Resourcestocks magazine World Risk Survey

18

COVER STORY WORDS BY ANTHONY BARICH

WORLD RISK SURVEY

LAND OF THE MIDNIGHT SUN

RISESAGAIN

Finland, renowned for its unique “Midnight Sun”, has proven the sun truly rarely sets there as far as investment goes, with the Scandinavian country topping the RESOURCESTOCKS World Risk Survey for the second consecutive year – and its third win in five years.

OCTOBER 2012 RESOURCESTOCKS

The famous Midnight Sun over Lakeland, the largest lake region in Europe

THE LAND OF THE Midnight Sun is experiencing a renaissance, topping the RESOURCESTOCKS World Risk Survey

for the third time in fi ve years.Having topped the WRS in 2008

and 2011, Finland has again been named the safest place in the world for resources investment for mining and petroleum professionals, in what has been a substantial increase in survey participation in 2012, with the WRS expanded to include suppliers and service providers to the resources sector.

After winning in 2008, Finland fell from grace, dropping to 10th in 2009, the year its economy recorded one of the steepest falls in GDP in the Euro area in the throes of the global fi nancial crisis. The United States and Canada won the intervening years before the Nordic country again won the gong in 2011.

The WRS asked respondents to rank their perception of risk according to fi nancial, social and sovereign risk, land access, green and red tape, land claims, infrastructure, civil unrest, natural disasters and labour relations.

Finland’s best scores were in the

natural disasters, civil unrest, social risk and sovereign risk categories, but suffered when it came to green and red tape – though these latter two scores were still comparatively lower than most other countries.

Respondents were asked to rank each category out of three – 0 being the best and 3 being the worst – and the total scores were weighted in relative importance, with an overall potential score of between 0 and 34.

London-based Michael Denison, global risks analysis research director at global political, security and integrity risk assessment consultancy Control Risks, told RESOURCESTOCKS that despite its top ranking, Finland’s deterioration in performance was broadly distributed across the political and social categories.

This was partially attributable to the more precarious economic

“From a sovereign risk and transparency standpoint, Finland and Sweden are very good, and the World Risk Survey refl ects that.”PETER CORDINDRAGON MINING

19OCTOBER 2012 RESOURCESTOCKS

www.greatwestex.com.au

Perth HQ

Western Australia

Bullseye

DoolgunnaMillrose

Forrestania South

Mt Gibb WSA JV

Ravensthorpe North

Spasskaya TKS JVKazakhstan

Astana HQ

Contact Details:

185 Hay Street, Subiaco 6008

PO Box 8142, Subiaco 6008

T: (08) 6489 0101

F: (08) 6489 0100

ABN 53 123 631 470

ASX Code: GTE

Capital Structure

Shares on Issue: 98.3 M

Options on Issue: 30.85 M

Share Price (5/09/2012): $ 0.21

Market Cap (at $0.21): 20.6 M

ASX: GTE

50% JV interest in the 12,500km2 Spasskaya Copper Field with the Kazakhstan Government owned National Mining Company. Significant widths of outcropping copper mineralisation have been confirmed from trench sampling including:

-14m @ 6.59% Cu -14m @ 6.51% Cu -12m @ 4.52% Cu -18m @ 4.05% Cu

100% interest in 1,750km2 area in one of Australia’s most exciting emerging copper and gold districts at Doolgunna, Western Australia making the company one of the largest landholders in the region.

Western Areas NL is solely funding exploration for high-grade nickel sulphide deposits at the company’s Mt Gibb Project.

Exciting gold target at the Bullseye Project where historic RAB intercepts of 8m @ 61.7 g/t Au and 8m @ 25.1 g/t Au remain untested and open in all directions.

position Finland found itself in this year.

“Growth forecasts for this year are only 0.4% mainly due to the Eurozone crisis (Finland has been a member of the European single currency since its launch), a far cry from the steady growth in 2010 and 2011 of 3% plus,” Denison said.

“While the Eurozone crisis weighs on economic prospects for the small, export-dependent country, it is also stirring political pressures. Finland is the only Euro country where parliament must approve every European financial commitment, and there is increasing popular resentment of the bailouts of southern European members.

“The rise of the right-wing True Finns in last year’s elections – who oppose EU membership – is pushing debate further to the right and is an indication of increasingly polarised political attitudes in the country, including to investment. It also frustrates decision-making on economic policy.

“At a sector level, the government has taken a tougher stance in 2012 on environmental regulation, with tightening rules for emissions. Also a number of reviews of investigations and permit reviews were launched this year, following complaints from local residents of two mines.”

Industrial action has also become more strident in recent years, and the deterioration in the country’s score for labour issues is reflective of industry-wide collective action in the metal industry in late 2011, when workers walked off the job in 35 companies and the dispute took a week to resolve. This followed on from a similar incident in 2010 involving port workers which severely disrupted exports for two weeks.

This year, Finland pipped its Scandinavian neighbour Sweden, which experienced a surge after coming equal fourth with Botswana last year.

Apart from Norway (sixth), which is not a part of the European Union, the UK (eighth) and eastern European country Bulgaria (15th), no other country from the European continent made the top 20, unless you include Greenland (11th), the North American nation with strong ties to Europe that has traditionally been a focus of oil and gas exploration but has this year been scoped out by the EU for mining operations.

Norway’s regaining of a top 10 spot was largely a return to form.

“The country represents higher

operating costs than its northern European peers, but an otherwise similar investment climate. The opening up of possibilities for Arctic mining may provide a boon to future prospects in the country,” Denison said.

Despite the federal government being under constant assault from mining magnates over the past year, Australia stayed steady at seventh spot, the same as 2011.

However, punters may take a different view of Australia now with BHP Billiton announcing in August that it had wiped $50 billion from its near-term growth plans, including abandoning its previous $30 billion plans to expand Olympic Dam to what would have been the world’s biggest open cut mine and its plan to build a $19 billion outer harbour iron ore expansion at Port Hedland. BHP’s decision came amid surging costs and tumbling commodity prices.

