RESOURCES - Burma's Buried Booty

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FAR EASTERN ECONOMIC REVIEW - December 9, 1999

RESOURCES

Burma's Buried Booty

Rangoon wants to realize the enormous wealth in this mineral-rich =
country - but it's up against foreign investors' distrust

By Shawn W Crispin at Three Pagodas Pass on the Thai-Burmese border and =
Bertil Lintner in Chiang Mai, Thailand

When Burma was in the thick of civil war, many of the rebel =
ethnic-minority armies financed their insurgencies by trading precious =
stones and metals across the Thai border. But since the Burmese military =
junta con=ADsolidated its grip across most of the coun=ADtry in the =
early 1990s, the flow has all but "In the past, antimony and gems came =
across the border almost every day," says a Thai border policeman at =
Three Pagodas l'ass. "I think it all goes through Rangoon now Nothing =
moves through here any more-except methamphetamines."

Without question, the potential hidden wealth of mineral resources was a =
central reason for Ran=ADgoon's lengthy war against the ethnic =
minorities. At least in  one  respect, though, the victory has been =
pyrrhic, as most of this hidden bounty re=ADmains underground due to the =
junta's lack of capital, equipment and know-how.

That's bad news for the junta. Sales of minerals would provide foreign =
exchange to buy desper=ADately needed fertilizers, spare parts for =
machinery and capital goods. Burma's foreign  reserves  have fallen to =
$50 million or less. It earns some foreign currency from exports of =
timber, rice and narcotics, but not nearly enough.

Darin Kobatake, a lawyer at Bangkok Internahonal Associates who deals =
with mining issues in Burma, says Rangoon is now seeking to stimulate =
industries that can provide short-term foreign-currency in=ADcome. "The =
mining sector," says Kobatake, enjoys one of the greatest potentials to =
generate this income."

The military government clearly sees that potential. In its most recent =
five-year development plan, issued in 1996, it prior=ADitized the =
exploitation of mineral resources to generate a fresh source of foreign =
currency. Yet as of 1997, the latest year for which figures are =
available, mining exports totalled 258.7 million kyat (then around $1.5 =
million) or just 5% of total acknowl=ADedged exports.

In 1994, the junta passed extensive legislation in an attempt to woo =
foreign investors into joint ventures with state enteiprises to help =
revitalize operating mines and explore for new deposits of minerals =
including copper, lead, zinc, gold and iron. Since then, the military =
govern=ADment has offered a series of invitations to foreign investors =
to bid on 1,400-square-kilometre blocks for exploration and possible =
joint production rights. To date, only one of the 26 blocks awarded is =
active; the junta was forced to cancel a fresh round of invitations in =
October due to lack of interest.

The sole active bidder is Ivanhoe Myanmar Holdings, a 50-50 venture =
between Singapore-based Ivanhoe Mines and the government's Mining State =
Enter=ADprise No. 1. Ivanhoe is one of several related companies that =
have been granted exploration rights to half the concessions.

The firms are either owned or chaired Robert Friedland, a mining =
entrepreneur. Friedland launched his mining enterprise in Asia in 1994 =
after a first venture Colorado ended in an environmental disaster that =
prompted him to declare bank- ruptcy in the United States. At present =
Ivanhoe is working the Myonwa copper mine in central Burma, which =
Executive Vice-President Daniel Kunz says produced 14 million pounds of =
copper in the first nine months of the year. "Burma is one of the most =
under-explored, resource-rich countries in the region," Kunz gushes. He =
says other mining firms are "naive" over-emphasizing political risk.

Most other mining executives disagree. A recent survey of the chief =
executives the 50 top mining corporations in the world conducted by the =
London-based Mining Journal, found Burma to be one the 10 "least =
favoured" countries for investment.

That low ranking is not primarily due to the country's pariah status in =
the West. The lack ol well-defined and enforced regulatory regime makes =
most potential investors uneasy. "Burma has dubious legal system says a =
Sydney-based mining analyst at a major investment bank." The question =
everyone is asking is if you find some-thing really big, will you be =
able to keep it?"

