The Fraser Institute

The Fraser Institute

March 07, 2005 07:01 ET

Mining executives rate the investment climate of jurisdictions around the world

VANCOUVER, March 7 - Attractive geology does not guarantee mining
investment if a region's policies are bad, say mining executives surveyed in
the eighth Annual Survey of Mining Companies, released today by The Fraser
Institute.
In this year's survey, companies responsible for a combined total of
US$798 million in international exploration (expected in 2005) rate the policy
attractiveness and mineral potential of mining jurisdictions in North America
and internationally.
Companies are asked to provide their opinions about the investment
attractiveness of 64 jurisdictions, up from 53 last year. The jurisdictions
include the Canadian provinces and territories, the Australian states,
selected US states, and jurisdictions across Europe, Asia, and Africa.

British Columbia as a Case Study

For the first time in the mining survey's eight-year history, British
Columbia has moved out of the bottom 10 jurisdictions in the policy potential
index. Three years ago, British Columbia was dead last. Last year, it was
seven from the bottom: this year, 20th from the bottom.
"British Columbia has lessons for the world," said Fred McMahon, the
survey's co-coordinator. "It boasts immense mineral potential, but
inconsistent, poorly administered, and badly structured regulations, federally
and provincially, have deprived British Columbia of needed investment and
well-paying jobs.
"A bad reputation lasts a long time," McMahon added. "British Columbia
has made real efforts to reform, but companies need to have confidence that a
good policy climate when they start exploration will be in place when the mine
enters production many years in the future. That's a key reason British
Columbia remains in the bottom half of the rankings."
The results of the survey were used to create several indices that gauge
a region's general attractiveness.

Policy Potential Index

The Policy Potential Index is a composite index that measures the effects
on exploration of government policies including: uncertainty concerning the
administration, interpretation, and enforcement of existing regulations;
environmental regulations, and regulatory duplication and inconsistencies.
Taxation, uncertainty concerning native land claims and protected areas;
infrastructure; socioeconomic agreements; political stability; labour issues;
geological database; and, finally, security, are also included.
"The question of security is new this year and was added because of
increased awareness of terrorism, banditry, and other security threats," said
McMahon.
This is the fifth straight year Nevada is rated as having the best
mineral policies. Other top-rated policy jurisdictions include Ireland,
Manitoba, Utah, Saskatchewan, Spain, Quebec, Ontario, Alberta, and Tasmania.
Chile, which held last year's number 2 spot, fell to 14, perhaps due to the
controversy over mining royalties in that nation. Both Ontario and Utah
improved substantially over last year.
Zimbabwe's last place score of 7.6 out of 100 is the lowest score
recorded in the last four years. Other jurisdictions at the bottom of the list
were DRC Congo, Indonesia, Russia, Bolivia, Venezuela, the Philippines, Papua
New Guinea, Wisconsin, and California. All were at or near the bottom last
year except for Bolivia, which is facing a number of internal problems and has
steadily fallen in Policy Potential rankings.
Both Russia and DRC Congo scored poorly last year but still fell
substantially this year, in the case of Russia likely due to doubts about the
future of market reforms and in DRC Congo by increasing chaos and civil
strife.

Current Mineral Potential Index

Current Mineral Potential is based on respondents' answer to the question
on whether a jurisdiction's mineral potential under the current policy
environment encourages or discourages exploration. Nevada, Chile, Quebec,
Mexico, Tasmania, Finland, Australia's Northern Territory, Brazil, and Ontario
hold the top 10 slots. All scored strongly last year except for Finland, which
is a new addition to the mining survey this year.
Not surprisingly, the jurisdictions at the bottom of the list are also
consistent with last year's poor performers-and with poor performers in the
policy potential index. California comes in last and is joined by Washington,
Montana, Zimbabwe, Colorado, Wisconsin, Minnesota, South Dakota, Venezuela,
and Alaska. These jurisdictions all scored near the bottom last year, with the
partial exception of Alaska (29 out of 53 last year), which has consistently
fallen since the 2002/03 edition of the survey.

Best Practices Mineral Potential Index

From a purely mineral perspective, the most appealing jurisdictions are
Tasmania, Nevada, Alaska, Canada's Northwest Territories, Western Australia,
Indonesia, Peru, Queensland, and Papua New Guinea.

Room for Improvement

The survey also calculates which jurisdictions have room to improve their
regulatory environments.
Many of the jurisdictions with the greatest room to improve are
developing countries, where additional investment, and job, wealth, and
capital creation are most needed. This includes the Philippines, Indonesia,
DRC Congo, Russia, Zimbabwe, and Zambia.
However, the worst performers are from the developed world and include
Montana, California, Colorado, British Columbia, Arizona, and the Yukon.
"Mining executives are becoming increasingly willing to invest their
exploration dollars around the globe. Attractive geology is necessary, but not
enough. Governments who want to maintain viable mining industries in their
jurisdictions must enact favourable policies to encourage investment," said
McMahon.

Established in 1974, The Fraser Institute is an independent public policy
organization with offices in Vancouver, Calgary, and Toronto. The media
release and survey (in PDF) are available at www.fraserinstitute.ca

Contact Information

  • Fred McMahon
    Director of Trade & Globalization Studies
    The Fraser Institute
    Telephone: (604) 714-4569
    Email: fredm@fraserinstitute.ca

    Suzanne Walters
    Director of Communications
    The Fraser Institute
    Telephone (604) 714-4582
    Email suzannew@fraserinstitute.ca