Denison said that while Australia’s steady seventh placing does seem surprising on the surface, the passage of the Mineral Resources Rent Tax (MRRT) earlier this year had been factored into investor expectations since the idea was launched two years ago, though it had been watered down substantially in the intervening debate. “The government consulted industry fairly extensively to produce the final draft, and it doesn’t signal further regulatory change that would affect mining companies, so in that sense most players are feeling nonplussed,” Denison said.

“Nonetheless, it stipulates a hefty 30% super profit tax on coal and iron ore companies, and one company has threatened legal action over it.

“Additionally, the MRRT’s passage has not resolved divisions within the mining community and the country more broadly.

“There is an ongoing dispute between the federal and state governments over it. The looming federal elections in 2013 mean mining will likely continue to feature prominently in political debate.

“Other headwinds are emerging: Australia’s ready pool of skills and expertise has long been an advantage, but labour shortages are beginning to bite and recruitment of foreign workers into the industry remains highly politically sensitive, given the government’s tough stance on immigration.

“Meanwhile, the domestic economy is looking increasingly troubled and the imbalance towards mining is garnering increased public attention.”

Canada fell from top in 2010 to ninth last year after concerns about investment restrictions had hurt the Canucks’ standing, but it rebounded again into third place in 2012. The US (fourth), Chile (fifth), New Zealand (ninth) and Brazil (10th) rounded out the top 10.

The election of a majority Conservative government in May 2011 on a pro-business agenda has made the policy and regulatory environments more stable, predictable and favourable to the mining sector.

This was demonstrated with the passage of the latest budget legislation in June 2012, in which the government streamlined the environmental assessment process, extended a mining tax credit, and relaxed some potential environmental restrictions for mining projects.

The government also responded swiftly and decisively to a railroad strike in May 2012, which had impacted negatively on miners, to illustrate its pro-business credentials. Earlier it had outlined a resource development strategy that was

21OCTOBER 2012 RESOURCESTOCKS

Artisanal mining activity on Middle Island Resources’ K5 prospect at the Reo project, Burkina Faso, which plummetted in WRS ratings

endorsed by Canada’s main mining industry group.

Nonetheless, environmental issues, direct action and negotiations with First Nations continue to throw up political and operational risks to the sector. Ontario and, recently, Quebec are also considering changes to tax policy that could have an adverse impact on the mining sector.

A big mover in this year’s World Risk Survey was Mexico, climbing from 28th last year to 12th, which is highly impressive given 2012 is an election year and economic growth has been fairly unimpressive.

Denison noted that the boom in gold prices had boosted the industry and the country’s low-cost production combined with decent infrastructure and broadly friendly business environment enhanced its attractiveness compared to other gold producers such as South Africa.

The ongoing security problems linked to drug wars will continue to weigh on the country’s prospects, however.

Tanzania (24th to 14th) has also shot up the rankings, again with high gold prices a welcome boost to the industry there. However, despite some improvements such as upgrading and expansion of port facilities in Dar es Salaam, infrastructure deficiencies – notably in power provision – were an ongoing concern.

However, the whole question of political risk had been generally oversimplified, Aussie miners and explorers operating overseas told RESOURCESTOCKS.

Mining is a financial activity, and therefore once some of the “obvious” issues of personal safety, corruption and security of tenure are eliminated all that is left is many shades of grey, so it then comes down to balancing the business risks.

Every country is different, and each has the right to determine its own laws and policies and it is up to the mining industry to deal with things as it found them. One executive even said that the term “political risk” was a poor one as it created the impression that it was all about politics, when in fact it was really only one component of the whole risk profile that explorers and miners had to consider – and it wasn’t necessarily the most important one.

Geological prospectively, costs, infrastructure, local markets, skills, suppliers, fiscal stability, rule of law and personal security were all part of the balance.

“What is the greater business risk – working offshore and having to deal with a slightly different regulatory regime than we would find at home, or staying comfortably at home and waking one morning to find that your project has suddenly been rendered uneconomic by increasing costs, a strong dollar and lots of new taxes?” one Aussie explorer operating in a developing country asked RESOURCESTOCKS.

For explorers, geological prospectivity is the first issue, then they look at the rest. In Europe, recent history would dictate that it is a question of social acceptance.

Mining requires land and it therefore must compete with other possible uses for that land – be it wine in Bordeaux in France or Margaret River in Western Australia, or other uses which draw strong environmental or tourism-driven protection.

Even the most ardent fan could admit that mining is not the most attractive of activities, especially when the land in question is green and pleasant (or just considered sacrosanct, like James Price Point)

and the population density high, then there are naturally going to be alternative land uses that the society may decide takes precedence over resource extraction.

The local society has a perfect right to do this, so, as one executive said, for miners to complain that they were not allowed to mine in Margaret River or the Darling Downs, for example, was “being a little precious”, as “we do not have the right to mine where we like simply because we will make money out of it”.

That said, places which at first glance are some of the greenest, most photogenic countries on earth – like those in Scandinavia – are some of the most supportive in the world towards mining, as this year’s and recent World Risk Surveys have revealed.

Peter Cordin, executive chairman of Nordic gold producer Dragon Mining, which has operations in both Finland and Sweden, said that while the geology and pro-active government made for a positive investment environment, companies must jump through many bureaucratic hoops to get projects approved in Finland, which reflected the reactions to the respective WRS categories on green and red tape.

While Sweden also had its bureaucratic issues, Cordin said that Finland stood out because its government was prepared to roll up its sleeves to get the job done – and could even be about to literally put its money where its mouth was.

“From a sovereign risk and transparency standpoint, Finland and Sweden are very good, and the World Risk Survey reflects that,” Cordin told RESOURCESTOCKS.

“When you get over the glitter of the first intercepts and resource calculations and you get to understand a project, to be able to develop, build,

22 OCTOBER 2012 RESOURCESTOCKS

A panoramic view of Endeavour Mining’s Nzema gold mine in Ghana, which made the top 20 this year

then operate a project, investors need to have comfort that you’re actually going to achieve that, and without too much government interference. And for me, with Finland and Sweden, you get that.

“Once you’re operating then you’re fine, so it’s a good place for investors to invest.

