Cultural differences in Asia pose the greatest risk to nurturing new mining projects in the region as it enters a period of unique resource-intensive demand, according to a leading Australian broking house. Addressing the second day in Perth of the 2007 Paydirt Asia Pacific DownUnder Conference, D J Carmichael’s Head of Research, Paul Adams, said most existing mining projects in Asia suffered from legacy issues. These included previous owners ‘bad habits’, old style cheque book community relations, opportunistic behaviour at a local level, and heightened expectations from a new owner.
“We are currently at an early, moderate phase of mining growth in the Asian region as its demand for additional metals and energy is being driven by higher per capita incomes, urbanisation and capital intensive industries,” Adams said. “It is also a well known fact that metal and energy intensity rapidly increases when per capita incomes reach between $2,000 and $5,000 – China’s GDP per capita last year, for example, reached $2,001 and this minimum level is being increasingly reached throughout Asian countries.
“For any new mining entrant in Asia, these entrant issues can be particularly challenging,” Adams said. “If Australia’s mining investment community is to help nurture the Asian resources elephant, it requires a more willing adoption of proven strategies, proper investigation of land owners versus land users issues, genuine relationship building and a framework of not promising what cannot be delivered.”
Adams said local communities living near the new breed of emerging Asian mining projects had common demands for phased in infrastucture, education, health and employment opportunities – but not at the expense where one group was advantaged over another. “The adverse consequences of not adopting this approach are the need for increased levels of diplomacy, more people to manage, higher burn rates, company resources spread too thinly to be effective, and ultimately, corporate ‘over-stretch’. It might take more time to get things right in the short term on new Asian mining projects but developers will save considerable pain in the long-term.”
Adams said the emerging Asian mining elephant would bring pressure on the environment and energy security would be paramount for any new resource projects. He urged Asian governments and resources companies to more vigorously pursue alternative energy sources to cushion the blow from rising energy prices.