Insights from Indaba – Mining in Africa

By Jeames McKibben, GM – Corporate Services and Mark Noppe, MD of Xstract Mining Consultants

With so many delegates at Indaba, there are invariably many reasons for attendance at the event. There are those who spend much of their time in the large auditorium, or its video-relayed over-flow hall, listening to speakers and spruikers; the brokers, financiers and large-fund investors who seem to have a series of parallel conferences in adjacent hotels; the earnest exhibitors manning their booths; and then the general on-lookers.
This year’s Indaba was largely a South African, Australian and British affair, with very few North Americans present. In particular, Australia fielded a strong contingent this year, with more than 100 Australian companies represented (30 of which were co-sponsors of Austrade’s Australian Lounge) and numerous on-lookers, suggesting both a strong degree of interest and confidence in the African minerals sector from Downunder.
Certainly, Africa as a whole has long held appeal for Australia’s mineral explorers and mining companies (although less so to Australian investors). Over the past decade, Australian-domiciled companies have increased their regional footprint throughout Africa, either purchasing or gaining joint venture interests in projects and/or African companies. Broadly, this advance has been lead by Australia’s junior explorers/developers and relates to the full spectrum of exploitable mineral commodities. Key areas of focus include nations of the Southern African Development Community (SADC), West Africa, the Central African Copperbelt and, more recently, Africa’s Equatorial iron province.
The bulk and base metal commodities seemed to be of most interest to delegates especially iron ore, coal and steel additives such as tungsten and manganese.
The PGM sector also saw renewed emphasis this year, although the right investment vehicle remained contentious. So too uranium, which given Obama’s self sufficient energy proposal and the recent breakdown in talks in Copenhagen, has received rekindled interest. Although views were mixed on the uranium market which has long suffered from transparency and predictability issues.
Relatively few mining/resource companies appeared and the absence of several large industry players in the local mining scene, such as Harmony Gold, Impala Platinum, Gold Fields and Lonmin was conspicuous.
Anglo American’s presence was due to its status as a sponsor of the event.
Mining service providers including financial, legal and technical disciplines were in greater abundance than in previous years. This was most likely in response to the previous, relatively lean year and Indaba offering fertile ground for business promotion.
In comparison to the previous year, project financiers and investors returned with gusto, with many looking for new investment opportunities, building networks and wooing existing clients.
Project developers were also out in force looking to secure key local management and technical staff to ensure the success of their distant (from Australia) planned operations.
Government officials from other African nations were also in attendance promoting their nation’s mineral potential and looking to attract desperately-needed foreign investment.
South Africa used to be known as the “Rainbow Nation”, but a more accurate description for Africa as a whole is perhaps that of a “patchwork quilt”. It would be a mistake to think of such a diverse continent in singular terms when there are such great differences in opportunities and risks between countries – and indeed the dynamic way in which some country’s operating environments can change. Land-locked countries wishing to unlock their mineral potential, particularly for bulk commodities, are dependent on neighbouring countries for access to ports and/or as offtake for their production (e.g. future power generation from Botswana depends on South Africa’s state electricity supplier, Eskom, buying this power). Assuming, of course, that these sovereign nations can either raise the required funds or attract significant private financial investments to construct or re-furbish the necessary infrastructure.
So, in short, the 2010 Indaba reflected a guarded optimism on mining opportunities in Africa, with those most interested typically within the junior end of the minerals sector - those with the most flexibility to take advantage of smaller projects offering potential to deliver short to medium term returns.
In general, the talk was of better conditions ahead but, as with all investments, the message remains “beware and be aware”.

For more details on the information in this article or general enquiries please contact Jeames McKibben on tel: +61 7 3221 2366 or email: jmckibben@xstractgroup.com. Visit: www.XstractGroup.com