Country Report Laos June 2009

The domestic economy: Development of mineral reserves continues

According to a survey published in May by the Ministry of Energy and Mining, large mineral reserves remain to be exploited in Laos. The figures are based on primary surveys of about 65% of Laos's 236,800 sq km of territory, but the ministry concedes that does not have the resources to conduct more comprehensive surveys and that not all private investors are providing accurate and detailed information. The survey lists 17m tonnes of gold ore, which could be processed into 143 tonnes of gold, 182m tonnes of copper ore that could produce 2.9m tonnes of the metal, and 0.8m tonnes of lead-zinc ore that could be refined into 0.2m tonnes of metal. It also details 1.6m tonnes of tin ore, 125m tonnes of aluminium ore, 14m tonnes of iron ore, 128m tonnes of gypsum, 399m tonnes of potash, 374m tonnes of coal and 44m tonnes of limestone.

Currently 132 mines are operational in Laos, the largest of which is the Sepon gold and copper mine in Savannakhet province. In 2008 the mine was valued at US$2.2bn-2.4bn, but its value fell to US$520m-560m this year owing to the global collapse of commodity prices. The sale of the mine by an Australian company, OZ Minerals, to a Chinese state-owned company, Minmetals, is expected to be approved by OZ shareholders in June. Meanwhile, the Australian parent company of Laos's Phu Bia Mining, PanAust, looks set to sell 20% of its stock to a Chinese investment group, Guangdong Rising Assets Management. Phu Bia has said that the sale will not affect the mine's management structure or the Lao government's shareholding. The sale is required to pay off debt and to fund expansion at the Phu Kham copper-gold mine and to develop the Ban Houayxai gold-silver project. Phu Bia is confident about the medium- to long-term outlook for copper prices, given that demand is expected to grow, particularly in China. The company aims to produce 65,000 tonnes of copper, 70,000 oz of gold and 500,000 oz of silver this year.

Local officials are trying to allay fears that a planned US$4bn bauxite project on the Bolovens Plateau in southern Laos will strip topsoil from large swathes of the country's major coffee-growing area. Champassak province's planning and investment department director, Nalongsak Xattakhoune, told national media in May that the proposed mine would not encroach on coffee plantations and that the projected aluminium processing plant would be built 100 km away from the bauxite quarry-far enough to ensure that coffee plantations would not suffer from the associated pollution. However, coffee producers remain concerned. A member of the Lao Coffee Association, Viengkham Sisanguan, has complained that discussions about the impact of the project say something different, leaving producers confused. The plateau produces 20-25 tonnes of coffee per year, generating about US$33m in exports.

Vietnamese lobbying for mining concessions in Laos is proving successful, with three project agreements signed in recent months. In April, Hoang Phat Forestry and Minerals was awarded a concession to explore and exploit copper ore in the northern province of Luang Namtha. The three-year contract provides for an initial investment of US$3m for a one-year exploration period and two-year mining period, which may be extended after further negotiations. In early May a second Vietnamese company, Esaco, signed a US$7m agreement, which gave the firm copper exploration rights over 396 sq km in the southern province of Attapeu. Another Vietnamese miner, Cavico, has teamed up with two Lao partners to explore for copper in Vientiane province. Cavico is providing 78% of the US$30m investment, with the exploration phase estimated to cost US$4m, according to Vietnamese state media.

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