NATURAL RESOURCES IN LAOS
Natural resources: timber, hydropower, gypsum, tin, gold, gemstones
Laos is fairly rich in natural resources and mineral wealth is largely unexploited. Tin and gypsum for a long time were the only minerals that have been exploited. Other minerals found in Laos include lead, zinc, coal, potash, iron ore, gold, petroleum, and some precious stones.
Laos's main resources are its diminishing forests and potential hydroelectric power. No significant oil or natural gas have been found in Laos but some exploration has been done in southern and northern Laos.
Martin Petty of Reuters wrote: Laos’ boom “is fuelled by mining and hydropower, accounting for 80 percent of foreign direct investment (FDI) and half of gross domestic product (GDP) growth. Export revenue from copper and gold from Laos's two big mines was projected to reach $1.3 billion and $240 million respectively this year, double the 2009 figure, according to the International Monetary Fund (IMF). [Source: Martin Petty, Reuters, December 18, 2011]
The natural resources of Laos—including coal, hydroelectric potential, and mineral deposits—are attracting development interest in the country. According to the Wall Street Journal (September 16, 2004; "Laos Is Looking Like a Gold Mine To Foreigners" by Patrick Barta), foreign investors are looking to capitalize on Laos' underdeveloped mineral resources. With gold prices steady over $400 and few new deposits turning up in the usual places, mining companies are flocking to Laos, which holds the dubious record of being the most bombed country in the world despite never officially being involved in the Vietnam war, may become an important source of revenue for mining companies willing to take on the extra risk associated with operating in a country with large amounts of unexploded ordnance and poor infrastructure. [Source: Mongabay.com]
Assessments of mineral reserves are imprecise, because by 1991 most of the country had not been geologically surveyed in a detailed manner. According to 1991 estimates, deposits of gemstones, gold, gypsum, iron, lead, potash, silver, tin, and zinc have relatively high commercial development potential, but mining activity is on an extremely small scale. In addition, Laos has small deposits of aluminum, antimony, chromium, coal, and manganese, as well as potential for oil and natural gas. In 1989 exploration agreements for oil and gas were signed with British, French, and United States companies. [Source: Library of Congress, 1994 *]
Mining operations are carried out by state mining enterprises, and supervised by the Department of Geology and Mines and small- scale miners. Production of tin — the principal mineral export — decreased 50 percent between 1975 and 1988, to about 240 tons. Gypsum production increased 167 percent between 1980 and 1988, to about 80,000 tons. Salt production increased 233 percent between 1981 and 1988, to eleven tons. Coal production increased more than 600 percent between 1982 and 1988, to about 800 tons. In addition to commercial enterprises, some individual households pan for alluvial gold on the Mekong as well as on small streams during the dry season to supplement household incomes. *
Environmental Impact of Mining in Laos
With the prospect of expanded mining operations in Laos, there is considerable concern over the environmental impact. Clear-cutting and the use of chemicals, especially mercury and cyanide, can cause severe ecological damage. Mining also exposes previously buried metal sulfides to atmospheric oxygen, causing their conversion to sulfuric acid and metal oxides, which run off into local waterways. Oxides tend to be more soluble in water and contaminate local rivers with heavy metals, affecting human populations and wildlife. In the short term, the financial opportunities presented by mining overwhelm the potential ecological effects. For example, at peak production, a $330-million operation run by Australia-owned Oxiana should yield as much as $15 million in royalties and taxes for Laos—a significant sum in Laos. [Source: Mongabay.com \~]
Gold Mining and Gold Panning in Laos
Upriver in the Mekong and other rivers in Laos gold is panned during the dry season using an un-environmentally-friendly technique. Sand is first dug up on little islands that emerge from the river when the water is low. The sand is sifted in wooden pans and then mercury is added which wiggles through the sand and forms little blobs. These blobs are then squeezed in pieces of cotton cloth producing dry balls the size of a marble. The mercury bonds with the gold not the materials in the sand. The balls are purchased by merchants who evaporate the gold using a blow torch, leaving 22 karat gold. On a good day a woman—they not men do most of this kind of work not work— made $7 or $8 a day in the 1980s, a good day's pay in Laos at that time. [Source: Peter White, National Geographic, June 1987]
Newmount Mining of Denver leased 2,507 square miles of jungle in Laos to dig for gold. The company signed a deal with the Laos government in the mid 1990s but eventually pulled out of Laos after finding only small quantities of gold. Rio Tinto, the company formed when CRA merged with RTZ of Britain in 1995, discovered copper in 1998. Rich as Sepon was, Rio Tinto decided that it too small to bother with.
