Mining hopefuls face long haul in Myanmar despite new laws

Wed Dec 5, 2012 2:08pm GMT

Quotes

   

* Resource investors holding back for clearer regulation

* New mining laws may shorten bottleneck to get permit

* Recent labour unrest at mine not seen deterring investors

By Melanie Burton

SINGAPORE, Dec 5 (Reuters) - New investment and mining laws in Myanmar are unlikely to open the flood gates to investment as prospective miners still face a wait of three years or more for approval to break ground, industry sources said on Wednesday.

Myanmar's parliament approved a foreign investment bill in November aimed at allowing overseas companies to fully own ventures and to offer tax breaks and lengthy leases of land.

Most major firms have been waiting to see the new law before committing significant funds. But some resource investors considering exposure to the country, which is rich in resources such as copper, gold and tin, say still more legislative work needs to be done.

Investors said Myanmar's new foreign investment legislation was a positive step but still needed to be backed by regulation, education and enforcement.

"We are taking a wait-and-watch approach. I think the fiscal and regulatory regime is not quite balanced enough at this point," said Clive Donner, managing director of boutique private equity fund LinQ Group, speaking on the sidelines of the Myanmar Mining Investment Forum in Singapore.

LinQ Group invests in resource companies in emerging and developed mining regions. Donner declined to comment on its assets under management.

Myanmar, also known as Burma, has introduced the most sweeping reforms in the former British colony since a 1962 military coup.

Some global companies are keen to tap business opportunities in the country, which has recently embraced democracy.

One remaining hurdle is the long waiting time to get permits for exploration and development, said Ma Cherry Trivedi, of Myanmar-based Two Palms Mining Company, which already has several permits.

"You are looking at a four-to-five year time frame to develop anything in today's regulation. The mining ministry is looking to shorten that time frame," she said.

Waiting times will still remain long because prospective miners must get rubber stamps from multiple government ministries as well as from local authorities.

"The time factor ... is probably the current bottleneck and discouragement for foreign investment in the country," said Edward Rochette, chief executive of Canadian explorer East Asia Minerals Corporation, which is currently negotiating an agreement for mine development in Myanmar.

"My wish list would be (for) acceleration of the process. You submit an application and you should get an answer in a set period of time."

Investors also cited remaining concerns surrounding profit-sharing arrangements, a comparatively short tenor of exploration permits at up to two years and a ban on the export of raw products.

But labour unrest, such as at Myanmar's biggest copper mine last month, is unlikely to deter investors because it is seen a common occurrence throughout the industry.

"I don't think that's going to derail the way things are going. It just highlights that we (investors) have to go into Myanmar with appropriate global standards," said Jeremy Kloiser-Jones, chief executive of Bagan Capital, a Myanmar-focused investment and advisory firm that is currently raising $75 million for its Myanmar Transition Fund.

Those resource-sector investors who want to get in quick and to prepare for when exploration really takes off should focus on gaining a foothold in existing projects and in the mining services industry, Trivedi said.

"There is a degree of wait and watch and a degree of first-mover advantage," she said. "At the end of the day it is a question of how much you are open to risk - there is a lot of opportunity in being an early mover."