“Getting there is just a small hurdle we’ve got to jump, but I’m most encouraged by what the minister has expressed publicly, and there are even moves within Finland for the government to actually get involved in investing in new mining projects. So it’s more than just heresay or verbal comment – they will actually act and invest money into new projects.

“Once the process is effected then you have confidence as you can undertake your activities without hesitation or reservation. So to me that’s a very strong positive in that the government is extremely supportive of mining, it understands the importance of mining to the community and it’s taking whatever steps it can to assist people investing in mining in the country.

“It may not have filtered down to the level of administration and getting that sorted out, but certainly with the opening of Altona’s mine at Outokumpu (copper project) in May, the minister made it quite clear that the government was very supportive of mining and wanted to encourage investment in mining in the country.

“So there’s some very strong signals from government as to what it’s going to be like in the future.”

While there were no surprises with the bottom five – Iran (fifth last at 66th; last in 2011), the Democratic Republic of Congo, Zimbabwe, Pakistan and Somalia – the deterrent for some reaps opportunities for others in what many would consider a high-risk environment.

All these countries were hammered in the financial risk, sovereign risk, land access, red tape and social risk categories.

By the same token, the only way to go is up. Randgold CEO Mark Bristow, who recently represented the mining industry at a government workshop, said that his advice was that the current mining code should be implemented more consistently, and “any change might just be for the better”.

Denison said that while there were few “pros” for these bottom five, the “cons” range from stringent (Iran) and less stringent (Zimbabwe) sanctions that apply for companies

from developed countries, general insecurity in mining areas and difficulty transporting products (Pakistan, Congo) to purely unproven investment environment in Somalia.

“Some companies are seeing upsides, it’s true, but they’re firmly in the minority,” Denison added.

While Africa had a swag of countries in the top 20 this year (Namibia at 13, Tanzania 14, Zambia 16, Ghana 17 and Botswana 19), others plunged, including Burkina Faso (from third last year to 33rd this year) and Mali (18th to 56th), but for good reason. Burkina Faso’s government ramped up fuel tax and Mali suffered from Islamist uprisings.

Turning the microscope more locally, the breakdown of Australian states reflected the excitement brewing over South Australia – in particular, its hydrocarbon-rich Cooper Basin which, despite its well understood geology and nearly 40-year history of production, is not yet a “mature basin”, with both Santos CEO David Knox and Drillsearch managing director Brad Lingo on the record as saying we’ve barely scratched the surface.

The Croweaters’ state was the top in the breakdown of Australian states and Canadian provinces, though still behind Ontario, Manitoba, New Brunswick, Saskatchewan and Quebec. SA topping Australia’s states also vindicated RESOURCESTOCKS’ State Scorecard in its August edition, which declared it the winner due to its highly prospective geology,

impressive regulatory environment, supportive and pro-active government and its highly respected resources department staff.

The surprise of the WRS was the low ranking of the two states driving the “resources boom” – both phases that have been touted – Western Australia (offshore gas and oil, not to mention its abundance of minerals) and Queensland, with its multi-billion dollar coal seam gas-fed LNG projects, as well as its well-known coal plays.

The WA government’s Department of Mines and Petroleum has bent over backwards trying to get a “drill club” up to help source a rig to tap the state’s unconventional reserves, of which the US Energy Information Services gave mind-boggling estimations – in the order of 288 trillion cubic feet of gas in the Canning and Perth basins alone.

Yet it appears miners were unimpressed with WA, which came last when WRS first included Australian states in 2008 and was struggling this year, languishing in equal 12th spot among Australian and Canadian provinces with Nova Scotia. Queensland came in second last (18th), ahead of only New South Wales.

It was a dramatic fall from grace for WA, which enjoyed top billing among Canadian and Australian provinces and states with South Australia and Nova Scotia last year. Queensland was at the bottom then, too.

23OCTOBER 2012 RESOURCESTOCKS

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We offer the well explored fluorite-deposit Schön-brunn-Bösenbrunn/Grüne Tanne (Germany, Free State of Saxony) with more than 1.3 Million tons of fluorite (prefeasibility and feasibility mineral resources according to UNFC-standard) and more than 0.41 Million tons of inferred fluorite resour-ces. The mining license is unlimited and irrevocable. The fluorite is classified as high quality raw spar due to the exploitation until 1990.

Azimuth Resources Limited is an ASX and TSX listed explorer focused on its portfolio of gold and uranium exploration projects in Guyana, South America, which comprise over 8,000km2 of granted licences (East and West Omai Projects) prospective for gold and 4,000km2 (Amakura Project) prospective for uranium mineralization in the northwest of Guyana.

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1 MACQUARIE BANK LIMITED (METALS & ENERGY CAP DIV A/C) 17.99%

2 PINETREE CAPITAL 3.5%

3 GLOBAL X MANAGEMENT 2.5%

4 DYNAMIC FUNDS 2.2%

5 EYE CAPITAL 1.8%

510A Hay Street, Subiaco, WA 6008Phone: +61 8 9381 2488Fax: +61 8 9388 3117Email: [email protected]

www.azimuthresources.com.au

WEST OMAI GOLD RESOURCE

Deposit CategoryTonnes

(millions)Grade

(g/t Au)Metal

(million Ozs Au)

Hicks Inferred 7.4 2.0 0.47

Smarts Inferred 5.0 4.6 0.75

Total Inferred 12.4 3.1 1.22

Our projects have the same geology as the West African Shield on the other side of the Atlantic. 110Moz gold inventory in 1,000km belt with shear hosted deposits (Omai, Aurora) and large Au/Cu systems (Las Cristinas, Toroparu).

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payments to vendors. • Initially exploring 12km x 3km of Omai/Hicks/Kaburi corridor. • A JORC/43-101 compliant inferred resource of 5.0Mt at 4.6g/t Au for 750Koz found

at the Smarts Deposit.• 2.7km long with 83% of ounces within 1.7km of strike.• Maximum depth approximately 200m with 80% of ounces within 140m of surface –

open down plunge.• Robust 10-15m wide mineralisation from surface with maximum 15m of sand cover.• Azimuth currently drilling potential depth and NW strike extensions.• Preliminary test work shows oxide and primary mineralisation amenable to cyanide

leaching with 93% recoveries and excellent gravity recoveries.

