*This article was first published in Mining World
By Nick Merritt, partner and head of the infrastructure, mining and commodities sector and Lily McMyn, associate at Norton Rose Fulbright
Myanmar quickly became a market of intense interest after a seismic shift in political ideology in 2011. A raft of political, legal and economic changes soon followed; the EU and the US suspended most sanctions and Myanmar opened for international business. Foreign investment has since grown dramatically – but not, it seems, evenly across the extractive industries despite the country’s enormous geological and geographical potential. The web of social, political, economic and legal complexities surrounding the mining sector is so multifarious that, for the present at least, Myanmar is losing out to jurisdictions with fewer bureaucratic hurdles and a more established mining regime.
There’s little dispute about what’s in the ground, despite some inconsistency in the estimates of quantum. Reserve estimates vary – one of the byproducts of a historic lack of systematic exploration of resources – but the industry appears unanimous in the view that copper, gold, silver, lead, zinc, tin, tungsten, antimony, rare earths and precious gems await extraction. In the precious gem subsector, around 90% of the world’s supply of rubies are sourced from Myanmar and the country is also the world’s largest single source of jade.
Myanmar’s mining sector is made up of large scale mining, small scale artisan extraction, and a certain amount of informal, ‘below the radar’ mining. The mining industry has been dominated by China to date. This is due partly to the opportunity presented by the imposition of EU and US sanctions and partly to Myanmar’s long standing close relationship with, and physical proximity to, China. The jade subsector is of particular interest to Chinese buyers, both as an investment and as a token of fortune and longevity. International researchers1 estimated recently that sales of jade reached US$8bn in 2011. The Government of Myanmar prohibits the extraction of precious gems by foreign investors; the subsector also remains subject to sanctions, thus entirely off limits to foreign investors for the foreseeable future.
Copper, tin, tungsten, gold and iron are, however, amongst the minerals and metals that are outside the current sanctions regime and attracting foreign investors. Copper makes up the largest export metal in the mining sector, and silver, lead, tin, tungsten and antimony deposits are widespread across the country.
Asian investors are amongst those showing interest in the Myanmar mining sector. Indonesia state-owned PT Timah has obtained various permits relating to a 10,000ha tin concession in southern Myanmar, and the company is also planning to build a smelter for processing raw ore2. Mid-sized Canadian mining and exploration companies appear to be particularly active; Centurion Minerals, for example, has been granted permits to explore two gold concessions in central Myanmar, a region accessible by road and in which exploration activities can be carried out year round. Concessions usually allow a mineral concession to be explored for up to 5 years, followed by 25 years of production. Foreign investors typically partner with local firms; Centurion is in a 80:20 partnership with a local exploration company3. Another TSX-V listed company, Northquest Ltd, submitted a gold exploration permit application 2012; latest reports indicate that the company is still waiting for the decision on its application, as well as for the new mining law4.
These latter two issues – permit delays and delay to the new mining law - are some of the reasons why the mining sector lags others in its ability to attract foreign investment at present. As of December 2012, foreign investment was concentrated in the power sector (at nearly 46%) and the oil and gas sector (at 34%), while the mining sector attracted only 6.82% of foreign investment5. (The manufacturing, hotels and tourism and real estate sectors follow at 4.6%, 3.3% and 2.5% respectively.)