Learn about some of the moves that we have made.
Building a Framework for Investing in Oil Shale
The Issue
A government was seeking to diversify its energy portfolio and make use of its oil shale resources for petroleum production as well as electricity generation.
The Complication
There were no laws or regulations that were designed to handle the complexities associated with oil shale retorting projects, not to mention attracting developers to an essentially an emerging field.
The Approach
A joint team of consultants and legal advisors proceeded with profiling suitable tiers of developers ranging from large IOCs to niche players. A legal and fiscal framework was developed taking onto consideration a fair and balanced outcomes between the government and the developers. A series of marketing and promotion activities were launched to appeal to various developers’ tiers.
The Impact
After some lengthy negotiations, several concession agreements were signed in addition to many more memos of understanding. So, far several 100’s of millions of dollars were spent on explorations, studies, pilot projects and engineering designs. Lately a power agreement was signed for over 400MW of output.
Revising Mining Regulations and Fiscal System
The Issue
A newly established commission mandated with regulating the mining sector is seeking to review mining regulations and royalties to reach a revamped system that is balanced and supportive of the mining sector.
The Complication
The previous regulations lacked a logical order and grouping. There were no evident economical models supporting royalties. Royalties were all flat rate per ton basis. A number of minerals varied in their values according to their purities or processing degrees, thus imposing a flat rate royalty can be on one party’s favor over the other. Many players in the industry were skeptical about any changes to the regulations.
The Approach
As a first step, the mining sector of the country was deeply studied to identify drivers of growth, trends, and contribution to national economy. The study was helpful in classifying the many minerals into just 4 key groups that share common drivers and impact. We have opened dialogue with key stakeholders and players of the sector to understand their concerns. We launched an investigation into the prices of covered minerals by the study in the country, the region and select competing markets. This was challenging as many minerals were not traded on open commodity markets and thus there were no published prices. We build economical models that took into account the costs of production in the country; selling prices, export prices, shipping and logistics costs, and impact of fuel prices. From that point on we have proposed an alternative system in which we revised royalties, up or down, or created a royalty system that is Ad Valorem and based on the value of the mineral. The new changes were shared with developers for their inputs before it gets approved and published.
The Impact
The relationship was improved between the commission and the industry and the new system is going through trials. It is our expectation that overall revenues to the economy will be maximized and new players will be encouraged to enter.
Review and Audit of Mining Feasibility Studies
The Issue
A government agency needs to make sure that a developer has carefully studied its assigned resource and the investment decision is sensible and rewarding for both, the developer and the government.
The Complication
Large mining projects require a deep and thorough study of the resource before committing to a significant amount of investment that will be hard to mobilize or adjust after actual works. Feasibility studies are usually voluminous and financials are complex for a project of over 20 years that requires considerable financing arrangements, not to mention various considerations of maintenance and replacement of equipment.
The Approach
A multi-disciplinary team was launched to review and check all parts of the study: geology, geophysics, geochemistry, mining approach, infrastructure, engineering, marketing, finance and financials. All notes were delivered for the developer to constructively challenge the study and reach a more solid outcome.
We provided specific advice related to markets and marketing of resource. We identified opportunities for better financial projections.
The Impact
The Study was revised and the financial model was reconstructed. The developer and the government are now more comfortable with the study and has better visibility of expectations.