In management consultant Behre Dolbear's annual ranking of countries for 2009 mining investment, the lowest-ranking countries continue to be Papua New Guinea, Indonesia, Russia, Bolivia and the Democratic Republic of the Congo.
However, the actual worst performer in this year's survey was Argentina, which fell 4 points to a composite score of 33, due to the populist policies of the government, the seizure of pension funds, and the expectation that things will get much worse than they were in 2008.
Argentina needs to be viewed with caution and could deteriorate quickly, Behre Dolhear advised.
The company said is it concerned about what the future holds for the mining industry. The instability of the credit, debt, and equity markets are almost unprecedented challenges for virtually all industry players. Buying and acquisition opportunities will abound for those private or state firms with healthy balance sheets.
Chinese and other Asian firms will benefit greatly by the buyers' market that has developed for mining and mineral assets, Dolbear advised.
The survey suggested Canada, Australia and China will remain the three best jurisdictions in which to develop mining projects. However, the United States will remain a difficult country in which to develop new projects and could deteriorate further depending on possible new regulations and taxes.
Behre Dolbear advised that U.S. permitting delays are the most significanat risk to mining projects. This will likely worsen due to the election of Barack Obama and the expansion of the Democrat Party majorities in both houses of Congress.
Meanwhile, South Africa continues to be ranked poorly due to government uncertainty, Dolbear asserted. Higher taxes are feared...... These taxes could take many forms including requiring conversion of crude products, imposition of a royalty, and the continued forced sales of mining properties or equity to Black Empowerment groups. These have often been cronies of those in power in the past.
South Africa also drifted downward due to currency devaluation and uncertainty about its future, according to the report. The rest of Sub-Saharan Africa (with the exception of Zimbabwe and the eastern D.R. Congo) has continued its relative stability.
Nevertheless, Behre Dolbear cautioned that all investments in South Africa need to be considered very carefully and then re-evaluated when the picture becomes clearer late in 2009.
Dolbear asserted social issues continue to be the highest risk facing the development of mineral products in every country. The watchwords for the industry are ‘sustainable development' and ‘social license' which while sound in principle, have often been used by opponents of mining to delay or completely halt mining projects.
Mexico, in Behre Dolbear's opinion, faces significant potential for social unrest with a de facto war raging between the narcotic cartels and the government. ...The battle has now reached the mine sites and will affect production once prices improve. The report also referred to concerns about the decline in petro dollar revenues, which could leave the Mexican government short of revenues during the global economic crisis.
Meanwhile, Australia, Chile and Canada continued to be rated the most stable in regard to social issues.
The report advised that India and Brazil will continue to develop in a positive direction, while China will remain an aggressive acquirer of mineral assets. However, Bolivia and Venezuela will continue to deteriorate and Argentina is posed to devolve significantly as government policies will drive out investment and capital.
Russia is expected to continue to chart its own course. However, Russia's ambitions will be tempered by the dramatic decrease in the ruble and oil revenues, which are the government's major source of revenue, Dolbear said. Its banking sector is vulnerable and significant capital outflows in a flight to quality will pose major challenges to the Russian government.
The report noted the Middle East region has enjoyed significant mining, minerals and metals investments in the past few years. This trend should continue as many of the region's nations seek to diversify their economies.
Southeast Asia will also see continued interest in mining investment. Nevertheless, infrastructure and government hurdles will remain significant challenges.
Behre Dolbear's advice remains to be very cautious where large sums of capital are invested. On-going world turmoil and political risks make the overall situation fluid and in many cases difficult to predict, the report concluded.