Mining Industry Overview

3. Government

Government's role in promoting mining

Enabling and promoting of investment is an important role strategy of governments seeking develop the mining sector. In many countries, mineral wealth is a key opportunity to develop the economy, create jobs and improve political and social stability, especially in a post-conflict environment.

Some development opportunities from mining:

  • Potential for relatively early economic benefits from the inception stages of mining projects

  • Markets for products are often readily available and internal utilisation of minerals can lead to development of downstream industries

  • Mines tend to be labour-intensive and, together with supporting industries, to become major employers; mining is often suitable for training and employment of members of local communities

From the ground up

Promotion of mining starts with a sound geological database to “sell” to potential investors. For this reason, many countries have established a geological survey unit to conduct mapping and to create a database to guide persons and companies interested in exploration to attractive targets.

Modern reconnaissance and exploration techniques, together with liberalised political structures which have emerged in some countries, have created competition for exploration investment, with many countries able to offer attractive targets for this activity. Emerging nations with little or no established mining tradition and possibly a recent history of conflict, are potentially at a disadvantage. It is important, therefore, to offer an “investor-friendly” environment which is one in which:

  • Laws and regulations are transparent and stable. This means they are publicly available, intelligible/sound and not subject to changes of undue frequency or magnitude;

  • Taxes and royalties  are stable, transparent and set at levels which balance the state’s need for revenue against investors’ need to secure a reasonable return on investment (RoI), one commensurate with all the risks of the venture;

  • Bureaucracy is kept within practical limits. Whilst governments are obliged to ensure compliance with all laws/regulations and this inevitably requires a degree of bureaucracy, there is a common temptation amongst regulators and other civil servants to insist on “bureaucracy for its own sake”.

Government's role in facilitating financing of mining

Facilitation is a key function of governments hoping to attract investment in any sector. Governments often recognise the need for the Ministry of Mines to be, as far as possible, a “one-stop shop” for mining investment. Thus a prospective mine operator, seeking to undertake exploration or exploitation, might be able to obtain all necessary permits online or by visiting the Ministry of Mines, providing the required information and paying prescribed fees.

Often, though, investors find themselves having to deal with an unnecessary multitude of ministries and agencies to obtain all the different approvals and permits needed, Governments may be unable to achieve a “one-stop” solution but should, at the very least, provide clear, comprehensive guidelines on exactly what all the requirements are for any undertaking, including necessary contact details for the relevant authorities. The Ministry of Mines might have an investment promotion department responsible for assisting prospective investors in their dealings with other authorities. These authorities, in turn, should be educated on the government’s policy to promote mining investment and instructed to do everything possible, within the provisions of the law, to smooth the process.

Whilst some requirements are closely linked to mining, for example, land use, water or energy, investors sometimes find themselves impeded by delays in obtaining requirements such as tax registration, import permits, visas for key personnel and other indirect requirements. These obstacles can seriously delay implementation of a project, with financial consequences, and can strongly discourage investors. Co-ordination and co-operation between diverse government agencies is a major challenge to some administrations, which can only be addressed at the highest level. Another challenge to governments is to achieve transparency in all dealings with other stakeholders and to eliminate actual or perceived corruption.