Research into jurisdiction risks in mining investments

Case Study: First Quantum’s Cobre Panama Mine

Perhaps the most striking example of how politics can influence the activities in recent years, is the closure of the first quantum minerals (TSX: FM, OTC Pink: FQVLF) Cobre Panama -my in Panama.

As with many mining activities, Cobre Panama lasted decades to put into production. First quantum Receive approval To work on the site in February 1997; However, it would take 22 years and US $ 10 billion to build the mine and the required infrastructure before production started in September 2019.

When it was placed on care and maintenance in November 2023, the mine was one of the largest in the world, good for about 1 percent of the total copper stock.

The closure came after the Panama government was confronted with intense public recoil for the granting of first quantum a 20 -year mining contract; It was quickly declared unconstitutional by the Supreme Court.

The Panamanian government too introduced an indefinite moratorium About all mining concessions. The relocation brought the mining sector of the country in a state of Limbo and led other companies to stop activities in Panama. Orla Mining for example (TSX: Ola, NyseAmerican: Orla) decided Stop the financing From his Cerro Quema project until “had more certainty with regard to mining concessions, as well as tax and legal stability in Panama.”

Cobre Panama’s closure and the subsequent moratorium Fitch led to Downgrade are investment prospects For Panama in March 2024, from BBB to BB+. The credit agency quoted tax administrative challenges that arose after the mine closure and noted that Cobre Panama was good for 5 percent of the GDP of the nation.

Although the international monetary fund Expect the GDP from Panama Up to 4.5 percent in 2025, while the non-mining sector of the country’s economy is growing, the changes have already had a significant impact on the national economy, with GDP growth delayed up to 2.9 percent in 2024, of 7.4 percent in 2023.

Case Study: Loulo-Gounkoto Complex of Barrick Mining

Another recent example is the impact of unrest on the operations of Barrick Mining (TSX: ABX, NYSE: B) in Mali.

The African nation has experienced a long -term period of instability, whereby the government will be overthrown within a period of 10 years in three coups in 2012, 2020 and 2021.

The most recent two came after months of unrest after election disorder and accusations of corruption in 2020, and then evokes that a more legitimate government would be installed in 2021.

Eventually the government was replaced by a military junta, and in 2022 it was announced that elections would be held in 2024. These were, however, postponed until the beginning of 2025, at what time they were postponed again.

Last July, Malian military authorities Admittedly current leadership A five -year mandate, so often renewable as necessary without requiring an election that guarantees control of the government until 2030.

The impact on the mining sector has been remarkable. In 2022, the new government Order an audit Of the mining sector, which led to that Mali adopted a new mining code in 2023 after a limited industrial consultation.

The code aims to generate more income for the government of mining activities by raising government property to 35 percent compared to 20 percent and the removal of tax -free status for some activities.

Existing mining contracts were also revised, which negotiate the ability to negotiate again, which led to a long-term negotiation process between the Malian government and Barrick about her Loulo-Gounkoto complex.

Although Barrick said that his dedication to Mali remains determined, so far that it makes a good loyalty payment of US $ 83 million, the two parties could not reach an agreement. The stalled negotiations led the government to arrest or carry out arrest statements for important staff on unpaid taxes and contract disputes, including Barrick CEO Mark Bristow.

Without resolution, Barrick was eventually forced to close the mine in January of this year. Although arbitration procedures continue, the operation was placed under Preliminary administration On June 16, government helicopters were seen on the spot that remove more than 1 tonne of gold on 10 July.

According to the transparency initiative of the extractive industry, the mining sector makes a Significant contribution For the economy of the country, which represents 79 percent of exports and 9.2 percent of GDP. Although other companies have not stopped the activities in the country, the government’s action did Tensions For investors, with CEOs who suggest that the new rules make it economically unfeasible for new mines or acquisitions in the country.

The Fraser Institute gave Mali a policy perception score of 14.94 in his 2024 Annual survey among mining companiesA significant decrease compared to 2023, when it reached 33.34, and a steep decline in relation to the score of the 2020s of 78.18. In the overall ranking, Mali fell to 74 of the 82 countries included in the survey, compared to 37 out of 77 in 2020.

