Resource nationalism major risk for global mining industry

Resource nationalism, poor infrastructure development and supply chain disruptions are some of the biggest risks facing the global mining industry, according to the Willis Mining Market Review.

Willis’ Mining practice leader Andrew Wheeler said: “Resource nationalism and business interruption as a consequence of strikes probably represented two of the biggest risks facing mining companies in 2012 and this trend is set to continue for 2013.

“For example, in July last year the Bolivian government announced the nationalisation of a silver and indium mine, Mallku Khota, operated by a Canadian firm, the third major nationalisation project within four months. 

“One way in which foreign investors may mitigate the risk of resource nationalism is building relations with the host state by adopting a sound corporate social responsibility strategy, such as healthcare initiatives, building schools and other community projects.” 

Wheeler also warned that many mining companies are facing increasing challenges in winning a “social licence to operate” because it is becoming increasingly easier for local people to oppose mining projects and force the cancellation of rights already gained. This, he said, is a trend that is expected to escalate through 2013 and beyond.

Despite the challenging conditions brought about by global economic and political uncertainty, insurers in the sector have been tightening their pricing, capacity and coverage following a period of poor underwriting results. 

In the review, Willis called on insurers to be more flexible and innovative in continuing to provide solutions that take into account these rapidly changing circumstances, and also urged mining companies to review their risks more frequently and more dynamically.