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New Mining Law Could Herald Gold Rush

Jonathan Cox / Khmer Times Share:
Sunlight shines from behind a gold mine pithead near Johannesburg. Cambodia is hoping new legislation will help it attract more investors to its nascent mining industry. Photo: Reuters

PHNOM PENH (Khmer Times) – Meng Saktheara wants to take some of the risk out of one of the riskiest businesses in Cambodia – commercial gold mining. As Indian mining giant Mesco Gold seeks a permit to build and operate the country’s first commercial gold mine in Ratanakkiri province, Mr. Saktheara – Cambodia’s Minister of Mines and Energy – is hoping to pass a new law that will reform the country’s mining regulations from the ground up.
 
Modeled on the West Australian Mining Act, the new law aims to level the playing field for mining companies by replacing the current contractual system for getting mining and exploration licenses with a concession system. Instead of having to negotiate for rights, under the new law all companies seeking to mine in Cambodia will have the same rights.
 
The goal is to make Cambodia’s underdeveloped mining sector more attractive to big mining companies.

“The thrust of this legislation is to get people to go and spend money on the ground, to explore and find things, and to develop mineral deposits,” said Richard Stanger, president of the Cambodian Association for Mining and Exploration Companies (Camec). He expects the new law to come to a vote in the Council of Ministers later this year.

Prospect-Friendly Legislation

Under the new law, companies will know exactly where they stand if they want to prospect for gold or mine in Cambodia. 

“[The law] will make legal frameworks more predictable,” Mr. Saktheara said. “We need a governance system that is transparent and reliable.”

The regulations will also penalize companies that misbehave. In the past, it has been common for companies to get licenses, then sit on them, doing none of the prospecting or mining. 

Mr. Stanger said this practice hurts the mining industry because, “it ties up ground that might be economically viable as an ore deposit.” 

Under the new law, if a company gets a license to prospect and does not use it, it forfeits the license. It must meet a minimum standard for work, performance, and security, as well as spend a certain amount of money every year. 

If the company has not met the minimum expenditure requirement at the end of the calendar year, the government can revoke their license. This will replace the much more lenient system that is currently in place, which allows companies to operate for as long as 10 years without losing their license. 

Along with the draft law, the ministry is considering reforms to the tax legislation. Mr. Saktheara said they aim to strike a balance between government and corporate interests. Too much taxation or royalty fees, and mining companies won’t invest in Cambodia. Too few and all the profits from the gold will leave the country.

The tax law is currently being drafted by the Ministry of Economy and Finance.

New Beginnings

Cambodia’s turbulent past has scared off many mining companies. Political turmoil such as the 1997 coup and the 2013/4 opposition-led protests discouraged mining companies from investing, and prospecting teams still need to watch out for landmines and unexploded ordnance while surveying.

Small artisanal mines for gold or rubies are common around the country, but no large-scale commercial mining operations exist yet. Mr. Stanger said this is about to change, with Mesco Gold expected to begin gold production by early 2016. The social and environmental impact assessment for the project is underway, and Mesco is expected to receive the licenses by November. 

Other analysts are confident that Cambodia is on the cusp of a mining boom. David Laurence, director of the Australian Center for Sustainable Mining Practices, said that the right regulations could usher in a gold rush of investment.
 
“This is where the new world-class ore bodies will be discovered – where they’ve been neglected in the past,” Mr. Laurence said. “Cambodia has the opportunity to learn from the mistakes of countries like Australia, and attract some world-class mining investment.”

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