Navigating Mining Arbitrations in the Current Risk Climate

Mining arbitration has grown increasingly complex due to geopolitical instability, shifts in resource control, and rising corruption risks. Mining projects, which already take decades to complete and require heavy upfront investments, now face added threats from governments reclaiming control or undermining international norms. In this challenging context, how can mining companies build a strong position before an arbitration tribunal?

In a recent webinar available in full here, our expert panel offered an overview of high risk jurisdictions, the specificities of mining valuations, and how to address corruption red flags. Speakers included:

• ‍Neil Keenan, forensic investigations expert and partner at Forensic Risk Alliance
• Tara O’Connor, Managing Director of Africa Risk Consulting‍
• George Rogers, Mining finance specialist and CEO of Rockface Capital

Resource Nationalism and Political Risk

Heightened country risk is most evident today in Africa’s Sahel, O’Connor explained, where resource nationalism, political volatility, and global power competition are reshaping the landscape for investors and mining companies.

Many African countries are now actively pursuing policies that reclaim control over natural resources. These include revoking exploration permits, expropriating mining rights, seizing physical assets, and unilaterally renegotiating contracts—sometimes retroactively. This resurgence in resource nationalism is tied to broader political shifts, including the rise of military-led governments and foreign influence from non-Western powers. Some mineral-rich African countries have also fallen under new geopolitical spheres of influence, particularly Russia and China.

The Erosion of Legal and Trade Norms

The traditional frameworks that once supported mining investments, such as bilateral investment treaties, World Trade Organization norms, and regional economic blocs, are increasingly under attack. In some cases, governments have expelled United Nations representatives and international peacekeepers, demonstrating a lack of regard for external checks on sovereign actions.

At the same time, mining companies operating in these regions are experiencing direct legal and physical threats. Executives have been detained, and entire shipments of gold have been seized by governments. In other cases, mining codes have been rewritten to increase government ownership stakes and limit private control. These changes are often sudden, politically motivated, and imposed without adequate legal recourse, resulting in a sharp rise in international arbitration cases.

The Complexity of Valuing Mining Projects

George Rogers, speaking from over 30years’ experience lending to and investing in mining projects, emphasized that they are long-term, high-risk ventures that move through several uncertain phases and can fall through at various stages. Very few projects that begin in the exploration phase reach production. Despite this, early-stage investors and companies often overestimate the value of unproven assets, leading to inflated expectations during arbitration disputes.

In arbitration, claimants must be strategic about how they present valuations. Valuations should be transparent, supportable, and performed by recognized experts who understand the various risk adjustments that should be made, including country risk. (For more on the main three approaches to valuation, including the most widely used Income Approach, read here.)

Country Risk and Discount Rate Calculations

Country risk plays a key role in mining valuation. Projects in high-risk jurisdictions often suffer from unreliable infrastructure, regulatory unpredictability, and expropriation threats. These risks must be reflected in the discount rate used in cash flow models.

One approach to evaluate the appropriate country risk premium to add to the discount rate in a discounted cashflow valuation involves comparing the perceived theoretic value difference of a notional identical mining project in a low-risk country (e.g., Australia) versus a high-risk one (e.g., Burkina Faso). Through this approach one can back-solve the implied country risk premium of the higher risk country. This adjustment is crucial for arriving at a fair and realistic valuation.

Corruption Allegations in Arbitration Settings

Neil Keenan highlighted that corruption allegations could become increasingly central in mining arbitration, especially in regions with weak legal oversight and opaque licensing practices. In other sectors, some arbitration tribunals have thrown out investor claims entirely when it was found that projects were obtained through bribery or fraud.

The presence of red flags like unusual consulting fees, politically connected counterparties, or inconsistent licensing procedures can trigger deeper scrutiny. However, red flags alone are not evidence of corruption. Arbitration tribunals are likely to require strong evidence of corruption indicators before determining on these concerns. (Read more about corruption red flags in mining arbitrations here.)

The Role of Due Diligence and Compliance

In defending against corruption claims, companies are now emphasizing due diligence and compliance programs as potential green flags. A company that can demonstrate robust internal controls, background checks on counterparties, and ethical licensing practices may be able to deflect corruption allegations during arbitration.

Proper due diligence includes assessing the political landscape at both the national and local level, understanding who holds influence over permits, and tracking reputational signals that may indicate ethical concerns. In many cases, failure to conduct this due diligence weakens a company’s legal position and increases exposure to both regulatory and reputational risk.

With thanks to Antonia Brooks for preparing this summary.