The Next Tiger Economy
Formerly known as Burma, the Republic of the Union of Myanmar’s (Myanmar) recent economic, political and social restructuring has been ground breaking. In a relatively short period of time, Myanmar has gone from an isolated economy to an investment focus point. With a youthful population of more than 51 million, vast natural resources, and its position as the poorest member of ASEAN on a per capita basis, Myanmar is poised to become the next Tiger Economy in Asia. As a starting point, the country needs billions of dollars to develop crucial infrastructure, such as roads, ports and air links, telecommunications, ensure regular power supply, and create a modern banking and financial system. Investment in such opportunities is accelerating with vast amounts of funding, particularly from the ASEAN countries, Japan, South Korea, Israel and China being committed to new projects in Myanmar.
Major Process Reform
Amendments to the Mining Laws
The amendments in the 2015 Mining Law revised a number of the outdated laws under Myanmar’s 1994 Mining Law that have proven to be major impediments to international investment in the mining sector.
Some of the amendments now address the following:
- Revision of the Current Production Sharing Model:
Currently production sharing contracts are imposed on miners (in some cases up to 30%), stipulating minimum quantities of production to be delivered to the Government on top of legislated royalties. The amendments contain a new Section,35(A), which introduces two alternative mechanisms to allow the Government to derive benefit from mining activities: profit sharing or equity participation with the possibility of co-contribution. The introduction of these mechanisms will vastly alter the economics of mining in Myanmar and are likely to result in a step change in foreign investment in the sector.
The amendments clause changes to the royalties applicable to minerals; now ranging from 2%-5% depending on the mineral.
- Investment in Small and Medium Scale Projects:
Where Myanmar companies hold small or medium scale permits, foreign investors will be allowed to apply to the Ministry of Mines to joint venture with Myanmar companies to expand the projects to large scale.
- Extension of Permit Tenure:
The amendments allow for an increase in the time permitted for large scale production, now up to 50 years. The amendments also introduce the concept of a "medium scale" mine where production will be allowed for up to 15 years.
- Administrative Powers of State and Divisional Governments:
The amendments allow for the formation of "Divisional or State Plot Scrutinizing and Permit Granting Boards" with the consent of the Union Government. These Boards will have the power to grant small and medium scale permits. We understand that the Government is currently contemplating allowing the new Boards to grant small and medium scale licences within specific geographical areas in each State and Division. The areas are being defined with reference to existing small scale mining activity. All other areas in the State or Division would be governed under the federal system.
- Social and Environmental Concepts:
The amendments introduce the requirement for investors to maintain an environmental conservation fund. The concept of environmental rehabilitation post mine closure has also been introduced.
(Source: Valentis Resources)
Enormous Minerals Potential to be Unlocked
Historically, Myanmar has had some of the world’s largest mines, for example the Bawdwin Mine (one of the world's largest sources of lead and silver before the Second World War) and the Mawchi Mine (once the largest source of tin and tungsten in the 1930’s). The country is well endowed with mineral resources and is one of the few remaining unexplored frontiers in the world today.
Myanmar's resources include metallic minerals such as copper, gold, lead, tin, tungsten, zinc, nickel and silver as well as precious stones including jade, ruby sapphire and diamond. For the best part of the past three decades, Myanmar has not received any specific attention from mineral exploration companies due to its political situation, ethnic conflict, US and EU Governments’ sanctions and uncompetitive regulatory mining regime. As such, the country remains vastly underexplored. These stagnation factors are changing rapidly.
Peace Process with Ethnic Groups a Priority for the Government
Myanmar's internal conflict issues are complex, with many participants and is steeped in history. The Government's policy towards the ethnic peace process is multifaceted, operating on the premise that the peace process is part of a much larger challenge including not only military and political affairs, but also social and economic issues, to achieve broader peace dividends. Under previous President U Thein Sein's Peace Initiative, eight ethnic organisations had signed a Nationwide Ceasefire Agreement in October 2015.
The NLD government is committed to implement the peace building process. The first step in this process is the implementation of a nationwide ceasefire.
From an exploration perspective, this peace process has opened up prospective exploration territories that have been inaccessible for decades. The result has been a rush of predominantly local companies making concession applications for areas with known mineral prospectivity. Practically, these areas can remain challenging to operate and an understanding of local stakeholders is critical.
Unity, with its local personnel who possess local knowledge of how the ethnic groups and other stakeholders operate within the region, is placed in a prime position to take advantage of these new untapped areas opening up for exploration activities.