Dear Minesite subscriber,

My old friend David Hargreaves, the gemstone specialist, also writes a weekly comment on the mining sector which is well worth reading. It will now get a wider circulation since brokers XCap Securities decided no actual recommendations on shares to buy or sell are included, like the weekly note from Ocean Equities. Common sense is now starting to pervade the world of compliance and private investors will welcome additional background information. Last week David wrote about political risk and as it would be difficult to cover this subject better, I got his permission to quote it extensively as political risk should be at the forefront of the minds of all investors.

As David points out, not too many nations are close to the top of the investor-friendly league nowadays as most of the competition seems to focus on the bottom slot. A year or three ago, no one would have questioned the credentials of Australia, Canada, USA, Chile, Peru, Bolivia, Namibia or Botswana just for starters. Good kindergarten reports were also pouring out for Tanzania, Mozambique, Colombia, whilst the '-stans' of central Europe were still having their nappies changed.

In detention, and rightly so, were Angola, DRC, Venezuela and much of West Africa. So, could an investor-explorer-developer pick and choose? To an extent, yes. You knew the risk and hoped to be rewarded accordingly if you got it right. But, now? Canada is still set fair but the rate at which First Nation braves pop their heads through the tundra is impressive and scary. Few could argue with the fiscal regime in the USA, but the environmental lobby is awesome. They won't let you knock the top off a mountain to mine coal inWest Virginia. Now Australia, without whose coking coal and iron ore India and China cannot do, is at war with itself as well as the miners. A 'super profits' tax is still mooted and the State of Western Australia thinks it should have the lion's share, since it mines most of the stuff.

South Africa is on the ropes. Its black empowerment policy is in tatters and there is a growing threat of nationalisation. Despite acute, long term power shortages, the call is for smelting at source.
This is capital intensive and creates only a modicum of jobs. Peru, huge in copper, silver and zinc has just elected a left wing ex-soldier as President, Mr Humala. The local stock exchange dropped 12.5 per cent with incumbent foreign miners leading the landslide. Word is he might nationalise or at least tighten the screws. Venezuela, Angola, DRC can be taken as read.

So who remain as safe havens? Namibia shot itself in the big toe by launching an unfunded State company to hold all essential mineral licences, whilst there are reports of Botswana doing similarly. Tanzania was being smiled upon until rumours of a super-tax began to circulate. It was enough to drop the shares of its major miner, African Barrick Gold by 7.8 per cent at the time and, though there have been denials since, the atmosphere has been poisoned.

Then there is the good news, at least for now. That emerging Indian Ocean-bound developer Mozambique has made no nasty noises. Zambia has stated unequivocally it will not move the goal posts and Chile is far too busy expanding other than to tinker around the edges. So investors are hardly spoilt for choice are they? Then for how long will those few choices remain sound? Until the next change of government or until the budget deficit becomes untenable probably. Pity the poor miner, who stares at a ten-year time gap from exploration to production, knowing he cannot pick-up his shaft and take it home.

Good stuff, David. Could not have put it better myself. But a little light creeps round the corner in the shape of the report by Adam Cooke , published today on Minesite, about a visit to Guinea and Mali where small explorers have done a bit of historical research. They know that mining companies in the past exploited countries in which they operated to the limit, while offering little in return. Now the realization has dawned that education by funding schools will help underwrite careers for the younger generation at the relevant mine or elsewhere in the world. So much more constructive that paying off local politicians in cash, which is then put to dubious use, as it also helps to promote more friendly attitudes towards the companies themselves. The world moves on and the crucial initiative, as so often , comes from the juniors.

Charles Wyatt. Cwyatt@assay.demon.co.uk