A new report from Ernst & Young said that the top risk factor for the mining sector was resource nationalization. The annual report, ‘Business Risks Facing Mining and Metals 2011-2012’, said that the most hindering factor for the minerals industry was going to be nationalization as close to 25 countries come up with new mining laws.
As per Ernst & Young, nations such as South Africa, Australia and Ghana are amongst the 25 countries which have already increased royalty taxes on resources. Other nations are already considering these hikes in taxes and many are about to implement the new tax rates in the next financial year.
Ernst & Young Canada national mining and metals practice leader Tom Whelan said that what originally began as a way for mineral-rich countries to repair and replace lost revenue from the downturn has become a way for governments to manage the effects of a two-speed economy.
In the top ten risk factors after resource nationalization the report lists skills shortage, infrastructure access, social license to operate, capital project execution, price and currency volatility, capital allocation, cost management, interruptions to supply and fraud and corruption.
Whelan added that they were seeing resource nationalism take the form of greater controls on foreign investment, mandated processing and ore beneficiation, use-it-or-lose-it demands and greater direct government participation