Mining in the Asia-Pacific

A range of social, political, and economic factors determine where mining companies invest their scarce capital. This chapter identifies nine areas of risk that investors need to consider before investing in the sector. These include high sunk costs, the finite life of a deposit, and the long period to achieve a positive financial return. Add to this, legacy issues and it is clear that mining is a high-risk venture. This chapter argues that increased attention to the nine areas of risk may benefit mining companies in the future.

This chapter analyses the major issues associated with regulatory governance of foreign mining investment in the Asia-Pacific Region. After surveying relevant literature on regulatory regimes, the chapter draws on the seminal work of Stern and Holder to evaluate the major regulatory governance issues in China, India, Indonesia, Papua New Guinea, and the Philippines. Our analyses indicate that there are six key regional challenges: regulatory overlap, regulatory capture and a lack of independence from government, a lack of impartiality in decision-making, a lack of transparency in decision-making, inadequate stakeholder engagement and access to regulators, and a lack of institutional capacity. These challenges are more pronounced in some countries than in others. Policy implications that may aide regional governments to improve governance infrastructure in their mining industries are outlined.

Political risks are critical variables for investors to consider when undertaking business in a globalised economy. Yet the concept itself remains under-theorised and, consequently, suffers from a lack of conceptual clarity. Attempts to define political risk thus far have failed to consider and analyse how the concept is theoretically grounded. This has led to a significant knowledge deficit and to a lack of consensus as to what constitutes the idea of political risk. This chapter addresses this deficit by exploring the theoretical nature of political risk. It examines the interrelated elements of property, politics, and power to develop a new understanding of how these elements underpin the idea of political risk. This chapter is, therefore, theoretical in nature. As such, it does not directly address risks, challenges, and opportunities facing the mining industry in the Asia-Pacific Region. Instead, it examines key ideas that inform the idea of political risk. It will be up to individual mining companies to adapt these abstract ideas to their individual circumstances.

Policy responses of governments across the Asia-Pacific Region to the security of supply problem amount to a new form of resource nationalism. Resource nationalist policies transfer resource rents, assets, skills, and technology to the government at the expense of mining companies. In the coming years, governments will be under increasing pressure to introduce policies that nationalise mineral and energy supplies. This will occur as resource (material) intensity increases and reserves decline. My argument is that Vernon’s obsolescing bargain model needs to be modified to take into account the security of supply issues facing host governments around the Asia-Pacific Region. This is a novel interpretation of the way resource nationalism is understood. Consequently, I modify the Vernon’s model to reflect recent policy responses to the potential shortfall in resource supply in the Region. I begin by considering how these policies influence the bargaining power of companies and host governments in mining projects. Vernon’s model is a useful tool for predicting and explaining future resource nationalist policies brought about by the growing gap between mineral and energy production and consumption in the Region. In response to this problem, I suggest that industry clusters may reduce the likelihood of resource nationalism affecting mining projects. This is something that has not, as yet, been trialled as a possible solution to resource nationalism in the region.

This chapter identifies a gap in the literature between the theoretical and philosophical motivations of corporate community development (CCD) and their practical applications. In recent years corporate community relations (CCR) has undergone a substantial change, moving from simply considering the fundamental ethical requirements of corporations, towards seeking to establish a role for corporations in contributing to community development. This change has led to a polarising debate, with proponents supporting the potential for corporations genuinely to contribute to a community and opponents perceiving the move as little more than a public relations exercise. This chapter suggests one catalyst for this debate may be the lack of a solid theoretical and philosophical foundation underpinning and guiding the development actions of corporations. While the rhetoric of human rights is often utilised as motivation for CCD the adequacy of this as a development framework is questioned. Consequently, this chapter explores the limitations of human rights as a development framework and proposes the capability approach as a more appropriate theoretical and philosophical framework to underpin the development aspirations of mining companies.

Activity in the mining industry in the Asia-Pacific Region has surged during the last 25 years, as growing populations, higher personal incomes, and increased demand for goods, services, and infrastructure—particularly in China and India—have led to large-scale building programs and rising energy consumption. This has intensified the use of minerals, metals, and oil and gas. While this longitudinal trend has been interrupted by several global and regional financial shocks, including the 1997 Asian Financial Crisis and the 2008 Global Financial Crisis (GFC), both of which saw weakened demand for commodities, mining companies predominantly have experienced a sustained period of production and revenue expansion, and growth in their market capitalisation. Competition for resource deposits, the emergence of a plethora of juniors eager to capitalise on the burgeoning demand, and consolidation at the mid-cap and major level have been observable features of the mining industry market. With this consolidation in mind, here, we examine recent merger and acquisition (M&A) activity in the mining and energy sectors across the Asia-Pacific Region.

