• 2 hours British Utility Companies Brace For Major Reforms
  • 6 hours Montenegro A ‘Sweet Spot’ Of Untapped Oil, Gas In The Adriatic
  • 8 hours Rosneft CEO: Rising U.S. Shale A Downside Risk To Oil Prices
  • 9 hours Brazil Could Invite More Bids For Unsold Pre-Salt Oil Blocks
  • 10 hours OPEC/Non-OPEC Seek Consensus On Deal Before Nov Summit
  • 11 hours London Stock Exchange Boss Defends Push To Win Aramco IPO
  • 12 hours Rosneft Signs $400M Deal With Kurdistan
  • 15 hours Kinder Morgan Warns About Trans Mountain Delays
  • 21 hours India, China, U.S., Complain Of Venezuelan Crude Oil Quality Issues
  • 1 day Kurdish Kirkuk-Ceyhan Crude Oil Flows Plunge To 225,000 Bpd
  • 1 day Russia, Saudis Team Up To Boost Fracking Tech
  • 2 days Conflicting News Spurs Doubt On Aramco IPO
  • 2 days Exxon Starts Production At New Refinery In Texas
  • 2 days Iraq Asks BP To Redevelop Kirkuk Oil Fields
  • 2 days Oil Prices Rise After U.S. API Reports Strong Crude Inventory Draw
  • 2 days Oil Gains Spur Growth In Canada’s Oil Cities
  • 2 days China To Take 5% Of Rosneft’s Output In New Deal
  • 2 days UAE Oil Giant Seeks Partnership For Possible IPO
  • 2 days Planting Trees Could Cut Emissions As Much As Quitting Oil
  • 2 days VW Fails To Secure Critical Commodity For EVs
  • 3 days Enbridge Pipeline Expansion Finally Approved
  • 3 days Iraqi Forces Seize Control Of North Oil Co Fields In Kirkuk
  • 3 days OPEC Oil Deal Compliance Falls To 86%
  • 3 days U.S. Oil Production To Increase in November As Rig Count Falls
  • 3 days Gazprom Neft Unhappy With OPEC-Russia Production Cut Deal
  • 3 days Disputed Venezuelan Vote Could Lead To More Sanctions, Clashes
  • 3 days EU Urges U.S. Congress To Protect Iran Nuclear Deal
  • 4 days Oil Rig Explosion In Louisiana Leaves 7 Injured, 1 Still Missing
  • 4 days Aramco Says No Plans To Shelve IPO
  • 6 days Trump Passes Iran Nuclear Deal Back to Congress
  • 6 days Texas Shutters More Coal-Fired Plants
  • 6 days Oil Trading Firm Expects Unprecedented U.S. Crude Exports
  • 7 days UK’s FCA Met With Aramco Prior To Proposing Listing Rule Change
  • 7 days Chevron Quits Australian Deepwater Oil Exploration
  • 7 days Europe Braces For End Of Iran Nuclear Deal
  • 7 days Renewable Energy Startup Powering Native American Protest Camp
  • 7 days Husky Energy Set To Restart Pipeline
  • 7 days Russia, Morocco Sign String Of Energy And Military Deals
  • 7 days Norway Looks To Cut Some Of Its Generous Tax Breaks For EVs
  • 7 days China Set To Continue Crude Oil Buying Spree, IEA Says

Government Greed May Kill Off This Nation’s Mining Potential

Government Greed May Kill Off This Nation’s Mining Potential

I've written over the past year of my high hopes for one of the world's most under-explored -- and high potential -- nations.

Madagascar.

This African island has some of the most prospective geology anywhere on Earth. And the little bit of work conducted to date across the country has unearthed world-class nickel, graphite, and titanium mines -- as well as strong potential for gold, coal, vanadium, and rare earths.

But news last week suggests an exploration boom isn't in the cards here anytime soon. In fact, this may be a spot for project developers to actively avoid. Related: Is Apple Banking On Fuel Cell Technology?

Those developments came from Madagascar's newly-elected government. Which said that it is eyeing a slate of measures designed to increase the national take from mining projects.

As reported by Reuters, such measures could include the government taking a direct 10 percent stake in new mining projects -- apparently as a free, carried interest.

Few details were released on how this rule might be applied. But the wording certainly makes it sound like mining developers will come out on the short end of the stick -- making project economics poorer here. Related: The Biggest Red Herring In U.S. Shale

The Madagascar government is also reportedly proposing to raise mining royalties to between 4 and 5 percent, up from a current 1 to 2 percent.

Such a move is very disappointing for a government that had been looking to attract more investment to the mining sector. The prospect of a mandatory carried interest from the initial stages of exploration is likely to be a non-starter for most companies -- no matter how good the country's potential might be. Related: Two Big Oil And Gas Finds In Unexpected Places

Importantly, it appears that the 10 percent carried interest would only be applied to new projects -- sparing existing mines like Sherritt's Ambatovy nickel operation.

Still, this is a solid step backward for Madagascar. If these developments do indeed come to pass, they will make this an exploration locale to avoid.

Here's to choosing wisely,

Dave Forest

More Top Reads From Oilprice.com:




Back to homepage


Leave a comment
  • Frank Texas on September 09 2015 said:
    Howdy

    Please note that cheap royalties do not really stop production of minerals if it is worth producing. We have 6.75% or 1/16 non participating royalty in Texas for non hydrocarbon or carbon minerals on government land. This means that the fair government gets 1/16 of the value without the reduction of any operating costs. So another country Madagascar edges up to the Texas model from the common model used elsewhere is not so catastrophic.

    On hydrocarbons, Texas charges over 20% net royalty, that is after costs.

    In Mexico the government receives 50% of the in-ground value for minerals.

    Other governments like Madagascar, moving in that direction for taxation common in Texas or Mexico does not mean a sudden abandonment of the mining sector in Madagascar or elsewhere. Mining companies have this idea that they are the rescuers of some land. Regardless of the company, at some point the mine is done and the company leaves the area. The people remain.

    Reducing the growth or rather the size of government might be a better solution than increasing overall the taxation of anyone. However a 1 to 6 percent increase in the resource tax is not a deal killer. Oil companies would love to be taxed at 6% instead of the 20 - 50% + they are used to paying.

Leave a comment




Oilprice - The No. 1 Source for Oil & Energy News