Mineral resourcefulness

Cambodia is looking to emulate its northern neighbour Laos in making millions of dollars from minerals, but first foreign mining firms will have to navigate the country’s myriad pitfalls.
As official events go, a state tax ceremony in a small, socialist country would hardly be expected to get pulses racing. But in this case at the end of March the Laotian government had cause for major celebration. Khamphay Vongsakhamphoui, Deputy Director General of the Tax Department, stood smiling as he received an oversized cheque worth a cool 3.6 trillion kip, about $57.5m.
It was the biggest corporate tax windfall in the country’s history generated from a single gold and copper mine, Sepon. With bonuses and fees factored in, Laos was set to receive more than $80m from the concession alone in 2009. In this country of less than seven million people, mining has suddenly become big business.
Cambodia, by contrast, made just $1.45m from the whole of the mining sector in 2009 in concession signings and social fund payments last year. But that may be about to change.
“Cambodia is still lagging behind its neighbours in developing its mining sector,” admitted Sok Leng, Director General of the General Department of Mineral Resources, at the country’s first-ever international mining conference in Phnom Penh at the end of May.
But as Douglas Broderick, the UN Development Programme’s country representative in Cambodia, told representatives at the same conference, “Cambodia stands poised to develop its nascent mining industry. Early exploration has shown that the country has exciting geological potential”.
Just how exciting, though, remains a mystery. As Prime Minister Hun Sen said himself in May, “we don’t know how much gold [there is]”.
The last land survey for the country was produced in 1989 by the Vietnamese government, the same year they pulled out after 10 years of occupation, and that geological mapping process is still ongoing and the results are looking good according to the handful of Australian mining firms that have forayed into Cambodia.
“Results to date have been encouraging for sure for gold, although there is a distinct possibility of discovering base metals such as copper, zinc and lead,” says Grant Thomas, Cambodia representative of Southern Gold, one of three Australian mining companies that announced it may be getting close to commercial gold production.
Another company, OZ Minerals, says it has discovered an inferred resource of more than 600,000 ounces in Mondulkiri province, equivalent to more than six years of annual production at Sepon in Laos, at grades of 2.3 grams of gold per tonne. At today’s exorbitant gold prices those deposits alone would be worth over $700m. But the nature of the mining industry – which must cover the cost of exploration, concession licences, taxes and government royalties – dictates that more gold must be found before production becomes commercially viable in Cambodia.
“It is considered to be a foundation resource and the company is continuing to explore … in the region [of eastern Cambodia] with the aim of increasing this resource to around two million ounces which would potentially be a scale which could warrant a study,” says Natalie Worlie, head of Investor and External Relations at OZ Minerals Melbourne office.
Mining for precious stones in Rattanakiri province (Stefan V. Jensen)The omens remain promising. Mondulikiri, Rattanakkiri and Kratie provinces in the east of Cambodia are the current epicentre of exploration activities in the country, and other areas – still mostly unchartered – also point to minerals beneath the surface. A study published this year with the help of the Japanese development organisation JICA suggests potential in the opposite corner of the country in Koh Kong province’s Cardammon mountains, an area that lies on the same geological fold as Sepon and Thailand’s Chatree gold mine. With Cambodia now employing “more technically advanced prospecting methods”, according to JICA, and international exports from state and private organisations assisting the government, these as yet unrealised deposits are likely to be the next frontier for prospectors in the country.
Nonetheless, it’s still likely to be some time before gold, iron ore or any one of a further 60 listed mineral deposits in Cambodia will appear on international commodity markets. Mr Thomas says Southern Gold could expect to start gold production in three years at the soonest, or more likely up to five years later for a larger mine of Sepon’s size, close to 100,000 ounces production per year. “This time would include discovery, definition, feasibility and construction [of a gold mine],” he says.
Similarly, OZ Minerals sees possible production happening during a comparable time frame having already spent five years in Cambodia. That is, of course, if everything goes according to plan, which in Cambodia is often not the case.
In the middle of June, some 30 families in Keo Seima district within one of OZ Mineral’s Mondulkiri concessions refused to vacate their premises, just one of a rising number of confrontations between local residents and authorities in a country that is plagued by land disputes. Then in neighbouring Rattanakiri province a day later, 100 ethnic Kreung families protested after Vietnamese mining firm Hong Anh Rattanakiri placed markers for a test drilling site on what locals claimed was their land.
