains a massive and seemingly intractable problem at the heart of the global energy plan. The DRC is the source of a huge amount of copper and more importantly, most of the world's cobalt. Although the DRC still boasts massive unexplored cobalt reserves, it remains an open question as to whether the battery metal can be accessed, given the current scale of risk in investing in the jurisdiction.
Regions hold flat
Across the regions, scores as a whole were largely flat year-on-year. The biggest mover was the US, where the score dropped by two points, though at 73 the US still ranks as the lowest risk area after Canada, once again topping the list at 77.
But the longer-term trend is less encouraging, with adjusted scores dropping over the last six years of the survey in all regions except Asia. Australia and Oceania has been the worst-performing region, dropping eight points since the report was launched.
The biggest good-news story from the survey has been a perceived improvement in the fiscal environment. The adjusted change in fiscal scores over the last year is 4 points, to 65.
Admittedly, this trend could be something of a bounce back, given that in 2021 the mining industry and the global economy was still languishing under the effects of long covid. And readers should be reminded that these scores are from data gathered over the year as a whole, and many in the mining industry have noticed a sharp drying up of finance in recent months, as the world faces up to the looming possibility of a global recession.
But although the overall trend was positive, one area saw a marked decline. This was in survey results on permitting.
The average global permitting score, which measures the speed permitting decisions are made in relation to guided estimates from authorities and is based on survey data, dropped to 53.04 (out of 100), compared to 57.84 in 2021.
This year's score equates to an average permitting delay of a little more than six months.
The steepest drop in perception was seen in Central America and the Caribbean, where the perceived permitting risk score dropped by nearly 19 points to 56.07, although a major factor here was the inclusion of a new jurisdiction, Jamaica, with a score of just 42.86.
Asia stood out as the only region where permitting was seen to have improved, thanks to an improvement in the situation in Laos, the Philippines, and India.
The US was a weak performer, with the risk score dropping by 6.57 points to 49.64. Miners have been concerned that the pressing need for permitting reform in the US, where new mines take over 10 years to reach construction, is being overlooked by the Democratic administration.
Democratic Senator Joe Manchin, chairman of the influential Senate Energy and Natural Resources Committee, was recently rebuffed in his attempt to include permitting reform in the pending Defense act.
The issue of mine permitting is expected to be taken up by the new Congress, which starts in January 2023.
Industry lobby group National Mining Association says US miners "remain subjected to a third-world permitting system that discourages investment and the downstream industries, related jobs, innovation and technology that depend on a secure and reliable mineral supply chain."
Survey respondents were also concerned about South America, where permitting scores dropped by 4.44 points to 50.95, with the outlook worsening in Argentina, Guyana, and Chile.
In Chile, where new President Gabriel Boric has some way to go to earn miner's trust, there have been a few of high-profile permitting setbacks, including at Anglo American's Los Bronces and El Soldado copper mines.
2022 also saw a big drop in the permitting scores for a few European jurisdictions, including Austria and Germany, while in the Middle East the Saudi government's mining ministry will be pleased to see a 37.74 jump in score, to 78.57.
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