JOHANNESBURG (miningweekly.com) – Latin American countries are able to source more mining project finance from Canadian stock markets than African countries, despite generally being perceived as higher risk, Canada-South Africa Chamber of Business president Bruce Shapiro said on Monday.
Speaking at the 2010 Africa Mining Congress in Johannesburg, he said that during the recent recession, a record $2,6-billion was raised for the development of African projects from the TSX and TSX-Venture Exchange markets, but added it that was still overshadowed by the $3-billion raised towards the development of South American projects, with Peru being able to draw the largest amount of financing.
Globally, Africa raised $9,7-billion in equity, while South America raised around $5,9-billion. Of this, the TSX and TSX-Venture Exchange were responsible for 52,5% of the equity raised in South America and 47% of the equity raised in Africa, still making Toronto the top exchange for raising mining finance in Africa.
Currently, about 174 mining companies operating in Africa are listed on the TSX and the TSX-Venture Exchange, with equity being raised through 68 financings for projects in 44 countries on the continent, while 256 South American mining companies are listed on the TSX and TSX-Venture Exchange.
Shapiro explained that some of the reasons why Canadian investors might be more inclined to invest in South America included that Canada has been active in the South American market for about 20 years more than in the African market and also that African markets were lagging behind in mineral policies.
"However, this just shows that Africa has the ability to source more of its financing from Canadian markets," commented Shapiro.
Shapiro also pointed out that South Africa had dropped significantly as a preferred mining investment destination over the past year.
According to the Canada-based Fraser Institute's latest mining investment ratings, South Africa has fallen right to the bottom of preferred mining investment countries on the continent, with only the Democratic Republic of Congo and Zimbabwe rating lower than the biggest mining country on the continent.
The Fraser report specifically considered different policy frameworks within country borders, and Shapiro said that the issue of nationalising South Africa's mines that keeps on raising its head might have played some role in this, together with some lagging in turnover times in the granting of mining permits.
"However, it is encouraging that South Africa's Mineral Resources Susan Shabangu had taken note of this, and assured that the country would strive to increase its position," said Shapiro.
South Africa slipped to 61 out of 72 countries surveyed.
The report also showed that Botswana rated as the "most-preferred" mining investment country on the continent.
Shapiro noted that African projects that were opting for finance from the TSX and TSX-Venture Exchange could either invest in listing on the exchanges, or partnering with interested Canadian companies.
"Last year, 442 such venture deals were concluded to the value of $10,2-billion. There are a number of benefits in forming strategic joint ventures, including sharing risk and sharing technical, legal, regulatory and financing expertise.
"Finally, I think it is pretty clear why Africa should be looking towards Canada for investment, even despite its colder weather," concluded Shapiro.