Capital Metals (LON: CMET) is having problems dealing with the bureaucracy in Sri Lanka. Or, if we were to be somewhat old fashioned about this, problems dealing with the legal and political management system employed by Johnny Foreigner over there in Sri Lanka. Given the recent economic implosion on that lovely island we might not be all that surprised about this - the collapse of the economy was entirely to do with the imposition of particularly stupid isolationist, nativist, economic policies. So, the idea that this might also apply to mining permits shouldn't come as the hugest of surprises.
The particular project is a very tempting mineral sands operation. Certain minerals (ilmenite, rutile, zircon garnet, say and not exclusively) are often mined from sand. The base idea is that they all used to be in the rock in the mountains. Water action - over millions of years - erodes the mountains and the minerals end up in the river bed. Where, given their greater or lower density the water action sorts them into beds and deposits. This is what makes the tin deposit at Bangka and Belitung so rich and easy to mine. So, to gain access to the ilmenite etc simply dig up the sand, a bit of gravity separation and we've our sorted minerals that can be sent off to refiners. Simple, not necessarily the most wondrously profitable of businesses but it's well known how to do it.
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Now comes the problem. By definition mines are where they are, in the legal jurisdiction they happen to be in. Indeed, mining itself can be described as the process of taking the minerals out of that legal jurisdiction. So, it matters what the politics and rule of law are like where the mine is. Equatorial found this out when they claimed that Congo was a safe and reasonable place to go mining. Atlantic Lithium, it has been suggested, got a little too local in its approach to doing business in Ghana.
Capital Metals finds that the Sri Lankan authorities want majority local ownership of the mining operation. Well, OK. But having organised that then the bureaucracy is providing no acknowledgement of the fact that it has been done. Nothing can progress - certainly not financing and offtake contracts - without all the paperwork being done. But if the bureaucracy refuses to do any paperwork then, well, where's the project now then?
Yes, of course, it's dreadfully archaic, possibly objectionable, to start talking about Johnny Foreigner in such circumstances. But the underlying problem is entirely true. Other places, other countries, might not have the same attitudes toward the law, contracts, business