1993 Jackling Lecture - Blueprint For Protecting The Foreign Investment

The percentage of exploration dollars flowing out of the industrialized countries continues at an all-time high, and this shift in risk money is justified (Samuels, 1990; Bosson, 1977). Clearly, the odds of discovery are greatly enhanced if exploration is pursued in an untrampled and geologically more prospective environment. Unfortunately, such major unexplored areas of the developed world are shrinking rapidly, not just because the lands have already been tested, but primarily because they have been withdrawn from exploration. Experience, however, has shown that foreign investment is not without risks. These include problems that result from working in isolated areas, a lack of infrastructure, untrained workers and an absence of a solid geological data base. While the likelihood of once-feared expropriation is now low, mining enterprises still must take precautions to gain the support of their constituencies, including a variety of governments (local, provincial and central), workers, environmentalists, cultural organizations and local landowners. Is foreign exploration worth the risk? In most cases, Yes! But maintaining tenure and long-term success in a less developed country is only likely with good planning and the use of appropriate safeguards. These include measures such as buying country-risk insurance, building multinational relationships, forming joint investments, developing a broad customer base and seeking local investors in the company (Cobbe, 1979). The primary theme of this lecture is: How a company handles its constituency is critical to long-term tenure in a foreign country. Ideally, a multinational mining company would be so effective in dealing with the local people and managing its relationship with the host government that it would become a preferred employer, preferred over its competitors and over local companies. Historical overview Our earliest ancestors lived in Africa three to four million years ago. The Paleolithic or Old Stone Age, about 500,000 years ago, marked the beginning of mining in its earliest form (Gregory, 1980; Wolf, 1984). Various types of rocks and stones were used for tools and weapons, with flint being the preferred resource for implements. Initially, these materials were collected as stones (eoliths) lying on the surface. Then they came from excavations of flint in limestone beds that were exposed in river banks or naturally occurring excavations. Later, more formal mining developed. No doubt tribes of the Old Stone Age experienced conflict over rights to eoliths, food and land. The question of who owns the land and has rights to its contents and what is fair value for extraction is still the subject of intense debate and, occasionally, open conflict. As time passed, the search for useful minerals required migration from one area to another. Later, voyages from Europe to the New World and travels to other remote regions were funded and supported by absentee investors, kings and such (Rogers, 1976). The primary objective of such funding was to obtain gold, silver, food stuffs and other commodities that could be collected from the new countries. This is still the objective of foreign investment.