MINING

Spotlight on mining

Mining Indaba Ceo, Jonathan Moore
Jonathan Moore (2).jpg

 

 

 

 

 

 

 

 

 

Mining has been, since the beginning of times the main driving force behind the history and development of South Africa's economy.

Diamond and gold production may now be well down from where it used to be in the 20th century, but South Africa is still number five in gold, and the country remains to have an abundance of mineral riches. It is the world's largest producer of chrome, manganese, platinum, vanadium and vermiculite. It is the second largest producer of ilmenite, palladium, rutile and zirconium and It is also the world's third largest coal exporter. South Africa is also a huge producer of iron ore and in 2012, it overtook India to become the world third biggest iron ore supplier to China, the world’s largest consumers of iron ore.

The African continent contributed 6.5% of the world’s mineral exports during 2011 from mining 20% of the world’s land area. From a regional perspective, members of the Southern African Development Community (SADC) produce two-thirds of Africa’s mineral exports by value. The biggest player in the region is South Africa. The East African Community (EAC) has several mineral belts that produce (amongst other commodities) tanzanite and gold, with Tanzania being the biggest regional gold producer. Burundi has some gold reserves along with copper, cobalt, nickel and uranium deposits. Exploration activity in western Kenya has increased significantly over the past few years. Central and West Arica are increasingly being seen as boom areas for iron-ore exploration and mining. The area is seeing a significant increase in railway construction in order to transport ore to ports and this has led to the opening of mines in Guinea, Liberia and Sierra Leone. The Economic Community of West African States (ECOWAS) exported US$150 billion worth of goods during 2011. The biggest challenge faced by the burgeoning mining sector in the region is country-specific political risk. Around 85% of global phosphate reserves are located in North Africa. The majority of the area’s mined phosphates are used in the production of fertiliser. The pricing outlook for phosphate is positive. There is no effective substitute for this raw material when used for making fertilisers.

Considering all of this,  it is no surprise that global giants with interests in the mining industry are lining up to invest in African mining.

Synonymous with investing in African mining, is the annual Investing in African Mining Indaba, a brand that is known for more than 20 years in over 150 countries across all six continents---the must-attend event for any professional interested in entering, investing or advancing their interests in African mining.

Jonathan Moore is the Managing Director of the annual Investing in African Mining Indaba (or informally known as the Mining Indaba™). Moore has been leading the Mining Indaba for six years and throughout these years, the Mining Indaba has solidified its position as the critical pathway to flow billions of dollars in foreign investments into capitalising the African mining value chain. His main responsibility is to ensure that the global Mining Indaba brand remains true to its core mission: to bring all the key deal-makers together and drive awareness of the attractive mining investments throughout the continent. To achieve this goal he leads a strategic team tasked with identifying and bringing forward the most relevant content, introduce more and enhanced networking opportunities to facilitate deal-making, and produce a world-class event that our global community of supporters has come to expect.  

Untapped natural riches

He believes that Africa’s untapped natural riches fuels his energy and continued expertise to bring global attention to the vast range of mining investment opportunities on the continent. He builds strategic partnerships with governments and industry influencers beyond Africa and explores and tests new markets to expand the global Mining Indaba brand.

In an exclusive interview with Opportunity, Moore looks back at the 2015 Mining Indaba and gives us a glimpse of what to expect at the  Investing in African Mining Indaba taking place from today until Thursday in Cape Town.

Moore says the environment at the 2015 Mining Indaba was more optimistic than what many expected it would be. "One of the recurring themes we heard among all our delegates at the 2015 conference was the calibre of people they had encountered in the conference sessions and in the networking venues. They found that the industry stakeholders at the 2015 Indaba were very focused on discovering and tapping into investment opportunities as it relates to new mining projects or other areas of the mining process such as infrastructure development.

He says even though the climate last year was unfavourable in the global commodity cycle, they heard from analysts, experts and global investors that Africa continues to be an attractive investment destination because of the untapped mineral riches of the continent.

"As an additional positive sentiment, we found greater participation and interest specifically from private equity managers. This trend continues to be on the incline for 2016 and aligns accordingly with the statistics that some of the countries on the continent have experienced with the increase in investments from private equity capital providers."

