JOHANNESBURG (miningweekly.com) – A favourable regulatory environment has placed Kazakhstan, Poland and Sweden at the top of the mining risk/reward index (RRI) of BMI Research, while a lack of dynamism has left Romania and Bulgaria at the bottom.
In a research note highlighting the risks and rewards of the region, the Fitch group company states that Europe, as a whole, is the strongest overall global performer on its RRI, owing to limited operational and government intervention risks, and well-developed mining regulatory frameworks. The region scored an average of 58.1 out of 100, compared with the global average of 50.
BMI Research says Kazakhstan’s mining sector size and its strong business environment will be key in driving the country’s top overall score. It highlights the introduction of a new mining code – set for approval later this year – as a positive, noting that the code will aim to introduce more progressive regulations that should smooth the licensing process, based on the Australian model of ‘first come, first served’.
Kazakhstan scored 66.5 on BMI Research’s RRI, ranking it first regionally and sixth globally.
Poland scored 65 and Sweden scored 64.7 on the RRI, placing those countries second and third in Europe and seventh and eighth globally.
Immature and undeveloped mining sectors have dragged down Romania and Bulgaria and joining those two countries as a “laggard” is Ukraine, which is suffering ongoing domestic conflict.
The bottom three countries on the RRI are Bulgaria (50.9), Ukraine (49.6) and Romania (48.3).
Russia is also listed as an “underperformer”, owing to a poor regulatory environment and a worsening geopolitical outlook. The country’s RRI is 57.1, placing it eighth in the region and 22 globally.
“In line with trends in the wider mining industry, we expect the 'safe-haven' status of the European mining industry to attract investors as miners try to improve balance sheets and reduce the risk exposure of portfolios. As such, countries with the highest scores in regulatory indicators will be highly rewarded by miners,” BMI Research states.
The researcher highlights the correlation between the top three performers in its mining RRI and those countries' strong regulatory scores. Russia, on the other hand, scored only level with the regional average, owing to the government's stringent restrictions on foreign ownership in the domestic mining sector and the ramping up of sanctions by the US.