In December 2004, SAPA reported: AngloGold Ashanti, a Ghanaian-South African gold mining company, said it would explore for gold in Laos following an exploration alliance with Oxiana Limited of Laos. A statement said the agreement with Oxiana follows AngloGold Ashanti's investment in Trans-Serbian Gold in Russia and a strategic alliance in the Philippines with Red 5 Limited. “This initiative aims to further unlock Laos’ gold potential by combining AngloGold Ashanti’s technical expertise with Oxiana’s in-depth country knowledge and operating experience,” the company said.[Source: SAPA, December 15, 2004]
The alliance is part of a business development strategy to assess opportunities in prospective but underexplored new frontier regions, the company said. AngloGold Ashanti said the alliance would explore for gold throughout the country except for areas held or under application by Oxiana. The first phase would be funded jointly by the two companies. Oxiana would be the initial manager with staff from the two companies. Any resulting projects would be owned equally by the two companies, according to the agreement. The South African company AngloGold merged with the Ghanaian company Ashanti Gold Company Limited in 2004. The strategic exploration alliance in Laos between AngloGold Ashanti and Oxiana Ltd expired in December 2007 and was not extended by mutual agreement.
Mining Gold in Laos Among Unexploded Bombs
Wayne Arnold wrote in the New York Times, “The earth here is suffused with metal millions of ounces of gold, millions of tons of copper and thousands of pounds of very old, very live American bombs left over from the Vietnam War. ''You factor it into everything you do,'' said Michael Wilkes, project manager for Oxiana Resources, a small Australian company that is developing a mine here. ''Before you go anywhere, you have to have it cleared.'' Long before miners ever heard of the Sepon camp, American pilots knew the area as the head of the Ho Chi Minh Trail and a transit point for troops and supplies heading from North Vietnam through Laos and Cambodia to South Vietnam. More American bombs were dropped on this stretch of territory than on Vietnam or on Europe in World War II. [Source: Wayne Arnold, New York Times, March 5, 2002 ~~]
“Now, Oxiana is helping to turn this bomb-riddled patch of jungle into part of Laos's first special economic zone. Oxiana's project, about 250 miles southeast of the capital, Vientiane, is the first significant foreign mining investment in Laos. When the mine is opened later this year, workers will begin to extract what the company projects is roughly $1 billion in gold and almost $2 billion in copper. ~~
“The Laotian government is counting on Oxiana's mine to provide desperately needed tax revenue and to help end a drought in foreign investment that has left Laos, an impoverished Communist backwater, more dependent than ever on aid. ''Investments like Oxiana's could turn things in the opposite direction,'' said Paul V. Turner, the resident representative for the Asian Development Bank in Vientiane. The International Finance Corporation, a private investment arm of the World Bank, has already agreed to lend Oxiana $30 million of the $46 million the company estimates it will cost to build its gold mine. Oxiana then plans to use its profit from the gold to develop a $100 million copper mine. ~~
“Officials in Vientiane say the mine is likely to encourage other development projects in the area. The mine needs power, so there are plans to build a hydroelectric dam nearby. Copper will be trucked out, and construction is already under way on a two-lane highway across Laos from Thailand to Vietnam. ~~
