This article about how to analyse your stock's country risk is a great resource for investors in individual energy and mining stocks. However, when you are investing in energy and mining stocks through an ETF like COPX, CU, KOL, XLE, XOP, IEO, FCG, URA, NLR, NUCL, SOIL, REMX, GDX, GDXJ, RING, GLDX, PLTM, SIL, SLVP or SILJ, I recommend you read this article too.
As easy-to-extract mineral resources are becoming more and more scarce, investors in the energy and mining sectors find themselves investing in companies with resource projects all over the world. While most investors are familiar with jurisdictions like Europe, Australia and North America a lot of investors — including myself — are unaware of the legislation in the rest of the world. This is why due diligence on country risk is one of the first steps in analyzing a stock for a potential investment.
To inform yourself about the economical and political risks related to specific countries and jurisdictions I have gathered 14 free resources for conducting your stock's country risk assessment. Although most of these resources can be used for country risk analysis in all kinds of sectors, some are more specific to the risks involved in the mining and or energy sectors. As legislation within a country can differ from jurisdiction to jurisdiction I recommend always conducting your own country risk assessment for each of the companies in your portfolio .
In the first note at the bottom of this page on UndervaluedEquity.com I will explain which of these resources provide the best country risk assessment in my opinion.
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1. Fitch
If you would like to view a country's risk rating according to Fitch you first need to create a free account. Then you can enter a country name in the search bar at: http://www.fitchratings.com after which you will be taken to that country's specific web page, where you can see Fitch's rating. In order to view more in depth information about a country's risk rating you will be charged.
2. Moody's
In order to access Moody's country risk assessment you need to first create a free account too, after which you can enter a country's specific web page by entering the country name in search bar at Moody's home page. When you have entered the web page of the 'government' of your choice, you can view Moody's ratings by clicking on the 'ratings-tab'. On the ratings-tab you can also view the 'issuer outlook' where you can inform yourself about Moody's interpretation of that country's future financial condition. To gain access to more in depth information about Moody's country risk assessment you will be charged as well.
3. Standard & Poor's
Just like with Fitch and Moody's you will first need to create a free account before you can access Standard & Poor's country risk analysis. You can find a country specific rating via the 'ratings search bar' on their website, or you can browse their 'Sovereigns Rating List' to find the country for which you would like to see the rating. You can access this list by clicking here. Again, similar to Fitch and Moody's, you will be charged to view more in depth information.
4. Fraser Institute
The Fraser Institute's annual "Survey of Mining Companies" can be found via the search function within the research and news section of their website (click here). After selecting "Mining" as topic and "Survey" as type you will find the survey reports which you can use for conducting your country risk assessments for the mining sector.
By selecting "Energy" as topic and "Survey" as type you will find Fraser Institute's annual Global Petroleum Survey which will help you to conduct your country risk analysis in the energy sector.
Survey results represent the opinions of executives and managers regarding barriers to investment in various jurisdictions around the globe.
5. Behre Dolbear
Since 1999, the Behre Dolbear Group Inc. has compiled a country risk assessment of countries of importance to the mining industry.
Their complete annual survey: Ranking of countries for mining investment where "NOT TO INVEST" can be found on Behre Dolbear's website by clicking this link.
6. Office National Du Ducroire
An additional source of information regarding country risk analysis is the website of Office National Du Ducroire (ONDD): the Belgium Export Credit Agency. Their information is based on the systematic analysis of each country's political and financial situation. By clicking this link you will be taken to their special web page about country risk.
7. EKN
EKN insures Swedish export companies against the risk of non-payment, thereby enabling them to conduct more secure export transactions.
In order to see which countries are covered in EKN's country risk assessment, you can access their country list by clicking the link provided.
8. Alacra Store
Another source of useful information regarding country risk is the website of Alacra Store. Country-specific information on the economic, political and investment environments can be found on their special web page about country risk. You can access this page by clicking here, however, you will be charged for access to more in depth information.
9. Economist Intelligence Unit
The Economist Intelligence Unit also has a specific country risk web page on their website which you can access directly by clicking here. You can register for free to gain access to country specific information about politics, the economy and the general risk profile. Just like with the Alacra Store website, in depth information can only be obtained after purchasing it.
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10. Euromoney Country Risk
Euromoney Country Risk created a new tool for analysing country risk. You can access this tool - called Country Wiki - via this link. In this country risk analysis model you will find the views from country risk experts from around the globe.
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11. The Organisation for Economic Co-operation and Development (OECD)
You can find the OECD's country risk assessment model at the bottom of this page in the pdf report titled: Prevailing Country Risk Classification.
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12. Basel Institute on Governance
The Basel AML Index is a country risk ranking to measure a country's overall money laundering risk. The Public Version is freely accessible by clicking this link.
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13. The Coface Group
The Coface Group is a trade risk expert and a worldwide leader in credit insurance. Coface country risk ratings can be accessed freely by selecting a country in the "country risk assessment" search bar, which you will find on their website by clicking here.
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14. A.M. Best
A.M. Best is a credit rating organization serving the insurance industry. They place countries into one of five tiers, ranging from Country Risk Tier 1 (CRT-1), for countries with the least amount of risk, to Country Risk Tier 5 (CRT-5) for countries with the most risk. You can access A.M. Best's page for conducting your stock's country risk assessment by clicking the link provided.
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Cautionary Note: Always be careful when interpreting a country's risk ranking as local (or federal) governments can have a different ranking than the country as a whole. (For instance, The Fraser Institute's surveys include data about sub-national jurisdictions).
