JOHANNESBURG (miningweekly.com) – Sustained commodity price growth and reduced costs are likely to present Africa’s mining sector with the best prospects in over a decade.
“The centrality of mining to the development of the continent means that 2018 is likely to be a watershed year in Africa’s ongoing growth story,” Standard Bank mining and metals group head Mark Buncombe said on Tuesday.
He added that, for the first time in a decade, most commodities, bar platinum, had seen a significant price recovery.
While the protracted absence of investment in prospecting would weigh on the industry for many years to come, reduced debt levels meant that, going in to 2018 balance sheets, were generally stronger.
“While the volatility of recent years means that many companies are reluctant to spend, real risk-managed opportunities present themselves in Africa as investment is taking place,” Buncombe added.
Those countries offering stability and a degree of political certainty are likely to benefit most, he said, pointing to countries such as Botswana, Namibia and increasingly Ghana, Cote d’Ivoire and Zambia as examples of countries with balanced legislative regimes.
These countries, which are cognisant of the industry’s long investment cycles and national development goals, are likely to attract global interest.
In South Africa, multinationals are looking to diversify ownership by developing commercially viable local relationships.
“Generally improved metals prices combined with rationalised cost-bases are likely to see a re-gearing and re-financing of existing assets in South Africa as new local players enter the market,” Buncombe said.
Global mining major Anglo American, for instance, is selling its coal assets that supply power utility Eskom to a local company headed by Mike Teke and diversified mining group South32 is preparing its Eskom-tied assets for sale.
As assets changed hands from large multinationals to local emerging entities, Buncombe said empowerment players would require financing.
Buncombe, meanwhile, said that China continued to account for about 50% of world commodity consumption, which underscored the importance of building Africa’s links to the east.
Given this reality, any consideration of commodity financing in Africa had to be predicated on access to, and capability in, China.
To this end, the Industrial and Commercial Bank of China’s shareholding in Standard Bank and the broad set of transaction and financing capabilities being built at both ends of Standard Bank’s Africa-China trade and investment corridor would remain critical to supporting and growing Africa’s commodity sector.
“This will include investment in the associated industrial and logistics infrastructures required to make Africa’s resources relevant to the world.”