25

WORLD RISK SURVEY

OCTOBER 2012 RESOURCESTOCKS

WORLD RISK SURVEY 2012Financial

riskSovereign

riskLand

accessGreen tape

Land claims

Red tape

Social risk Infrastructure Civil

unrestNatural

disastersLabour

relations

Maximum risk rating 3.83 3.91 3.48 3.14 3.14 3.48 3.21 3.12 3.26 2.11 3.01

RaNK COUNtRY tOtaL

1 Finland 1.25 1.20 1.46 1.80 1.35 1.94 1.18 1.29 1.09 0.78 1.29 14.63

2 Sweden 1.42 1.32 1.62 1.84 1.50 1.83 1.38 1.38 1.00 0.78 1.48 15.55

3 Canada 1.43 1.43 1.63 1.69 1.58 1.86 1.34 1.46 1.15 0.80 1.26 15.63

4 United States 1.39 1.35 1.78 2.02 1.61 2.00 1.33 1.00 0.96 0.92 1.37 15.73

5 Chile 1.64 1.58 1.69 1.57 1.50 1.71 1.52 1.48 1.28 1.00 1.48 16.45

6 Norway 1.48 1.44 2.04 2.03 1.50 2.10 1.38 1.53 1.05 0.81 1.58 16.94

7 Australia 1.53 1.45 1.97 2.08 1.80 2.24 1.34 1.38 0.84 0.73 1.59 16.95

8 United Kingdom 1.49 1.40 2.15 2.14 1.39 2.40 1.41 1.36 0.99 0.76 1.52 17.01

9 New Zealand 1.57 1.44 1.93 2.22 1.79 2.38 1.38 1.26 0.94 1.01 1.32 17.24

10 Brazil 1.89 1.86 1.91 1.82 1.75 2.23 1.56 1.71 1.46 0.92 1.48 18.59

11 Greenland 1.68 1.69 1.87 1.89 1.66 2.16 1.55 2.43 1.25 1.05 1.50 18.73

12 Mexico 1.89 1.90 1.78 1.81 1.67 2.10 1.89 1.55 1.74 1.01 1.59 18.93

13 Namibia 2.15 2.30 1.99 1.75 1.72 2.06 1.73 1.83 1.62 0.89 1.61 19.65

14 Tanzania 2.26 2.23 1.90 1.66 1.70 2.13 1.80 1.97 1.65 0.93 1.60 19.83

15 Bulgaria 2.14 2.08 2.10 1.97 1.66 2.19 1.68 1.86 1.59 0.95 1.73 19.95

16 Zambia 2.33 2.26 2.00 1.70 1.85 2.15 1.76 1.77 1.67 0.89 1.67 20.05

17 Ghana 2.15 2.28 1.98 1.76 1.79 2.06 1.90 1.75 1.72 0.98 1.69 20.06

18 Turkey 2.10 2.20 2.16 2.14 1.76 2.38 1.66 1.61 1.56 1.09 1.50 20.16

19 Botswana 2.19 2.20 2.04 1.86 1.78 2.10 1.87 1.98 1.76 0.97 1.72 20.47

20 Malaysia 2.17 2.23 2.10 2.14 1.86 2.67 1.89 1.47 1.53 1.01 1.60 20.67

21 New Caledonia 2.24 2.18 2.03 1.96 1.95 2.19 1.92 1.80 1.63 1.18 1.67 20.75

22 South Africa 2.09 2.39 2.05 1.90 1.92 2.37 2.14 1.44 1.94 0.79 1.94 20.97

23 Vietnam 2.31 2.54 2.17 2.00 1.96 2.47 1.63 1.89 1.43 1.09 1.59 21.08

24 Spain 2.56 2.34 2.25 2.10 1.75 2.65 1.85 1.59 1.44 0.84 1.73 21.10

25 China 2.36 2.63 2.31 1.83 1.65 2.66 2.01 1.64 1.38 1.10 1.56 21.13

26 Morocco 2.45 2.45 2.10 1.77 1.86 2.25 1.95 1.86 1.88 1.03 1.82 21.42

27 Colombia 2.31 2.39 2.20 1.86 1.93 2.21 1.96 1.86 1.98 1.07 1.68 21.45

28 Mozambique 2.36 2.39 2.10 1.78 1.89 2.28 2.09 2.23 1.83 1.05 1.78 21.78

29 Peru 2.17 2.32 2.28 1.98 2.05 2.25 2.21 1.90 1.98 1.14 1.76 22.04

30 Thailand 2.27 2.59 2.35 2.19 1.95 2.66 1.92 1.67 1.85 1.11 1.53 22.09

31 Laos 2.53 2.75 2.23 2.01 1.86 2.53 1.77 2.30 1.64 0.98 1.51 22.11

32 Fiji 2.64 2.86 2.37 1.77 1.92 2.30 1.83 2.01 2.07 1.18 1.56 22.51

=33 Mauritania 2.53 2.56 2.18 1.85 1.78 2.42 1.89 2.30 2.04 1.06 1.91 22.52

=33 Burkina Faso 2.45 2.58 2.14 1.82 1.85 2.25 2.10 2.19 2.16 1.10 1.88 22.52

35 Senegal 2.49 2.56 2.25 1.92 2.02 2.35 2.00 2.26 1.90 1.08 1.82 22.65

36 Argentina 2.66 2.67 2.26 2.16 2.09 2.63 1.99 1.72 1.69 1.08 1.84 22.79

37 Mongolia 2.83 2.89 2.30 1.98 1.83 2.60 1.95 2.45 1.51 0.92 1.60 22.86

38 Kenya 2.68 2.62 2.30 1.87 1.99 2.44 2.13 1.98 2.11 1.04 1.78 22.94

39 Kazakhstan 2.65 2.75 2.30 2.11 1.93 2.56 2.04 2.11 1.91 1.06 1.69 23.11

40 Ukraine 2.89 2.64 2.37 2.07 2.07 3.00 1.83 1.86 1.86 1.02 1.54 23.15

41 Cambodia 2.80 2.81 2.16 1.99 2.04 2.63 2.02 2.26 1.95 1.06 1.63 23.35

42 Madagascar 2.83 2.70 2.25 2.03 1.93 2.44 2.04 2.34 2.00 1.15 1.80 23.51

43 Malawi 2.68 2.78 2.30 2.02 2.05 2.60 2.16 2.28 2.09 1.15 1.88 23.99

44 Guinea 2.84 2.82 2.28 1.93 1.92 2.62 2.12 2.24 2.20 1.15 2.00 24.12

