Engineering & Mining Journal

MAR 2013

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INDABA REVIEW continue to grow and this would put an upward pressure on prices. Although there were easier places to mine—Europe, Asia and North America—these regions were suffering from reserve exhaustion, as well as mass urbanization, which meant cities now stood on ground still rich in resources. With few options—and Africa holding an estimated one third of global resources, the continent would see an increased competition from investors for access to its resources. "We have also seen an emerging new trend toward increasingly stable governments and open economies. This is something we have to watch very carefully," Saghir said. Currently, about a dozen countries derived half their earnings from mineral exports. They would soon be joined by more, said Saghir. Gradually, he noted, aid would be replaced by trade as the foundation for the GDP of most African states. But to achieve this, a substantial investment in infrastructure and logistical chains had to be made—up to US$100-billion, he added. Down Under No More Leading the charge in Africa are the Australians. At least 207 listed Australian companies are engaged on the continent, and they are responsible for almost 70% of all exploration activity, according to the Australian Securities Exchange (ASX). Together they account for 1,300 projects in total. This is a far cry from the days when London, Toronto and Johannesburg dominated the continent. "Africa is important for us, and looking more attractive than it has for a long time," said John Madew, Australia's Senior Trade Commissioner for Sub Saharan Africa. He noted that Australia has become the single largest participant in the Indaba, and had brought 54 companies to the event, under the banner of the trade commission. Already A$24-billion had been invested by Australian companies, with another A$20-billion pending. Last year seven initial public offerings of Africa-focused companies were held on the ASX, raising a total of A$17-million. In follow-up raisings in 2012 another A$750-million was raised by ASX-listed companies active on the continent. 42 E&MJ; • MARCH 2013 Some of these include familiar names, such as BHP Billiton, Rio Tinto and Newcrest. But most are junior explorers and mines that have moved to Africa in search of virgin deposits. For juniors, the continent is especially enticing because unlike mature mining destinations such as Canada, South Africa and even homeland Australia, they do not have to jostle elbows with the bigger players. "A junior miner's business is to go out and explore—and there is a lot of unexplored territory in Africa," said Madew. Africa remains a tough place in which to operate however, as the lingering shadow of fired Rio Tinto Chief Tom Albanese, which hung over the event like a ghost, would no doubt have testified. Lack of infrastructure, energy and shifting legal requirements keep many mining bosses awake nights. Randgold Resources CEO Mark Bristow used the event to speak out against creeping resources nationalism. The company, with assets in Mali, the Côte d'Ivoire and the Democratic Republic of Congo, is already paying substantial dues to the various governments. "The host country is already a significant, if not the main beneficiary, of its mining activities," Bristow said. "That is why it is disturbing that there is a growing tendency among the sub-Saharan mining countries to want more without giving anything back. Even a moderate change in their current codes will diminish these countries' abilities to compete for direct fixed investment or to encourage reinvestment." Mali, the most recent hotspot, has proven especially troublesome—not because events affected mining operations much, since most are to the south and west of the country, away from the conflict zone. But it has had a knock-on effect on sentiment for companies operating in the country. "Our share price took a knock, which is a bit sad," said Bruce Mowat, group exploration manager for Mali-focused Resolute Mining, manning the company's booth. The Australia-listed gold producer has two operating mines in Africa, including an 80% holding in the Syama project in the south of Mali, a joint venture with the government. The mine produced 140,000 oz last year, at a cash cost of around A$784/oz. "We've been in Africa 16 years, and our shareholders know that things like this do happen. So even though our share price has been affected, our investors mostly stick with us," said Mowat. Ease of Access The lack of institutions on the continent is frequently cited as a hindrance to doing business in Africa, but for some companies at least, this can be in their favor. More than a few junior miners noted that ministerial access was simply a matter of showing up at the right door—no appointment needed. "You can't even get an appointment in South Africa with a senior government official, because the majors get all the attention," said Thapelo Mokhathi, director of Shumba Coal, a Botswana-focused junior explorer. A South African himself, and having worked for more than 13 years in the country's mining industry, he decided a few years ago to look beyond his homeland's borders for opportunity. "It's a lot easier to do business in Botswana. The regulations are fewer and the field is open to new entrants. South Africa is a mature market so there are not many new opportunities for new companies." Other countries are making themselves attractive too. Ghana is now Africa's second largest gold producer, and Ethiopia is pushing to become a major exporter of potash. While lack of infrastructure remains a formidable hurdle, West Africa has the potential to rival Australia as the world's go-to source for iron ore. Given the drift across South Africa's borders it's perhaps no surprise some local commentators have suggested a change of venue for forthcoming Indabas, all of which have been held in Cape Town. David Gleason, the doyen of South African mining writers, suggested in an editorial carried in Business Day, the Johannesburg daily, that it be moved to a more appropriate venue such as Nairobi in Kenya. Hotels were fleecing conference goers, he noted, raising prices up to 60% for the event: "This is a case of the flea biting the dog to death," he wrote. Despite these criticisms the 2013 African Mining Indaba lived up to its name as a continental affair, and is likely to be the voice of Africa-focused mining for years to come. Gavin duVenage covers Africa for Engineering & Mining Journal (E&MJ;). He can be reached at: gavinduvenage@gmail.com. www.e-mj.com

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