Mining sector in Cambodia

An Expert's View about Mining Support Services in Cambodia

Posted on: 2 Sep 2010

Latest overview of market potential for the mining sector in Cambodia.

Mining ? Cambodia Sector Report Mining Cambodia Produced by: Reingsey Oum, Trade & Investment Officer, British Embassy Phnom Penh 9 October 2009 Whereas every effort has been made to ensure that the information given herein is accurate, UK Trade & Investment or its sponsoring Departments, the Department of Business, Innovation and Skills and the Foreign & Commonwealth Office, accept no responsibility for any errors, omissions or misleading statements in that information and no warranty is given or responsibility is accepted as to the standing of any firm, company or individual mentioned. Published October 2009 by UK Trade & Investment. Crown Copyright © Mining ? Cambodia Table of Contents OVERVIEW 3 OPPORTUNITIES CHARACTERISTICS OF MARKET 4 KEY METHODS OF DOING BUSINESS 6 MORE DETAILED SECTOR REPORTS 7 EVENTS 8 CONTACT LISTS Page 2 Mining ? Cambodia OVERVIEW The decades of civil war isolated Cambodia from the rest of the world. The Khmer Rouge regime crippled the country?s economy in almost every aspect. Nowadays, the Cambodians enjoy peace, social and political stability. It is the time for reconstruction and other developments. Over the 1997-2007, the economy has grown at a remarkable speed- annual GDP growth averaged at 9.8 percent per annum. Foreign direct investments have subsequently been attracted into the country given its largely unexplored resources, open market economy and the government?s continuing efforts to improve the business environment. Several sectors of the Cambodian economy appear to be the centre of interests. Very likely one of those is mining, a sector that is still in its infancy and open to all investors. At the moment, Cambodia uses the results of old geological studies, conducted since th the late 19 century, as the basis of all mining activities. A number of exploration or mining licenses have been given to companies of any sizes; some well-known Australian, Chinese, and Japanese mining firms are reportedly operating in the sector along with other local ones. Recently, there has been a finding of a significant amount of gold and other minerals in some concession areas. Meanwhile, there has been a disappointing outcome in bauxite exploration. Overall, there could be a promising prospect in the sector, and those who first enter the market generally get a big stake. OPPORTUNITIES There are very little materials currently available for mining investors. Mineral studies in Cambodia have long been conducted by French and Chinese geologists. Whilst these have identified the presence of mineral reserves (e.g. sapphires, rubies, gold, cassiterite, silica sands, bauxite, manganese, kaolin, coal, peat, limestone, phosphate and other minerals), no detailed financial evaluation has ever been made. Based on these studies, however, we see opportunities to explore and exploit different mineral reserves across the whole of the country. The following table shows what minerals have been found: Province/City Mineral found Banteay Meanchey phosphate Banttambang bauxite, gold, iron, phosphate rubies, sapphire Kampong Cham gold Kampong Chhnang limestone Kampong Speu copper, copper-lead-zinc alloy, marble , phosphate, tin, tungsten Kampong Thom amethyst, gold Page 3 Mining ? Cambodia Kampot graphite, gold, iron, lignite, limestone, phosphate Kandal molybdenum Koh Kong jet, sapphire, silica Kratie copper, lignite Mondolkiri bauxite, copper-lead-zinc alloy, gold Pailin rubies, sapphire Preah Vihear copper-lead-zinc alloy, gold, jet , lignite, manganese , molybdenum, iron, sapphire, zircon gems Prey Veng fluorite Pusat antimony , chromium Rattanakiri copper, copper-lead-zinc alloy, gold, zirconium dioxide Siem Reap gold, iron Steung Treng amethyst , coal, copper, dolomite, gold, iron, marble Sihanoukville lignite, silica Takeo molybdenum, tin Other minerals used for construction work (ie basalt, granite, jaspers, laterite, quartzite, rhyolites, sandstone/ sand, and gravel) can also be found in some Provinces. Specifically, we have seen a likely opportunity for any investors interested in Cambodia?s coal potential. A local conglomerate claims to have a 6-square kilometre coal mine. It is looking for a business partner. UKTI publishes international business opportunities gathered by our network of British Embassies, High Commissions and Consulates worldwide. These opportunities appear in the Opportunities portlet on the relevant sector and country pages on the UKTI website. By setting up a profile you can be alerted by email when relevant new opportunities are published. New or updated alert profiles can be set in My Account on the website. Please contact the Trade and Investment Officer in Cambodia to discuss your particular interests and where UK Trade & Investment can help you to succeed in the Cambodian market. CHARACTERISTICS OF MARKET Since 1993, the Government has issued licenses to a number of local and foreign companies to explore and exploit bauxite, gold, iron, antimony, chromium, coal, lignite, gemstone and some other metallic minerals. In 2006, BHP Billiton and Mitsubishi Corporation signed an agreement with the Cambodian Government to explore bauxite and evaluate the