Investors

Mining in Tibet is Risky Business! Resource extraction projects in Tibet pose the following risks to investors:

Financial Risks

Weak rule of law: Foreign companies doing business in Tibet face the challenge of China’s weak rule of law, especially regulatory laws and lack of enforcement. Orchid Capital, an Australian venture capital company, experienced this first hand in 2005 in their failed attempt to establish a mine operation in central Tibet. Despite signing a Letter of Intent with the TAR Government the government began negotiating with a Chinese competitor to Orchid. When Orchid discovered this Orchid saw no avenue for recourse and so pulled out of Tibet – despite already spending several millions of dollars on preliminary work proving up potential sites. Orchid’s investors also suffered – Orchid’s share price almost halved in the space of a month on the back of Orchid’s Tibet adventure.

Political instability: As more non-Tibetan settlers are drawn to Tibet by economic incentives provided by the Chinese government, the likelihood of political instability in the region is increasing. If a conflict were to erupt between Chinese authorities and local Tibetan communities near a foreign owned mine operation, it may shut down critical supply routes and impede production. Conflict can also arise at a mine site if mine operations continue despite opposition from local Tibetans who will not benefit from the extraction of their own natural resources.

Divestment Campaign: Tibetans and Tibet support groups view the exploitation without consent of Tibet’s natural resources by foreign companies as a violation of the Tibetan people’s economic rights. SinoGold, the first Western company to attempt opening a mine in Tibet was forced to withdraw from Tibet in 2005 following a high-profile campaign targeting their Tibet plans.

In 2000, PetroChina, which was responsible for building a gas pipeline through Tibet, experienced massive financial losses and only managed to raise US$3 billion of an expected US$10 billion at its initial public offering (IPO). Major US financial institutions boycotted the listing because of pressure from labour, human rights, and environmental groups. Tibet support groups in coalition with environmental organizations also forced the Chinese government to retract its bid for a $40 million loan from the World Bank to resettle 58,000 Chinese farmers onto Tibetan lands. This landmark decision came after the Bank’s Inspection Panel found the project would be in violation of a number of the World Bank’s own policies.

Reputational Risks

Human rights violations: Chinese government sponsored repression of human rights in Tibet and China is well-documented. Tibetans inside occupied Tibet continue to live in a climate of fear, making it impossible for companies to ensure that communities have freely consented to a project. Tibetans who speak out against government supported development, face possible arrest, imprisonment, and torture. Canadian companies run the risk of being associated with human rights abuses perpetrated against Tibetans living in and around proposed mine sites.

Environmental disasters: Gold mining has a record of causing significant environmental damage. In Tibet, where industry regulatory standards are almost non-existent and government oversight is minimal at best, there is an even greater potential for environmental damage to occur. A mine related disaster, for example a cyanide spill from a tailing dam, would equate to a reputational disaster for the participating company and its investors.

Public Scrutiny: High profile campaigns by Tibetans and their supporters can also be damaging to a company’s reputation. Canadian companies inlcuding Bombardier and Nortel know this all too well after facing intense and damaging public scrutiny over their role in building the controversial China-Tibet railway. Canadians and the international community are more concerned than ever with corporate behaviour. Developing operations in Tibet, an occupied country, clearly contradicts even the most basic standards of ethical business practices and is highly damaging to a company’s public image.

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