Can companies trust governments? The NSW ICAC is scheduled to deliver a report in the next few days into whether former mines minister Ian Macdonald behaved corruptly in granting an exploration license for the Doyles Creek coal deposit in the Hunter Valley. ASX listed company Nucoal Resources subsequently bought the property and, based on the calls made at the ICAC public inquiry, is now at risk of losing it or having to pay big compensation. Taking away rights that have been confirmed on multiple occasions by NSW ministers would be a drastic step. How would any company ever know with certainty that a minister's decision would not be questioned subsequently? Companies will have to start asking for warranties from governments to protect their interests before committing capital to new projects. This is one to watch for its wider commercial implications.
John Robertson is Chief Investment Strategist for PortfolioDirect a provider of resource sector investment stock ratings and portfolio strategies for mining and oil and gas investors. He has worked as a policy economist, corporate business...
You could argue that this falls into the sovereign risk argument/discussion so often raised about investing offshore. Highlights the risks that exist domestically as well as offshore.