The institute notes that companies say that policy is good for around 40 percent of their decision when choosing where the activities can be set up. The other 60 percent is based on the mineral potential. In this respect Mali improved to 55.26 of 41.18 in 2023; However, it remains in the lower half of all areas of law and ranks 40 out of 58.

The institute uses these scores to determine the overall investment attacks of areas of law. In 2024, Mali scored 39.13 and ranked 72 of the 82. Respondents of the survey suggested that the rejection of gold mine permits and the lack of transparency caused uncertainty and released the investments.

Even when investments are in the national interest, underlying issues are difficult to overcome.

Case Study: The DRC

The Democratic Republic of Congo (DRC) is endowed with an enormous wealth of minerals, ranging from copper to cobalt and diamonds, but a lack of infrastructure and geopolitical instability has hindered the investments.

However, the mining sector has brought steady growth in recent years because the government wants to attract investments. A project is the construction of the LobiteAfrica’s first open-access transcontinental rail connection. It connects Zambia and the DRC with the port of Lobito in Angola and offers improved chances for producers.

Among the operations that are registered to use the rail connection, Ivanhoe Mines’ (TSX: IVN, OTCQX: IVPAF) KAMOA-KAKULA MIN. The active is one of the world’s largest copper mines and produces 964 million pounds in 2024.

In February 2024, the company signed a term leaf To gain access to the corridor, so that it can transport between 120,000 and 240,000 tons of copper concentrates per year for a period of five years, starting in 2025.

In a press release, Robert Friedland, founder and executive co-chairman of Ivanhoe, said that the corridor “quickly becomes one of the most important trade routes for vital copper metal in the world.”

He added that the rail connection will unlock projects due to the lower logistics costs.

Although the development in the DRC is moving in the right direction, this is not without problems. Tensions remain with adjacent Rwanda, because Rwanda has supported anti-government M23 rebels. The groups have been fighting since 2022, with many of the violence that occurs in the eastern DRC, a mineral -rich area of ​​the country.

In April 2024, M23 Seized the city of Rubayathe center of the production of Coltan in the DRC; Coltan is a critical mineral for the technical sector. While the mine of Ivanhoe has avoided the violent revolts elsewhere in the country, it still emphasizes important security challenges for activities in the country and emphasizes the vulnerability of stability.

Just like Mali, the DRC fell last year in the research of the Fraser Institute.

It fell to 12.97 on policy, compared to 24.93 in 2023, with one of the 77 out of 82. However, the mineral potential ranked much higher, scored 73.53 – that is an increase of 55 in 2023 and a rank of 14 of 58.

The DRC in the middle was in the middle of the general investment, scored 49.31 and ranked 58 of the 82. The report points to issues such as disputes about ownership of land ownership, which have led to uncertainty and the investments has been detected.

Is there really a safe jurisdiction of mining?

The mining community mainly looked at North America, Europe and Australia to minimize the risk of jurisdiction.

Canada, the US and Australia are generally considered safe places to invest in because of the stability of their governments and the absence of cross -border conflicts. Despite changes in the government, political parties in these nations tend to support extractive industries through tax credits and investment programs.

As a whole, challenges in these jurisdictions are usually more regular than geopolitics of nature, with strict environmental and social regulations that add years to development time lines.

However, there have recently been some movements to break down these barriers.

The US and Canada have made both promises to streamline the permit process to reduce timelines for critical minerals. In addition, under the Biden Administration, the US Department of Defense, Increased financing For projects that are crucial for national interests, including those with Canadian companies Fortune Minerals (TSX: FT, OTCQB: FTMDF) and Lomiko Metals (TSXV: LMR, OTC Pink: LMRMF).

The program continued under the American President Donald Trump, with the Most recent price Announced on July 22, for US $ 6.2 million in financing for Guardian Metal Resources (LSE: GMET, OTCQX: GMTLF).

Although there are still challenges in these regions, they generally remain stable. For investors it can help to risk portfolios and to avoid geopolitical tensions and uncertainty that arise elsewhere.