=45 Kyrgyzstan 2.87 2.91 2.43 2.19 2.10 2.57 2.13 2.19 2.16 1.15 1.68 24.38

=45 India 2.70 2.70 2.62 2.23 2.10 3.10 2.20 2.08 1.81 1.08 1.76 24.38

47 Suriname 2.73 2.67 2.49 2.24 2.24 2.42 2.33 2.31 2.21 1.11 2.10 24.85

=48 Venezuela 2.88 3.04 2.51 2.26 2.29 2.65 2.16 1.96 2.09 1.17 1.93 24.94

=48 Egypt 2.84 3.03 2.41 2.00 2.05 2.74 2.37 1.93 2.50 1.10 1.97 24.94

WORLD RISK SURVEY 2012Financial

riskSovereign

riskLand

accessGreen tape

Land claims

Red tape

Social risk Infrastructure Civil

unrestNatural

disastersLabour

relations

Maximum risk rating 3.83 3.91 3.48 3.14 3.14 3.48 3.21 3.12 3.26 2.11 3.01

RaNK COUNtRY tOtaL

50 Niger 2.93 2.97 2.49 1.99 2.11 2.51 2.24 2.36 2.44 1.24 1.93 25.21

51 Russia 3.02 3.06 2.51 2.15 2.26 3.21 2.13 2.02 1.95 1.16 1.95 25.42

52 Uganda 2.93 2.85 2.51 2.19 2.19 2.54 2.29 2.38 2.37 1.31 2.03 25.59

53 The Philippines 2.82 2.91 2.70 2.28 2.39 2.80 2.24 2.03 2.16 1.42 1.88 25.63

54 Ivory Coast 2.92 3.10 2.46 1.99 2.16 2.53 2.37 2.33 2.62 1.18 2.01 25.67

55 Indonesia 2.93 3.17 2.60 2.25 2.32 2.86 2.20 2.12 2.07 1.37 1.87 25.76

56 Mali 2.98 3.07 2.53 2.00 2.07 2.55 2.45 2.42 2.67 1.14 1.99 25.87

57 Algeria 3.02 3.14 2.54 1.90 2.16 2.70 2.50 2.39 2.68 1.09 1.93 26.05

58 Turkestan 3.37 3.22 2.63 2.21 2.29 2.72 2.00 2.41 2.11 1.37 2.06 26.39

59 Papua New Guinea 2.84 2.93 2.69 2.21 2.54 2.69 2.32 2.56 2.36 1.40 1.92 26.46

60 Angola 3.08 3.20 2.62 2.00 2.21 2.69 2.54 2.50 2.52 1.17 2.03 26.56

61 Uzbekistan 3.37 3.22 2.63 2.29 2.29 2.89 2.08 2.33 2.11 1.37 2.10 26.68

62 Sierra Leone 3.14 3.18 2.60 2.07 2.34 2.68 2.45 2.59 2.46 1.31 2.03 26.85

63 Eritrea 3.31 3.23 2.58 2.07 2.14 2.70 2.46 2.60 2.55 1.26 2.03 26.93

64 Burundi 3.05 3.15 2.67 2.26 2.43 2.70 2.50 2.45 2.57 1.36 2.26 27.40

65 Nigeria 3.13 3.22 2.68 2.13 2.31 2.87 2.67 2.33 2.74 1.20 2.21 27.49

66 Iran 3.33 3.46 2.76 2.35 2.27 2.94 2.35 2.15 2.46 1.37 2.12 27.56

67 Democratic Republic of Congo 3.23 3.39 2.74 2.16 2.29 2.84 2.63 2.60 2.77 1.26 2.10 28.01

68 Zimbabwe 3.61 3.75 3.00 2.27 2.73 3.10 2.73 2.39 2.65 1.17 2.26 29.66

69 Pakistan 3.47 3.60 2.88 2.48 2.41 3.23 2.70 2.66 2.74 1.51 2.15 29.83

70 Somalia 3.62 3.75 2.99 2.44 2.66 3.07 3.00 2.77 3.11 1.49 2.35 31.25

WORLD RISK SURVEY 2012 – CaNaDIaN PROVINCES aND aUStRaLIaN StatESFinancial

riskSovereign

riskLand

accessGreen tape

Land claims

Red tape

Social risk Infrastructure Civil

unrestNatural

disastersLabour

relations

Maximum risk rating 3.83 3.91 3.48 3.14 3.14 3.48 3.21 3.12 3.26 2.11 3.01

RaNK PROVINCE/StatE/tERRItORY tOtaL

1 Ontario 1.27 1.33 1.6 1.67 1.44 1.81 1.2 1.28 0.99 0.76 1.27 14.62

=2 Manitoba 1.46 1.40 1.47 1.51 1.43 1.72 1.28 1.44 1.18 0.80 1.15 14.84

=2 New Brunswick 1.33 1.35 1.59 1.61 1.43 1.72 1.28 1.35 1.18 0.80 1.20 14.84

4 Saskatchewan 1.41 1.43 1.46 1.52 1.42 1.93 1.23 1.29 1.19 0.77 1.20 14.85

5 Quebec 1.36 1.26 1.63 1.60 1.55 1.78 1.33 1.51 1.10 0.63 1.15 14.90

6 South Australia 1.39 1.21 1.68 1.81 1.76 1.99 1.17 1.51 0.83 0.61 1.45 15.41

7 British Columbia 1.29 1.52 1.69 1.92 1.79 1.88 1.31 1.24 1.06 0.77 1.27 15.74

8 Alberta 1.50 1.38 1.62 1.86 1.69 1.97 1.40 1.27 1.01 0.84 1.43 15.97

9 Newfoundland and Labrador 1.48 1.50 1.62 1.65 1.60 2.00 1.33 1.53 1.25 0.81 1.29 16.06

10 Yukon 1.46 1.48 1.75 1.64 1.58 1.85 1.41 1.80 1.17 0.84 1.20 16.18

11 Victoria 1.52 1.33 2.00 2.07 1.54 2.30 1.41 1.07 0.82 0.66 1.56 16.28

=12 Nova Scotia 1.46 1.56 1.68 1.76 1.58 1.89 1.47 1.49 1.30 0.88 1.26 16.33

=12 Western Australia 1.45 1.39 1.73 1.98 1.92 2.18 1.18 1.48 0.76 0.66 1.60 16.33

