Short pice this week as I’m enjoying some downtime in Lisbon, Portugal — checking out the business climate in this beautiful city-by-the-sea, and checking in on some of the world’s best wine and cuisine.
Even though it’s summer, things are far from quiet in the global resource sector. With this week’s news on the implosion of Tanzania’s mining (and possibly oil and gas) sectors representing one of the most critical geopolitical events we’ve seen in the industry for some time.
George Soros And The Human Uncertainty Principle
The division between academic economics and the way traders look at the market is deep. The efficient market hypothesis assumes that markets and valuations are always pushing towards an equilibrium, and evidence to the contrary gets pushed aside as fluctuations or statistical deviations. But the dot com bubble, the
The government's move to up state ownership and taxes, and cut legal certainty, is going to have a major effect on incoming investment in this already-struggling locale. In fact, the extreme steps taken by officials here may put the country right up there with pariah state South Africa in terms of ranking on the "places to avoid" list worldwide.
Of course, there's no way to know for sure if Tanzania's miners have been paying their fair share of taxes (remember, this whole thing stated with a fight about local gold-copper producer Acacia Mining under-reporting its duties on concentrate exports).
But whether or not there was shortfall, the steps taken by the government in response have gone well beyond the practical. Asking miners to shoulder potential 50% state ownership -- plus no right to international arbitration -- is a proposition few firms will be willing to take.
In light of that, it's been interesting noting the patterns recently in global exploration and development spending. With funds for new projects being severely biased to the world's most stable jurisdictions.
I first noticed this in early May, when I hit the proEXPLO conference in Lima, Peru. And was stunned at how many mining firms -- junior and senior -- are running Peruvian programs.
That makes sense, given the incredible success Peru has enjoyed in bringing on new mining projects the last few years. Proving this is a place where you can discover big deposits, and put them into production.
That investment friendliness has literally brought miners running from around the globe. And I've noticed the same pattern happening lately in another of the world's go-to mining jurisdictions: Nevada.
Nevada has always been a hotspot for mining projects. But talks with colleagues the last several weeks have revealed that several new major companies have quietly entered the state recently. Picking up projects and advancing under-the-radar exploration programs.
We got confirmation of this trend the past week -- when AngloGold Ashanti signed a deal with Nevada specialist junior Renaissance Gold to acquire the Silicon gold project in southwestern Nevada.
With all the problems emerging in spots like southern Africa, it makes sense miners would be pulling in their horns -- and doubling down on proven districts with a level and reasonable playing field. Watch for that trend to continue as long as metals prices stay relatively subdued, and international governments keep making oversteps like in Tanzania.