potential for an alumina refinery. The exploration has begun since May 2007 and was due to complete this year. However, the two companies have recently shelved their operation and even cancelled the plan for building the refinery as they failed to find sufficient quantities of Page 4 Mining ? Cambodia bauxite. This has destroyed the hope of ?billions of US dollar? investment in the country. Unlike the outcome of bauxite ore, the work on gold exploration seems to yield promising results. There may well be a gold system that is of interest to the mining firms. Two Australian based companies, OZ Minerals and Southern Gold, have been active in their exploration. OZ Minerals is currently interpreting soil-sampling results in northern province of Mondolkiri. Some samples had reportedly yielded up to 14.75 grams per tical in gold. Southern Gold also appears to have good prospects. The company owns seven mining concessions in Cambodia, three of which are the joint venture with Japan Oil, Gas and Matels National Corp. Southern Gold?s recent shallow drilling programme in southern Kratie province has found significant gold mineralisation close to the surface. It has also found high level of other metals including silver, copper and zinc. The Chinese stated owned company China National Machinery & Equipment Import & Export Corporation might still be involved in exploiting an iron mine in Preah Vihea province. As of now, it is unclear whether they have pulled out from this project. The official website of the Ministry of Industry, Mines, and Energy (MIME) has revealed the presence of 15 other mining companies: gold exploration 6, limestone exploration 5, coal exploration 1, stones production 2, and phosphate fertiliser production 1. Nonetheless, the total number of licences companies hold could be hundreds in total. It is worth noting that all currently available documents about local mining potential are outdated but they are the only source of information available. A Sector master plan is expected to be issued in March 2011. At present, the skills and abilities of the government officials are limited and any interested companies must conduct their own pre-feasibility and feasibility studies before submitting any license requests. It is also worth considering the ?Corporate Social Responsibility? provisions of the Law on Management and Exploitation of Mineral Resources 2001- particularly, those about the restoration fund, community development plan, environmental protection and restricted mining sites. For instance the concessionaire is required to set up a restoration fund within 60 days after obtaining a mining license. It?s also important to minimise the impact of any mining operation on the surrounding environment and local communities (i.e. areas such as burial sites, temples, ancient monuments, national parks etc are off-limits for mining operations, although in real practice there may be some exceptional cases). Another area of interest is that local law requires companies to refine raw mines to be eligible for exports. This means building their own refinery factories in Cambodia Initial contact with the MIME could be the best start to involve in the sector. Another entry route is to find a good and well connected local partner. Most foreign companies enter the market after signing a Memorandum of Understanding (valid for 6 months but can be extended for a further 3 months) with the MIME to carry out a geological survey. Should the findings be positive, then this should be followed by a request for both mineral exploration and industrial mining licenses. Page 5 Mining ? Cambodia The potential for mining opportunities in Cambodia is not widely disclosed to attract foreign investors. Nevertheless, all investors are very much welcomed by the government. KEY METHODS OF DOING BUSINESS Initial research is strongly recommended to assess your prospective investments or potential business partners in Cambodia. In emerging markets, it can often prove difficult to source reliable information from the Internet. Some Cambodians can, at first, come across as being unduly suspicious but are generally keen to build and retain relationships. Therefore, firm commitment ? coupled with a willingness to visit the market ? is an important step in establishing a successful working relationship. Most successful foreign investors have some form of local representation (i.e. establishing an office, appointing an agent/distributor etc. This enables them to develop their brands, gain loyalty and ? in particular ? clearly demonstrate they are in the market seriously. Cambodians consider the trade-off between price and quality of products/services although the market, in general, is price sensitive. Reliable Technical support is also a key factor. Some Do?s and Don?ts: ? Language can be a problem although English is becoming more commonly used throughout Cambodia. Be sure to speak clearly, slowly and avoid slang/adages. ? Double check to ensure your counterparts fully understands your messages. ? Cambodian people care about their names (surnames precede given names) and title. It is not common to directly address Cambodian people?s surnames (e.g. Mr/Mrs. Surname). In fact, you can just call them by their titles only (e.g. Your Excellency, Lok Chum Teav, Okhna, Sir, and Madam) and/or their given names