Lawyer Monthly - June 2022

EXPERT INSIGHT 62 WWW.LAWYER-MONTHLY.COM | JUN 2022 Africa will soon feature more prominently with analysts and investors. Africa is still fraught with security risks of militant activity in the Sahel region, but the continent is looking increasingly attractive given the geopolitical crises unfolding in Eastern Europe, Asia and the Middle East. What are other legal risks to mining companies should practitioners be cognisant of? Valuable extractive commodities are often located in high-conflict zones and jurisdictions where government regimes frequently change, or are located in places with despotic governments. The rapid technological changes occurring currently in the EV space and the battery sector have led to a rush to secure future supply of battery metals for exploitation. Protecting a company’s investment is just as important as determining how profitable it could be if materials were viably extracted. It would therefore be incumbent for the legal practitioner to research intensively and understand what types of sovereign guarantees might be available to protect an investment, whether the host country is a signatory to any international convention on mediation and arbitration, the credit rating of the host country and the relative ease with which one can advance projects from mineral evaluation to extraction. Given the current insatiable demand for battery metals, it is possible that in the event a massive discovery is made, that the project may be deemed a strategic asset and perhaps expropriated. It would be prudent to recognise this legal risk and mitigate it where possible. Having worked on projects in some of the most difficult jurisdictions across the globe, we also see the potential for the rise of resource nationalism when dealing with countries that host commodities that are classified as critical metals. Maintaining favourable working relations with the government and engaging effectively with the local communities where mining activities will be conducted will go a long way to ensure a lasting tenure. Local beneficiation is also a factor to consider implementing into the plans of the mining operation. Is disclosure becoming a twoway street? The push for enhanced transparency and disclosure does not fall squarely on the shoulders of mining companies. Certain countries, particularly in Africa, have embraced technological advancements to offer better transparency to investors on permitting status processes for applicants. This has resulted in improved investor confidence in the sector and the reduction of the potential for cronyism in the award of lucrative mining permits. Separately in Canada, the Impact Assessment Act (IAA) – which came into Engaging effectively with the local communities where mining activities will be conducted will go a long way to ensure a lasting tenure.

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