11 March 2010
A mining law which the International Financial Corporation has been helping the Yemeni government to draft has recently been completed and will be submitted to Parliament. According to this article, one of the main hindrances for potential investment in Yemen's mining sector is the security issue, leaving us with a few questions: Is the IFC willing and planning to invest? Would the Multilateral Investment Guarantee Agency provide insurance for investors?
Source
Reuters, March 10, 2010
By Humeyra Pamuk
INTERVIEW-Yemen mining could take off with new law-IFC
CAIRO, March 10 (Reuters) - Yemen is likely to attract more mining investment once its parliament gives the green light to a mining law to reform the poor Arab country's legal framework and make it more investor-friendly.
But security remains the biggest challenge for prospective investors trying to reach out to the remote parts of the violence-stricken country, where its gold, silver, zinc, copper and cobalt deposits are based, an official at the World Bank's private lender said. [ID:nYEMEN]
Sammar Essmat, project officer at the International Finance Corporation (IFC), which helped draft the law, said that Yemen's mining sector could account for up to 7 percent of its economic growth once its "world class" resources are fully exploited.
"The passing of the law will radically change the investment landscape in the sector in Yemen," she told Reuters in an interview, adding that the law had cabinet approval.
"I know that there are a lot of companies waiting for this law to be passed to come in," she said, without naming the firms.
There are 14 mining firms active in Yemen, with only one, London-listed Zinc miner ZincOx Resources (ZOX.L: Quote, Profile, Research), in production in what will be the country's first large scale mining project to be developed. The rest, including Canadian, Indian as well as Yemeni firms are at the exploratory stage.
ZincOx's deposit contains a mineable reserve of 8.7 million tonnes of ore and located about 110 km (70 miles) east of the capital Sanaa, according to its website.
The new law, which was developed from scratch rather than amending existing legislation, would introduce the idea of tax and royalty versus other profit sharing, and address environmental and social sustainability issues, Essmat said.
CREATING JOBS
"Yemen is ... facing a number of social economic development challenges and it is also running out of oil. We realise the potential that the mineral sector has to offer to help create job opportunities and make the mining sector a contributor to social development," she said.
Western and Arab powers worry that Yemen, a small oil producer where around 40 percent of the population lives on $2 a day, will become a failed state and fear al Qaeda could exploit the situation to use Yemen as a base for attacks.
"If you bring in one mid-size mining investment, you're possibly looking at an investment of around $300-$500 million over the lifespan of 10 years that could create 700 direct and 2,000-3000 indirect jobs," she said.
Securing the blessing of the local communities in mineral-rich areas would be crucial for investors.
"If you settle on the wrong terms, you are exposed to potential disruption of work that could translate into losses and that is a huge risk," she said. "This is one of the deal-breakers for companies to come in. "When you're on the ground, it's business as usual. But I think the challenge in doing business is the perceived security issue," she said.
(Editing by Keiron Henderson)
Further Resources
IFC's role in Yemen mining, by Nadia Daar, Bank Information Center, April 17 2009 (Bretton Woods Project website)
IFC's project page on Yemen's mining reform