if they are junior and you know them well. ? Control your emotions ? any signs of anger, impatience and frustration will not help matters! Do not point your finger or shout at Cambodian counterparts/colleagues as this can easily result in the loss of face, which is a very important issue in Cambodian society. ? Avoid sitting with legs crossed and your feet pointing to the people you are meeting with as this can be interpreted as ?lack of respect?. ? Cambodian businessmen and consumers normally do not like to read very long text. Often, they prefer short versions with images and bullet points. Therefore, when presenting your products/services for the first time, try to make it attractive, short and straight to the point. ? Do not interrupt an ongoing conversation even if you disagree. Many Cambodians perceive this as impolite. ? When planning your visit ? organise appointments before your departure. Follow up with telephone calls on arrival to confirm availability. Meeting for the first time should be arranged during normal working hours with subsequent meetings being arranged over breakfast, lunch, and dinner as well as normal office hours. Page 6 Mining ? Cambodia ? Arrange a market discussion with the Trade and Investment Officer at the British Embassy in Phnom Penh. ? Take plenty of business cards and corporate literature. If possible have the reverse of your business card translated into Khmer. ? Follow up meetings by letter/e-mail on return to the UK. If possible keep the Embassy informed of progress. ? Do not expect to do business immediately or necessarily on the first visit to Cambodia. ? Think about intellectual property rights issues. ? Check carefully if your business activities relate to the use of lands. Other background information on doing business in Cambodia can be found on UKTI?s website. Simply go to the Cambodia country page where you will find information on: ? Economic background and geography ? Customs & regulations ? Selling & communications ? Contacts & setting up ? Visiting and social hints and tips MORE DETAILED SECTOR REPORTS Research is critical when considering new markets. UKTI provides market research services, which can help UK companies doing business overseas including: ? Overseas Market Introduction Service (OMIS). Bespoke research into potential markets, and support during your overseas visits. ? Export Marketing Research Scheme. In-depth and subsidised service administered by the British Chambers of Commerce on behalf of UKTI Contact your local International Trade Advisor if you are interested in accessing these services, or for general advice in developing your export strategy. When considering doing business in Cambodia, it is essential to obtain legal, financial and taxation advice. A useful list of contacts as well as further information on the energy sector in Cambodia is available from the British Embassy. For further details, please contact: Reingsey Oum Trade & Investment Officer British Embassy Phnom Penh No. 27.29, St. 75 Srass Chak, Daun Penh Tel: +855 (0) 23 427 124/ 23 428 153 Extension: 2209 Fax: +855 (0) 427 125 Email: Page 7 Mining ? Cambodia EVENTS At the moment, there is no specific event related to the mining sector. UK Trade & Investment?s Tradeshow Access Programme (TAP) can help eligible UK businesses take part in overseas exhibitions. Attendance at TAP events offers significant benefits: ? possibilities for business opportunities both at the show and in the future ? a chance to assess new markets and develop useful contacts ? grants are available if you meet the criteria ? UKTI staff overseas will be available to assist delegates To find out if you are eligible to apply to attend look at the UKTI How to do business page. Details of TAP events can be found in the Events portlet on the appropriate country page. Other Market Visit Support may be available via your local International Trade Advisor. CONTACT LISTS Chea Vichett (Mr) Deputy Director Department of Mineral Resources Ministry of Industry, Mines and Energy 45 Norodom Blvd, Phnom Penh Tel: (855) 23 210811 Mobile: (855) 11 850 839 Fax: (855) 23 210 811 Email: Haeng Eang (Mr) Officer, One-Window-Service Ministry of Industry, Mines and Energy No 45, Norodom Boulevard Phnom Penh, Cambodia Mobile: (855) 12 867 906 Email: Website: Senaka Fernando Chairman of British Business Association in Cambodia Director of PricewaterhouseCoopers (Cambodia) Ltd 124, Norodom Blvd, Chamkarmon Phnom Penh Tel: +855(0) 12 803891 / 23 218086 Fax: +855(0) 23 216 991 Email: Page 8 Mining ? Cambodia Website: UKTI?s International Trade Advisers can provide you with essential and impartial advice on all aspects of international trade. Every UK region also has dedicated sector specialists who can provide advice tailored to your industry. You can trace your nearest advisor by entering your postcode into the Local Office Database on the homepage of our website. For new and inexperienced exporters, our Passport to Export process will take you through the mechanics of exporting. An International Trade Adviser will provide professional advice on a range of services, including financial subsidies, export documentation, contacts in overseas markets, overseas visits, translating marketing material, e-commerce, subsidised export training and market research. Page 9
Posted: 02 September 2010