As a country that has historically lived off international sales of primary commodities, Australians need to understand better than most the cyclical fashion in which commodity markets move and the risks entailed in that recurring pattern. To that end, this chapter investigates the way that political risks have been, and are still being, handled in the three nations from the Asia-Pacific region that have successively led the world in steel production through the last century—the United States, Japan and China. The implications for Australia, which has now emerged as the world’s largest exporter of iron ore, associated with each of these three regions are sketched out, with greater detail on the ‘super-cycle’ derived from the phenomenal expansion of Chinese steel production in recent decades.

This chapter looks at coal’s changing contribution to primary energy supplies in the Asia-Pacific Region, most notably in China. It then examines how coal’s uses in the region have evolved in recent decades and how they might change in the future, paying particular attention to steam and coking coals. Attention then moves to a discussion of the region’s domestic coal production, with a brief examination of the region's coal reserves. Although the region, as a whole, is largely self-sufficient, imports and exports in the coal trade are important. The main geographical origins and destinations of trade are described, before a discussion of the constraints, risks, and challenges faced both by domestic and foreign producers, as well as end-users of the product.

This chapter investigates the current rare earth elements trade in the Asia-Pacific Region. It begins by noting the elements that fall within this category of minerals, noting their rarity. It then looks at the trade in the commodity and some of the issues associated with its supply chain. In the last part of the chapter I examine the tension between Japan and the United States over China's restriction of exports to these countries. The chapter concludes with some speculation about the future of the trade.

This chapter analyses change and continuity in the regional approach to LNG markets since 2010, focusing, in particular, on Japan, the world’s largest LNG importer. The primary focus is on natural gas markets in the region as opposed to extraction, production and/or domestic regulation in producing states in the Asia-Pacific Region. This approach is driven by the fact that the regional gas market is in flux and the evolution of regional gas pricing will have a significant effect on the economics of natural gas production worldwide. Japan’s approach to LNG markets is evaluated in the context of its interaction with other formal institutional actors and is couched within the broader regional institutional setting. Consequently, the chapter documents recent developments in Japan’s LNG policy and summarises its activities in the LNG market since 2010.

This chapter examines the demand for copper in the Asia-Pacific Region. Like steel, most refined copper is processed into a range of semi-fabricated products before it is embodied in finished goods. Often it is alloyed with other metals, such as zinc, tin, and silver. Data on how copper is used only is available for semi-manufactured products, whether or not these have been made solely from refined copper or from copper alloys. Accordingly, the uses and production of, and trade in, copper are analysed here, before a discussion of trends in the region’s demand for copper. In the final section, I examine the future of the copper trade and the political risks that may weaken its commercial value.

This chapter focuses on the development of the coal seam gas industry in Australia. The rapid development of unconventional energy resources since the mid-2000s has left the community divided with regard to the benefits and risks involved, and has risen to prominence in the Australian policy debate. In 2015, the Australian Government adopted its Domestic Gas Strategy, which emphasises the development of onshore gas resources as a national priority and recognises the need to ensure the responsible development of coal seam, shale and tight gas resources for the benefit of all Australians. “Introduction” section of this chapter discusses the significance of coal seam gas resources in the Australian context. “The Growth of the Coal Seam Gas Industry in Australia” section considers the issues that have arisen in relation to the growth of the coal seam gas industry and its impacts on communities. “Coal Seam Gas, Water, Air Pollution and Communities” section reflects on the regulation of coal seam gas activities. The conclusion addresses questions about the future of the industry.

This aim of this chapter is to introduce the reader to the key elements of sustainable development. To achieve this aim, the chapter is subdivided into the following sections. Section one offers a short history of sustainable development in the mining industry. In the following section, an overview of sustainable development principles and frameworks are examined. The following three sections examine the relationship between a social licence to operate and sustainable development, and issues surrounding implementation and measurement. In the penultimate section, a case study of the Philippines is covered. The paper concludes that sustainable development is becoming increasingly central to the future of the mining industry in the region.

