Incentives needed for mining sector

  • Business
  • Monday, 18 Mar 2013

KUALA LUMPUR: The Federal Government should introduce suitable incentives for the domestic mining sector to make it more cost-competitive to attract both local and foreign investors, according to Malaysian Chamber of Mines (MCOM) executive director Muhamad Nor Muhamad.

Muhamad said the state governments, meanwhile, could offer support via a speedier decision-making process in the areas of applications, renewals of mining leases and exploration licences.

In addition, state governments should make potentially mineral-rich lands “more” available for exploration and mining development, thus preventing sterilisation, he added.

Muhamad told StarBiz that the country's mineral export-to-mineral import ratio currently stood at an outrageous 1:10. Therefore, Malaysia could make huge savings in terms of foreign exchange outflow if the mining sector could be further developed.

Essentially, the Government should consider the mineral resource sector for inclusion into the National Key Economic Areas, given its important contribution to the country's gross domestic product.

“This is more so when Malaysia has a mineral resource potential of some RM340bil at current prices that can be developed,” noted Muhamad.

He said one important factor that would drive the domestic mining sector this year would be the global mineral and metal prices environment.

“Should prices of minerals be sustained at current levels or move higher, there would be greater buoyancy in the sector.”

In addition, there should be a more conducive operating business environment in the sector through the lowering of cost and ease of doing business,” he added.

On potential minerals that had yet to be fully exploited, Muhamad said: “MCOM sees plenty of rich coal deposits in east Malaysia, which if properly developed, can meet Malaysia's entire domestic requirements and even for export.”

The potential for base metals such as nickel, gold and copper was also seen in Sabah and the central belt of Peninsular Malaysia stretching from Kelantan to Johor.

Over the years, there has generally been positive response from the mineral-rich state governments towards mining, as reflected by the encouraging numbers of mining leases and exploration licences and renewals granted lately.

“However, there are still some areas requiring improvement, such as the duration of time taken in deciding on the granting of such applications and renewals.

“Another critical area is the size of the mining leases granted, which currently tends to be limited to small areas and shorter lease periods, thus rendering mining uneconomical,” Muhamad said.

He pointed out that the trend in mining currently rendered the activity to be undertaken on a medium to large-scale basis.

“There is not much room for undertaking small-scale mining,” said Muhamad.

One of the reasons is that there are not much rich secondary alluvial deposits available now.

“Those that can be re-mined contain left-over deposits at low grades and high cost.

“Other virgin secondary deposits are very deep-seated, requiring new technology, know-how and high capital cost,” he explained.

Therefore, having medium to large-scale mines would also mean better control, supervision and implementation by the authorities of the necessary environmental, safety and mine-rehabilitation requirements to enable a more sustainable form of mining.

At the same time, Muhamad said the current information and data on Malaysia's mineral resource potential was outdated.

“It would be necessary for these information and data to be suitably updated in order to draw investor interest to the domestic mining sector,” said Muhamad.

He suggested the renewed government reconnaissance mineral exploration programme be continued.

This would result in more information and better knowledge on local mineral reserves potential, which is needed to attract more investment into mineral exploration and mining.

In addition, the potential for development of “lode” or primary mineral deposits, particularly in the central belt of Peninsular Malaysia, was great.

However, he said the development would require different kinds of technology, know-how and skills and would be very capital-intensive.

Muhamad noted that the domestic mineral sector last year recorded a “somewhat” sustainable performance although not as great as in 2011 when metal and mineral prices were very buoyant.

Going forward, he believes minerals and metal prices willd continue to sustain at current levels because of supply constraints globally.

“There are unlikely to be many new big-scale mines being opened up in the near future. Those likely to be opened are smaller ones situated in developed countries in a high capital cost environment.”

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Business , mining , malaysia , MCOM


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