MANAGING RISKS ASSOCIATED WITH NON-OIL RESOURCES EXPLORATION

A PRESENTATION

MANAGING RISKS ASSOCIATED WITH NON-OIL RESOURCES EXPLORATION
EVENT: THE NATIONAL INSURANCE CONFERENCE
2016
DATE: 10TH JULY 2016
VENUE: TRANSCORP HILTON, ABUJA
MANAGING RISKS ASSOCIATED WITH NON-OIL
RESOURCES EXPLORATION

OVERVIEW
INTRODUCTION
UNDERSTANDING SOLID MINERALS BUSINESS: THE VALUE CHAIN
THE GLOBAL MINING DEVELOPMENT OUTLOOK
DESCRIPTIVE ANALYSIS OF THE GLOBAL MINERALS BUSINESS STRUCTURE
EXPLORATION COMPANIES
GLOBAL EXPLORATION BUDGETS
NIGERIA’S GEOSCIENCES DATA
CHARACTERISTICS OF THE PLAYING FIELD AND THE PLAYERS
THE RISKS IN THE MINING BUSINESS
SOLUTIONS TO RISK MANAGEMENTS
WORLD INSURANCE PENETRATION
INVESTMENT STIMULUS FOR THE MINING SECTOR
ROLE OF INSURANCE COMPANIES IN DEVELOPED ECONOMIES
THE WAY FORWARD
CONCLUSION

INTRODUCTION

Mining has continued to drive the economies and
fortunes of many mineral endowed Countries. But like all high-risk investments no matter the nature of mining, the insurance risk index remains high.
The required insurance policies must provide cover for multiple risks as a result of the mining activity such as loss of life, equipment and machinery failure, production loss and premiums paid out as a direct result of environmental damage.
All these risks must be managed properly and premiums kept when there are no claims.

Understanding solid minerals’ Business: The value chain

Many countries such as Australia, Canada, Russia, India, and South Africa have depended on their mineral wealth to finance their societies. Australia benefitted from mineral export, earning up to AUD 59.2 billion in 2006 alone.
Nigeria, together with other West African Countries fall into the category of mineral endowed economies: each of these countries have the capability of growing their solid mineral extractive industry.

DISTRIBUTION OF THE WORLD’S LARGEST EXPLORATION COMPANIES
DISTRIBUTION OF THE WORLD’S LARGEST EXPLORATION COMPANIES
GLOBAL EXPLORATION BUDGETS
BUDGETARY SHARE BY LOCATIONS
NIGERIA’S GEOSCIENCES DATA
MINERALS FOUND IN NIGERIA
CHARACTERISTICS OF THE PLAYING FIELD AND THE PLAYERS
THE PLAYERS AND THE PLAYING FIELD
WHAT ARE THE RISKS IN THE MINING BUSINESS ?

