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Doing Business in the Host Country -- Non-Tax Considerations For a Mineral Exploration Company

James L Armstrong, International Resources Law: A Blueprint for Mineral Development (1991)

This paper focuses on legal and commercial considerations which are not only taken into account by mining companies but influence the way in which they act in reaching decisions about undertaking mineral exploration in countries of which they have no previous mining experience. Although this Conference is generally about law and lawyers I would be surprised if any lawyer who is involved with mining companies, whether as in-house counsel or as an external adviser, could sensibly fulfill the role of the legal member of the team without a very good understanding of the business considerations that influence decisions about the exploration programmes undertaken by companies. Thus, I should begin by drawing attention to a number of the non-legal issues before moving to the legal areas with which lawyers get specifically involved when mining companies are examining the potential for exploration in a country for the first time.

NATURE OF MINERAL EXPLORATION

The willingness of mining companies to undertake and accept the uncertainties of exploration is driven by the common objective that it is primarily an investment in the future. It may also provide opportunities which could give the company a winning edge over its competitors. Exploration programmes are essentially high risk, costly and, very often, frustratingly slow in providing rewards for the mining company. Th