Vietnam rising

It has been 20 years since Vietnam decided to loosen its totalitarian grip on the economy and open its arms to foreign investment. The policy change was dubbed “Doi Moi,” or “Renovation” in 1986, and while many potential investors treaded cautiously in those early years, blistering economic growth and an ever-growing confidence in government policy is claiming more believers all the time.

Toronto-based Olympus Pacific Minerals (OYM-T, OLYMF-O) is playing a significant role in building investor confidence in the country. The pouring of its first gold dor at its Bong Mieu project back in March was a watershed for Vietnam as it was the first gold production the country had seen since the Second World War.

“It was extremely difficult early on,” Olympus chairman and chief executive David Seton says of trying to convince investors to put money into Vietnam. “It took a lot of private money, mainly from my family and friends; whatever you could to get it started. But now it’s widely accepted as one of the favoured countries to do business in.”

While the Bong Mieu project hosts three deposits, the mill is currently drawing from the Bong Mieu Central open pit. The deposit has proven and probable reserves of 858,000 tonnes grading 2.42 grams gold for 66,550 oz. Its measured and indicated resource stands at 1.1 million tonnes grading 2.36 grams gold for roughly 84,000 oz., with another 96,000 tonnes of 2.17 grams gold inferred for 6,700 oz.

Not exactly huge numbers, but just the right size, Olympus says, to test the waters before it starts to mine its more robust Phuoc Son site.

“Bong Mieu has been a learning experience,” Seton says. “We wanted to iron out the wrinkles and it’s given us confidence going into Phuoc Son.”

Phuoc Son hosts a measured and indicated resource of 466,000 tonnes grading 13.6 grams gold per tonne for just over 203,000 oz. and an inferred resource of 162,000 tonnes averaging 12.61 grams gold for roughly 65,000 oz.

The company says a feasibility study for Phuoc Son should be completed in the third or fourth quarter of this year and mine commissioning is scheduled for the first quarter of 2008.

Olympus was given its mining licence for the project in January — which the company says is further evidence of the good business environment in the country. Olympus was told that if it got Bong Mieu into production then it would be given its licence for Phuoc Son; the government was true to its word.

Shares in Olympus have gained 31% over the past 12 months, and were trading at 46 at presstime. The company has nearly 165 million shares outstanding.

But Olympus isn’t the only Canadian-based company proving up Vietnam’s mining potential. Both Toronto-based Tiberon Minerals (TBR-T, TBMLF-O), and Vancouver-based Asian Mineral Resources (ASN-V) are pushing hard to begin production in the coming years.

While socialist and communist regimes are infamous for thick layers of bureaucracy impeding progress towards mine development, Tiberon’s vice-president and CEO, Walter Henry, says such notions are out of proportion to the reality of the situation in Vietnam.

“It’s been an excellent business environment,” Henry says, pointing to the fact that it took the company only five and half years to become fully permitted to operate a mine. Henry says such a short amount of time would be a testament to the strength of mining policy in any jurisdiction in the world.

With production slated to begin in 2008 at its 77.5%-owned Nui Phao mine, Tiberon is set on becoming the world’s largest primary tungsten producer and a major producer of fluorspar. Bismuth, copper and gold will also be mined.

The mine is scheduled for startup in the fourth quarter of 2007 and commercial production is slated to begin in early in 2008. Capital costs, including a contingency of roughly US$24 million, should come in at around US$229 million.

The open-pit mine will be taking ore from a proven and probable reserve of 55.7 million tonnes grading 0.207% tungsten, 8.13% fluorspar, 0.093% bismuth, 0.185% copper and 0.206 gram gold per tonne.

Annual concentrate production is projected to average 4,869 tonnes tungsten, 213,739 tonnes fluorspar, 5,537 tonnes copper, 2,274 oz. gold and 1,991 tonnes bismuth.

Operating costs are estimated to come in at the low end of the spectrum at US$2.59 per tonne of ore. For the two principal products, tungsten and acid-grade fluorspar concentrates, average annual cash costs should be US$7 per metric ton unit (MTU) of tungsten and US$16 per tonne of acid-grade fluorspar.

Tiberon shares have gained roughly 23% over the last 12 months and were trading at $2.70 at presstime. The company has roughly 75 million shares outstanding.

As for Asian Mineral Resources, the company has the distinction of being one of the first foreign companies to set up shop in Vietnam.

In 1993, it was granted a foreign investment licence to explore and develop nickel and copper deposits, opening the door to the discovery of its Ban Phuc nickel project. The company recently increased its stake in Ban Phuc to 90%; the Vietnamese government holds the remaining 10%.

The project is 150 sq. km of prospective ultramafic-hosted nickel occurrences and hosts a measured and indicated resource of 1.2 million tonnes grading 2.7% nickel, 1.13% copper, and 0.09% cobalt. Inferred resources stand at 260,000 tonnes grading 2.43% nickel, 1.16% copper and 0.09% cobalt.

With the approval of its resource estimate in mid-June, the company has completed two of the four required steps to attain its mining licence, which it anticipates having by the end of the year.

Over the past year, Asian Mineral’s shares have climbed 42% to 50. The company has roughly 50 million shares outstanding.

Going international

While Vietnam still has issues to iron out — Transparency International gave it a low 2.6 out of 10 rating on its 2005 global corruption monitor, placing it alongside such countries as Nicaragua, Belarus and Zambia for the 107th spot out of 158 positions — it’s clear that its reputation for security and stability are growing.

Control Risk, a London-based independent, specialist risk consultancy firm, gives Vietnam a low political and security risk rating — better than neighbours Thailand, Cambodia and the Philippines, all of whom scored a medium-to-high risk ranking.

But perhaps the most significant indication of the country’s commitment to creating a pro-business environment — albeit while maintaining the formal vestiges of a communist state — is its push for membership in the World Trade Organization (WTO).

Vietnam wants its membership confirmed by the time it hosts the Asia-Pacific Economic Cooperation summit in November and with WTO member countries praising the numerous laws, rules and regulations it has implemented to meet international standards, the prospect of admission looks good.

Such positives are accentuated all the more when considering where the country has come from and how quickly it has progressed.

“There was no colour there at all when we first arrived. There weren’t even any street lights; everyone was dressed in green fatigues,” says Seton of his first impressions back in 1989. “But each time I went back there were more street lights and people were wearing more colourful clothing. Now it’s as bright and colourful as any other Asian country.”