14 Nunavut 1.61 1.56 1.65 1.72 1.72 1.85 1.40 1.52 1.24 0.88 1.32 16.47

15 Northwest Territories 1.54 1.43 1.75 1.78 1.78 1.93 1.49 1.75 1.19 0.77 1.40 16.81

16 Tasmania 1.63 1.56 2.04 2.34 1.54 2.32 1.38 1.31 0.90 0.67 1.45 17.14

17 Northern Territory 1.42 1.36 2.02 1.98 2.14 2.18 1.41 1.67 0.92 0.85 1.56 17.51

18 Queensland 1.60 1.62 2.14 2.14 1.92 2.24 1.33 1.44 0.83 0.92 1.70 17.88

19 New South Wales 1.69 1.67 2.21 2.29 1.83 2.46 1.50 1.22 0.84 0.73 1.80 18.24

26 OCTOBER 2012 RESOURCESTOCKS

WORLD RISK SURVEY

27

World risk survey Words by Anthony bArich

regional focus

JUNIORS are driving Scandinavia’s renaissance now that the majors who triggered its initial mining boom have moved on.

Peter Cordin, executive chairman of Dragon Mining, which operates the Orivesi underground gold mine and Jokisivu open cut and underground gold mine in Finland and the Svartliden open cut gold mine and operating plant in Sweden, said the future of Scandinavia looked promising.

“It’s interesting how Scandinavia has developed – all the majors came in when both Finland and Sweden joined the EU because geologically they’re very attractive,” Cordin told RESOURCESTOCKS. “They didn’t have a lot of immediate success so they seemed to have moved on, and you’re now seeing a new generation of smaller companies come in, pick up licences and do very well.”

However, while both countries received top marks in the RESOURCESTOCKS World Risk Survey for sovereign and social risk, and Cordin said they were also very transparent, it’s the red and green tape that presented challenges.

“The implementation of the new mining Act (in July 2011) is causing issues because the government didn’t quite understand what it was doing and didn’t understand what was going to happen when they introduced it,” Cordin said, referring to Finland changing its mining and exploration permitting.

The government shifting its approvals administrative office from Helsinki to the remote northern town of Rovaniemi – touted by local tourism as “the original home of Santa Claus” – has caused serious issues, with almost all its staff leaving, which has clogged up the whole system.

This has also left few staff to implement the new Act who are familiar with the old one.

“The government is taking steps to unclog it by recruiting people and processing applications – both mining licences and claim applications – as quickly as possible, asking companies to prioritise their preferences, but we haven’t seen any evidence to date of that moving forward,” Cordin said of Finland’s new mining regime.

“My colleagues in Finland identified five months ago that there are over 50 mining licences and over 500 claims awaiting approval.’

“Based on the current time of processing, they foresaw a backlog of over three years.”

He described Sweden, on the other hand, as “an interesting dynamic”.

While it was as transparent as Finland, the system was a bit more complicated because environmental permitting was totally separate from mining approval.

In Finland, achieving an environmental approval and mining licence are separate, but are administered by the same body.

In Sweden they were administered by two different bodies: the environmental permit is issued and authorised by the environmental court, which is part of the Ministry of Justice system.

So the civil, criminal and environmental courts come under the same ministry and because law and order is understandably a high priority in Sweden, the process to achieve an environmental permit could be very slow, purely because of the lack of personnel available in the courts to process those applications, Cordin said.

“We see a problem in Sweden where there’s little effort from government to improve that situation. Whereas in Finland there’s definitely government effort to improve the permitting and licence granting situation,” Cordin said.

Bob Beeson, managing director of Drake Resources, which has eight

exploration and resource definition stage projects in Norway and Sweden, plus another in Finland, has found the Scandinavians are “a little bit like the Australians – a very pragmatic people” – with all three countries very supportive of rebuilding their mining industries.

Sweden has always been a mining industry and is keen to see that continue, particularly as a way of keeping people in rural areas.

Norway used to be a major copper producing country but most of its mines closed down in the 1970s and ’80s. But it also sees mining as a way of keeping and bringing people into rural areas.

“The rural communities are extremely supportive of bringing people to areas where often there has not been mining in the past,” Beeson said.

Part of the Scandinavian “sense of community” between countries involves them transferring processes, equipment and people between jurisdictions.

Drake has been using Finnish geophysical contractors in Norway for ground geophysics.

“Finland and Sweden have a bigger exploration and mining base, so Norway is taking advantage of their proximity,” Beeson said.

Some of the world’s biggest mining equipment companies are based in Sweden, including Atlas Copco, “it’s just that not many people in Australia know it’s a major mining country”.

scandinavia: a mining ‘community’

OCTOBER 2012 rESoUrcEStocKS

Dragon Mining’s Svartliden open cut mine

“You’re now seeing a new generation of smaller companies come in, pick up licences and do very well.”PETER CORDINdrAGoN MiNiNG

28

World risk survey Words by Anthony bArich

regional focus

CENTURIES-OLD mining practices and illegal mining syndicates may spell trouble in South America, but that doesn’t mean it’s a bad investment destination; you just need to get to know the locals – and gain their trust, says one Aussie executive who’s been scoping out a project in Peru.

