One day, everyone hopes, Cambodia’s gold will come out of the ground.
The environment around it will be left undamaged. The villagers living near it will be dealt with fairly. The companies that discovered it will reap a handsome reward for their years of bold, high-risk investment, the government will manage the rising revenues in a transparent manner and the economy will grow.
But how far away is that?
With just six years under its belt, modern mineral exploration in Cambodia is still in its infancy, its growth inhibited by a lack of certainty and an immature set of laws and regulations resulting in weak concession agreements and poor fiscal incentives.
This was the reason behind the creation this year of the Cambodian Association of Mining and Exploration Companies, or CAMEC, which, according to board members, will join with the government in helping the industry to turn the corner from being a collection of explorers to a mature industry.
Heightened confidence in Cambodia’s natural resource potential saw investment approvals for mining ventures rise by 153 percent to $11.8 million in 2009, according to the Council for the Development of Cambodia.
However, CAMEC sees improving the investment climate as priority. For those who have laid out millions to explore, with geologists and drill rigs on the ground, two clear problems present themselves.
Anthony Houston, head of exploration for OZ Minerals, spoke on behalf of CAMEC in June, before the organization was officially formed, at a meeting of the government-private sector forum’s working group on law, tax and good governance.
Cambodia needs a transparent regime for taxes and royalties, he said, according to minutes of the meeting.
Miners must know they can confidently pass from exploration to extraction “without the threat of their licenses’ not being renewed.”
Without such reform, profits in the industry will be curbed, he said, citing OZ Mineral’s outlay at the time of $9 million with no return.
“The basic objectives are to promote mining exploration in Cambodia and it’s also a voice for the industry going forward,” said Richard Stanger, CAMEC president and managing director of Liberty Mining International, which has three concession areas in Cambodia totaling a surface area of about 900 square kilometers.
CAMEC was registered with the Ministry of Commerce in the beginning of January and has so far convened on two separate occasions. The association has also acquired a seat on the government-private sector Working Group on Law, Tax and Good Governance co-chaired by Finance Minister Keat Chhon.
To date, Liberty Mining International, Southern Gold, Indochine Resources, Cambodian Resources Limited, OZ Minerals and Kingdom Resources have all joined the association with several others currently going through the application process.
Mr Stanger said that one of the initial goals of CAMEC includes pushing for more tax incentives, such as a reduction on tariffs on imported mining equipment.
“We really need a proper fiscal structure and incentives for people to do things,” he said. “There are a lot of things that need clarifying.”
“Fiscal policy must be looked at holistically,” said Mick Sharry, vice president of CAMEC and exploration manager for Oz Minerals in Cambodia, who said he was not speaking on behalf of the Australian company. “There is no point in looking at royalties without realizing the impacts on other aspects of the fiscal regime.”
Cambodia’s mining industry has seen a recent increase in operations, with a high proportion of Australian firms conducting exploratory activities for minerals in the northeastern corners of the country.
And still incentives for investment remain relatively low, according to those in industry.
Ensuring that the relative ministries–of agriculture, mining and land management–are synchronized when dealing with mining companies is another issue in need of attention, said Mr Stanger.
The realization of such advances will hopefully make it more financially viable for companies to operate, a blessing in an industry with high overhead costs.
“This business is all money going out. It’s very high risk and it’s all long-term,” said Mr Stanger.
Billie Slott, secretary of CAMEC, said the sheer youthfulness of the Cambodian mining industry meant that the private sector and government alike are going through a steep learning curve in how to enforce more stringent regulations.
“You have to figure out what kind of contracts you want. They have to decide on difficult issues like royalties,” she said, adding that adherence to international standards on aspects such as the environment would also be on the future agenda.
“It’s not just to organize the government. The by-laws say we are looking at ourselves as well,” she said.
Mam Sambath, chairman of Cambodians For Resource Revenue Transparency, said he hoped CAMEC would be able to have a constructive dialogue on matters such as corporate and social responsibility, transparency and best practices on social and environmental impact mitigation.
Such discussion “could help to attract the responsible mining companies to come to invest and promote the sustainable development in Cambodia,” he said.
Chhith Sam Ath, executive director of NGO Forum, highlighted the persistent need for the government to introduce a tighter legal framework on areas such as land rights, the environment and financial transparency, all of which are relevant in the mining sector.
“Consultations to ensure that the concerns of the public are taken into consideration as well as transparent assessments of the impact on the environment and social impact [on local communities] should be encouraged,” he said.
Presently, companies have different approaches to operating here, said Mr Sam Ath. Thus, CAMEC should play a role in streamlining the requirements on how mining companies operate, he said.
A year ago, Global Witness claimed Cambodia does not yet have the laws and capacity to ensure that Cambodia’s minerals are extracted in safely and fairly.
In a worrying sign for the future, exploratory rights were sold off in secrecy while millions of dollars in mining fees and non-tax revenues had apparently disappeared from government ledgers, Global Witness said in a report.
The government “has made the decision to prioritize mining over environmental needs and protection,” the report said.
According to Mr Sharry, CAMEC can help to alleviate concerns about transparency and environmental conservation.
“Any issues that pertain to a constructive international dialogue on international standards in the mining industry being developed, [CAMEC] will be happy to participate,” he said.
He added, however, that CAMEC does not yet have a common position on environmental safeguards and addressing the concerns about the displacement of people. Such matters are on CAMEC’s agenda, according to Ms Slott.
And Mr Stanger said that, although firm plans to address transparency do not exist “at this stage,” most companies were obliged to declare their costs as they are publicly listed.
Secretary of State for the Ministry of Mines and Energy, Khlaut Randy, referred questions to Secretary of State Tann Kim Vin, who could not be reached.
Despite the concerns on transparency and the environment, CAMEC will, at last, urge companies to join forces in their operations and provide assistance to one another.
The industry “is pretty embryonic,” said Mr Stanger. “So what we’ve done is pretty much get together and start moving ahead.”
But the moves to unify the industry do not mean that the extraction of minerals is any more likely to occur.
Mr Stanger said it would not be unusual for companies to invest large sums of money in exploration and still end up leaving for fear of a lack of profits from mineral extraction, particularly for bauxite, which must be mined in large quantities to be worthwhile.
“That could happen to anyone of us. And that’s why in exploration you’ve got to keep generating new projects,” he said.