TRADE

Unearthing Africa’s potential

Gold nuggets on black background.

Mining remains one of the world’s largest and most lucrative industries. Recent figures revealing the total revenue of leading global mining companies averaged US$ 435 billion (R 6.2 trillion) annual income for 2014 alone.

Africa is traditionally known for its rich mineral wealth, and South Africa’s particular endowment has seen a number of global players investing in the country’s resources. Currently South Africa is the world’s foremost producer of chrome, manganese, platinum, vanadium and vermiculite, and remains one of the top five international producers of gold.

While Africa has been in a process of renegotiating its own position with regard to the trading of its resources with the rest of the world, the invitation to invest is clearly open, as platforms across the continent prove.

As one of the most widely recognised brands associated with investing in African mining, the Investing In African Mining Indaba has seen great success over the more than 20 years since its inception.

According to the Indaba’s official statement pertaining to delegates, the event remains, “The world’s largest gathering of the most influential stakeholders—financers, investors, mining professionals, government officials, etc… in African mining. By attending Investing in African Mining Indaba, you will join an international, powerful group of industry professionals that make Cape Town, South Africa their preferred destination to conduct important business and make the vital relationships to sustain their investment interests.”

Mining Indaba

Preparing for next year’s event, to be held from 8 to 11 February, the organsisers of the Mining Indaba made public that more than 7 000 of the most internationally-diversified and influential people on the planet with an interest in mining are expected to once again attend the annual Investing in African Mining Indaba in Cape Town.

They include representatives from more than 100 countries; more than 45 African and non-African Government Delegations; national mining ministers, government leaders and regulators; more than 2 300 international companies with vested interests throughout the African mining value chain; and investors, analysts, and financiers from across the globe (multi-national institutional investment firms, individual investors, portfolio managers, private equity managers, hedge funds, sovereign funds, merchant banks, analysts and more).

According to an official statement by the Industrial Development Corporation (IDC) there is reason for Afro-optimism following this year’s event. The IDC points out that as the founder of the Africa Governance Initiative, former UK prime minister Tony Blair, who delivered the keynote address at this year’s event, was well-placed to analyse the challenges of change in Africa, and to indicate the vast opportunities on the continent.

"I am an optimist on Africa for both objective and emotional reasons," Blair said, noting that 10 of the 15 top growing economies in the world were in Africa; that the middle class was set to double in five years; and that African growth should come in at around 5% this year, while the composition of the continent's economy was changing in terms of both gross domestic product and foreign direct investment.

The IDC further points out that change was at the core of Blair's presentation. The relationship between the North and South was moving from one of dependence to one of partnership, he said. African governments were also changing their approach to investments in extractives. "The outside world is looking at Africa differently; African countries are wanting to take their destiny into their own hands, and to build partnerships."

Challenges

Africa was going to change enormously over the next decade. "Those of you who know a long-term bet over a short-term bet, I think Africa is a great place to come to and a great place to invest in for the future." And to companies already invested in Africa, he added: "I know you face challenges that are very difficult to overcome, but personally I think you made the right choice."

The year 2015 has also seen successful exposure to emerging African markets through events such as the iPAD Mining and Infrastructure Indaba and Katanga Mining Week, held in the Democratic Republic of the Congo (DRC) in October this year, and the iPAD Nigeria Mining Forum hosted by Cape Town based events company Spintelligent.

Louis Watum, Managing Director at Ivanhoe Mines, one of the Diamond Sponsor at year’s event, remarked that, “Now that commodities prices are low, it should be recalled that there will always be mining cycles, resulting in highs and lows, and that now is the time to invest and to look for ways to improve our respective operational efficiencies in order to stay competitive.

“The state in turn needs to take an honest look at the current bearish commodity market and adjust its fiscal expectations from the mining industry. Each party in the trilogy between the state, mining operators and civil society must play its own role. Lastly, I remain convinced that developing profitable mining projects remains a singularly important way to propel our country into the realm of emerging economies.”

