Capital Metals (LON: CMET) shares are up 14% this morning in London. CMET shares have risen on hte news that the assumed to be corrupt Minister in Sri Lanka has just been fired. What’s going to be interesting here is seeing whether this does actually solve the problem or not. For it’s possible that there was just the one bad egg in the basket. Or, obviously enough, it is also possible that the system more generally has problems with the rule of law. We might be about to find out.
It’s worth noting that there really are parts of the world that still operate to a different ethical standard than we might think righteous. We've made comments about West Africa here often enough with respect to Atlantic Lithium, Leo Lithium and Kodal Minerals for example.It’s possible to get shocked and upset about this but the rational investor will simply include it all in calculations about value.
There’s been a problem in Sri Lanka for Capital Metals: “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? “
Capital Metals share price from Google Finance
But now there might be a solution: “As a result of his expulsion, Mr Ahamad has lost his parliamentary seat and therefore his position as Minister of Environment with responsibility for the Geological Survey and Mines Bureau ("GSMB"). Mr Ahamad and the Chairman of the GSMB, whom the Minister appointed to the position, were named by the Company as respondents in the Company's legal proceedings instituted in the Court of Appeal of the Democratic Socialist Republic of Sri Lanka ("Court"), seeking the intervention of the Court in respect of the notice of cancellation of the Company's Industrial Mining Licences ("IMLs") issued by the GSMB.”
There are parts of the world - sad to say it but it is true - that this would just mean a different person standing there with their hand out. Others where the removal of one specific individual does mean the return of normal contractual law. We’re about to find out about Sri Lanka - is it an individual or is it the system as a whole? So too will Capital Metals of course.