In this year’s RESOURCESTOCKS World Risk Survey, the increasingly popular Chile (fifth), South American giant Brazil (10th) and Mexico (12th) enjoyed high billing, but others like Colombia (27th), Peru (29th), Argentina (36th) and Venezuela (48th) didn’t fare so well.

For Sydney-based Commissioners Gold (CGU), which is on a mission to expand its portfolio beyond the Lachlan Ford Belt of eastern New South Wales to Peru, getting to know the continent in all its exotic and sometimes gory detail is all part of the adventure. In fact, it’s critical to do the homework, or they could find themselves subject to what better-funded, far bigger global companies have copped.

CGU exploration manager Jason Needham told RESOURCESTOCKS that while Peru, like the rest of South America, had its idiosyncrasies it is definitely worthwhile.

“One of the joys of working in countries like Peru is that people are quite passionate about their mining

industry and about their land,” Needham said.

“For a poor, very arid country that doesn’t have a huge amount of sustainable agriculture, mining is what keeps them sustained for the most part. It’s far and away more important to the everyday Peruvian than everyday Australians, at least in the rural areas.”

Peru’s relatively low ranking – just one spot higher than last year – is likely due to the inherent problems plaguing the country that Needham said were endemic throughout Latin America.

“From the Incas to the Spanish Conquistadors to now, a lot of the country has been built on small-scale mining for a couple of thousand years, which makes it a bit hard to get them out of some of these entrenched mining practices,” Needham said.

Illegal, or “informal”, mining, lax safety and community revolt – all stemming from long-held traditional practices – can cause serious issues for foreign companies and investors who don’t treat the locals with respect.

The projects of some global majors have been shut down or delayed and clashes have arisen where people have been killed. Take Newmont’s $US5 billion Conga gold project, where rallies against the mine led to five deaths and two cabinet reshuffles, and Southern Copper’s Tia Maria project, which experienced troubles in April 2011 after clashes between protestors and police left three people dead.

That said, in terms of sovereign risk, Needham believed Peru had done an admirable job of minimising risk for foreign investors, who had the same rights and responsibilities as locals, “so automatically you’re on the same footing as everyone else”.

“It’s also got really good tax concessions for foreign investment

and if your investment is over a certain threshold you can lock in legislation for a 10-year period, which gives you a lot of certainty. I’m not sure how many other jurisdictions have that,” he said.

“Countries like Bolivia and Colombia nationalise mines on a fairly regular basis, so we probably wouldn’t get into those jurisdictions. But Peru is one of the top five mining countries in the world.”

Mining makes up 60% of Peru’s export earnings and has long powered its economy. However, poverty often plagues the towns near mines, so companies need to be acutely aware of them. CGU has struck a partnership with one such community in Peru’s north whereby the community has a minority equity in the exploration project, with a seat on the board and therefore a voice, which gives them confidence moving forward and the company a mechanism to effectively communicate with them.

Peru is also rife with small syndicates and individuals who may just turn up to someone’s freehold farm and start mining on it. Peru passed legislation early this year which criminalised such practices, making them punishable by prison rather than just a fine.

“Illegal mining is a big risk in Peru. You’ve got to ensure you’ve got the law on your side and an avenue to talk with these illegal guys, most of whom are simply members of the community, so strong relationships with the community can really help,” Needham said.

Safety is also critical.“That’s an educational thing;

not only educating them on safety mechanisms, but giving them the equipment, like proper hardhats, safety vests etc, which in the past they either have been ignorant of or haven’t had access to,” Needham said.

south america: tread carefully and prosper

OCTOBER 2012 rESoUrcEStocKS

“For a poor, very arid country that doesn’t have a huge amount of sustainable agriculture, mining is what keeps them sustained for the most part.”JASON NEEDHAMCoMMissioNers Gold

A panoramic shot of the Andes, including Peru’s highest mountain, on the approach to the Anita Mine

29

world risk survey words by Anthony bArich

regional focus

DEVELOPING Asian countries are experiencing a growing middle class, which is leading to increased levels of savvy among the public and changing the dynamics for mining companies and investors scoping out projects in the region.

Australian federal Resources Minister Martin Ferguson has often talked about the rising middle class in China, which is causing a dramatic rise in demand for the things in life which westerners have long taken for granted – and which involve our minerals. This is certainly true throughout the Asia Pacific region.

However, the bar was raised considerably in terms of security of tenure when Aussie Intrepid Mines, which had poured $US100 million into its flagship Tujuh Bukit project in Indonesia, told the market in July that exploration activities there had been suspended by its Indonesian joint venture partner PT Indo Multi Niaga.

Shortly after the debacle, Timothy Spencer, finance director of Kingsrose Mining, which is mining at the Way Linggo operation in Sumatra, said that “what people have to remember is it is a commercial dispute, it’s not involving the Indonesian government”.

Adding to the complicated dynamic in Asia, Aussie miners’ discussions with landholders from Papua New Guinea to Indonesia have revealed that non-government organisations, many of which are based in the Philippines, including religious groups, are vying for the hearts and minds of the locals who see mining as not necessarily as being the priority of those communities.

In Thailand, Aussie gold miner Kingsgate Consolidated was one of the early movers and has what are likely to be the only modern mines in the country. While it got in early to identify very prospective ground, there was no supporting industry lobby to help the government and administrators formulate and

manage the issues involved in mining, including distribution of royalties, providing infrastructure and supporting mining companies in their endeavours to acquire and explore ground to make discoveries and build mines.

The Asia Pacific region is rife with inexperienced government bureaucracies, and there will sometimes be pressure from groups trying to get a piece of the action, and governments need to be strong because it’s a significant potential risk in many of these Southeast Asian countries.

Thailand doesn’t exactly have a “mining culture”, but has one that’s focused on manufacturing. The southeast part of the country, for example, sees itself as a major competitor to Chinese manufacturing. So companies like Kingsgate benefit from labour costs and manufacturing goods there.

Thailand is also one of the largest exporters of rice in the world, so mining struggles to find a niche.

Malaysia, the top-ranked Asian country at 20 in this year’s World Risk Survey, has had a history of tin mining and a few other projects but isn’t as mining intensive as Indonesia or the Philippines.