Regarding the fact that mining has traditionally been associated with investment in South Africa, according to Moore, the investment climate today in South Africa mirrors what the rest of the world is seeing, a slowing of Foreign Direct Investment (FDI) into the country. However, he says South Africa still remains one of the top destinations on the continent for foreign investments. South Africa encourages foreign investment in both the public and private sectors and has the potential to strongly appeal to foreign investors compared to other countries in the world. According to A.T. Kearney's Foreign Direct Investment Confidence Index, South Africa ranks 13th most attractive foreign direct investment destination in the world, attracting $10 billion in FDI in 2013.

"SA is the third largest recipient of FDI in Africa as a result of some strong positives including a large population, access to raw materials and political stability and most recently more investment directed at addressing infrastructure inadequacies. The top sources for FDI into the country are the United Kingdom (a significant majority), the Netherlands, USA, Germany and China. The greatest areas of investment have a focus on financial and insurance services, mining, manufacturing and telecommunications.

Trade and investment

Reflecting on the barriers for trade and investment in South African (and African) mining at the moment, Moore says Africa continues to be an attractive investment destination with perceived improvements in political and macroeconomic stability, more certainty in policy and legal framework in many of the countries and as a result of the overall growth of the middle class and consumption.

"FDI in Africa is primarily targeted at the metals and the mining industry. The majority of FDI investments have funnelled into Southern and Eastern Africa. Given all of these positives, Africa continues to confront obstacles in driving FDI in mining. The main issues impacting the continent are sectoral dynamics, currency fluctuation, inadequate infrastructure for transport and electricity, a lagging perception of corruption, taxation regimes, and policy frameworks. South Africa did not perform as well in the Frazer Institute Survey of Mining Companies 2013 Policy Perception Index. The top five performing countries were Botswana, Namibia, Ghana, Burkina Faso, and Eritrea. South Africa ranked 64th and Nigeria 75th."

Asked what some of the most noticeable trends in investment in African mining are that emerged last year in the industry in general, Moore says private equity is one of the areas that has increased its presence in the sector significantly. Although only a few countries have been the target of investments (specifically South Africa), it is expected that the trend will continue to grow and reach other countries.

"Further, we have seen a return of India showing greater interest in FDI and a shift from China’s approach (from M&A to more partnership and joint ventures). Regardless of the source of investments, the world continues to view Africa as a host of mineral riches and a source for attractive investment opportunities."

Talking about the factors impacting mining in Africa at the moment, ranging from the use of the latest technology to the establishing of appropriate policies and regulations, Moore says the 2016 Mining Indaba will feature a broader but more thematic approach to the conference agenda which will address the growing interest in infrastructure investments to support new and current mining projects, panel discussions on the downstream applications of metals and mining in today’s industrial and consumer good markets, and more interactive panel discussions featuring a mix of investors and mining corporates discussing the investment climate in Africa. In addition, there will be more emphasis given to the progress the mining sector is making with regards innovation and technology and what this means for the long-term sustainability of the industry.

"For more than twenty years, the annual Mining Indaba has taken place in Cape Town. As the event has grown, Mining Indaba has driven revenue to the local Cape economy in the form of bringing more than 20 000 professionals each year with significant purchasing power. It is estimated that Mining Indaba has directly delivered more than R610 million in revenue for the local Cape economy and created 5 000 jobs in the period of 2007-2015 (prior to 2007, data was not being researched or tracked). It has been said that the Mining Indaba delivered more revenue to local Cape businesses in one week than the 2010 FIFA World Cup festivities in Cape Town," he says.

Skills workshop

The 2016 event will also include career skills workshops that will make a huge contribution in terms of equipping the youth in the industry with the proper skills to take the industry to the next level. In this regard, Moore highlights the Mining Indaba's  bursary program (now in its fourth year) on the belief that we need to cultivate young talent to lead tomorrow’s industry.

"It goes without saying that globally there is a challenge in bringing educated labour work into the mining sector. The Mining Indaba continues to contribute to the bursary programme in order to ensure that as an industry we continue to invest in the next generation of mining leaders who will bring this industry forward.

In 2016, we have launched the 'Young Leaders Career Skills Workshop' to further our efforts in cultivating young leaders who want to advance their career in a mining discipline. The workshop, scheduled for Thursday 11 February, is open to post-graduate (up to 2 years after graduation) professionals who want to speak with HR representatives from various companies and get a better understanding on the skills the industry are looking for and future prospects," he says.