Even when mining companies are able to avoid the minefield that is the Cambodian land management system, they then have to contend with tonnes of unexploded ordinance dropped by US warplanes during the Indochina campaigns, a plight that also deeply affected Laos.
At May’s Cambodia mining conference, Australian ordinance clearing firm Bactec highlighted the extent of the explosive problem that the likes of Southern Gold and OZ Minerals face when targeting the Kingdom for minerals. Business Development Manager Mark Latimer showed detailed maps of Cambodia displaying bombing coverage blanketing almost the entire east of the country, currently the most promising mining area, adding that the data only represented about 40% of Washington’s disclosures so far. The remainder will slowly come out as information on the “Secret War” campaigns is declassified, and for mining companies that means an expensive clear-up operation before test drilling can even begin.
Other problems derive directly from the Cambodian government, which earlier this year was suspected to be at the centre of a corruption scandal involving BHP Billiton, now the subject of a US government investigation that looks set to all but end the participation of the world’s largest mining company in the Kingdom.
And even if foreign firms can avoid succumbing to paying money under the table in Cambodia – both OZ and Southern Gold have denied making such payments – many face the problem of a chaotic allocation system by which concessions are granted in the first place. At least one large mining company in Cambodia has told opposition parliamentarians it had to struggle to buy up a series of concessions from local speculators who had bought licences with no intention of ever putting them into practice. The sole aim was simply to sell them on to the highest overseas bidder, a quick personal windfall that has everything do with short-term gain but does little for longer-term vision.
Melting point: Workers at a goldrefining facility melt gold for production, in an industry that is quickly picking up steam in CambodiaAs a string of government and private sector representatives noted at May’s mining conference in the Cambodian capital, the key to exposing the country’s likely vast mineral wealth is relatively simple in theory: attract serious, experienced global mining corporations in the hope they will commit to production. Indeed, to date the only minerals Cambodia has ever produced have been at the hands of small artisanal operations panning for gold in conditions that hark back to the beginning of the last century in many cases, some legal, some not.
In 2001, Cambodia’s mining sector contributed just 0.16% to the country’s GDP, according to the JICA study, employing only 4,000 people, a figure that has increased five times since. In Laotian terms that remains a drop in the ocean – Cambodia’s northern neighbour estimated that mining accounted for 85% of the country’s exports last year and some 15% of total GDP. In other words, Cambodia has some way to go before mining becomes a main staple of its economy.
“Minerals development … is rapidly becoming an important source of economic growth and poverty reduction” was the conclusion Eravanh Boungnaphalom, the Laotian Director of Environment and Mining Inspection Division Department of Mines, put to delegates in the case of his own country during a presentation to gathered Cambodian delegates in Phnom Penh in May.
It may not have been the most profound statement made at the conference, but it represents a prize that may soon be within Cambodia’s grasp – if the country can finally get things right.
EXPLORATION FOR METAL DEPOSITS
Gold (Au)
Cambodia is known to host at least 19 gold deposits, the one commodity that is robustly increasing in price. Gold exploration continues to expand in Cambodia with three foreign companies leading the exploration
Iron ore (Fe)
Sixteen deposits of haematite and magnetite are known in the Northern provinces including Stung Treng, Preah Vihear, Oddar Meanchey and Battambang. Most are Triassic age (251–199.6 million years ago) deposits, with some having an Fe content of 68%. However, apart from a deposit estimated at 30 million tonnes, which was being explored by Korean company Kenertec, most are believed to be very small, raniging in size from 5-10 million tonnes
Manganese (Mn)
Three lateritic occurences are known, grading 11-26% Mn, in the Chep district of Preah Vihear province
Aluminium (Al)
Two bauxite deposits are known, one in Battambang and one in Mondulkiri. A joint venture between BHB Billiton and Mitsubishi of Japan was evaluating the Mondulkiri deposit for nearly three years. They concluded that a project based on this would not comply with the T1 requirements of BHP and have declined to continue with the project for economic reasons
Base metals
12 deposits of base metals are known to occur in Cambodia, including zinc, lead, copper and other sulphide minerals. With mapping and further geophysical work from the Geological Survey it is likely that further base metal deposits will be found.