Mining investment risk at highest since 2018 — report
Investment risk within the mining industry reached a seven-year high globally in 2023, as companies and investors are now faced with rising legal and regulatory headwinds, said Mining Journal Intelligence in its World Risk Report 2023.
The global average Investment Risk Index (IRI) score – the main measure of risk used in the report – dropped by 2.1 points this year to 58.5 (lower scores mean higher risk) for a B rating, meaning upper moderate risk.
This represents a downgrade on the score of 60.6 or BB (lower moderate risk) in 2022. The average scores are adjusted for the changes in jurisdictions used in the two reports.
According to MJI, the adjusted average IRI scores have fallen gradually since the inaugural report back in 2017, from a high of about 62 in 2018.
The World Risk Report 2023 provides a comprehensive evaluation of mining investment risk, with 80% of IRI scores based on 11 ‘hard risk’ metrics, from established risk-related data. The remaining 20% is based on ‘perceived risk,’ calculated from the World Risk Survey 2023, in which more than 600 mining professionals rated jurisdictions they are familiar with.
Risk is assessed across five categories – legal, governance, social, fiscal, and infrastructure. The report covers 121 jurisdictions this year.
Legal risk
The drop in average IRI in 2023 was partly due to weaker legal scores, the MJI report found.
The legal category – which is the highest-weighted category, accounting for 40% of the IRI – is based on regulatory risk ratings from MJI’s partner MineHutte, which measure risks inherent in legislative frameworks, plus survey responses.
On an adjusted basis, average global Legal scores dropped to 51.7 in 2023 from 53.3 last year.
The fall in IRI was also due in part to changes in how Infrastructure scores were calculated and weaker Fiscal performance, due largely to lower GDP growth. Scores in the Social category improved year-on-year.
Top and bottom risk
Geographically, Canada and the US remained the lowest-risk mining regions in 2023, with average regional IRI scores of 73, or A ratings (low risk). Asia and Africa were the highest-risk regions, averaging 48, or CC (high risk).
Wyoming and South Dakota were the lowest-risk jurisdictions, both on 79 (AA). The Democratic Republic of the Congo (DRC) remained the highest-risk jurisdiction despite a four-point improvement to 34 (D rating), a score matched by Venezuela, a new entry to the rankings.
The World Risk Report 2023 featuring MineHutte Ratings is available here.