Global Mining Deals 2010: The Rise of Frontier Markets – Five Risks

The expectation of sustained commodity demand has increased investor interest in mining projects in frontier markets. Frontier markets are generally characterized as being less politically stable places that have a relatively recent history of steady mining activity and therefore provide a more uncertain operating environment for mining companies, particularly when compared to more mature emerging markets with longer track records of inbound investments in the mining sector. As such, these countries have a unique set of political risks associated with their mining sectors that companies involved in the space should be aware of. We have profiled five such risks.

1. Security: Often, the lack of mining sector development in a frontier market is due to poor security conditions that threaten the physical safety of mining staff or disrupt mining operations. The security uncertainties in turn often stem from internal conflicts and/or from social and environmental