As for the statistics, representatives from South Africa continue to make up the majority of the delegates at the event. At the 2015 Mining Indaba, 59% represented South Africa. "We continue to see the entire African continent remain an attractive investment destination for global investors. The 2015 Global Opportunity Index ranked six sub-Saharan African countries---Mauritius, South Africa, Botswana, Rwanda, Namibia, and Zambia---in the top 50% of the Index. In 2015, we did experience increased representation from both official government delegations and industry professionals. Most specifically we noted an increase from East Africa and other Southern African nations."

Demonstrating the value of corporate sustainability efforts to new and potential investors is a crucial step in facilitating longer-term discussions for mining companies. The importance of sustainability issues to investors is already widespread and will only increase over time. Moore says it is known that sustainable development impacts the bottom line and helps organisations maintain a social licence to operate around the world. Therefore, investors want to see actions and progress that have been made in operational cost efficiency, addressing labour issues, reigning in board and shareholder behaviour, and building constructive relationships with government, community and employees to secure the social licence to operate.

"At the end of the day, investors’ primary concern is a return on investment and these are some of the critical risks impeding their ability to maximise return. Although we are still putting the finishing touches (as of November 2015) on the agenda, we have confirmed a calibre keynote presentation with Evy Hambro, Chief Investment Officer of Blackrock, who will address the very topic of sustainability."

Online Investor Portal

The 2016 Mining Indaba will also present investors with access to the online Investor Portal with easy filtering of the many companies who attend the conference. Moore shares his thoughts on this important addition: "The Mining Indaba added a new strategic member to the management team, Kael O’Sullivan, Director of Investor Relations, who will assume the role of this newly developed position to foster deeper collaboration with the strong contingency of investors who participate at the event. O’Sullivan leads the management and development of the Mining Indaba Investor Programme, offering a high touch one-to-one service for accredited investors to customise their experience while at the annual event.

"In addition, he identifies and recruits investors from new and emerging markets. This investment into the investor programme once again reaffirms our commitment to not only highlighting the many attractive investment opportunities on the continent, but also to proactively bring a group of global investors to see what Africa has to offer. The 2016 investor programme is phase 2 of what we originally introduced in 2015 and has already significantly escalated its offering to investors. With Mr O’Sullivan leading the programme, he will work one-on-one with VIP investors to custom tailor their networking and educational experience while at the Mining Indaba.

"The online investment portal, that will be launched in 2016, is a test pilot platform which enables us to better understand how investors are using technology and searching and scoping potential projects of interest. This first phase of the online portal will match investment interests with mining companies based on primary metal(s), production phases, and many other critical elements. Each of these components will maximise the investors’ time at the Mining Indaba. At the conclusion of the 2016 event, we will analyse all feedback, usage statistics and outcomes to develop a more defined platform for the 2017 event," Moore told Opportunity.

Asked about the biggest names in terms of speakers that we can expect for 2016, Moore says the speaker faculty for the 2016 Mining Indaba will not focus so much on big names, but rather on global experts who have made big inroads into bringing attention to mining opportunities on the continent, the overall investment climate in Africa and what the future of mining may appear after this commodity super cycle. The agenda will feature more discussions, more interactions among experts, critical topics of interest surrounding technology, sustainability, and infrastructure development, downstream applications and more.

Looking at improvements at the 2016 event, Moore says as the organisers, they would like to see the same as what the industry is hoping for: "A shift in the commodity cycle so that mining companies, investors and governments can once again regain confidence in Africa’s untapped investment opportunities in the mining sector."

In conclusion, his message to those in the industry and investors alike is that although the mining world has been inundated with information and the negative sentiments of a lagging commodity cycle, it is important for them to understand that this cycle will turn. "The new face of the mining industry may look a little different but we shall emerge with an industry that is stronger and more sustainable to ride the ties of these market cycles. Africa is expected to be the shining story of the next generation and the mining sector is poised to be one of the great chapters of this story line."

Lindsay King

Sources: U.S. Geological Survey, Mineral Commodity Summaries, January 2013, http://minerals.usgs.gov/minerals/pubs/mcs/, www.platts.com

 

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