Page 2 of 2 Why miners dig
Indochina By Andrew Symon
communities and local governments
in the vicinity of its projects. Albert said
Oxiana's Sepon project is a model for both
governments and mining companies.
"The
project's success rests on four corners -
macroeconomic benefits, direct benefits to
government, indirect benefits to local
communities, and flagship benefits stimulating
more investment
and
setting good standards," said Albert.
Golden opportunities Other
foreign companies in Laos include Pan Australia,
which already has a large copper-mining operation
in Thailand and began operating Laos' Phu Bia gold
mine about 120 kilometers north of Vientiane in
November 2005. The mine is also to produce copper
beginning next year.
Australia's Rox
Resources is developing the Pha Luang
zinc-lead-silver zinc mine north of Vientiane and
is reportedly looking at copper, gold, iron ore
and coal prospects elsewhere in the country.
Australian mining company Argonaut Resources is
exploring for copper gold in southeastern and
northwestern Laos.
In Cambodia, Australian
explorer Southern Gold is looking for gold and
base metals such as lead in the country's eastern
regions, including in Mondolkiri and Kratie
provinces.Chinese companies are also reported to
be looking for coal in the area, while four
Chinese state-owned steelmakers recently announced
a joint venture to explore and develop iron-ore
mines in the country. Wuhan Steel, China's
fifth-biggest steel mill, is leading the project.
In Vietnam, New Zealand's Zedex and
Canadian-run Olympus Pacific Minerals began
operating in April 2006 the Bong Mieu gold mine at
Phu Ninh in the central province of Quang Nam and
are reportedly looking at other prospects.
Elsewhere, Knight Piesald, of New Zealand, is
developing a nickel mine at Ban Phuc in the
mountainous northern province of Son La.
The legal and regulatory regimes are
similar in Laos and Cambodia, where foreign mining
firms pay royalties and corporate taxes under
long-term mining licenses. Government or
government entities commonly have minority
partnership interests in the projects, with that
equity carried and subsequently to be paid for
through future project earnings.
In the
case of Oxiana's Sepon project, the Laotian
government has the option of taking up to a 10%
interest by forgoing dividends, which it will
likely take up this year, according to company
sources. The central government receives corporate
and other taxes and the provincial government
production royalties and taxes. The project
received a tax holiday on profits for the first
two years, and then pays 16.6% tax for the next
two years, and 33.3% for the remaining years of
operation.
Vietnam runs on a different set
of regulatory gears, because of various
state-owned enterprises already active in the
mining sector. The country already produces a
range of minerals and coal, although far below
levels that geologists and the international
mining industry think is possible.
Hanoi
is now encouraging expansion through the
state-owned consortium, the Vietnam National Coal
and Mineral Industries Group (Vincomin), which is
embarking on several new projects under the
government's 10-year mining master plan for the
period 2006-15. These include lead and zinc mining
and processing in the northern mountainous
provinces, bauxite mining and aluminum production
in the Central Highlands, and in partnership with
China's Chalco for iron ore in the north-central
province of Ha Tinh.
All of these are open
to foreign investors up to a 30% stake, and
foreign interest in Vietnamese ventures is strong.
But some foreign miners tend to find Vietnam's
legal and regulatory framework more cumbersome
than those in Cambodia and Laos, where there is no
competition from state-owned enterprises. Despite
recent market-opening initiatives, the Vietnamese
government still prefers to see national companies
positioned strongly in project partnerships.
One important future project is the Nui
Phau tungsten project, managed by Canadian miner
Tiberon some 80km northwest of Hanoi; the open-cut
mine is set to begin production in early 2009.
Tiberon executives say Vietnam could become one of
the world's largest tungsten producers. The
operation is distinguished by the fact that
ownership of Tiberon, currently listed on the
Toronto Stock Exchange, was recently taken over
through an equity buyout by a Vietnamese
investment company, Dragon Capital.
Set up
by young expatriates in 1994, the investment fund
has grown quickly with Vietnam's rapidly rising
fortunes in the past five years and has
established a profile for institutional investors
interested in Vietnam through, among other things,
its Dublin-listed Vietnam Enterprise Investment
Fund. Dragon's new commitment to mining is
arguably a barometer of the momentum now building
in the industry in Vietnam and the wider Mekong
region.
Andrew Symon is a
Singapore-based journalist and analyst
specializing in energy and mining.
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