This Week in Africa Mining newsletter from African Mining Indaba reports Mozambique is looking to cash in on the new diamond exploration rush, following discovery of vast diamond resources in the Gaza province last month and Nigeria has confirmed the discovery of considerable deposits of nickel in its northwestern Kaduna state. Meanwhile, for South Africa, last week was one of economic and political turmoil, starting with mining companies digging in their heels about government’s proposed 1% community revenue share [BDay]. The remainder of the week was marred by even more dissent, ending with fears of a credit rating downgrade looming and the Rand taking another tumble on news of the Hawks vs. Pravin Gordhan debacle and the Eskom vs. Treasury furore about Gupta-linked coal contracts.
In neighbouring Zimbabwe, the country’s Reserve Bank has reassured foreign investors that remittance of capital is a top payment priority, and that payments will still be made in US dollars. Also, on the mining side, investment approvals in the seven months to July 2016 have declined by 70%. On the upside, investors in Kenya’s mining sector will no longer face the risk of arbitrary cancellation of their licences. This follows the establishment of a Mineral Rights Board to oversee the licensing of prospecting and mining activities and the leasing of mining tenements.
In Nigeria, where a technical recession looms as the economy contracts by 2.06% in Q2, government is placing its hopes on the mining sector as having the potential to contribute 5-7% to GDP (with proper investments). Government is looking for $5 billion to commence full operations in the mining sector and has started a search for private investors to operate the Ajaokuta Steel Complex. Earlier last week the African Development Bank also endorsed Nigerian government’s mining roadmap for solid minerals sector.
Burkina Faso, which is now Africa’s fastest-growing gold producer, may sell a Eurobond – like Senegal and Ivory Coast did in 2014 and 2015 – to help fund a $9.5 billion investment program to accelerate growth in an economy that’s become increasingly reliant on income from gold mining. Production of the metal, non-existent a decade ago, now accounts for almost 80% of export income. Output in the landlocked nation is forecast to reach almost 49 t of gold this year, from 2.3 t in 2007. Growth is expected to accelerate to 5.2% this year, from 4% in 2015.
Results last week suggest AngloGold’s future is not in South Africa as local mines now only account for 28% of its gold production in the six months to June, with more restructuring on the way. Meanwhile, Anglo American faces a tough call over bundling or selling its assets, but definitive deals are expected by December. Anglo has already said it wants to exit its stake in the Pandora joint venture and now Northam is considering its options, after its share of the loss in the venture deepened to ZAR12.6 million for the year. In other news, Coal India opts to surrender its prospecting licences in Mozambique and its board gives the go-ahead for a proposed partnership with state-controlled African Exploration Mining & Finance Corp to jointly acquire coal mines in South Africa.
Infrastructure development has been a top priority for many African countries this year. So Japan’s pledge this week to spend $30 billion in Africa was well-received, but it is still only one-third of the $90 billion, which World Bank President Jim Yong Kim says Africa needs annually for infrastructure investment. Of the funds Japan committed, the African Development Bank will execute $10 billion for infrastructure projects and an additional $20 billion will be injected by private investors. Noteworthy that Japan’s recent investment equals the combined budgets for the 2016/17 financial year of Kenya ($23 billion) and Uganda ($7.9 billion), a large portion of which has been committed to infrastructure development by both countries.
Coal, uranium, gold, copper and potash projects were the focus of development funding efforts. Ncondezi Energy received an additional $3 million from the Africa Finance Corp for its 300 MW coal-fired power project in Tete, Mozambique and Galileo Resources sold its Nevada gold-copper asset for $2.5 million, to help fund its Concordia copper project in South Africa (shown in the picture). And, aided by JP Morgan Chase, Danakali raises A$6.7million for its Colluli potash project in Eritrea. Project funding still to come includes £3 million for uranium-focused Aura Energy’s Tiris project in Mauritania – production only in 2018; and ZAR3.5 billion for SA’s state-owned mining company AEMFC, which is looking to expand its portfolio and operate two of its assets in Mpumalanga.
World-renowned economist Dr Dambiso Moyo, who will be speaking at the 2017 Investing in African Mining Conference, shares her thoughts on the road ahead.
“In my opinion, the most significant trend expected to impact investment in Africa mining going into 2017 is going to be consolidation. In the context of weak economic growth, lower demand driven by China’s economic slowdown, and falling commodity prices, companies will struggle to balance cutting costs and investment in order to stay competitive. Companies will be forced to close down mines that are less profitable or limit operations in politically unstable areas in order to be viable.”