Asia had to accept the baton as the source for much needed world-class mineral discoveries to correct the worsening global imbalance in metals supply and demand, according to one of the region’s most prominent project investors. And another presenter urges the purchase of local equipment for Asian projects.

However, creating a ripe environment for such discovery would require mineral rich Southeast Asian countries to address the hurdles currently limiting resources investment from such willing and experienced players as Australia. Addressing the second day of the 2008 Paydirt Asia Downunder Conference in Perth, Lion Selection’s President – Asian Funds, Jon Dugdale, said there had been no major worldclass metals discoveries for about five years. “There is no doubt that the best chance for the next world-class discoveries will be in Asia – particularly in Indonesia, PNG, the Philippines and the Tianshan gold belt in China and Central Asia,” Dugdale said.

“There are a number of very challenging issues, however, that need to be overcome if the region is to take advantage of its unique proximity to such huge mineral demand markets as China and India,” he said. Regulatory hurdles are a key risk factor for investment in Asia. The rules can change half way through the game. That is perilous for Australian mining juniors for example that might have good people and projects in Asia but are looking to raise seed or project development capital.

“Access to exploration or mining land cannot be taken for granted as many Asian countries have increasing population pressures. This is a factor which provides further issues in terms of compensation for indigenous communities and managing expectations by these peoples on compensation for exploring and mining on their land.” Dugdale said such hurdles were a constant in trying to participate in Asia’s resources sector.

“Not surprisingly, the situation is now overlain by the global credit crisis as banks and equity markets have gone completely risk adverse as Asian markets continue their corrections. Australian junior resources companies in Asia should expect to get caught in the market turnoff as even good projects are being lumped in with the bad.”

Dugdale warned that participation in Asian mining required time and patient capital. Australian resource investors also needed to heed the region’s rising energy and inflationary costs with countries like Vietnam running at around 25% inflation. “This is seeing some knee-jerk reactions by Asian governments with nationalistic responses such as tariff increases. This can result in severe impacts on the market capitalisation of junior explorers and miners – and that can be decimating to market perceptions about future investment.”

Dugdale said a subset suite of 35 resources companies in Asia charted by the Asian Lion Fund showed that since the peak of the resources boom in November last year, most such stocks had retreated by around 60%.

Also, Australian resource investors in Asia were encouraged to give greater consideration to “buying local” to boost the economics of their minerals projects as well as enhancing employment opportunities for remote Asian communities. Ausenco’s General Manager – Business Development, Stuart Ratcliffe, said Asian mills and other manufacturers were increasingly delivering higher quality steel products – a key mine cost – and at lower local costs.

“We should accept that buying mining equipment in Asia or steel made in Asia is now inevitable and can deliver significant benefits for structural steel and platework issues as well as construction equipment such as tower cranes,” Ratcliffe said. “Critically, mine component delivery times – the bane of Australian mine developers can be halved – and this is a real value add to participating in Asia’s resources sector.”

Ratcliffe said such a “buy local” attitude should also flow through to employment as potentially hundreds and thousands of local people could eventually be involved in a mine development. “There are, of course, some downside considerations which Australian resource developers need to better plan for in the region,” he said. “There may be a need to import trades skills for technically difficult tasks due to a lack of certified trades persons in Asia. For existing infrastructure and climatic circumstances, road surveys are critical ahead of equipment delivery and scheduling. These considerations also have to be mindful of dimensional and weight restrictions on roads, bridges and diversions, importation procedures and customs clearance requirements.”