"Zimbabwe's rising resource nationalism…could very well be a mistake."
"More robust government ownership and higher taxes tend to increase the costs structure and life risk, which increases the required rate of return on invested capital," he advised.
In his analysis, Melek observed "a harder form of resource nationalism can totally squeeze out private capital and often cause production declines and resource degradation. A hard form of resource nationalism can include partial or total confiscations of producing facilities."
"Any actual or perceived threat to the guarantee of tenure may very well stop private investment cold, he warned. "Ownership rights are critical in order for capital to flow into the development of both brownfield and greenfield projects."
If Zimbabwe's cabinet goes through with its plan to take a 51% share of mining assets, "new private sector mining development in that country will very likely slow materially, or stop outright," Melek advised. Meanwhile, he worries the situation could cause the investment climate in PGMs in South Africa to "deteriorate further due to the Zimbabwe action."
"Markets are already showing concern about a lack of strong land ownership guarantees and the expansion of Black Economic Empowerment targets," said Melek. "Investors are also concerned that Zimbabwe's action may embolden ANC youth leader, Julius Malema, to again make calls for nationalization of South Africa's mines."
via www.mineweb.com
Hanging on by a thread. Zim learned from us, now they are taking it to the most ridiculous extremes. This analyst (Bart Melek, head of commodity strategy for TD Securities) does not see a huge difference in our own situation.
But will they listen?
I have never understood nationalisation of any business especially mining. To understand tax the first thing one needs to realise is that when you start a business the tax authorities (in our case SARS) put up their hands and say “I’m your partner, good buddy” The trick of good tax is to leave enough on the bone so that the entrepreneur works his guts out making a profit and as the tax man I get my partners share for no work or contribution. And most important “NO RISK”. As the tax man all I have to do is keep my partner (the businessman) motivated to bust a gut!
If I nationalise, even only 51% I take on the RISK, and I take on the business RESPONSIBILITY. Mining is not easy. And mining is a boom and bust business. Now the gold price is $ 1450 but ten years ago it was $ 250 and mines were crying. It goes in cycles.
Theres something else that you need to understand: It suits the people who own the mines to nationalise: They sell to brainless governments at the top, when commodity prices are high, and buy back 20 years later at the bottom at about one tenth of the price. If you don’t believe me there are lots of examples e.g. Zambia copper mines.
Versus the above situation of no risk and partners share, I must be insane, totally insane, to nationalise.
I can’t think of anything more brainless than nationalising a mine.
Richard Ferrer
I have never understood nationalisation of any business especially mining. To understand tax the first thing one needs to realise is that when you start a business the tax authorities (in our case SARS) put up their hands and say “I’m your partner, good buddy” The trick of good tax is to leave enough on the bone so that the entrepreneur works his guts out making a profit and as the tax man I get my partners share for no work or contribution. And most important “NO RISK”. As the tax man all I have to do is keep my partner (the businessman) motivated to bust a gut!
If I nationalise, even only 51% I take on the RISK, and I take on the business RESPONSIBILITY. Mining is not easy. And mining is a boom and bust business. Now the gold price is $ 1450 but ten years ago it was $ 250 and mines were crying. It goes in cycles.
Theres something else that you need to understand: It suits the people who own the mines to nationalise: They sell to brainless governments at the top, when commodity prices are high, and buy back 20 years later at the bottom at about one tenth of the price. If you don’t believe me there are lots of examples e.g. Zambia copper mines.
Versus the above situation of no risk and partners share, I must be insane, totally insane, to nationalise.
I can’t think of anything more brainless than nationalising a mine.
Richard Ferrer