Resource nationalism remains number one risk for miners

By Adianto P. Simamora

For two consecutive years, resource nationalism remains the number one risk for mining and metals companies around the world, including Indonesia, a new report by Ernst & Young?s said.

The annual report ?Business risks facing mining and metals 2012-2013 says many governments around the world going beyond taxation in seeking a greater take from the sector, with a wave of requirements introduced around mandated beneficiation, export levies and limits on foreign ownership.

The global skills shortage and infrastructure access retained second and third spots respectively in the risk rankings this year, as more and more countries experience these constraints. Rapidly escalating costs have pushed cost inflation up from number eight to four.

Ernst & Young Global Mining & Metals Leader Mike Elliott says resource nationalism is now a bigger challenge than it was 12 months ago, at a time when the myriad of risks facing the sector have become increasingly complex and critical.

?Resource nationalism retains the number one risk ranking with many governments around the world going beyond taxation in seeking a greater take from the sector, with a wave of requirements introduced around mandated beneficiation such as bans on the export of unprocessed raw materials, as well as export levies and limits on foreign ownership,? Elliott said in the statement.

?There is no doubt projects around the world have been deferred and delayed, and in some cases investment withdrawn altogether because of the degraded risk/reward equation.?

?The uncertainty and destruction of value caused by sudden changes in policy by the governments of resource-rich nations cannot be understated.?

?Miners must continue to engage with governments to foster a greater understanding of the value a project brings to the host government, country and community, and be better able to negotiate appropriate trade-offs that preserve the value to miners, governments and other stakeholders.?

Editing by David Mustakim