Minerals, Wealth and Progress - Mining and the Environment: From Ore to Metal - page 13

The Investment Climate
Metal mineral reserves are limited, but this does not mean that reserves will be exhausted
in the near future. Exploration will go ahead following demand and price movements, and
new exploration and mining technologies will allow the mining industry to exploit deposits
that previously have been economically unattractive. While the location of each deposit is
fixed, international mining companies can often choose between multiple deposits located
in different national jurisdictions. Investors will consider not only a proven ore resource
but also political, social, economic, and administrative characteristics (the 'investment cli-
mate') of the host country prior to committing significant investments ( Case 1.2 ). As a con-
sequence, countries that possess mineral reserves are in competition to attract investment
dollars. The existence of superior ore bodies will not by itself attract investment.
Administrative infrastructure differs among developing countries, although some gen-
eralizations may be made. Most developing countries suffer from inadequate resources to
staff and properly manage administrative organizations, and may lack a tradition of social
processes based in law. To those proposing large mining projects, administration in devel-
oping countries commonly exhibits one or more of the following deficiencies:
●

The existence of superior ore
bodies will not by itself attract
investment.

inefficiency;

●

lack of concern for the realities of business and commerce;

●

lack of transparency;

●

disregard for existing laws and regulations;

●

avoidance of accountability and responsibility; and not infrequently, corruption.

Legal Systems and Un-coded Legal Traditions
The legal system of a developing country, including commercial law, tends to reflect its
colonial history: British common law in the case of former British colonies, the Napoleonic
Codes for France, and Roman law in the case of the Netherlands. Such systems are well
understood by investors and provide a degree of comfort, although the existence of a legal
system does not necessarily ensure its application in all cases. Of utmost importance to pro-
spective mining investment is “security of tenure”, the inherent right of the discoverer to
develop the deposit. Development of a new mining operation requires many years of effort
and substantial expenditure before there is a financial return to investors. It is therefore

CASE 1.2
Mining in the Philippines

The Philippines, being located on the 'Pacifi c Ring of Fire',
is the home of many mineral enrichments, some of them
well known, others yet to be discovered. While mining in
the Philippines goes back for centuries, production has
declined substantially since 1990, and no modern large
scale mine has been developed in the past decade despite
surging metal prices and booming exploration and mining
activity in less prospective countries. What hinders the
interest of foreign mining companies? The Philippines
continues to rank high in terms of corruption. Until

recently the investment law prevented foreign majority
ownership. Land rights remain unclear. Past mining acci-
dents (some involving loss of life) caused by irresponsible
mining operations, fostered wide-spread community opposi-
tion and resistance to mining. The infl uential Catholic
church has publicly opposed mining on many occasions. As
a result, the Philippines has missed out on the investments
that could provide jobs and help reduce poverty in the
poorest parts of the country.