Alison Turner of Panmure Gordon notes, “whilst we would caution against a knee-jerk panic reaction from investors to the horrors of Ebola, following a closer look we do believe it poses a very real short term risk to mining companies operating in West Africa. We believe the risk is not so much that companies are directly impacted by an outbreak of the disease on site, but rather that increasing risk of such an incidence could force companies to decide to halt operations on health and safety grounds or that a lack of availability of expat staff and contractors could have the same effect. For companies at the exploration stage the impact would be likely to be short term until the disease is brought under control. Companies already in production risk also suffering the knock-on impact on cash flow and funding headroom.

“Whilst a robust response from the international community working with governments could help to end the outbreak in the medium term, current statistics suggest that the spread of the disease is actually on the rise and since Ebola has already taken hold in the capitals of Liberia and Guinea halting that spread is going to be extremely difficult even with additional resources (Medicins Sans Frontieres estimates it could take six months).

“We think availability of expats could become a major problem. We see the potential for expat staff and contractors to refuse to return to West Africa at the end of their rotations as a significant operational risk. Companies are doing their best to manage this risk through keeping staff adequately educated and informed. However when staff return to their homes at the end of their rotations they are exposed to the fears of their loved ones and the opportunity to seek alternative employment.

“Wouldn’t you? Particularly if there was a perceived or real risk that further airlines cancelling flights or countries closing borders could effectively trap you in country?

“Likewise major international contractors may choose to halt activities in the region rather than risk reputational damage.

“Whilst immediate neighbours and other African countries have scrambled to manage the risk of the disease spreading (including restricting travel from affected countries) somewhat ‘porous’ land borders make that more challenging. Mali and Cote D’Ivoire would appear to be most at risk given their immediate proximity to affected areas. Meanwhile the efforts of other African countries to stop the spread of the disease create a major logistical challenge for companies operating in West Africa.

“Ebola first broke out in Guinea in January 2014 and spread to Liberia and Sierra Leone (and more recently Nigeria). Since then the number of cases has grown steadily. Up to August 13, a total of 2,127 cases have been identified and 1,145 people have died. At first the virus was limited to a remote area near the border between Guinea, Liberia and Sierra Leone but more recently a number of cases have been confirmed in the capitals of both Liberia and Guinea which significantly increases the challenge of preventing the spread of the disease.

“Because of the nature of Ebola (which is not airborne but spread by contact with bodily fluids) medical staff are amongst those most at risk of contacting the disease. A combination of already fragile health systems, the increasing number of cases, the death of more than 100 doctors and nurses and fear amongst medical staff which has forced closure of a number of hospitals means that health facilities are overwhelmed (and you should read this account of an Ebola treatment centre before you accuse anyone’s fears of being irrational http://www.msf.org.uk/node/25891).

“Up until last month, Ebola had spread only across land borders in West Africa and those outside the immediate region had tended to take a sanguine view of the risks. However the death of a Liberian-American in Nigeria on July 25 led airlines and countries to sit up to the risk of cross-border travel. Whilst the situation seems to change on an hourly basis (particularly when it comes to land borders) as far as we can see the following restrictions on travel are currently in place:

• Guinea has closed land borders with Liberia and Sierra Leone
• Guinea Bissau has closed land borders with Guinea. The status of land borders with Mali and Cote D’Ivoire are subject to conflicting reports – latest reports suggest border points are open but being closely monitored
• Emirates airlines has cancelled flights to Guinea. British Airways has cancelled flights to Sierra Leone and Liberia until (at least) August 31. Amongst other airlines Air France continues to operate flights to Guinea and Sierra Leone (although return flights seem unusually full)
• Cote D’Ivoire has banned all flights from Guinea, Sierra Leone and Liberia. Kenya has closed its borders to travellers from Guinea, Liberia and Sierra Leone (except for returning Kenyans). Kenyan Airlines (a major regional carrier) has cancelled flights to Sierra Leone and Liberia from Wednesday (August 20)
• Cameroon, The Gambia and Zambia have closed borders to travellers from Sierra Leone, Liberia and Guinea. Nigeria’s Arik and Asky airlines have cancelled all flights to Sierra Leone and Liberia
• Korean Airlines has cancelled flights to Kenya (which doesn’t even have any cases of Ebola but was identified by the WHO as “high risk”

“Whilst these measures may help to prevent the international spread of the disease they significantly increase the challenge for companies operating there.

“A challenge for contiguous countries Mali, Cote D’Ivoire, Senegal and Guinea Bissau is that borders tend to be ‘porous’ with movement of people not necessarily restricted to official border posts.

“The map illustrates the number of mining companies operating in the region. We spoke to eight of those companies to get a better idea of their experience on the ground, and in particular the actions they are taking to mitigate risk, whether they think the situation on the ground has deteriorated materially in recent days and weeks, whether they think this is likely to impact operations, and whether they are having difficulty in getting expat staff to return to/travel to West Africa. Responses were mixed but in general companies felt there was no immediate risk to their operations. Common themes were:

• Companies have had measures in place for months. Companies have been well aware of the risks around Ebola for a number of months (since February/March) and have had time to put in place protocols to mitigate those risks. Given the way the disease is spread these focus on:
  • Enhanced hygiene practices
  • Enhance site access control and restrictions on travel
  • Temperature screening and isolation facilities for suspected cases
  • Education programs.

“Companies are generally confident that their protocols adequately mitigate risk and that the likelihood of any incidence amongst their workforce is low. Only one company that we spoke to (Bellzone Mining) admitted that they had experienced a suspected case of Ebola that had turned out to be a false alarm (and a good if unwelcome test of response protocols). Patrick Sawyer, the Liberian-American who travelled to Nigeria with the virus and subsequently died was an Arcelor Mittal employee and had been suspended from work at the company following the death of his sister from the virus.

“Companies do not feel that the risk has increased significantly in recent weeks. Whilst the level of press coverage on Ebola has snowballed since the spread of the disease to Nigeria, on the ground companies feel that the situation has not significantly deteriorated in recent weeks (a view potentially at odds with the statistics). The cancellation of flights by certain airlines has increased the logistical challenges of getting people to and from site but is ‘very manageable’.

“Most companies have welcomed the increased worldwide attention as the WHO and other Aid agencies/NGOs commit further resources to helping overstretched governments to fight the spread of the disease.

“There is some concern amongst expats but this is manageable. Asked specifically about expat staffing, companies gave us a mixed response. Whilst some companies with large expat staff contingents (e.g. African Minerals with 1,000 expats on site) reported no change to expat staff numbers, a number of smaller companies did tell us there is some reluctance amongst staff (including in some cases senior management) to travel to site. Some companies (including London Mining and Aureus) have reduced travel by non-essential expats. At the other end of the spectrum Arcelor Mittal has been forced to delay a planned expansion of its Liberian iron ore mine as a result of the declaration of Force Majeure by the 15 major contractors (who have evacuated 645 employees).

Map by Panmure Gordon.