Category Archives: Mining

Mineral Revenue-Sharing as Peace Dividend: Incentivizing Stakeholders to Support Peace and Stability in Afghanistan

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Journal of Political Risk, Vol. 9, No. 6, June 2021

The image shows a map of Afghanistan. A satellite image of the region is contained in the map.

Mineral Map of Afghanistan. Source: USGS

Priscilla A. Tacujan, Ph.D.
Analyst for the U.S. Department of Defense

 

Various players have raised the prospect over the years of Afghanistan developing its mineral wealth as a means to stabilize the country, but nobody believes that it could achieve enough security to prevent attacks on infrastructure and mining operations.  However, it is possible that Afghanistan might be able to broker peace and reconciliation through a mineral revenue-sharing scheme[1] that directly distributes mining dividends and profits to the general population as well as extract concessions from the Taliban — an approach that has helped mitigate conflict in some other war-torn areas where revenue-sharing has been part of their peace accords.[2]  A trickle-down incentive structure could incentivize the Afghan people and militant groups to pursue peace and reconciliation if they become vested stakeholders and direct beneficiaries of their country’s natural resources.  While security conditions in Afghanistan’s extractive industries remain a challenge, a review of successful revenue-sharing practices in other countries suggests that a similar practice in Afghanistan may yield long-term gains.

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Greenpeace Working to Close Rare Earth Processing Facility in Malaysia: the World’s Only Major REE Processing Facility in Competition with China

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Journal of Political Risk, Vol. 7, No. 10, October 2019

The image is a screenshot of the Greenpeace website. The main image shows protestors holding yellow and black signs.

Partial screenshot from the Greenpeace website, taken on 10/3/2019, detailing Greenpeace’s leading role in the ‘Stop Lynas’ campaign. Source: Greenpeace.

Michael K. Cohen
Journalist

Rare earth – the colorful metals derived from 17 extraordinarily hard-to-mine chemical elements – are a little-known part of all of our lives. They are crucial elements of mobile phones, flat screen televisions and more than 200 other consumer electronic devices that we use every day.

But these exotic elements are needed for more than just phones and televisions. Their lightweight properties, and unique magnetic attributes, are indispensable to military assets that use sonar, radar or guidance systems, lasers, electronic displays, and myriad other mechanisms.

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Arctic Enterprise: The China Dream Goes North

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Journal of Political Risk, Vol. 7, No. 9, September 2019

The image depicts a ship from above against the backdrop of a sunset.

Arctic Ocean, ship on Barents Sea. Source: Tom Thiel via Wikimedia Commons.

Jonathan Hall
Security and Political Risk Analyst

Until recent years, harsh weather and unmanageable navigation routes have precluded all but the most determined crews from venturing through the Arctic. As climate change continues to take effect, however, warming temperatures are opening up the region to new opportunities. In 2017, for example, merchant ships were able to pass through a shipping lane, known as the Northern Sea Route (NSR), for the first time without icebreaker escort.

The NSR has since been discussed as a logistical windfall that will revolutionize the world of international shipping. The often-cited reasoning is the potential 5,000 mi (8,000 km), or 10-15 days saved in transit, as compared to more traditionally used routes such as the Strait of Malacca, or the Suez Canal. While the NSR is only open three months per year, climatologists predict it will be traversable for 9 months out of the year by 2030, and completely ice free within the next two decades. As these changes are coming into effect, no state seems to understand the geopolitical advantage a strong presence in the Arctic will bring more so than the People’s Republic of China (PRC). Continue reading →

Alleged Corruption in Mongolia’s Resource Extraction Sector

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Journal of Political Risk, Vol. 7, No. 7, July 2018 

Dump trucks are photographed operating in an open pit at the Oyu Tolgoi copper-gold mine.

Dump trucks operate in an open pit at the Oyu Tolgoi copper-gold mine, jointly owned by Rio Tinto Group’s Turquoise Hill Resources Ltd. unit and state-owned Erdenes Oyu Tolgoi LLC, in Khanbogd, the South Gobi desert, Mongolia. Mongolia exported 817,000 tons of copper concentrate in the first half of the year compared with 663,800 tons a year earlier, an increase of 23.1 percent. Source: Flickr.

Indra Tsatsral

Oxford Brooks University

The year is 2008 and Ulaanbaatar, the capital city of Mongolia, still resembles a gritty Soviet satellite state with its deteriorating apartment blocks and a statue of Lenin standing bold. Fast-forward a mere four years later and the apartment blocks have deteriorated further while a dazzling 25-story hotel overlooks the shadow of the recently removed statue. Today, with a plethora of Western companies ranging from luxury brands such as Rolex to the familiar Pizza Hut sprouting all over the city, you will be forgiven for mistaking Ulaanbaatar as one of the Four Asian Tigers. Unlike the Four Asian Tigers, which flourished predominately through industrialisation, however, Mongolia’s rapid ‘development’ is mainly attributed to the country’s colossal mineral wealth.

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Nationalism, Pastoral Nomadism, and Political Risk to Natural Resource Investments in Mongolia: Case Studies of the Aluminum Corporation of China Limited (Chalco) and Rio Tinto

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Journal of Political Risk, Vol. 2, No. 6, June 2014.

From right to left, Shaft #1, #2, and #5 at Oyu Tolgoi, a copper mine in extreme southern Mongolia photographed from afar.

From right to left, Shaft #1, #2, and #5 at Oyu Tolgoi, a copper mine in extreme southern Mongolia, 2013. Oyu Tolgoi, also known as Turquoise Hill is a combined open pit and underground mega mine project in Khanbogd in the south Gobi Desert. The site was discovered in 2001 and is being developed as a joint venture between Ivanhoe Mines, Rio Tinto and the Government of Mongolia. The mine is scheduled to begin production in July 2012. The Oyu Tolgoi mining project is the largest financial undertaking in Mongolia’s history and is expected upon completion to account for more than 30% of the country’s gross domestic product. Copper production is expected to reach 450,000 tonnes annually and Gold production is estimated to reach 650,000 ounces per year. Source: Wikimedia Commons.

Jamian Ronca Spadavecchia [1]
Founder and President of Oxbow Advisory

Mongolia stands at a critical juncture between the rewards of natural resource development and the challenges of modernization. On the one hand, it offers abundant opportunities in the natural resources sector and is located near growing and resource-starved industrial nations of East Asia. At the same time, the presence of autocratic neighbors impose international instability on this democratic and market-oriented economy.

This article considers two underanalyzed political risks that are necessary for understanding the future of the Mongolian economy: nationalism and pastoral nomadism. In doing so, it proffers an improved analytical framework for resource investors to better assess and mitigate their Mongolia risk.

Finally, the analysis uses selected case studies to demonstrate how nationalism and pastoral nomadism might impact natural resource investment. For nationalism, a study of the proposed acquisition of SouthGobi Resources (SouthGobi) by the Aluminum Corporation of China Limited (Chalco) is offered. The Chalco study is emblematic of the link between nationalism and two dominant trends in Mongolia: resource nationalism and increasing geopolitical risk in the natural resources sector. The section also looks at how pastoral nomadism poses a risk to Oyu Tolgoi, Mongolia’s premier copper and gold mining project, by examining a dispute between Rio Tinto and indigenous communities of Gobi herders that threatened Oyu Tolgoi’s project financing. Continue reading →