article on miners risk-oxr, avl ...

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    Risk is not a word you hear often in a boom. It is a concept that we neatly tuck away for the duration and then wake up to discover that it never went away, it was just lying doggo – but, like all sleeping dogs, it has a capacity to bite when least expected.

    Oxiana, for example, is doing marvellously well on the stock market. The price of both copper and gold is up and its Sepon mine is looking terrific. When was the last time anyone mentioned the fact that Laos, the country in which the mine is located, remains a communist dictatorship and there is a low-key insurgency being fought in the jungle?

    It's the same with Anvil Mining and First Quantum as they beaver away in a currently peaceful Congo, or Centamin as it battles bureaucracy in Egypt, or Harmony as it tries to charm its way through the problems of Papua New Guinea.

    None of these interesting companies ever seem to have the word risk attached simply because commodity prices are rising and a splash of cash can solve most problems, should they arise.

    Dryblower, who likes to look a bit further down the track than the boom (or bust) currently being played out on world markets, had his risk-nerve jiggled the other day when looking at the latest list of country risk as determined by the London-based Economist Intelligence Unit, and reported in The Economist magazine.

    What struck him immediately was the status of Argentina, a country which is redeveloping its appeal as a destination for mineral explorers but which, according to the EIU, ranks second behind Iraq in terms of risk, as assessed using 77 indicators such as political stability and credit quality.


    The EIU table shows that Argentina has become marginally less risky over the past year but still scores around 78 on a scale of 100 while Iraq, which needs no risk explanation whatsoever, is still around 90 – but getting better.

    Turkey, another emerging destination for both mineral and oil explorers, is right up there in fourth spot on the risk list, just above Indonesia, a one-time favourite of mining companies in search of their big discovery.

    The EIU list is by no means definitive, nor should it dissuade a company from exploring. After all, some of the world's best mines are to be found in some of the world's trickiest places, and explorers (by definition) are risk takers.

    But, Dryblower wonders, how many of today's investors in hot mining stocks could give a twig for a risk assessment of where they are sending their money? Does anyone really care that Egypt is still eighth on the list, or Peru ranks ninth – or that Russia is actually considered to be only a slightly more risky place than South Africa, and improving at a fairly rapid rate. Or that China, India and Thailand are already considered less risky than South Africa.

    The Russia v South Africa ratings, if there is a message to be taken from the EIU list, is the most fascinating. Last year, Russia was scoring somewhere in the low 50s; today it has dropped to the mid 40s. South Africa, over the same time, has stayed in the low 40s.

    If the trend continues, how interesting it might be to see Russia considered a less risky destination than South Africa.

    The rating of risk, naturally, has little to do with mineral prospectivity, and in a boom that is all that seems to count – what are the chances of making a discovery.

    The risk rating only becomes valid when times are tougher, or when it become time to turn the discovery into a mine - that's when delicate little issues like corruption, crime and questions of black empowerment sneak into the equation, and that's why South Africa is stuck on a moderately high risk score and places like Russia, Brazil, Thailand, and even Indonesia are improving their risk rating.

    Dryblower can't wait for next year's list.
 
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