Resource World Magazine

j u n e / j u l y 2 0 1 5 www.resourceworld.com 19 O ne of the advantages of having been part of the mining world for about four decades is that an observer becomes aware of important patterns in the industry. One of the most important of these relates to the changing focus of worldwide lawmaking and taxation as they impact the junior mining industry. When I entered the field in the mid- 1970s, the overall concept was relatively simple. A prospector would make what appeared to be an important discovery. He would contact potential investors and, if they agreed the opportunity might be worthwhile, capital would be raised, a junior company would be formed and resource exploration and development would quickly ensue. Expenses for the most part would relate directly to geological studies followed by activities such as geologic mapping and planning; sampling; then trenching with drilling and assaying to follow. If results were encouraging, one might then see moves toward the early and efficient onset of production. Throughout all of these processes, tight expense control, speedy progression and maximum efficiency were the bywords. However, I can state, categorically, that over the past 20 years or so the focus of junior miners has changed considerably and, in the opinion of many within the industry, these changes have not been for the better. In recent years, mining management has been forced to engage in extensive and expensive permitting procedures; equally extensive and expensive share listing requirements; building relationships with environmental and aboriginal/cultural groups; complex environmental studies and reporting and, in the eventuality that actual mineral production does begin, a company might surely anticipate contact from a bar- rage of municipal, state and federal taxation authorities. As a separate issue, countries such as South Africa also require that certain per- centages of the value of projects be handed over to various national and indigenous organizations. The processes for successful operation of mining projects in various countries has led to the virtual requirement that many juniors must hire local geologists and other management personnel and legally attempt to gain the positive support of the local or national political establishments by placing persons with local contacts into positions of authority. Regarding the latter point is Egypt- based, junior mining company, Alexander Nubia International, led by President and CEO Alexander Massoud, M.A. Econ, who has a lengthy involvement in resource development in Egypt, and General Faisal El Masry, PhD, who holds the position of Country Manager. According to the corpo- rate website, "…General Faisal El Masry… brings significant logistical, government and corporate affairs experience with day- to-day field operations and interfacing with all key Egyptian-based stakeholders." This is not a criticism; it's how to get things done. See article page 34. As an example of the intense regulatory complexities which might be encountered in many mining nations, Nigeria has enacted mining laws and regulations that can be almost overwhelming. Their mining laws include subjects such as the Minerals and Mining Act of 2007, the Nigerian Mining and Minerals Regulations of 2011; the Mines and Quarries Act of 2004, the Land Use Act of 2004, the National Minerals and Metals Policy law of 2008 and the Environmental Impact Assessment Act of 2004, among many others. These laws are enforced by numerous bodies including the Mining Cadastre office, the Mines Inspectorate Department, Mines Environmental Compliance Department and the Artisanal and Small Scale Mining Department. Laws in other countries, specifically including Indonesia, carry additional titles such as Mining License Law, Foreign Investment Law and other bodies of regu- lations designed to define priorities for domestic suppliers of mining equipment and services, plus laws requiring the utili- zation of nationally located mineral refiners and processors. In India, a multitude of laws define in-country transportation regulations. If over-regulation of mining itself was not a sufficiently important obstacle, junior miners must also deal with taxa- tion regimes that seem determined to discourage mining since one of the favourite targets is the imposition of roy- alties on mining production, whether or not such production is profitable. Many nations also have an unfortunate habit – from the industry point of view – of imposing sudden and dramatic increases in various taxation impositions. One example is the nation of Zambia which recently increased their announced rate of royalties on open-pit production from 6% to 20% and, as a result, mining giant Barrick Gold will suspend produc- tion at their Zambian copper mine with the loss of numerous jobs unless a fairer royalty agreement can be reached. From the industry point of view, one can only hope that lawmakers in these and other mining nations will truly come to realize the important economic and social contributions of mining and, with that understanding, they will also realize how important it is to set up regulatory and taxation regimes which encourage, not dis- courage, the mining industry. n This material is taken from sources believed to be reliable and is provided for information only. Any investment decision should be made only after prior consultation with investment professionals. Leonard Melman is a financial and political writer who focuses on issues relat- ing to the resource sector. Mr. Melman lives in Nanoose Bay, British Columbia, Canada and can be reached at lmelman@shaw.ca s p e c u l a t i o n s L e o n a r d M e l m a n Taxes and Regulations

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