Emerging Nations - Minerals PPP
Many of the emerging nations of the Global East, Global Middle and Global South are rich to very rich in mineral natural resources. The current resources exploitation business model still has the old-fashion colonial structure: mining ores for almost free and exporting them. The nations and their governments have only small benefits of this neo-colonial model: as the value adding take place in other parts of the world. Simply because there’s no alternative for it.
This is what we want to change: delivering nations an alternative for the neo-colonial model. As it’s really time to abolish this neo-colonial model. Abolishing it gradually by replacing it wisely by a new model that’s more beneficiary to nations and its population and businesses. A model where the natural resources are processed (upgraded in value chain) in the nations of origin. Delivering an income boost for the governments (making them able to provide public goods/services) and delivering a natural resources driven economic boost to the national economies.
What would the alternative for the old neo-colonial model look like? Or better said: what should the ideal new national focused model look like? Let’s first determine some important facets. We think that the state should stay state and not become a mining corporation. We think the states should focus on improving governing. This include a wide scoop of resources revenue legislation, environment protecting legislation and labour protecting legislation. We think corporations should focus on improving mining (doing it the most profitable way and the most environmental friendly way). As long the state gets 50% of the revenues of the mining corporation (and has the power to enforce such) the problem is solved instantly. But this will make national governments still the subject of huge multinational corporations who can play around governments by cartel agreements with their competitors. So there a new model needed.
These lines above are certainly not a plea for a wave of nationalization of existing mineral mining foreign corporations. We think nationalization damages the imago of a nation abroad and by this damages the nation in its progress process. Therefore we think that existing operations should continue producing in the way they do. Although we promote the concept that any government should have/demand 50% of the real (in OECD language called ‘arm’s length distance’) revenues (resources revenue legislation). As the governments of the nations of Africa otherwise never will be able to build/provide enough public goods/services: they need this income flow resources income. Although we also promote the concepts of both environment protecting legislation and labour protecting legislation too. But most of all we also promote the national processing of raw materials. There are too much benefits/advantages in this that nations in the old neo-colonial only ore mining and ore exporting model don’t get. To name them: there are sector attached ‘internalities’ and general economic/fiscal/monetary ‘externalities’.
Regarding the mineral processing delivered ‘internalities’ effects: 1) getting global market access without the multinationals, 2) being able to make bilateral deals with other nations, 3) being able to use also lower grades of coal and ores (that now are worthless: they have now no commercial value on the international market), 4) reducing the infrastructure needs of ore transport (rail tracks and deep sea harbours), 5) reducing the transport costs of ore, 6) significant up-cycling in the mineral value chain (just ore has no value added, processed minerals have a huge value added), 7) having a cost advantage on the current global players operating old mills (lower energy costs, less transport costs), 8) having a quality advantage on the current global players operating old mills (ITmk3 delivers stronger steel as output), 9) being able to operate inland (non-coastal), etc, etc. This list of positive sector ‘internalities’ could go on and on. It opens perspectives that otherwise would stay closed.
Regarding the mineral processing delivered ‘externalities’ effects (economic/fiscal/monetary): a) emerging nations needs a lot of steel themselves, steal that they now must buy more expensive with foreign added value and unnecessary double transport costs, b) importing foreign processed ore to steel burdens the national trade balance, c) burdening the national trade balance is creating monetary instability, d) importing steel doesn’t have the same thriving drive to economies as making national made steel has, e) the quality imago of a nation rises by the use of third generation mineral mill technology, f) delivering diversification of the economy, g) delivering extra growth to the economy, h) delivering more jobs (and addressing unemployment), i) around mineral mines and mineral mills whole service sectors will emerge, j) iron processing has been always a huge drive in industrialization everywhere in the world, k) cleaner environment, l) less dependency of abroad (more autarky), m) better monetary health, n) possibility of barter deals, o) possibility of BCS (bilateral currency swaps), p) stopping ‘brain drains’ (as university graduates have more future possibilities in their own nations), etc, etc. This list of positive ‘externalities’ could go on and on. It opens perspectives that otherwise would stay closed.
So once again: What would the alternative for the old neo-colonial model look like? Or better said: what should the ideal new national economy focused model look like? It should be a PPP public private partnership). It should be focused on both mining and processing (up-cycling in the value chain). Why? The state should have 50% ownership in this entity. The PPP should be good in both mining and processing. The PPP should sell the processed (in the value chain up-cycled) commodities in open contracts. The PPP should organize all finance demand. Placing the nation and it progress central and no longer a central place for the interests of those multinational mineral corporations who has not real binding with any nation they operate in.
This PPP model could start with a huge advantage: While the whole world is still operating the second generation iron mill technology, the PPP could implement the ITmk3 process. ITmk3 is the name of the ‘third generation’ ore to refined mineral technology that’s is developed by Kobe Steel in Japan. It has huge advantages over the ‘second generation’ ore to refined mineral technology by which most mineral plants worldwide currently yet operate (as they want to run the old mill technology as long that’s economical). The third generation mineral mill technology a) saves 30 till 40% of energy, b) can use all grades of coal (not only the rare/expensive cooking coal), c) can process low ore grades (so making also low grade ores valuable) and d) can be done in smaller sized plants near the mines (saving a lot of ore transport costs). These 4 huge advantages will deliver the nations that start to refine their ores themselves a huge advantage on the current very concentrated global players on the world market. As almost all the current mineral mills still operate the old second generation mineral mill technology, without the huge advantages the third generation mineral mil technology has to offer (as they want to operate their old mills/refineries as long as economic possible). Coming late to a party almost never pays off but in this case it has huge advantage on costs, material input and output quality. The third generation mineral mill/refinery technology (the ITmk3 process) is developed and patented by Kobe Steel of Japan. The engineering of the on ITmk3 technology based mineral mills for these PPPs will be done by Hares Engineering of Austria (one of the two global license holders of ITmk3 on engineering).
Together with the IDB (Islamic Development Bank) we offer nations an instant full package PPP solution for mining and processing. The only thing needed is a signature on an one page ‘mining and processing PPP contact’ delivering the national state 50% ownership in the PPP. The IDB is owned by and serves 56 nations worldwide. The IDB operates by Islamic finance principles where finance is done not by debt models (as the Quran forbids debt and interest), but by equity based models. We use the other 50% for achieving the equity based finance of all the large/huge investments needed. We arrange the construction, the operation and the sales organization. We‘ll do as much of the manufacturing/constructing of the investments in the nation (for example: we install a mining truck factory etc). We hire as much as possible national workforce. We use as much as possible national businesses.
(the same could be said for energy resources exploration, see http://www.planck.org/publications/Emerging-Nations-Energy-PPP)
(see also the 'Emerging Nations - Electricity PPP' model: http://www.planck.org/downloads/Power-For-Africa.pdf)
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Gijs Graafland | Planck Foundation | Amsterdam | 2015
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