We may laugh at Gadaffi’s United Nations speech and his call to divide Switzerland into three and then to unite each linguistic region with its linguistic equivalent in France, Germany, or Italy respectively.
We may laugh at the suggestion by Chavez of Venezuela that an Africa and South American mining company be formed to wrest back for its nationals the country’s wealth currently flowing to foreign companies. He said:
Africa and South America are rich lands, yet their peoples are poor, because they have been exploited. Let’s not allow them to keep exploiting and ransacking our lands. Those riches belong to our people. Without having conditions imposed on us, we obtained various billions of dollars a while ago to invest in mining. And with a part of the production of gold, iron, diamonds, we are going to pay that investment. We want to form a mining corporation for ASA. Those governments who are interested, even before leaving Margarita island, please contact our team, Let’s not waste a day. If we start with just two or three countries, well we’ll start with those that can.
We may laugh or cry at Zimbabwe promising never to expropriate your assets if you come back to mine in Zimbabwe.
Yet none statements from these assorted mad dictators is a laughing matter. People take what they say seriously for they have the power to act; they have acted in the past; they could act again. And many will be hurt in the process. Investors will loose; as will nationals of the affected countries affected by the inefficiencies of socialized mining.
At this link is an interesting story about the problems that areise when dictators get involved in mining. I quote;
The provincial government oversees an island in the Philippines and it accuses Placer Dome of severely polluting the land and waters for 30 years by its mining operations. It says Placer Dome contaminated the food and water and then left the province without cleaning up the mess. The suit contends that former Philippine President Ferdinand Marcos, in exchange for a personal stake in the mining operations, eased various environmental protections that were obstructing the mining operation of Placer Dome.
One solution may be for Canada to make an offer to do for these nasty dictators what we already do for an equally nasty bunch, namely the old Spanish aristocracy that still rules Cuba for its benefit and to the detriment of those of other origins. Keep in mind that the nickle mines of Cuba are well-run and well-mined by a nice Canadian company. Lots of money goes into the pockets of the Castros and their cronies. And if we are to believe it, some money goes to train nurses and doctors who are shipped out as a kind of prime export to other socialist places. The point is that Sherritt Mining could do for Venezuela what it does for Castro and thereby make the Canadian taxpayers a bit more money.
Maybe Chile can give them some advice. The Chilean mining industry is dominated by the state company that resulted from nationalization of the mines in the early 1970s. Nowadays foreign companies can come and mine and they seem to make money. I am no expert in the details of how Chile balances both a major state-owned company and private companies all going after its vast copper deposits, but the country seems to thrive. Maybe Chile can advise Venezuela and all those other Africa countries looking to nationalize everything that ores in the ways of balancing socialistic and capitalistic mining principles.
These strange happenings and dreams by dictators and others may be ludicrous, but they do raise some interesting and very serious issues in mining. The first question that pops to mind is: who owns the ore? The natives who came across the Beiring Straight more than ten thousand years ago; the Spanish who came five hundred years ago; the people who now live in the place; or the people who properly lay claim to it and take the risk of investing in finding and developing it?
Next we have the difficult question: does state ownership and control bring better returns to the locals than foreign ownership? Can taxes and royalties make up for the profits that a foreign company may make?
Can you balance state-ownership and private initiate so that you enjoy the benefits of maximum incentive to private enterprise—which obviously produces better mining—while maximizing the income to the state? Mongolia is a perfect example of this conundrum playing its way to an idea future by way of a muddled and politicized process.
The final question: does the environment benefit or suffer from state-owned mining? In this regard I am convinced that state-owned mines inevitably are far worse for the environment than privately owned, but well-regulated, mining companies. It is simple: once the politicians get their hands on a source of wealth and they are not accountable, regard for the environment goes out the window. So we have the cry: to mine and to protect the environment while doing so, avoid state-ownership and/or control. This idea presents a major moral heart-burn for my liberal lady friend. She believes in the virtues of the environment and the virtues of socialism. She cannot get her head around this nasty contradiction of theory and practice by her admired socialist politicians.
For the rest of us, it means that we should keep away from mining-related investments in companies operating in countries where the mines are likely to be nationalized. We should also encourge a few anti-mining NGOs to protest at what some countries are doing in unequally distributing the wealth around that is being made from mining. Per calorie of energy expenditure, I am sure they will do better than attacking oil sands operations.
PS> After first posting the above, I came across a reprot from MineWeb on this topic. Here it is:
Venezuela said on Tuesday (29 September 2009) that seven African nations would join it in forming a cross-continental mining corporation intended to give poor nations greater control of developing their resources.
Venezuela’s President Hugo Chavez proposed the “multi-state” corporation at a summit of South American and African (ASA) nations at the weekend.
State media said Mauritania, Mali, Niger, Sierra Leone, South Africa, Angola and Tanzania had signed letters of intent to create the “ASA Mining Corporation” with an initial focus on iron.
“This alliance … foresees the forming of joint ventures for exploration, geological prospecting, production and installation of small plants to process iron into steel,” Venezuela’s official news agency ABN said.
Venezuela’s Mining Minister Rodolfo Sanz said the South American steel-producing nation would send technical teams within 30 days to Mauritania and Tanzania.
“We are going to help those countries calculate their reserves and their geological refuges so they know what they really have under the earth,” he said.
The goal is “to prevent industrial countries from continuing to suck the undersoil of those nations,” said Sanz, whose socialist government pursues an aggressively “anti-imperialist” line in international affairs.
The weekend summit was dominated by grand proposals for South America-Africa cooperation, and calls for poor nations to unite against the economic dominance of the West.
Analysts say, however, that the Venezuelan government has a track record of failing to carry through some of the international initiatives that it enthusiastically announces across many sectors.
