Global mining sector at tipping point over government intervention

Thursday, August 18, 2011 | Posted by: Fiona Cullinan
Categories: Thought leadership | Tags: report, legislation, taxation, mining report, mining, miners, study, environmental, nationalisation, intervention, Martin Goddard,

‘Increasing and unpredictable’ intervention by governments is putting the mining sector at risk of stagnating and causing uncertainty among companies and nervous investors, according to Grant Thornton International’s new global mining study.

Three key areas of impact
Changes to taxation, nationalisation and environmental legislation are the three main factors that are having an impact and posing a threat to commodity prices, according to the report Facing an uncertain future: government intervention threatens the global mining sector.

They are also increasing risk for investors, clouding corporate valuations and making it harder to raise capital. And the knock-on effect may threaten the long-term health of the global economy.

Martin Goddard, Global Head of Transaction Advisory Services at Grant Thornton UK, said:

“Intervention is having a real impact on the mining sector. The threat of nationalisation in South Africa, for example, is emblematic of the situation facing mining companies around the world. How can companies plan and operate successfully when governments keep chopping and changing the rules? Meanwhile, from an investor perspective, interest in mining assets is likely to diminish in the face of this uncertainty.”

Mining sector ‘a target’
But the traditionally profitable mining sector continues to be seen as an easy target for governments looking to boost their revenues. Mining companies operating in Australia, for example, have been hit by new federal taxes designed to replace existing state-based royalty schemes, threatening profits and causing regulatory uncertainty. Some companies are considering moving operations to lower tax jurisdictions as a result.

“For the companies involved, they may reach a tipping point where their valuations are so negatively affected, and the landscape in which they operate is so unclear, that they simply walk away in the search for more competitive jurisdictions or asset classes.”

Download the report
Read the full story and ways mining companies can minimise the impact in Grant Thornton International’s report: Facing an uncertain future: government intervention threatens the global mining sector. Alternatively, for further help and information, contact:

Gerry Beaney
T +44 20 7728 2589
E gerry.d.beaney@uk.gt.com

Martin Goddard
T +44 20 7728 2770
E .(JavaScript must be enabled to view this email address)

For further information on Grant Thornton’s services to the mining sector, visit our Mining & Extractive page.

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