Resource World Magazine

epilogue David D uva l Infrastructure issues confront Canadian miners at home and abroad O ne of the key operational constraints facing mineral explorers and developers on the African continent is the lack of infrastructure. Canadian companies are confronted by similar issues in their own back yards given the fact mineral deposits in Canada are increasingly being found and developed in remote areas with poor or non-existent infrastructure. In 1958, Prime Minister John Diefenbaker promoted the "Road to Resources" program as part of a major effort to unlock the natural resource potential of the Canadian north – only to abandon the program four years later. Back then governments often showed a willingness to allocate taxpayer money to infrastructure projects that would support industrial development. However, you don't see that happen very often these days with the exception perhaps of Québec's "Plan Nord" which might well be scaled back by the newly elected Parti Québécois government. Today, supporting employment and infrastructure in local communities, particularly indigenous ones, is a prerequisite to getting anything done and it's the mining companies that usually end up paying the tab. Managing expectations has become a major problem in South Africa, the strongest and most advanced economy on the African continent. Miners there remain among the highest paid wage earners in the nation's industrial sector but they are highly politicized with widespread strife among competing unions and their respective memberships. Striking platinum miners at Lonmin's Marikana mine in South Africa recently accepted a 22% pay raise, ending six weeks of violent labor unrest that killed 45 people (34 at Marikana) and continues to destabilize the national economy. Not only has the pay raise negatively impacted the economic viability of Lonmin's operations, 62 www.resourceworld.com it has spawned wage demands on a similar scale at other mines in South Africa. While South Africa's mining industry is facing an uncertain future, other African countries are putting great effort into creating fiscal regimes that are attractive to foreign investors, especially in their mineral sectors. A 2011 survey by Ernst & Young, one of the "Big Four" international accounting firms, suggests that Botswana "is a country that can be looked to as one that got the balance right between state and citizen participation and lower tax rates." Canadian companies like Hana Mining [HMG-TSXV] would seem to agree. Hana is developing its Ghanzi copper-cilver project located right in the centre of the Kalahari Copper Belt in northwestern Botswana. The government and international banks are lending support to infrastructure projects that will promote investment and development in this critical sector. The country's favorable geologic environment, mineral investment climate, low tax rates, and political stability are expected to continue to make Botswana a foreign mineral investment magnet. However, the paucity of water in landlocked Botswana has to date tempered investment in large scale industrial developments. According to Hana, the Ghanzi Project will benefit from proposed rail and power infrastructure expansions along with proximity to local population centers and workforce. The company notes that a feasibility study has been completed (funded by the World Bank and the governments of Botswana and Namibia) to support the construction of a rail line link that would connect Botswana with the Namibian port of Walvis Bay on the Atlantic coast. Construction is also well advanced on the 600MW expansion of the government-owned Moropule Power Plant, having secured US $825 million project funding in May 2009. Namibia has tremendous resource potential but its taxation rate for mining companies is one of the highest in the world when viewed as an overall "effective tax" or cost to the company which includes royalties on gross sales, taxes to shareholders and profits tax, the latter being 37.5%. In addition, the Ministry of Finance for Namibia will soon publish proposals for export levies that are hotly contested by the industry. Ghana remains attractive to investors due to its high GDP growth rate, the recent discovery of oil as well as a stable and democratic political system. But the country is also striving to increase the contribution of the mining industry to tax revenues. While some of the changes will rightly concern mining companies operating in Ghana, many of these companies have stability/development agreements with the government to protect against adverse consequences of newly introduced laws. These agreements often include concessions to mining companies on corporate taxes, windfall taxes, mineral royalties and property taxes making the proposed changes less effective. However, they might serve to deflate new investment in this critical sector. Tanzania has attracted major investment into its gold mining sector with companies like African Barrick and AngloGold Ashanti accounting for most of the country's productive capacity. But the country has been struggling to maintain its gold production levels after frequent blackouts began to hit mines. Poor infrastructure is among the significant obstacles affecting production. Lack of infrastructure in some regions has been a problem for many years; however, where there is a will, there are ways to solve this problem. There are numerous examples of successful mines being built in the Canadian Arctic with zero infrastructure and a brutal climate. n NOVEMBER 2012

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