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02/12/2016

Euromines President’s Article for Mining Journal

Article published in Mining Journal, 1st December 2016.

We all receive many unsolicited pieces of investment ‘advice’ every day whether we have the money to actually act on it or not. So do governments and other bodies including the European Commission (EC). A deluge in fact, from the downright hair brained, to the plausible. 

We approach a time of year in Brussels when expectant droves descend in the hope of securing financing for their ideas. For some, this is normal and lucrative work, others find it an exasperating, incomprehensible spiral that suffocates their worthy and even inspired ideas.

I suspect that the powers that be share both impressions.

For some years, I have travelled around Europe meeting a great number of people in and around our industry and those who host and regulate it. Some things have changed, others hardly at all.

There remains, for example, a fundamental divide between those who see raw materials as sacrosanct public resources deserving planning and control, and those who live in the world of optionality, share valuations and commodity markets.

That does not mean that some Ruritanian mindset lingers, far from it.
In the UK recently, much comment was given to Sirius Minerals, the funding of its project and its share price. I can see the ‘Brussels’ view that such development projects are laudable and deserving of support as they address long-term strategic supply needs.

Certainly. But somebody has to pay for them to deliver and that won’t be customers for some time. And there lies the issue.

In Europe today, there is a recognition that the importance and value of natural resources is growing as competition grows but in practical terms that remains unquantified.

Of course we have stock exchanges that are meant to do that but so few European companies, and by that I mean companies that explore develop and produce in Europe, actually trade on European exchanges with any meaningful liquidity that it is difficult to bring home that meaning of ‘value’ to governments let alone the general public.

So governments and the EC are given to setting targets using different criteria and persist with what seem too many abstract ideas.

This is a real pain if you find yourself in a dispute of course. And so we hope the Comprehensive Economic Trade Agreement (EU-Canada) and its like may begin to bridge that gap between perceived public utility and stock market valuations.

The trouble is that this is just not fashionable, it runs counter to current political trends.

So rather than being a tool to create wealth and value, the EC sees these stock market valuations suspiciously and as possibly detrimental to both ordinary investors and pensioners who have suffered enough in recent years (as of course it is only company executives and financial institutions who benefit therefrom etc). These markets also somehow take away from the state, which cannot access that ‘value’.

I struggle with this view.

We, as an industry, invest hundreds of millions into a project that will produce jobs, taxes, infrastructure and a future to many communities where there was at best sheep previously. Is that not value?

In Europe, industry in general, not just mining, has somehow done a great job in turning too many people away from it. Rather than contributing to social utility, industry is seen as best conducted elsewhere, away from places populated by people running nice German or Swedish cars and domestic appliances.

What may be needed is more dedicated promotion to drive a new fiscal approach.

The Dutch government made admirable efforts during its presidency of the EU earlier this year to increase transparency both in terms of specific matters, such as commodities produced in the Great Lakes region of Africa, and in ensuring that companies with Dutch registrations or subsidiaries demonstrated that they pay proper amounts of tax.

So unlike some household names that are now spending a lot on legal fees, not one mining company to my knowledge has been pursued either by the EC or a member state to investigate tax evasion.

But not enough is made of this. We need to reward good performance not simply punish the bad guys. Stock markets can’t do that well but governments can.

Good performance in health and safety, good performance in research and development, in innovation and in general corporate sanity, deserve more attention from the public than simply demands for better margins and cheaper input prices for consumer goods.

We should publish and promote good examples and educate the public, from schools onward, as to what that actually means.

From that can follow better mineral policies in more countries that can genuinely assist in developing new projects that can be both better understood and welcomed.

Work is now well underway on the concept of ‘deposits of public importance’ in the European context. We have many already, de facto, but so few people know about them.

Imagine what stock markets might make of that. After all, do you want your pension to be invested in something that just makes money for someone else?

 

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