As an example of the successes being achieved when it comes to investing in emerging African mining markets, Ivanhoe Mines DRC is in the initial stages of building a large, modern copper mine at Kamoa. According to the company, the Kamoa copper deposit, one of the largest ever exploited in the world, contains 739 million tonnes of ore at 2.67% copper (measured resources) and 227 million tonnes of ore at 1.96% (inferred resources), with a cut-off grade of 1% copper.

“The Kamoa mine will be developed in phases”, says Watum, “the first phase will consist of a conventional underground copper mine and surface concentrator complex with an initial mining rate and concentrator capacity of three million tonnes per year. The first phase of mining would target high-grade copper mineralisation from shallow, underground resources to yield a high-value concentrate. In the second phase this modern, mechanised, underground mine will be expanded to eight million tonnes per year in concentrator capacity.”

Kamoa

He says that mining operations at Kamoa should begin at the end of 2018 adding that “a smelter is planned with a capacity of 300 000 tonnes of copper per year, which is equivalent to one third of the copper produced by all mining companies in the DRC.” Besides investing in the mining of resources, these events further assist in bringing together the top minds in the industry to discuss and showcase the latest technologies and best practices.

Katanga Mining Week event director, Nicole Smith, says: “We acknowledge the need for mine personnel to get the best training possible from our experts, as the efficiency of their work on site is a pre-requisite to improve the quality of the operations in the field. We are offering free technical workshops on the expo floor again and will focus on the latest blasting technics as this was a hot topic last year and a crucial part the open sky mining expertise. Other topics on the workshop agenda are maintenance of machinery and health and safety, which will include making staff aware of the risks of malaria and ways to prevent it.

“This year’s Katanga Mining Week’s key partners, exhibitors and sponsors will be providing those training workshops for free, including Ivanhoe, Onlime, Schlumberger and Spraying Systems. Furthermore, the indoor and outdoor expo will showcase the latest technology, hardware and software, enough to excite and inspire any mining professional!”

The conference sessions was further dedicated to: “infrastructure, the railways, the fiscal regime and the daily challenges that the mining operators encounter will be addressed and the specifics of the environment regulation will be elaborated on. Power and key solutions for the Katanga province will have a dedicated session. This is to help boost the production of copper and cobalt.”

Looking at Nigeria as emerging mining region, Olayinka O. Mubarak, Group Head, Solid Minerals and Metals, Large Enterprises Directorate, Bank Of Industry in Nigeria, says, ”Nigeria is perhaps the last remaining frontier for mineral investment in the region. With the wide occurrence of minerals and a history of mineral production, Nigeria presents a rare opportunity for serious investors and that opportunity is worth exploring.”

Nigeria

The iPAD Nigeria Mining Forum in partnership with PwC Nigeria, is regarded as a long overdue strategic investment platform that will gather key role players in the Nigerian mining space to discuss the way forward. Nigeria’s vastly underexploited natural resources include about 44 varieties of minerals in over 500 locations. Attendees will include current and prospective investors, legal advisors, regulators, mining professionals and other stakeholders.

The Bank Of Industry and the MRI Group were both silver sponsors at the event. The MRI Group is the world’s third largest independent trader of non-ferrous concentrates. Hadley Natus of MRI Trading says, “Two years ago MRI took the strategic decision to start operations in Nigeria and with the first forum of its kind in Nigeria, we couldn’t afford not to be a part of it.

“It is our view that Nigeria has all the prerequisites to enjoy the benefits of building a mining industry from a low base and if managed correctly can be a major factor in increasing the standard of living for many Nigerians and help the government get away from its dependence on oil,” he says  

But there remain multiple challenges facing the industry in Nigeria, as Ola Alokolaro, Managing Partner: Head of Energy and Infrastructure Group, Advocaat Law Practice and speaker at the upcoming iPAD Nigeria, event explains.