That's not the only risk: Once a deal is cut in Rangoon, it may come =
undone up-country. Many region military   commanders have made fiefdoms =
of the ethnic territories they control and enjoy growing clout; the =
final terms of any agreement must meet with their approval. The Mining =
Journal says ther have been instances in which the Ministry of Mines has =
relinquished mineral rights to regional commanders with whom foreign =
investors must further negotiate.

Kriangsak Kaewsat, exploration manager at Padaeng Industry, a Thai-based =
zinc smelting company that buys slag through an intermediary from Burma, =
points to the "uncertainty of the political situafion along the =
Thai-Burmese border as a deterrent to further investment in the country.

For now, the lack of well-defined regulatory regime and political =
uncertainty are working to ensure that Burma's buried economic potential =
remains below ground.=20


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<BODY bgColor=3D#ffffff><FONT face=3DArial size=3D3>
<DIV align=3Djustify><FONT color=3D#0000ff size=3D4><STRONG>FAR EASTERN =
ECONOMIC=20
REVIEW - December 9, 1999</STRONG></FONT></DIV>
<DIV align=3Djustify>&nbsp;</DIV>
<DIV align=3Djustify><STRONG><FONT color=3D#800000=20
size=3D4>RESOURCES</FONT></STRONG></DIV>
<DIV align=3Djustify><BR><FONT color=3D#800000 size=3D4><STRONG>Burma's =
Buried=20
Booty</STRONG></FONT></DIV>
<DIV align=3Djustify>&nbsp;</DIV>
<DIV align=3Djustify><FONT color=3D#800000><STRONG>Rangoon wants to =
realize the=20
enormous wealth in this mineral-rich country - but it's up against =
foreign=20
investors' distrust</STRONG></FONT></DIV>
<DIV align=3Djustify><BR>By Shawn W Crispin at Three Pagodas Pass on the =

Thai-Burmese border and Bertil Lintner in Chiang Mai, Thailand</DIV>
<DIV align=3Djustify>&nbsp;</DIV>
<DIV align=3Djustify>When Burma was in the thick of civil war, many of =
the rebel=20
ethnic-minority armies financed their insurgencies by trading precious =
stones=20
and metals across the Thai border. But since the Burmese military junta=20
con&shy;solidated its grip across most of the coun&shy;try in the early =
1990s,=20
the flow has all but "In the past, antimony and gems came across the =
border=20
almost every day," says a Thai border policeman at Three Pagodas l'ass. =
"I think=20
it all goes through Rangoon now Nothing moves through here any =
more-except=20
methamphetamines."</DIV>
<DIV align=3Djustify><BR>Without question, the potential hidden wealth =
of mineral=20
resources was a central reason for Ran&shy;goon's lengthy war against =
the ethnic=20
minorities. At least in&nbsp; one&nbsp; respect, though, the victory has =
been=20
pyrrhic, as most of this hidden bounty re&shy;mains underground due to =
the=20
junta's lack of capital, equipment and know-how.</DIV>
<DIV align=3Djustify><BR>That's bad news for the junta. Sales of =
minerals would=20
provide foreign exchange to buy desper&shy;ately needed fertilizers, =
spare parts=20
for machinery and capital goods. Burma's foreign&nbsp; reserves&nbsp; =
have=20
fallen to $50 million or less. It earns some foreign currency from =
exports of=20
timber, rice and narcotics, but not nearly enough.</DIV>
<DIV align=3Djustify><BR>Darin Kobatake, a lawyer at Bangkok =
Internahonal=20
Associates who deals with mining issues in Burma, says Rangoon is now =
seeking to=20
stimulate industries that can provide short-term foreign-currency =
in&shy;come.=20
"The mining sector," says Kobatake, enjoys one of the greatest =
potentials to=20
generate this income."</DIV>
<DIV align=3Djustify><BR>The military government clearly sees that =
potential. In=20
its most recent five-year development plan, issued in 1996, it =
prior&shy;itized=20
the exploitation of mineral resources to generate a fresh source of =
foreign=20
currency. Yet as of 1997, the latest year for which figures are =
available,=20
mining exports totalled 258.7 million kyat (then around $1.5 million) or =
just 5%=20
of total acknowl&shy;edged exports.</DIV>
<DIV align=3Djustify><BR>In 1994, the junta passed extensive legislation =
in an=20
attempt to woo foreign investors into joint ventures with state =
enteiprises to=20
help revitalize operating mines and explore for new deposits of minerals =

