Myanmar is open for business and ready for a gold rush
Myanmar —until recently called Burma— is slowly but steadily starting to attract foreign investment, driven mainly by international resource firms eager to tap into the mineral-rich South East Asia's country.
After more than half a century of military ruling, Burma has started benefitting from the recent suspension of sanctions by Canada, the United States and the European Union. As a consequence, big players are rushing to establish a presence in the market.
Oil giants Total and Chevron are already in Burma, also known as Myanmar, as are companies from China, the country’s largest foreign investor. Coca-Cola and Pepsi have announced plans to re-enter the country, while General Electric has also shown interest in the nation.
Although undeveloped, the country is home for vast and untouched reserves of highly demanded minerals and metals, such as gold, tungsten, copper and even some oil. It is also known by its precious stones and lithium reserves.
Another advantage of the still impoverished nation is to be conveniently located between China and India, which are international economic growth’s engines and hungry consumers of raw materials.
Gold rush anyone?
Mining experts say the lack of multinational mining firms active in Burma makes it an ideal playground for small-scale miners. And, according to Saturday’s edition of the Sydney Morning Herald, gold is what the juniors are looking for.
One of those companies is Canadian exploration firm Northquest, which aims to lead the way once it is granted an exploration permit, which it submitted in June.
"There have been no big gold discoveries in this country, ever," Jon North, chief executive and president of Northquest was quoted as saying.
However, the country’s strict regulations, including an export ban on raw ore and select mineral commodities such as gold and coal, combined with poor infrastructure, might force interested companies to adopt a “wait and see” approach, reports the Democratic Voice of Burma:
One of the major bones of contention involves the 30-70 profit sharing ratio, stipulated under the country’s 1994 mining law, between a foreign company and the Burmese government, which does not act as an equity partner but takes a hefty percentage of the total resource extracted on top of royalties and income tax.
Besides, Burma’s precious stones industry, particularly famous for its ruby, sapphire and jade production, is closed to foreign investment.
“The legal system is a mess (…) Corruption is still endemic, and little is being done to control it (…) Enter now, and risk running afoul of laws and entrenched customs. Stay away, and risk giving away first-mover advantage to your competition. The choice is yours,” writes The Nation’s columnist, Eric Rosenkranz.
Despite the known risks, says Rosenkranz, multinationals are flooding into the country:
A hotel room cannot be had for love or money. A hotel that used to charge US$75 per night is now $150 and is over- booked. Everyone and his brother is queuing up for visas. People are deliberately flying from Phnom Penh to Yangon on Myanmar Air because it is the only flight where you can get a visa onboard.
Recent reports seem to indicate that junior mining exploration companies from Australia are to blame for the overblown prices.
According to Stephen Everett, chairman of Brisbane-based exploration company Global Resources Corp., small Aussie mining firms are in a good position to entry the Myanmar market, as they seem willing to operate in remote areas and have a strong reputation with respect to environmental and social responsibility.
Despite the enticing opportunities and the latest developments, only China, India and South Korea have invested in the country from the major economies. A situation that, judging by the enthusiastic reports on Burma’s mining outlook is about to change.
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