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2 Why miners dig
Indochina By Andrew Symon
PHNOM PENH - War and political
instability, uncertain legal and regulatory
regimes, and the sheer difficulty of working in
isolated mountainous and jungle terrain have long
conspired against modern mining activities in
Cambodia, Vietnam and Laos.
Now the
combination of high global mineral prices and more
market-friendly governments is propelling a wave
of foreign mining investments and pushing
exploration and production to levels
never before seen in the
Mekong region. In French colonial times, there was
exploration in the region, but not on a large
scale apart from coal operations in northern
Vietnam.
Western mining companies made
limited forays in the region in the early and
mid-1990s, but the 1997-98 Asia financial crisis,
flat global commodity prices and vacillating
government policies toward foreign investment
stymied most of those efforts. Now, small and
medium-sized Australian, Canadian and New Zealand
exploration companies are in growing numbers
taking the regional plunge, most prominently on
gold and copper, but also on bauxite, iron ore,
nickel, zinc and lead.
Unexploded ordnance
from the region's many wars still poses
life-and-limb operational challenges to miners.
Upon making discoveries, the companies now active
in the region often either sell the rights to
bigger multinational operators, possibly
maintaining an interest, or after raising capital
to transform themselves into full-blown operators
themselves.
At the same time, the world's
largest miner, Australia's BHP Billiton, is also
in the regional hunt, including for bauxite in
eastern Cambodia's Mondolkiri area in a joint
venture with Japan's Mitsubishi. And consistent
with China's growing commercial presence in the
Mekong region, Chinese mining companies are also
taking up positions.
One Western company
leading the way is Australia's Oxiana Resources.
Listed on the Australian stock exchange, the miner
began operating the first of what promises to
become a wide array of new mines in Laos run by
foreign mining companies. Oxiana started producing
gold in Savannakhet province's Sepon area in 2002
and in 2005 expanded into copper. At the time, the
US$285 million open-pit mining and processing
operation was the first large-scale
foreign-invested project in the country.
Jointly developed with support from the
World Bank and its private-sector financing arm,
the International Finance Corp, last year the mine
exported 173,000 ounces of gold dore and 61,000
tonnes of copper cathodes on to the global market.
Gold and copper deposits already discovered in the
Sepon district hold an estimated 3.9 million
ounces of gold and 1.9 million tonnes of copper -
and the company says it expects further
discoveries.
Sepon's output now makes up a
substantial part of Laos' total exports,
strengthening the country's trade position and
providing desperately needed revenues to the
cash-strapped government. In 2005 and 2006, Oxiana
paid the national government $50 million and the
provincial government $21 million - a sizable
amount considering that total central-government
revenues from local sources and overseas
development assistance is less than $400 million
annually.
Oxiana's Vientiane-based Asia
manager, Peter Albert, believes that Laos - and
the wider largely unexplored Mekong region - have
good long-term prospects. Oxiana recently entered
an alliance with AngloGold Ashanti, the world's
second-largest gold-mining company, to explore for
gold throughout Laos. The company has also turned
its attention since 2006 to Cambodia and is
exploring in the east in the Mondolkiri province
for both copper and gold.
Albert
acknowledges that managing mining operations does
not stop at the pit and plant. As with
multinational petroleum companies, miners often
find themselves in complex social and political
situations, especially in economically
underdeveloped countries such as Laos and
Cambodia.
Albert emphasizes the benefits
the project is providing for local communities,
not only through employment and the use of local
suppliers, but also through community-development
projects provided under a trust fund set up by the
mine. He says that of the mine's total 3,500 or so
workers, about 2,000 come from the local area and
the rest from other parts of Laos - excluding
about 350 expatriate employees.
This is
hardly surprising, as the social and environmental
impact of mining projects are - and will be -
scrutinized closely by governments, development
assistance agencies, international and local
non-governmental organizations and the media. The
question of transparency of payments to
governments - and the transparency in the use of
revenues by governments themselves - is another
major issue that has complicated operations in
such places as Indonesia.
Oxiana, for its
part, sees that its ability to operate long-term
in Laos and elsewhere depends on its ability to
achieve good relations not just with national
governments, but also with
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