Australian mining companies are exploring options in the 'new' Burma

• by: Victoria Bruce
• From: The Courier-Mail
• July 25, 2012 10:00PM

LAND OF OPPORTUNITY: John Bovard and Stephen Everett, two Aussies hoping to strike it rich in Burma (Myanmar). Picture: Victoria Bruce

IT'S Queenslander Stephen Everett's first time in Burma and he and his mate John Bovard are hoping to strike gold in the resource-rich country.

Mr Everett, chairman of exploration company Global Resources Corp, based in South Brisbane, and Mr Bovard, principal of Sterling Mining Group, are in Rangoon, now officially called Yangon, to assess opportunities for Australian investors, including some unnamed Brisbane clients.
Mr Everett said smaller Australian exploration and mining firms were well placed to enter Burma, now officially called Myanmar, one of South-East Asia's final frontier markets.
It recently opened to foreign investment after more than half a century of military rule.
"Australian entrepreneurial junior companies are often the first movers going into remote areas," Mr Everett said, pointing to examples in South America, Africa and parts of Asia.

"We have a significant track record in terms of being ahead of the game in terms of exploration processing."

Australia's strong reputation in environmental and social responsibility would work in favour of new investors, he said.
At the first Myanmar Mining Summit, in Yangon this week, Australia's junior mining exploration companies are dominating the list of foreign firms scoping out opportunities in Burma's underdeveloped minerals sector.
Mining experts say the lack of multinational mining firms active in Burma makes it an ideal playground for small-scale miners.
The absence of global players such as Rio Tinto had a few tongues wagging, noted Nicholas Powrie, general manager (legal regulatory) of West Australian company Mineral Commodities.
"I think it is surprising that Rio Tinto isn't here, for the simple reason they have gone through a cycle of property divestments over the past six years and they have recently been wandering around Papua New Guinea, as has BHP, looking for new investments," he said.
Mr Powrie said Rio would most likely allow the smaller exploration firms to do the groundwork before making its move on Burma.
"The risk capital required to come into a jurisdiction such as this one comes from the small to medium players, the self-funded equity parties who are prepared to risk $50 million to $100 million to explore and develop," he said.
"As a general rule we see companies such as BHP and Rio Tinto as acquirers of these sorts of projects rather than explorers of projects - that's been the trend over the past 15 years."
One Canadian competitor may have jumped the gun on its Commonwealth cousins and has already applied for a licence to explore for gold deposits in remote central Burma.
Jon North, president and chief executive of Canadian firm Northquest and a geologist by trade, said he was "very optimistic" that his company would win an exploration permit from the Burmese Government.

Jon North, chief executive of Canadian firm Northquest, which has already applied for an exploration licence.           Picture: Victoria Bruce

"Myanmar will have an explosion of discovery, just like Canada did," Mr North said, likening the status of Burma's mining sector to an unexplored Canada a century ago.Mr North said Burma had done some small-scale exploration in the past but previously lacked modern technology necessary to identify rich mineral deposits.
The country has great potential for gold mining, he said, and foreign investors could bring in the capital and technological expertise to exploit this resource.
But first, they had to find the deposits.
"Myanmar needs superheroes to come in here, risk their capital and get out there to help this era of explosion," Mr North told conference delegates.
Mining veteran Owen Hegarty, head of Australian-based resources company Tigers Realm Group and the former boss of Oxiana, told delegates Australia's mining industry was poised to enter Burma's minerals game.
"Australian exploration firms are ready," Mr Hegarty said before flying to Indonesia to pour the first gold at his Martabe gold-silver project in north Sumatra.
True to his words, Australians were out in force during the three-day conference, with more than 50 representatives from 30 firms among the 200-plus companies attending the event.
As the impoverished nation emerges from more than 50 years of military rule and Western countries have eased trade and investment sanctions, foreign investors have been flocking to the former capital of Rangoon to seek their fortune.
But Burma's restrictive regulatory framework, including an export ban on raw ore and certain mineral commodities such as gold and coal, an inhibitive Production Sharing Contract arrangement combined with a lack of legal and physical infrastructure, means many interested companies will be adopting a "wait-and-see" approach.
One of the major bones of contention involves the 30:70 profit-sharing ratio, stipulated under Burma's 1994 mining law, between a foreign company and the Burmese Government, which does not act as an equity partner but takes about 30 per cent of the total resource extracted on top of royalties and income tax.
"That means you risk all the money, you risk all the development, then you give the Government a share of the production free of charge, on top of royalty," Mr Everett said. "People will not invest on that basis, not large-scale, anyway."
Investors and experts pointed to many grey areas in the legal framework.
They said law and practice were two different games in Burma, with some government officials explaining everything was open to negotiation.
"Foreign investors can negotiate the production-sharing ratio with the relevant mining department," said Daw Ma Thu Za, an expert on foreign investment from the Burma Directorate of Investment and Company Administration.
"No one's going to sign that deal - it's just not profitable," said one West Australian investor who asked not to be named, adding companies would prefer to try their luck in countries with more attractive framework such as Indonesia or the Philippines.
Other sticking points included prohibitions on the export of raw ores, trading restrictions and the bureaucratic hurdle involved in negotiating the rights to an exploration permit from the Burmese Government, and the tenure of prospecting, exploration and production permits.
But while Burma's framework might not be attractive to big investors, Richard Taylor, general manager of Melbourne-based boutique firm Five Corners Consulting, said Australian firms were well placed to make the first move and test the waters in Burma's mineral sector.
"The junior exploration plays a very significant role in stimulating the interest in getting the high-risk exploration activity under way within a country and it is these people which we will see larger companies follow," Mr Taylor said. "They are going in at a point where the mining law is in its infancy and down the track if Myanmar pursues an attractive and open mining system you will see larger companies taking part in a very promising country."
Australian companies attending the 2012 Myanmar Mining Summit included Horizon Mines, Venture Minerals, Newmont, Sterling Mining Group, Eastern Iron Limited and Altura Mining.

This article was first published on The Courier-Mail website on July 25, 2012: http://www.couriermail.com.au/business/australian-mining-companies-are-exploring-options-in-the-new-burma/story-fnefl294-1226435172339

And Perth Now: http://www.perthnow.com.au/business/australian-mining-companies-are-exploring-options-in-the-new-burma/story-e6frg2r3-1226435172339