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Resource rich African countries increasingly changing laws to increase share of revenue from mining activities

Author: Barbara Lewis, Reuters , Published on: 15 April 2019

‘EXPLAINER-How countries are getting tougher with mining companies’ 

A mix of political populism, higher commodity prices and the expectation electrification will spur demand for some raw materials has led resource-holding governments to change the rules for miners operating in their countries. In most cases, governments are seeking to increase their share of profits, rather than all-out resource nationalism, although Mongolia has been trying to nationalise a stake in a copper mine. The toughness is not universal. Some governments see the hardened stance of other countries as a chance to lure investment. Ethiopia is rolling out pro-business reforms after Prime Minister Abiy Ahmed swept into office last year.

Typically, resource holders have increased the demands they make of international companies when commodity prices rise. Commodity prices have been increasing since the start of this year, but are relatively low and were still recovering from the crash of 2015-16 when the latest wave of resource nationalism began. In Africa, Tanzania, regarded as an extreme example, turned on the miners after President John Magufuli swept to power in late 2015 pledging to secure a bigger share of the country’s natural resource wealth. Industry insiders and lawyers say political populism and social media are impelling calls for a greater share, beginning with the local communities around mines.

…China’s growing investment in mining projects has helped spur resource nationalism by giving many resource-rich countries an alternative to Western investment,” Henry Hall, associate director at Critical Resource advisory firm, said…In Africa, Democratic Republic of Congo, Tanzania and Zambia have been seeking more of the profits from copper, cobalt and gold. Democratic Republic of Congo in June last year signed off regulations to implement its new mining code that raised royalties and taxes. Major mining companies, such as Glencore and Barrick, have opposed the code and are seeking negotiations and ways to increase pressure…“One of the most important aspects to have a good understanding of is the community landscape - without the social licence, mines will either not start up, or will be disrupted by community activism,” Warren Beech, a partner at law firm Hogan Lovells, said...

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Related companies: Barrick Gold Glencore