Protecting mining investors’ rights
25 June 2012
Mining activities call for large up-front capital investments, with often considerable delay prior to seeing any return, and comparatively smaller investments later once production becomes profitable. These conditions create a ‘hostage effect’ to future intrusive regulation. Additionally, rising commodity prices incite governments to seek an increased share of mining profits. Profit-generating assets in the mining sector are therefore particularly vulnerable.
Pursuing resource nationalism
Risks arising from resource nationalism in the mining sector continue to increase. To maximise protection, tools such as those set out above should be considered from the earliest stages of the investment process. Only then can one negotiate contractual protections, or structure the investment to benefit from investment treaty protection. While resource nationalism risks may seem remote initially, early planning can bring significant benefits once mining assets become profitable – and potential targets of resource nationalism.