St. LOUIS (ResourceInvestor.com) -- Even since Dow Jones reported in late September that Venezuela was changing its mining policy and “revoking concessions,” mainstream media has had a field day with anything and everything concerning national mining policies. In late November, news outlets reported that Mongolia was next in line to drastically alter mining legislation, giving the government “the right to own 30% of foreign mining projects.” Needless to say, shares of miners in both Venezuela and Mongolia were decimated.
After the announcement in Venezuela, Gold Reserve [TSX:GRZ] shares lost nearly 25%, Bolivar Gold [TSX:BGC] lost 16%, Hecla Mining Company [NYSE:HL] lost 8% and Crystallex [AMEX:KRY; TSX:KRY] lost a whopping 48.5%
Among Mongolian miners, Entreé Gold [AMEX:EGI; TSXv:ETG] stock fell almost 11%, QGX [TSX:QGX] lost 8.5% and Ivanhoe [NYSE:IVN; TSX:IVN] dropped 7.6%.
Shares in these companies have since recovered, at least to some degree, after statements were clarified and the damage was repaired. However, it seems more speculation has hit the media - this time in Tanzania, Peru and Bolivia. How much this will affect share prices of mining companies in these countries remains to be seen.
Tanzania
According to a Dow Jones article released today, Tanzania’s government may raise mining royalty rates or make other changes to earn more from high gold prices.
Minister of Energy & Minerals Daniel Yona told Dow Jones Newswires that soaring gold prices necessitate the government to get more from its growing gold exports - worth around $700 million annually.
“Mining companies are always coming to us asking for concessions on taxes but we don’t give in,” he said. “I hope they have the same attitude when it comes to sharing the cake the other way, especially now that gold has gone up to almost double what it was five years ago.”
According to Yona, the government wants its share of mining revenues to rise to around 10% of GDP by 2025, up from 3% in 2005.
“The public perception of the mining industry is that we are being cheated and foreigners are taking the lion’s share of the value of the minerals and we are not benefiting as much as we should be,” Yona said.
Yona declined to specify what changes Tanzania would make to its minerals policy, acknowledging only that higher mining royalty rates were possible, but said the government is considering repealing incentives to retain more wealth from rapidly growing mining industries.
However, Yona did admit “I have to keep the mining companies as well as the investors happy. Those that are already here as well as those that want to come in.”
AngloGold Ashanti [NYSE:AU], Barrick [NYSE:ABX; TSX:ABX], Placer Dome [NYSE:PDG; TSX:PDG] and Minieres du Nord (Northern Mining) [TSX:MDN] have producing mines in Tanzania.
However, other companies with properties include Randgold [Nasdaq:GOLD], Falconbridge [NYSE:FAL; TSX:FAL-LV], Tan Range Exploration [AMEX:TRE; TSX:TNX], Coeur d’Arlene Mines [NYSE:CDE; TSX:CDM], Castillian Resources [TSXv:CT], Conquest Resources [TSXv:CQR], Currie Rose Resources [TSXv:CUI], Lakota Resources [TSXv:LAK] and Midland Minerals Corporation [TSXv:MEX].
So far share prices of these companies seemed unchanged, but only time will tell the full impact.
Peru
But if that wasn’t enough, Dow Jones released another article today saying that presidential candidate Ollanta Humala could put more than $11 billion of planned investment in Peru’s mining and energy sector at risk if elected.
According to the article, Humala has threatened to review contracts of companies, arguing that they don’t meet tax and royalty obligations and extract minerals and hydrocarbons without benefiting local communities.
Mining companies alone will paid $785 million in taxes this year, according to Carlos del Solar, head of Peru’s National Mining, Petroleum and Energy Society.
“Someone who says they are going to review mining and energy sector contracts makes investors extremely nervous,” he said.
Del Solar underscored that different mining companies have invested around $1 billion in Peru this year and are expected to invest more than $10 billion over the next five years.
Producing miners include: Andean American Mining [TSXv:AAG], Barrick [NYSE:ABX; TSX:ABX], Dynacor Mines [TSXv:DYN], Falconbridge [NYSE:FAL; TSX:FAL-LV], Newmont [NYSE:NEM], Pan American Silver [Nasdaq:PAAS; TSX:PAA], Phelps Dodge [NYSE:PD], Southern Peru Copper [NYSE:PCU] and Teck Cominco [TSX:TEK-SVB, TEK-MVA].
Some of the numerous companies exploring and developing are Absolut Resources [TSXv:ABS], Bear Creek Mining [TSXv:BCM], Cambior [AMEX:CBJ; TSX:CBJ], Candente [TSX:DNT], Cardero [AMEX:CDY; TSXv:CDU], Chariot Resources [TSX:CHD], Fortuna Silver Mines [TSXv:FVI], Inca Pacific Resources [TSXv:IPR], Plexmar Resources [TSXv:PLE], Sienna Gold [TSXv:SGP], Sulliden Exploration [TSX:SUE] and Vena Resources [TSXv:VEM].
Peru’s presidential election is in April, and thankfully for mining companies, Humala is behind in the polls.
Bolivia
According to the Associated Press, Evo Morales, the soon-to-be winner of Bolivia's presidential election, has repeated his vow to nationalize natural resources, with attention to gas and oil.
"We will nationalize (Bolivia's) natural resources," Morales said at a news conference Tuesday in La Paz.
He said he will void at least some contracts held by foreign companies "looting" the poor Andean nation's natural resources.
Morales said the government would renegotiate contracts so that the companies are partners, but not owners, in developing Bolivia's resources.
"Many of these contracts signed by various governments are illegal and unconstitutional. It is not possible that our natural resources continue to be looted, exploited illegally, and as the lawyers say, these contracts are legally void and must be adjusted," Morales said.
With 92% of polling stations officially counted, Morales had 54.1% of the vote in Sunday's election.
Gold Eagle International [OTC:MYNG], Newmont [NYSE:NEM] and Orvana Minerals [TSX:ORV] have producing mines in the country.
Apex Silver [AMEX:SIL], Coeur d’Alene [NYSE:CDE; TSX:CDM] and Pan American Silver [Nasdaq:PAAS; TSX:PAA] have advanced development projects.
The top energy companies are Petroleo Brasileiro SA [NYSE:PBR], known as Petrobras, Spain's Repsol YPF [NYSE:REP], France's Total SA [NYSE:TOT], British Gas and BP PLC [NYSE:BP].
Conclusion
Even though these stories did not seem to impact share prices of the above companies today, this type of news coverage is bound to continue - especially with metal prices on the rise. Governments around the world are trying to figure out a way to cash in the bullish market and will openly say so. It is up to the investor to take into account all the facts before acting one way or another. To put it quite simply, beware of the hype.
