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Shattered: “In-country” risk bible takes a hit

Twigger’s Tales asks whether one key survey is all it is cracked up to be. Credit: File

It was 2009 and I found myself in the beating heart of Zambia.

I remember heading down a steep ravine carrying a big rubber raft, along with some other hapless hotel guests who had ticked the “white-water rafting experience” at one of the five- star hotels in Livingstone. We were about to launch our paddle craft onto the mighty Zambezi River, which was in full flood, for an experience that none of us would ever forget.

There was no going back once we pushed off and we were quickly sucked into a vortex of giant six-metre waves, whirlpools and massive drops, all of which stood to underline rule No.1 – don’t fall in. If you did, you were underwater for at least a minute, even with a life jacket.

There was no Westpac chopper around to get you out if you broke an arm or a leg (or worse), which as it turned out, was a regular occurrence. And those who were washed too far downstream got a first-hand look at the crocodiles that were waiting patiently down there, with mouths agape.

In-country risk is something that extends to all aspects of life, whether it be as a tourist, a corporate entity or as an investor.

Well-known travel app, Trip Advisor, is the go-to point of reference for most Australians before they head abroad. It provides a plethora of first-hand accounts and experiences to help prepare the would-be traveler for what lies ahead.

But for a junior mining company looking to raise money for a high-risk overseas exploration play, life isn’t quite that simple.

Junior mining and exploration companies are often first movers into new jurisdictions. They accept the risk and reward payoff and pride themselves as being fleet of foot, fast to react and they can sometimes provide for spectacular returns – even if the in-country risk is factored into their share price along the way.

The typical path for an aspirant junior looking to raise exploration and development funding for a high-risk jurisdiction is to prepare an investor presentation highlighting the prospectivity and upside potential of the project and if possible, some kind of favourable independent in- country risk assessment from a third party specialising in such commentary.

Most will defer to the renowned Fraser Institute to underline the attractiveness and potential of the jurisdiction for investment.

The Fraser Institute (, is a Canadian-based think-tank established in 1974 that among other things, issues an annual survey calling on executives around the world to assess the attractiveness of global mining jurisdictions in terms of both mineral potential and a broad range of policies and regulations.

The results from these surveys are regularly quoted in the business media and in political arenas, but more often than not, they are used by mining and exploration companies to assist in securing millions of dollars from investors. Twigger’s Tales has been present at many investor pitches with mining company executives promoting the attractiveness of their overseas investment opportunities based on a high-ranking Fraser Institute score.

Unfortunately, based on the most recent analysis by a group of researchers at Lulea University of Technology in northern Sweden, it would appear some Fraser Institute results do not hold up well to scrutiny. According to the Lulea report, the survey is sent out to between 2000 and 5000 participants, with responses falling since 2011 from some 500 to 700 to just 180 last year.

Respondents have not necessarily ever worked or done business in the region they were ranking and a number of country rankings were based on between five and nine responses only. One wonders about the usefulness of the findings of a survey that bases its results on a 9 per cent response.

The researchers highlight the impact of the Fraser Institute’s findings, with several governments including South Africa, Namibia, Papua New Guinea and even Australia, discussing ways to improve their processes with a view to jumping up the rankings.

Can we trust in-country investment rankings? Credit: File

With such a small number of survey respondents and a country ranking requiring at least five to nine responses, the survey would clearly also open itself up to being gamed should a group of mining executives or companies in a particular region decide to work together to get a country’s score up. Perish the thought!

The survey then becomes nothing more than an opinion poll from a small selective group, rather than views that are representative of the broader mining industry.

Blimey, having spent a lifetime funding juniors with projects in far-flung places, Twigger’s Tales winces at the substantial PR budgets deployed by many that could have been set aside in favour of just a handful of so called “professional respondents” saying the right thing about any given jurisdiction.

And don’t think for a minute that the market isn’t switched onto in-country risk. Twigger’s Tales has run out of fingers to count the billions of dollars in reduced market caps for companies with projects in some African country, for example, that would have the West Perth mining glitterati blushing if they were instead located in Western Australia’s Goldfields region.

Some African projects do get off the ground and eventually make good money, however, such as the Robert Friedland-inspired Kamoa-Kakula project in the DRC that will spit out a serious 400,000 tonnes of copper this year.

Even smaller ASX-listed companies such as Tietto Minerals can occasionally jump through the hoops in Africa and actually build a mine and its Abujar operation is starting to bear fruit. Others such as Indiana Resources, however, have had to resort to a little-known World Bank mechanism to sue the Government of Tanzania for “expropriating” its project – and as an aside, that finding was in Indiana’s favour for wait for it … $160 million in penalties. Although, actually getting the money might be a little more difficult.

Twigger’s Tales reckons it would be nice if there was some well-researched body out there that could accurately predict which country is going to “expropriate” your project and which one likely will not.

Perhaps, we need the mining investment equivalent of Trip Advisor. You could paddle the Zambesi, peg some exploration ground, fight off the crocodiles and then rank your experience – particularly if your project never gets “expropriated.”


Liam Twigger is the deputy chairman of Perth stockbroking, funds management and corporate finance firm Argonaut and he draws from more than 30 years of experience in corporate finance to regale you with his market tales. After starting his career as a professional soccer player in the UK, before working in the 1980s for corporate raiders Robert Holmes a Court and Alan Bond, he moved into investment banking when he established Macquarie Bank’s Bullion and Commodities division in WA before establishing PCF Capital, which later merged with Argonaut. While he is an executive director of Argonaut (AFSL 221 476) this column is for information and entertainment purposes only and is not intended to constitute financial advice. The views and opinions contained within are those of the author and do not necessarily represent those of Bulls N’ Bears, this media outlet or Argonaut.



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