FINDING SOLUTIONS TO MANAGE RISKS IN THE MINING INDUSTRY
Mining industries require leading solutions and services for managing the risks exposures related to exploration and other stages of the mining business.
Mining industries require leading solutions and services for
managing the risks exposures related to exploration and other
stages of the mining business.
Operational liabilities
Flooding
Equipment damage
Health and safety
Surface, underground, caving in
3rd party contractors
Pollution
Loss or revenue etc.
Political risk
WORLD INSURANCE PENETRATION
STEPS TO ENCOURAGE MASSIVE INVESTMENT IN THE MINING BUSINESS
REDUCE AND MANAGE THE RISKS FOR MINING SECTOR INVESTORS BY:
PROVIDING ACCESS TO FUNDS
PREREQUISITES INCLUDE THE FOLLOWING:
COMPLIANCE TO GLOBAL BEST PRACTICES IN ALL ASPECTS OF THE PROCESSES
INVOLVEMENT OF STOCK EXCHANGE, BANKS AND OTHER FINANCIAL INSTITUTIONS
ROLE OF INSURANCE COMPANIES IN DEVELOPED MINING ECONOMIES
EXAMPLES OF SUCCESSFUL COUNTRIES WHERE MINING INSURANCE COMPANIES PLAY A CRUCIAL ROLE IN THEIR ECONOMIC DEVELOPMENT
CANADA
CHINA
SINGAPORE
AUSTRALIA
MAJOR ZONES OF OPERATION OF MINING INSURANCE COMPANIES
USA
AUSTRALIA
TURKEY
CANADA
MOST OF THESE COMPANIES HAVE THEIR OWN INSURANCE OUTFITS AS WELL
THE WAY FORWARD FOR MINING INSURANCE INDUSTRY IN NIGERIA
THEY HAVE TO ENGAGE WITH:
THE MINING COMPANIES
GOVERNMENT
CONSULTANTS
THINKING OUTSIDE THE BOX
THINK OUTSIDE THE BOX
THINKING OUTSIDE THE BOX
MINING INSURANCE COMPANIES
SPECIAL PURPOSE INSURANCE VEHICLES (SPIVs)
BONDED WAREHOUSES
LABORATORY TESTING CENTERS
NON CONFLICT AND OTHER GLOBAL INVESTMENT OPPORTUNITIES
HOMEGROWN NETWORKS FOR GLOBAL PARTNERSHIPS

THINKING OUTSIDE THE BOX
MINING INSURANCE COMPANIES:
Government promoted
By Equity
By Bonds
Partnerships
Foreign participation
HOW?
By Executive Fiat
SMEDAN in July 2003

THINKING OUTSIDE THE BOX
SPECIAL PURPOSE INSURANCE VEHICLES (SPIVs)
Risk Cover for SPIVs going into JV with Nigerian Companies
Covers for the various stages of mining exploration and losses resulting from equipment failure
Cover in times of low reserves and low commodity prices
Provision of Funds from big Stock Exchanges like TSX and ASX
SPIVs boost investor confidence

THINKING OUTSIDE THE BOX
BONDED WAREHOUSES
Established as a
Business equivalent to Tank Farms
Precursor to a Metal Exchange

THINKING OUTSIDE THE BOX
LABORATORY TESTING CENTERS
Dearth of Quality Infrastructure and
Assurance for Safety, Integrity, and Market acceptance of Nigerian non-oil goods and services

THINKING OUTSIDE THE BOX
NON CONFLICT AND OTHER GLOBAL INVESTMENT OPPORTUNITIES
Upsurge in global prices of Ores for the production of Tin, Tantalum, Tungsten and Gold from non-conflict regions assures Nigeria of tremendous opportunities.
Apple for example has stringent measures in place
WORLD DEMAND OF COAL WILL HIT

THINKING OUTSIDE THE BOX
HOMEGROWN NETWORKS FOR GLOBAL PARTNERSHIPS
Create networks /
Partner with international investors
to underwrite mining risk insurance.
An avenue to increase the Insurance Penetration rate to move not just Nigeria but Africa as a whole from below 2% of the global average

THINKING OUTSIDE THE BOX
CONCLUSION:
MINING COMPANIES PLAY A CRUCIAL ROLE IN FAST RACKING THE MINERALS BUSINESS LIKE IN MANY MINERAL DEVELOPED COUNTIES
CURRENTLY, The FGN has declared the solid minerals sector as a focus for national prosperity
Area Geophysical surveys have been carried out on gold, tantalite and metallic minerals
The Mining Cadastre has set up a world class home grown mines land administration system
The Hon. Minster of Solid Minerals Development has confirmed that further exploration will be funded by Government.
He has further stated that an Intervention Fund will soon be put in place.
Conclusion cont’d
EXPECTATIONS FROM THE PRIVATE SECTOR

Put in place a financial structure to raise funds for mining from the Stock Exchange
Put in an insurance structure to provide needed cover for major and junior mining companies.
Nigeria’s Insurance penetration to rise beyond 0.3% and that of Africa to rise to beyond 2%
This is what will move Nigeria into the World Group of Mineral Developed Economies

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