Correlating Economic and Social data for a Globalized Mineral Investment

CIM Montreal 2003
Sean Dessureault, Michael Rieber,
Abstract Globalization and the search for new ore deposits inevitably lead to investment in foreign markets. Investors need to be aware of the effect of their venture on the regional social, and economic issues when they invest. Decades of detailed statistics from various sources can be integrated and analyzed mitigating risk and measuring and social-economic effects. The correlation among such variables as foreign direct investment into mining (FDIM), reserves, and socio-economic indexes is examined. The investigation focuses on South America from 1992 to 2000.

Throughout the past decade, South America has benefited from capital investment from more developed countries. This huge investment by the mining industry during the period has had an impact on the South American economies which can be measured directly the FDIM. Other economic variables investigated include mining gross domestic product, direct employment, and human development indexes. The correlation is based on accumulated data from the World Bank, international risk assessment agencies, the United States Geological Survey (USGS), and the information agencies of various South American countries.

Initial analysis of the economic data suggests various expected outcomes. For example, foreign investors may disregard a measured, highly negative country risk in deference to the quality of its mineral resources. It is important to note that the standard measures of country risk are not designed for specific industries or for all investors. In the case of the investor, the level of accepted risk is based on their managed investment portfolio. It is noted that arguments for level-playing fields may be the antithesis of globalization.

The discovery and exploitation of ore bodies in a globalized environment necessitates the development of economic measures that standardize mining-specific risk variables and trends. The latest published information on the security of mineral investments in South America are investigated by integrating databases of economic, geologic, production, human indexes, and risk ranking.
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