PERTH (miningweekly.com) - While the African continent was still offering exploration and merger and acquisition opportunities for resources investors, the lack of infrastructure and skills, as well as the price volatility in the market were providing obstacles to investment, advisory firm Deloitte said on Thursday.

Reporting on an Insomnia Index undertaken at this year’s Investing in African Mining Indaba, in Cape Town, Deloitte noted that resource investors still felt that Africa presented a huge opportunity for mines, with exploration topping the opportunities lists.

Miners also expected demand from emerging markets to offset some of the risks associated with entering new markets, adding that Africa’s central location to the emerging markets could be seen as a benefit from a supply chain perspective.

Deloitte noted that the major players in mining were typically targeting acquisitions of developed assets, with midtier mines operating in Africa offering faster growth and penetration strategies.

However, the index found that the lack of infrastructure in Africa was still considered a massive challenge for mines.

“The lack of rail and road, as well as power and water in large parts of Africa make it incredibly difficult for companies to start operations in Africa. Mines need to consider the extra funding and potential partnerships with local governments in order to operate in Africa,” Deloitte said.

Moreover, price volatility was also proving to be a global challenge, and was affecting investment opportunities in Africa.

Deloitte noted that the large fluctuations in commodity prices could impact significantly on profitability, cash flow and input costs, which would ultimately negatively impact the investment case.

Another key challenge identified by miners at this year’s Indaba was the availability of skilled labour.

“Midtier miners who are not afforded the same access to a global network of skills that the large-scale miners have, may see this as more of a challenge as the cost of importing skills to remote areas in Africa can be very high,” Deloitte noted.

The advisory firm added that reporting and compliance in the different African countries could also prove difficult to navigate, without local knowledge and understanding of the specific requirements.

“Respondents listed this as the fourth-biggest challenge when looking to expand their operations into Africa.”

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