I have seen some on-line discussions about whether governments should be regulating corporate takeovers, some of which may be outside their own borders. The fear from some groups is that mine assets may be acquired by less than desirable acquirers.
One specific example that I have seen is related to the 2015 disposition of foreign resource assets by both Barrick and Ivanhoe to Zijin, a Chinese company. I don’t know much about Zijin, other than having heard Norway’s government directed its $790 billion oil fund to sell holdings in some companies because of their environmental performance. Zijin was one of these companies.
In light of the Norway decision, some groups are questioning whether Zijin should be allowed to buy mining assets currently owned by Canadian or American companies.
Its a balancing act
It appears that some groups would like their governments to step in and prevent a company from selling their mining assets to another company that may have a poor reputation or limited financial capacity. The fear is the new company would operate in a non-sustainable manner and ignore local environmental rules.
Government sanctioning of deals gets tricky in that how do they define which companies have poor reputations and which don’t. Also how can they dictate to the shareholders of a company, possibly nearing bankruptcy, that they cannot sell their assets to a certain interested party?
Governments have stepped in and blocked acquisitions in the past but these were mainly related to deals involving antitrust issues or technology of national interest.
It will be interesting to see whether the idea of governments sanctioning the acceptability of acquirers in the mining industry will gain traction.
It may be an overstep for the government of one country to block the acquisition of a foreign property when the owner may not have the capability to develop the project while the acquirer does.
The foreign government may want to see their own resources developed but another government may be hindering that by blocking transfer of ownership.
The last thing we want are more country-to-country disputes. I presume the only option in this case is to revoke the mineral concessions and assign them to someone willing to develop them. One company will lose an asset, which creates new issues related to compensation. It also harms the reputation of that country as a place to invest in. Unfortunately it had no choice if a foreign government was getting in the way.
Conclusion
If we can agree that government’s priority (after security) is to set the stage for employment then it doesn’t matter who owns the business, other than in select situations such as you mention above, or in situations where foreign owners attempt to place their own people into jobs that can be filled by Canadians. Nexen is an example of a foreign owned company where they are slowly displacing Canadians and replacing them with foreigners who are compensated less than Canadians. In cases such as that one, or with HD Mining there is a compelling need to restrict a foreign owner’s interests.
There are plenty of codes available for companies to follow. It would be a simple matter to force new companies to follow them. ISO 14001 would be a good example, or the MAC sustainability guidelines. Provincial mining associations are tied in some way to codes. If foreign companies are unwilling to commit then they should be prevented from investing. Perhaps foreign companies should be required to belong to an association like MABC, who could hold a “hammer” over a foreign company to ensure they comply or else face expulsion and ultimately loss of assets.
The concerns that I have heard about were not about a foreigner buying a mine here in Canada, but rather a foreign company buying a Canadian-owned mine in a foreign country. While the Canadian company may follow their best practices in that foreign country, the acquirer might not follow those practices. Their position is that someone(?) should prevent the sale to the foreign company.
One of the good things we have in Canada is a clear regulatory system. The initial permitting may be lengthy and frustrating, but once the mine is permitted the regulations are pretty clear. Other countries are not so good at regulating mines. This is one of our advantages.
Anyone who wishes to purchase a mine in a foreign country will do their due diligence on the regulatory requirements. If not then they should expect the unexpected.
Below is an interesting link to an article about the major miners are shedding their smaller projects. The question being asked by some is whether governments should step in a decide who is allowed to acquire those shedded assets.
http://www.mining.com/web/85-billion-in-write-offs-may-fuel-small-gold-mining-stocks
I don’t see the process as bing much different from gaining an initial permit. I know of at least one project in BC that has been turned down by the government because government has no confidence in the management team.
The resource ultimately belongs to the people. They or their state representation should decide how the resource is to be used and who can “rent” it from the state. Companies need to realize that once they make a decision to manage a mine they should consider themselves married to that resource, and divorce should not be an easy process.
As for Barrick…I’m not sure I would want them mining in my country. All they’ve managed to do is lose 11 billion of shareholder value in retained earnings. And by the looks of their head office staff they still haven’t learned how to manage mines. There isn’t a single operator among them…all bean counters.