Mineral Policy


13. Land access, infrastructure and trade barriers

Land access

Access to land is a key issue for exploration and mining companies. In the 1990s, a mining company in Canada spent more than $50 million on advanced exploration and development of a mining project in Northern British Columbia, one of the most scenic wilderness areas of Canada. Following prolonged lobbying by environmental and eco-tourism groups, government took the unprecedented step of declaring the area “protected” and therefore not open to mining.  This decision sent shock waves throughout the global mining industry. One outcome of this policy decision (to declare an area closed to mining after allowing advanced exploration and development) was that many Canadian mining companies left Canada and invested their money in what they deemed “safer” investment destinations, primarily in South America. 

It is a policy decision as to how a country makes its land use decisions, including access to land for mining mineral resources.  In Botswana, there has been a degree of controversy over the removal of the San (Bushmen) people from the Central Kalahari Game Reserve to allow diamond exploration and mining.  The San people took the government to Court to maintain access to hunting and traditional use of the Reserve. Without the consideration of these competing land uses during a credible consultation process around mineral policy development, conflicts between different stakeholder groups can arise and the country’s reputation can suffer.

Infrastructure

One of the biggest policy issues a country can face is how to accommodate the mining industry’s infrastructure needs. A mine typically needs water, electricity and a telecommunications facility to mine and process ore.  Then, it needs to get its product to the market and eventually to the buyer, usually through road and railway networks to transport product to port. Sometimes when a country is quite under-developed, it may require the mining company to develop an integrated project. This means that the mining company must produce its own energy supply and may need to construct at least part of the transportation network.

When government seeks assistance for infrastructure construction, the projects can be developed through what is known as a “PPP” – a public-private-partnership. Companies are often compensated for these contributions through tax credits or incentives. There are concerns, however, that lack of infrastructure may deter mining companies to come to an under-developed jurisdiction. Mining companies must have a sufficiently large and valuable mineral deposit to mine that would make an integrated project viable. Countries should weigh the pros and cons of these arrangements in making policy choices.

Trade barriers

The mining sector cannot trade its products in a country or region where some minerals are banned. One example of where this has occurred is in the asbestos industry. Certain forms of asbestos are very harmful if they are not handled or transported correctly. Some countries and regional trade organisations decided to enforce a ban on the mineral due to these concerns. Some mining experts have protested that not every form of asbestos is dangerous, and if the proper handling of the mineral is assured, there is little to no danger to human health.

Several countries have restricted the use of nickel in jewellery due to allergy problems with consumers.  However, nickel is used in the manufacturing of coins in many countries, and the banning of nickel in a wholesale manner means that substitutions to the metal must be found. This is an example of an unintended consequence that can arise unexpectedly from a policy decision around a substance ban. Sometimes insufficient research is applied to these policy decisions, but the pressure from interest groups or the public becomes too strong for the government to ignore.

Another area where trade barriers can be erected concerns import and export duties on mineral products. Some countries impose a high tax on the export of unprocessed minerals in a bid to persuade companies to process a certain percentage of their product in the country. In Indonesia, for example, the export of unprocessed nickel was banned. This decision affected the worldwide supply of nickel and drove up the prices. 

When countries impose restrictions on exporting of raw materials, companies are forced to seek local processing facilities or to construct them if they are unavailable. This is an important policy issue that can have serious financial ramifications for the mining industry and the country.