including copper, lead, zinc, gold and iron. Since then, the military=20
govern&shy;ment has offered a series of invitations to foreign investors =
to bid=20
on 1,400-square-kilometre blocks for exploration and possible joint =
production=20
rights. To date, only one of the 26 blocks awarded is active; the junta =
was=20
forced to cancel a fresh round of invitations in October due to lack of=20
interest.</DIV>
<DIV align=3Djustify><BR>The sole active bidder is Ivanhoe Myanmar =
Holdings, a=20
50-50 venture between Singapore-based Ivanhoe Mines and the government's =
Mining=20
State Enter&shy;prise No. 1. Ivanhoe is one of several related companies =
that=20
have been granted exploration rights to half the concessions.</DIV>
<DIV align=3Djustify><BR>The firms are either owned or chaired Robert =
Friedland, a=20
mining entrepreneur. Friedland launched his mining enterprise in Asia in =
1994=20
after a first venture Colorado ended in an environmental disaster that =
prompted=20
him to declare bank- ruptcy in the United States. At present Ivanhoe is =
working=20
the Myonwa copper mine in central Burma, which Executive Vice-President =
Daniel=20
Kunz says produced 14 million pounds of copper in the first nine months =
of the=20
year. "Burma is one of the most under-explored, resource-rich countries =
in the=20
region," Kunz gushes. He says other mining firms are "naive" =
over-emphasizing=20
political risk.</DIV>
<DIV align=3Djustify><BR>Most other mining executives disagree. A recent =
survey of=20
the chief executives the 50 top mining corporations in the world =
conducted by=20
the London-based Mining Journal, found Burma to be one the 10 "least =
favoured"=20
countries for investment.</DIV>
<DIV align=3Djustify><BR>That low ranking is not primarily due to the =
country's=20
pariah status in the West. The lack ol well-defined and enforced =
regulatory=20
regime makes most potential investors uneasy. "Burma has dubious legal =
system=20
says a Sydney-based mining analyst at a major investment bank." The =
question=20
everyone is asking is if you find some-thing really big, will you be =
able to=20
keep it?"</DIV>
<DIV align=3Djustify><BR>That's not the only risk: Once a deal is cut in =
Rangoon,=20
it may come undone up-country. Many region military&nbsp;&nbsp; =
commanders have=20
made fiefdoms&nbsp;of the ethnic territories they control and enjoy =
growing=20
clout; the final terms&nbsp;of any agreement must meet with their =
approval. The=20
Mining Journal says ther have been instances in which the Ministry of =
Mines has=20
relinquished mineral rights to regional commanders with whom foreign =
investors=20
must further negotiate.</DIV>
<DIV align=3Djustify><BR>Kriangsak Kaewsat, exploration manager at =
Padaeng=20
Industry, a Thai-based zinc smelting company that buys slag through an=20
intermediary from Burma, points to the "uncertainty of the political =
situafion=20
along the Thai-Burmese border as a deterrent to further investment in =
the=20
country.</DIV>
<DIV align=3Djustify><BR>For now, the lack of well-defined regulatory =
regime and=20
political uncertainty are working to ensure that Burma's buried economic =

potential remains below ground. </DIV>
<DIV align=3Djustify>&nbsp;</DIV>
<DIV align=3Djustify>
<HR>
</DIV></FONT></BODY></HTML>

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