Indirect forms of resource nationalism, particularly in Africa, are on the rise, threatening the investment climate in some of the world’s biggest oil and mineral producing nations, according to global risk consultancy, Verisk Maplecroft.
A total of 30 countries have witnessed a significant increase in resource nationalism risks over the last year, including 21 major producers of oil, gas and minerals, Verisk Maplecroft’s latest Resource Nationalism Index shows.
The country now most at risk is the Democratic Republic of Congo, which has been downgraded by five places in the rankings from a year ago to the highest globally alongside Venezuela.
Regionally, Africa is also home to 10 countries experiencing a growth in resource risks, including Tanzania (third highest risk), Zambia (17th) Gabon (23rd) and Equatorial Guinea (40th), according to the study.
The most common issues increasing risk in countries include rising tax pressures, changing contractual terms and tougher local content requirements, the consultancy believes.
“The index shows host governments are using such measures to wrestle revenues away from oil, gas and mining operators across the continents,” the study concludes.
Countries now rated “extreme risk” by the study include: Venezuela and the DRC (joint highest risk globally), Tanzania in third, Russia fourth, and North Korea and Zimbabwe joint fifth, followed by Swaziland and Papua New Guinea.
In the DRC — Africa’s top copper producer and miner of more than half of the world’s cobalt — the risk profile rose sharply following last year’s new mining code with onerous fiscal terms for existing operators and increased scope for government intervention.
“The government has attempted to block commercial asset transfers; tried to usurp operators to glean more profit; and choked exports from a cobalt mine,” the report notes. “The future doesn’t seem too rosy despite a change in leader. The new president (Felix Tshisekedi) will not present a vast departure from the status quo for mining regulation.”
Cobalt prices spiked to 10-year highs of $95,250/mt in March 2018 as electric vehicle and other battery metals producers rushed to secure supplies after the country classified cobalt as a strategic metal, allowing it to hike royalties.
Since then, prices have slumped, hitting a one-year low of $31,000/mt this week, on the back of a surge in supplies from small-scale producers and aggressive moves to reduce the amount of the metal in EV batteries.
The DRC, Africa’s second-biggest country, produces only small amounts of oil and gas of around 25,000 boe/d.
India (15th in the index), Malaysia (30th), Turkey (36th), Iraq (42nd) and Mexico (68th) are among major producing countries that have also seen their scores in the index fall.
RUSSIA MINING THREAT
Tanzania has also jumped up the list in recent years, reflecting President John Magufuli’s self-declared “economic warfare” launched against large-scale mining companies in 2017, the report notes.
Magufuli prohibited the export of unprocessed copper and gold ores to boost the domestic smelting industry. He has also insisted that IOCs develop onshore LNG infrastructure as part of his local beneficiation drive, meaning onshore infrastructure is now harder to finance.
Russia, the world’s largest energy producer, rose two places in the index from a year ago, reflecting a growing risk to the country’s mining sector from Russia’s “informal and unpredictable” political system, according to the report.
Western sanctions are also concentrating power in state-run companies, and conflicts between Russia’s political leaders could drag in mining companies as the race to succeed Putin heats up, the report said.
The risk of outright business expropriation is also rising in Russia as a result, as it is in Venezuela where President Nicolas Maduro’s socialist government attempts to cling on to power, despite widespread civil unrest and wide-ranging corruption.
Read the original article published on SPGlobal