Resource nationalism

Among the challenges facing the mining industry in the 21st century is the resurgence of resource nationalism.

Defined as “the desire of a mineral-rich regime to secure more strategic control of its country’s natural resources and economic benefits,” resource nationalism has enormous implications for the mining industry.

Alex Gorbansky of the U.S.-based Frontier Strategy Group compares today’s mining industry with that of the 1970s and finds numerous parallels.

“We are living in an era of high commodity prices, and resource scarcity and supply are major questions facing the industry,” he says.

Global economic growth and demand for minerals are being fuelled by the rise of China and India, just as Japan was a key catalyst of demand in the 1970s. And, as in the 1970s, we are now witnessing a global resurgence in resource nationalism.

“Fundamentally, the rules of the game have changed and governments now hold enormous leverage over foreign investors,” Gorbansky says.

According to him, both junior and senior mining companies can operate successfully in countries that have adopted a policy of resource nationalism as long as these companies understand how it varies by region and by country, and provided they have a “toolkit” of strategies to deal with resource nationalism.

He identifies three principal strategies: creative partnerships; branding; and social programs. He presented a series of objectives and practical measures that companies can employ for each category.

In establishing creative partnerships, for example, Gorbansky suggests that the company find a joint-venture partner with political connections and structure the joint venture to minimize financial exposure by limiting upfront investment or reaching the break-even point quickly.

Under “branding,” he recommends that the company brand itself as a national, rather than a foreign company. Two ways this can be achieved, he says, are using a local name, and hiring significant numbers of workers from nearby communities.

The third strategy he suggests is to implement social and development programs with clear and measurable goals and tell locals and other stakeholders about their benefits. The programs usually involve health, job creation and education.

For a copy of Gorbansky’s Powerpoint presentation, please e-mail the PDAC’s Teresa Barrett at tbarrett@pdac.ca.