other developments in major producing countries. Furthermore, according to the Austrian Federal Ministry of Agriculture, Regions and Tourism, most producing countries are politically unstable, which increases the risk and cost of doing business. Also, the governance of natural resources in many of these places is “suboptimal,” as the International Council on Mining and Metals (ICMM) put it. Producing countries’ political and economic stability, which affects the supply risk, is one key factor in classifying of what constitutes a “critical mineral” – the other is its economic significance.
Chrome and Platinum mine, North Eastern part of South Africa. Credit: Sunshine Seeds
CONCENTRATION IN MINING SPELLS TROUBLE The high concentration of mineral reserves and production in a few locations raises concerns among importing nations. A paper published by the British government defines the critical threshold for production concentration as three producers accounting for 70 percent of global production. The top three producing countries in oil and gas represent 43 and 46 percent of world’s oil and gas supply, respectively. In contrast, in the case of lithium, cobalt and REEs, the world’s top three producing nations control more than three-quarters of global output.
The Democratic Republic of the Congo and China account for 70 percent and 60 percent of global production of cobalt and RREs, respectively (2019 data).
The paper concludes that the risk of anticompetitive behaviour designed to restrict the international supply of a natural resource is, therefore, higher for some metals and minerals than resources such as oil and gas.
Similarly, the International Energy Agency (IEA) warns that high concentration levels increase the risks that could arise from physical disruption, trade restrictions or
Additionally, for all those countries, the sector has strategic importance, especially where it is the backbone of the economy and the primary source of government revenue. Countries are considered resource-dependent when metals and minerals account for more than 20 percent of exports by value, and mineral rents are more than 10 percent of the country’s gross domestic product (GDP), according to the ICMM. In many developing countries, that threshold is easily exceeded.
Meanwhile, some have expressed concern that mining companies (especially those operating in Africa) have been granted too many tax concessions and subsidies, leading to an unfair erosion of taxable income and paving the way for fiscal terms’ upward revisions. Such a scenario becomes a reality when the industry enjoys greater profitability in a high-price environment.
WHEN A NATURAL RESOURCE GAINS GREATER STRATEGIC IMPORTANCE AND ITS VALUE INCREASES ACCORDINGLY, IT ATTRACTS STATE INTERVENTION AND CONTROL.
14 | ADMISI - The Ghost In The Machine | Q2 Edition 2023
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