“Firstly is the issue of regulation of mining titles. Whilst a mining cadastre office has been set up and there is better transparency on the issuance of mining tittles, there is still a need for the monitoring of minimum work obligations of licensees; environmental compliance and the enforcement of the ‘use it or lose it’ principle.

“Secondly, the lack of adequate road and rail infrastructure is a hindrance to mining investments. We should be looking at PPP options to develop infrastructure.  A third issue is funding of public mining institutions so as to be able to enforce provisions of the law and lastly access to long-term funding to finance a mining project."

Infrastructure

Being an important area associated with mining, infrastructure also took centre stage at the iPAD Nigeria conference this year. Carmie Olowoyo, General Manager-corporate, Symbol Base Metals in Australia, who was also a panellist during one of the sessions, says, given the scale of the workings and expansive distance they cover, it makes for a highly prospective region. “The very high grade nature of the mineralisation is almost unique in the world. We are equally excited about the other opportunities that exist in the Nigerian mining sector. For reasons not limited to infrastructure deficiency, oil, security concerns, investor perception and limited modern exploration, the sector is very much underdeveloped.

“We are believers in the unique geology of Nigeria and very much encouraged by the renewed government focus on solid mineral development. We believe the next couple of years will herald an investment boom into Nigeria, for the benefit of all.”

Oluwaseun Olatunji, Managing Director of SBOG Nigeria, says “We are a company focused on doing our bit in the development of the mining trade in Nigeria, regardless of the enormous challenges. We don’t believe in waiting on the federal government to do everything; however, we also have minimum expectations from the specific mining government agencies.

Alhaji Sani Shehu, president of The Miners Association of Nigeria (MAN), who was also an official partner at this year’s event, says “My excitement about the mining industry in Nigeria is its ability to accommodate every player: small, medium and large. The mining sector also gives massive employment and creates a lot of activities in the rural areas. “My vision for the mining industry is to see a mechanised and robust industry that produces a processed minerals for export and industrial minerals as raw material for our local industries,” he says.

Diamond mining is another lucrative trade which has historically had a strong presence on the continent. World leaders in the industry recently gathered in Windhoek, Namibia, for the second International Diamond Conference, this year themed Omugongo, a Cut Above the Rest.

The summit of speakers from across the world represents a unique forum for dialogue and cooperation between industry leaders at the highest level, according to an official document released by the African Press Organization (APO). The overall theme of the conference will be focusing on the challenges facing diamond beneficiation in Southern Africa – questioning how we can make this industry viable and sustainable.

De Beers Group

According to the document, the Namibian government has a 50-50 joint venture partnership with the De Beers Group and together have implemented a long-term economic development plan that aims to build a self-sustainable national gem-cutting industry. This will ensure the sustainability of an industry that accounts for about 30% of Namibia’s annual export revenue, bringing funds into the country to improve infrastructure, childhood education and healthcare in local communities.

In order to protect the marine ecology and the coastal areas in which most of Namibia’s diamonds are found, international environmental standards are strictly followed in diamond mining activities. Namibia’s comprehensive environmental management plan has been independently verified as ISO 14001 compliant, ensuring long-term ecological and economical sustainability of mining areas. “Namibia’s Atlantic coast area holds an estimated 80 million carats of gems, which were carried to the sea by the Orange River and could be mined beyond 2050,” Kennedy Hamutenya, Diamond Commissioner for the Republic of Namibia.

The highest quality diamonds and one of the world’s largest alluvial diamond deposits are found in Namibia. “Namibia’s diamonds fetch the highest prices because they are of high quality, pure carbon, spotless and they don't disintegrate…what we don’t have in quantity is made up in quality,” Hamutenya said in 2014.

Africa might be considered a developing continent when compared to the rest of the world, but as international investment interest reveals, remains a literal and figurative goldmine in terms of the exploration and harvesting of its natural resources.

Michael Meiring

 

 

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