BHP, junior miners consider position over NT seabed ban

The Northern Territory’s reputation as being “open to business” is at risk of being damaged after revoking a combined 11 offshore licenses held by BHP Billiton (ASX: BHP), Northern Manganese (ASX: NTM) and unlisted Brisbane-based Yukida Resources.

Whilst the matter has not yet gone to the courts, the three companies are in discussions with the government over the surprise decision to impose a ban on seabed mining off Groote Eylandt, located in the Gulf of Carpentaria.

According to The Australian, the companies’ rights to explore the region for minerals were removed after tenure had already been granted, based on complaints from the local community regarding the potential environmental impacts of seabed mining.

Whilst BHP is currently involved in a joint venture with Anglo American on a manganese project on Groote Eylandt, it has been suggested that the miner had no immediate plans to expand into the waters off the island. However, the decision has certainly impacted on Northern Manganese and Yukida Resources.

Since mid-2011, Northern Manganese shares have plummeted 80% from 16.5 cents to just 3.4 cents per share. Doug Daws, the company’s chairman, said that the Northern Territory’s decision has caused its market capitalisation to drop from $80 million in 2010 to as little as $3.5 million now. Both Northern Manganese and Yukida are said to be seeking compensation for the lost investment opportunity and any losses incurred.

According to Scott Perkins, the chief executive of the NT’s Department of Mines and Energy, the government is in negotiations with each of the three companies, although it is unclear as to whether compensation will be paid.

Foolish takeaway

Whilst the companies involved have certainly been impacted, the decision also carries further ramifications, such as dampening the attractiveness of Australia as an investment opportunity for foreign investors. Yukida’s director, Nathan Cammerman, said “The haphazard revoking of granted exploration and mining tenure presents an issue of sovereign risk for the resource sector and has broader ramifications for the mining industry and its ability to attract incoming investment.”

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Motley Fool contributor Ryan Newman does not own shares in any of the companies mentioned in this article.

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