This chapter argues the significant issues affecting artisanal and small-scale mining in the Asia-Pacific Region are caused by the profit-driven nature of the industry, which encourages poor practices to lower operational costs. Three key issues—environmental damage, health and safety and security—seriously impact on the industry, and will not be resolved without better legalisation of the industry. Environmental damage caused by poor mining practices is a key concern, and is not only an environmental issue. It also has a significant impact on the health of miners and their local communities, which is further compounded by poor safety standards and a lack of knowledge and skills. The establishment of artisanal and small-scale mining camps also has lead to increased violence as a result of community breakdown, and security is further threatened by conflicting relationships with large-scale mining corporations and state governments. The hazardous nature of the industry limits its potential, and without the introduction of standardised regulations, it will continue to be affected negatively by these issues.

We examine the corporate social responsibility (CSR) experience of the mining industry and the limitations of CSR activities. We consider the dominant ideologies that underpin these activities and then juxtapose those ideologies with academic and practitioner critiques of CSR. This is followed by a short discussion of Royal Dutch Shell’s long-standing commitment to CSR, which has resulted in marginal improvement to its corporate reputation at best. We then provide an analysis of the recent publications of the International Council on Mining and Metals (ICMM) on development partnerships. We argue that this body’s shift in emphasis from CSR to development partnerships signifies a move away from the CSR discourse of the mining industry toward an approach centred on genuine community development. In the final section, we consider the potential strengths and limitations of the development partnerships approach. To that end, we adapt Arnstein’s (1969) ‘Ladder of Citizen Participation’ to the contemporary mining industry. In so doing, we attempt to illustrate the complexities associated with participation in the development paradigm. While the ICMM appears to be tracking in a more altruistic direction through its promotion of development partnerships, we believe that a greater focus on the complexities associated with participations may add value to companies engaged in the mining industry in their future pursuits to achieve positive community development outcomes.

This chapter argues that the relationship between a changing natural environment and the mining industry remains strong, but is greatly undervalued. In the absence of robust localised climate modelling and experiential knowledge that can help devise strategic climate management plans, ongoing performance as well as future viability of the mining sector remain under a significant climate threat worldwide. More research is needed to better understand, not only the differentiated nature of impacts from varied climatic changes (from droughts to floods to bush fires) across various stages of the mining lifecycle, but also how these impacts may lead to different consequences across various geographical regions. To this end, I identify five key areas to strengthen the mining industry’s understanding of climate change. First, recognise the complexity and inter-linkages that underlie climate change. Second, recognise that climate is a relative, not an absolute risk. Three, leadership is important in order to promote a behavioural change in both employers and employees. Fourth, develop open and flexible institutions. Finally, begin to develop a repository of knowledge on climate change, its impact on the industry and successful mitigation strategies.

This chapter argues that the provision of reliable, accessible and affordable infrastructure is one of the main challenges facing mining projects in the Asia-Pacific Region. Infrastructure is one of the most important features of a mining project, as it is the means for transporting minerals and metals to market, and for maintaining access to a mine by staff. However, the high cost of infrastructure and its associated economic, social and political risks means it can strongly influence the feasibility of a mining project. Infrastructure provision is an even bigger problem for junior mining companies, who may not have the budget or experience to implement the infrastructure they need to progress a mining project. The chapter begins by explaining infrastructure and the growth of infrastructure investment in the Asia-Pacific Region in recent years. The chapter looks at the risks associated with infrastructure investment, along with the ways in which governments seek to attract this type of investment. The chapter concludes with an analysis of the present and future challenges of infrastructure investment in the mining industry of the Asia-Pacific Region.

The chapter summarises the principal problems associated with current approaches to closure planning. Then it discusses the critical relationship between effective mitigation and management of mining legacies and abandoned mines. In the third section, I review global and Australian initiatives on mining legacies. Then, drawing upon global leading practices, I develop a maturity model to guide jurisdictions as they move toward more mature management of abandoned mines. In the fifth section, I present a case study of the abandoned Mount Morgan gold mine in Queensland, Australia. Throughout the chapter, I draw attention both to the importance of fully accounting for liabilities to internalise costs, and to the benefits that can flow to industry, governments and communities when beneficial post-mining land uses are created.

Please check the hierarchy of the section headings and confirm if correct.