Yet there are no real majors operating in the Philippines or Thailand. You don’t see the likes of Newmont, Barrick Gold or BHP Billiton, who have a strong presence elsewhere in the region. Rio Tinto is in Indonesia, but issues relating to security of title and the potential size of discoveries have hindered the country of late.

Thailand often ranks low in risk surveys and is in 30th place this year. In the more than 10 years that Kingsgate has been mining there, there have been seven changes of government and a military coup, so the perception is that it has been unstable which, politically, it has been. But most of the politics is

confined to Bangkok. Travel 280km from the city, where Kingsgate is, and its mining operation did not lose a single day of operation.

So the country is low-risk from an operating basis, but investors would rank it as high risk, which presents a conundrum.

Taking a broader view, resource nationalisation has been a growing topic in developing countries around the world – be it South America, Africa or Southeast Asia.

As PNG – which dropped from 30 last year to 59 this year – moves forward from independence and as its people gain greater knowledge and education, the type of agreements that were signed 10-15 years ago are very different from the ones signed today, because the communities have access to things like the internet and can investigate what the best deal is going around, and not just the best deal being offered by the companies operating there.

Aussies operating there have told RESOURCESTOCKS that many of the politicians supportive of resources development in PNG were returned to parliament in the recent elections, and explorers and miners are optimistic about stability in the country.

Communities are trying to apply leverage from that perspective, which then requires a strong government to manage it, as the administrators need to encourage investment to develop the mining and resources industries to generate revenue for the country.

So the balancing act is the key for developing Asian countries moving forward.

asia pacific: a changing dynamic

OCTOBER 2012 rESoUrcEStocKS

A typical Indonesian coal loading and barge facility

“NGOs are vying for the hearts and minds of the locals who see mining as not necessarily being the priority of those communities.”

30

world risk survey words by anthony barich

regional focus

THE “Arab Spring” that bled into Africa and arguably changed the face of North Africa has dented the continent’s investor risk profile, but not all is as it seems.

West African country Burkina Faso copped the biggest hit in this year’s RESOURCESTOCKS World Risk Survey, falling from third last year to 33rd this year, which west Africa veteran Mark Connelly believes was mainly due to the 40% hike in fuel tax.

While the past two years have been marked by popular uprisings across Africa, it’s not all that new, and the fact that a number of majors have not budged from the strife-torn continent speaks volumes for the reality on the ground, which would seem at odds to media and subsequently investor perception.

Connelly, who has spent much of the past 20 years in Ghana, Burkina Faso, Mali, Liberia and the Ivory Coast, said Africa was unique in that with its impressive geology, cheap labour and production costs and supportive governments, there was substantial opportunity to add to mine life.

He said the world’s media had “over-cooked” reports of civil unrest in Mali which had upset investor certainty but did not reflect operational strength.

A military coup in March unleashed political chaos, allowing an Islamist takeover of the country’s north and forcing half-a-million people to flee their homes. Connelly said this had impacted on investment appetite for that country.

“But perception is always an interesting point: Randgold, AngloGold Ashanti and Resolute are still operating there, even during that minor issue, so I think it’s probably a little over-cooked by the media because operations continue on course,” he said.

“It’s a very good geological belt so there’s lots of upside there. In west Africa, you can turn some of these assets into 8-20 years of mine life, which is quite opportunistic.”

Randgold, which extracts two-thirds of its gold output from Mali, bucked the effects of the conflict, posting record production from its flagship Loulo-Gounkoto mine in August, plus its profits rose 10% to $US142 million in the period, surpassing the $128 million made in 2011, thanks to higher production and in spite of a 6% fall in the average gold price that the company obtained.

Connelly said that historically the country’s mining sector has risen and fallen largely on the commodity prices, especially gold.

“The mining industry in west Africa is more dependent on the gold price, which drives investment, so right now a high gold price means more investment because there’s more opportunity there to bring these projects on-stream and they can pay their way and support the capital investment,” he said.

Connelly added that there have been steady governments in both Burkina Faso and Ghana, which work under democratic rule.

“Elections do exist, it’s a very organised structure, people are educated and there are many companies spending many millions of dollars in investment,” he said. “Africa is one of those places where you’ve got to have good personal relationships with government, the EPA and minerals offices, and to do that you’ve got to spend a lot of time on the ground breaking bread and educating.”

He said Ghana had more organisational structure due to the

maturity of its mining sector, which is some 300 years old and enjoys the presence of majors like Newmont, AngloGold Ashanti and Kinross. Ghana and Liberia werealso English-speaking, which makes it easier for Aussies to operate there.

Africa Downunder conference convenor Bill Repard said ahead of the August event in Perth that Australia’s $US24 billion resources investment in Africa was under competitive pressure for project involvement and financing from international mining investment houses. He said Australian exploration, mining expertise and resources investment had carved a substantial bridge between Australia and Africa over the past 15 years due to their similar mineralised geological structures, mining challenges and like-minded equities market support

”(However), it should be no surprise to anyone that Africa is increasingly a keen bidder for China-based resources funds, while the flipside is also increasingly evident – China, India and other mineral-hungry economies are looking to secure or build a foothold in the substantial mineral opportunity continuing to present throughout most of the African continent”, he said.

“There is a push for an African-wide free-trade area by 2017 and such a zone could potentially enhance its mining growth by dissolving issues such as disparate levels of sovereign risk, mining royalties, taxation and infrastructure investment,” he added.

“This more borderless environment would make Africa as a whole a more fertile ground for joint Australian-African resources investment.”

“Certainly, a barrier to Africa’s mining sector growth is poor infrastructure in the key areas of road, rail, water and power – yet that is an area in which Australian expertise excels – so potential economies of scale for mining-related infrastructure could be achieved through removing inter-country barriers to such project investment.”

africa: a gem in disguise

OCTOBER 2012 rESoUrcEStocKS

Endeavour Mining’s Nzema gold mine in Ghana

“In west Africa, you can turn some of these assets into 8-20 years of mine life, which is quite opportunistic.”MARK CONNELLYeNdeAvour MiNiNG