JUNIOR MINING SPECIAL — Vietnam now open to new mining

On Feb. 3 of this year, U.S. President Bill Clinton removed the 19-year-old prohibition against American companies doing business in Vietnam. This prohibition had, by moral persuasion, inhibited most other Western nations from investing in the southeast Asian country.

Now there is a major influx of investment dollars into the country, and the mining industry will soon be contributing as well.

There is more than enough geological justification to look for deposits in Vietnam. The French, during their colonial occupation in the first half of this century, operated many mines there.

Deposits of gold, iron, chromite, tin, copper, lead, zinc, titanium and rare earths have been located and partially developed. Relatively large reserves are already outlined.

Examples include: the Bong Mieu gold mine near Da Nang, with reserves of 200 tons gold (about 180 million grams) in three zones and with grades running 4-8 grams per ton; the Sin Quyen copper-gold deposit, where reserves of 551,000 tons copper (averaging 1.03%) and 34 tons gold (about 31 million grams) are outlined in 11 zones; the Cho Dien lead-zinc mine, which contains 495,000 tons running a combined grade of as high as 19%; and the chromite deposits in the Nui Nua area, which contain 33 million tons Cr2O3 and 3 million tons nickel.

These figures have been established without modern mining assessment and are therefore probably on the conservative side.

During the prohibition, the lack of capital prevented modern mining development. Now the Vietnamese government is actively seeking mining investment. To quote the director general of the Department of Mines and Geology, Pham Quoc Tuong: “Domestic financial sources, foreign investment and technology transfer from overseas are badly needed for mineral development.” There is a good technical base from which to work. The country has been mapped at a ratio of 1:500,000. In addition, 80% of the country has been mapped at 1:200,000, with a ratio of 1:50,000 having been used for the main metallogenic areas.

Extensive heavy mineral and geochemical mapping has been completed. Airborne magnetic and radiometric information exists, along with some ground follow-up statistics (including gravity measurements). These data are available to serious mining groups.

But what is really in store for a foreign mining group that wishes to explore and mine in Vietnam?

There is some basis for security of investment in Vietnam. The law on foreign investment in the country outlines how investment can be structured and what the provisions for repatriation of monies are. However, the specifics as they apply to mining have yet to be promulgated.

Two pieces of legislation — a mining investment law and a set of mineral regulations — are being prepared and will likely be presented in 1995. Nevertheless, certain aggressive mining groups are taking the attitude that they should be entitled to find a deposit, explore it as they see fit and then influence the new mining laws to satisfy their individual requirements. With the exception of commercial trading companies, most of which are based in Chi Minh City, virtually all companies are state-run. Mining is controlled by the Ministry of Heavy Industry through the Department of Mines and Geology (DMG).

Foreign miners have no choice but to form joint ventures with DMG. They can then readily obtain geological information, select a prospect and explore it for a limited period. After this, they must obtain a mining permit and an investment certificate.

Theoretically, an outside investor can automatically get an investment certificate provided he is willing to finance the operation in full. However, this procedure is never followed for the simple reason that state enterprises are ever eager to get a piece of the action so as to gain hard currency. As there is little currency in the country, the government has insisted that all state enterprises be self-financing.

On the working level, self-financing can hinder the implementation of projects. Take the case of a senior mining engineer who is paid 300,000 dong per month (US$30). The state insists on charging him out to foreigners for about $20 per day (14 times his salary), but it does not pay any of the difference. This engineer consequently has little incentive to work. Nevertheless, local labor rates are low and therefore attractive for mining projects.

However, the costs for foreigners, both personally and for the equipment they need, are anything but low. Foreigners pay at least double what a Vietnamese pays (for example, the airfare between Hanoi and Ho Chi Minh City is US$360 for foreigners and US$175 for national citizens). Foreigners pay for hotel accommodation in U.S. dollars, with rates running about US$250 per night. Most restaurants also charge a disparate rate.

Moreover, there is no readily available supply of heavy equipment or vehicles. These must be imported and the import charges can be high. It will soon be evident that compromises are required between the local need for quick gain of hard currency on the one hand and the foreigner’s need for investment security on the other.

Key properties should be staked out now and the realities negotiated, or these opportunities will flow to the more adventurous companies (often regionally based) which are intent on seizing them.

— The writer is with GeoThai Services of Bangkok, Thailand.