Myanmar Metals Ltd. CEO John Lamb believes he has timed the junior's entry perfectly into the country which is expanding trade links with China, but an international mining lawyer who helped Myanmar build its regulations has serious reservations as exploration is still at a trickle.
The ASX-listed junior announced May 25 it had entered two binding agreements to ensure its A$18.5 million share of the Bawdwin polymetallic project option exercise is fully funded, becoming the first ASX-listed company to exercise any option to take operatorship of a world-class asset in the country.
Once those deals go through Myanmar Metals will have 51% of Bawdwin with local Myanmar entities — private company WinMyint Mo Industries Co. Ltd., which holds the concessions, and East Asia Power (Mining) Co. Ltd. — each holding 24.5%.
As a first-mover of sorts in his market, Lamb said the two local partners were chosen as they already conduct trade across the same border into China's Yunnan Province as his company will from its lead-zinc-silver-copper project.
"The Belt and Road [initiative] goes through that 'Oriental Highway'" that runs from Mandalay right up to the border and connects up on the other side and runs through to Kunming in China," Lamb told S&P Global Market Intelligence.
"That is the main artery for cross-border trade into China. The Chinese on their side are busy building the Dali to Ruili railway, a massive infrastructure asset which will have the world's longest railway tunnel and the biggest single-span railway bridge.
"So it's a very important part of the world to be in from an economic development point of view, and our location is just off the side of that major corridor."
Strong trade signals
Argonaut Vice President Stan Wu said it was another sign of strong trade ties that one of Myanmar Metals' partners, East Asia Power (Mining) Co. Ltd., is essentially controlled by the same key shareholders that control Europe and Asia Commercial Co. Ltd., a significant local conglomerate which controls over 70% of the FMCG, or fast-moving consumer goods, market.
Wu, whose firm was the lead manager on the May 25 deal, said many major foreign entities had already identified the opportunity to invest in Myanmar whose economy is expected to grow by 6.8% this year and 7.2% in 2019, according to the Asian Development Bank.
TPG — the first major U.S. private equity firm to invest in Myanmar since the country emerged from military rule — is now, through its vehicle Apollo Towers Myanmar Ltd., reportedly looking to merge with rival Pan Asia Majestic Eagle Ltd. to create the country's largest independent owner of telecom towers.
Norwegian telecom multinational Telenor ASA's Myanmar group has also invested more than US$2 billion in the country.
Lamb also noted that car maker Ford recently built a manufacturing plant in Yangon, Unilever has invested in a big way, as have Australia's biggest oil and gas company Woodside Petroleum Ltd. and many of its larger peers.
"An enormous amount of money is also coming in on property development, tourism, telecommunications and the manufacturers are also starting to move their facilities there," he said.
"So it's the right time for this mine, because you're just seeing the development of Myanmar, with a democratically elected government in office since 2016 really hitting its straps now, and their good work is beginning to bear fruit."
He said it was also significant that China and Myanmar's commerce ministers signed a memorandum of understanding for the Building China-Myanmar Border Economic Cooperation Zone in May 2017.
Regulatory uncertainty persists
International mining lawyer, Mining Standards International Founder Robert Milbourne, assisted Myanmar's previous government reform its mining regulations in 2014 to help bring in foreign investment, then subsequently led a global tender for a major power project there in 2015.
He also advised Anglo American PLC on its exploration in-country and PanAust Ltd. — which was delisted from the ASX in 2015 having been taken over by Guangdong Rising Assets Management Co. Ltd. — on its dealings in Myanmar.
Despite all the efforts made to date, Milbourne said Myanmar's regulatory framework "still requires further reforms to bring it in line with international best practice".
"A company's relationship with the local community should be a high priority and needs to be carefully managed given in light of recent challenges and poor performance of the mining industry in Myanmar," he said.
Lamb conceded that while his company already has a mining concession granted, "you would have to be a little more brave than I to go in at the exploration point at this stage, although as I understand it the new regulations address some of the issues converting exploration leases into mining leases."
"One of the very important things Bawdwin is that, because it's a historical mining area, the concession remains with the tenement and the various other assets associated with it," Lamb said.
S&P Global Market Intelligence data shows that only four companies were exploring in 2017, up from two in 2016; and the firm's Metals & Mining Associate Director Mark Ferguson said, "improving conditions were encouraging some companies to re-enter countries previously deemed too risky."