“Oxiana is helping the Laos government eliminate unexploded ordnance, a scourge that kills at least 100 Laotians a year. It is a painstaking process. Crews use powerful metal detectors to search for objects as far as 10 feet below the ground. So far, they have found about 2,000 explosive devices — from 1,000-pound bombs to fist-size antipersonnel weapons. Oxiana prefers not to dwell on the unexploded weapons. ''It sends the wrong message,'' Mr. Wilkes said, adding, ''It doesn't make the project any riskier or less economical.'' In the 10 years that miners have been exploring the area, he declared, none have been hurt by a bomb. ~~
Oxiana Mining Company’s Quest for Gold and Copper in Laos
Wayne Arnold wrote in the New York Times, “It helps to have a local guide. For Oxiana, that is Saman Aneka, who grew up not far from Sepon. Now 47, he remembers as a teenager watching American bombers drop their payloads. Mr. Saman studied geology in the Soviet Union and after a brief stint in government joined an Australian mining company, CRA, to explore Sepon in 1990. People who live near Sepon have long known the area as Muang Ang Kham, the district of the gold valleys. In the early 80's, Soviet geologists found Laotians panning for gold with chunks of shrapnel and aircraft wreckage. [Source: Wayne Arnold, New York Times, March 5, 2002 ~~]
“CRA saw potential in the area, but winning a deal with the government on taxes and mining rights took more than two years of negotiations, said Robert Maloney, an Australian lawyer who worked for CRA in Laos at the time. Laos had no mining law and officials had little concept of the industry. ''A lot of it was basically education to explain what risk and reward was,'' Mr. Maloney said. And there were numbers of visiting investors, not all of them reliable. ~~
“It helped that CRA was not the only mining company working with the Laotians. Newmont Mining was also negotiating a contract to explore for gold in the northern part of Laos, and in 1993 it clinched a deal. Just weeks later, CRA won a contract giving it the exclusive right to explore a 1,930-square-mile area around Sepon. But when CRA's surveyors arrived, they were slowed by malaria and other diseases, said Antony Manini, who came to Sepon for CRA and also now works for Oxiana. To avoid the unexploded bombs, they carried metal detectors everywhere they walked. The bombs also yielded some happy surprises. While surveying one day in 1995, Mr. Saman and two other geologists stumbled on evidence of gold in rock formations that war created. What he and his colleagues jokingly called ''bomb crater geology'' turned out to be one of Sepon's biggest gold finds. ~~
“Oxiana estimates it is sitting on top of 3.5 million ounces — at the current commodity price of gold worth more than $1 billion. Yet it is the copper that excites Mr. Wilkes most. ''It's super-high-grade,'' he said. After Rio Tinto decided not to exploit the copper it found in Laos, Owen L. Hegarty, a former Rio Tinto executive who had left that company to help start Oxiana, saw opportunity. In 2000, Mr. Hegarty won a deal for Oxiana to pay Rio Tinto the roughly $22 million it had spent on developing the site in return for an 80 percent interest in the project. ~~
“As incentives, Laos has exempted Oxiana from corporate taxes for two years as well as its employees from having to pay income taxes. It has waived duties on imported equipment and is permitting Oxiana to hire a customs official to be posted on site, eliminating long waits for shipments at the border. In return, Laos is to receive a 2.5 percent royalty on the value of the ore mined, taxes on Oxiana's profits after the two-year exempt period, and an option to buy a 10 percent interest in the mine.” ~~
Image Sources:
Text Sources: New York Times, Washington Post, Los Angeles Times, Times of London, Lonely Planet Guides, Library of Congress, Laos-Guide-999.com, Compton’s Encyclopedia, The Guardian, National Geographic, Smithsonian magazine, The New Yorker, Time, Newsweek, Reuters, AP, AFP, Wall Street Journal, The Atlantic Monthly, The Economist, Global Viewpoint (Christian Science Monitor), Foreign Policy, Wikipedia, BBC, CNN, NBC News, Fox News and various books and other publications.
Last updated May 2014