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islation was informed by a strong and
reasonable desire for government and
its people to get more value from its geol-
ogy. But the new framework did not account
properly for sensitivity of mining investment
to sovereign risk and the needs of the busi-
nesses that finance such projects.”
Litvin advises companies to work harder
at explaining their position to government
and other stakeholders in-country if they are
to insulate themselves against resource na-
tionalism.
“In more extreme cases it is based on
misconceptions on the profits companies
are making,” he said.
“Companies have increased their efforts
to build trust but the situation is getting worse
so I believe miners will have to redouble their Daniel Litvin
efforts again and become more sophisticat- “Juniors don’t have those resources,
ed about it,” he said. but they can be very good at building
Work at the community level is also es- strategic relationships at both the lo- be vigilant about other forms of national-
sential for companies’ mitigation efforts, Lit- cal and national level,” he said. “Often ism.
vin said. it is the CEO dealing with a minister or “Indirect expropriation, where the gov-
“CSR is certainly essential to get a com- local leaders. So, on one level juniors ernment takes a measure that does not
munity onside and that provides some insu- are disadvantaged but they do have the deprive the investor of ownership of the
lation to a degree but it’s not everything,” he personal touch and commitment to com- investment but does cause a substantial
said. “Sometimes companies assume that munity programmes. They don’t have to deprivation of value or expected economic
if communities are onside it protects them be expensive it is about bringing the com- benefit or the loss of use of the investment,
against resource nationalism but there are munity what they want, not what you think is more common,” he said.
many examples where they have suffered they need.” “These are often based in policies
regardless of their community engagement. Luttrell believes investors’ response around downstream processing and
“A lot of work needs to also take place to Tanzania’s new policies would likely value-addition on local content require-
at the national level, particularly in capac- prompt other countries on the continent ments which show a naivety in host gov-
ity building and helping the government to consider how effective their policies ernments about the economics of the in-
strengthen its ability to spend revenues ef- are in attracting capital. ternational mining industry.”
fectively.” “Other African states will see Tanza- Luttrell and Litvin agreed that capital
Such levels of engagement may be nia’s changes as an opportunity [to cap- flight was inevitable once Tanzania in-
achievable for multinational majors who can ture more foreign investment],” he said. troduced the amendments in 2017 but
afford entire external affairs departments “All governments need to understand that following the Government’s formalised
but in junior miners and explorers it is often they are in a very competitive business agreement with Barrick Gold Corp in
the executive management which is tasked when it comes to attracting mining invest- February, both retain positive outlooks
with the job of government and community ment.” for its future.
relations. While Tanzania’s move was at the more “In many ways, what Tanzania did do
Litvin doesn’t see this as necessarily a radical end of the resource nationalism was more hazardous than full expropria-
disadvantage. spectrum, Luttrell warned companies to tion from a sovereign risk perspective
because it creates so much uncertainty
for investors,” Luttrell said. “It is a positive
and I’m optimistic about Tanzania now,”
Luttrell said. “The fact the Government
has been able to do a deal within the le-
gal framework bodes well for Tanzania as
a host of mining investment.”
Litvin believes there is a mix of enthusi-
asm and trepidation about Tanzania.
“It can turn quickly,” he said. “Investors
are very nervous when things go wrong
but if it is a good asset and the Govern-
ment is plausible and genuine in wanting
reform and makes an investment-friendly
climate capital will come back quickly. I
think capital is nervous but also excited
by many of the resources prospects in
Tanzania.”
– Dominic Piper

Francis Gatare

aUSTRaLIa’S PaYDIRT MaRCH 2020 Page 53