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Infrastructure deficit thwarting investment

ROGER DIXON A lack of well-maintained infrastructure in many African countries remains a serious obstacle to new mining investment

11th July 2014

By: Pimani Baloyi

Creamer Media Writer

  

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A lack of infrastructure in several African countries continues to hinder investment in new mining projects and efficient operations at existing mining operations, says multidisciplinary mining and engineering consulting firm SRK Consulting.

Company chairperson and corporate consultant Roger Dixon tells Mining Weekly that the lack of infrastructure on the continent has affected the start-up of several coal and iron-ore projects, as mining companies consider effective materials-handling infrastructure as an imperative precondition for the viability of mine operations.

“When mining companies consider whether to start a mining operation, the cost of a rail line and a port to transport . . . will often outweigh the cost of the mine itself.

“For mines that have been established despite inadequate infrastructure – that is, when a mine has to generate its own electricity or transport its ore by road instead of rail – operating costs are usually much higher than what they would have been, had there been adequate, well-run infrastructure,” Dixon explains.

This exposes mining operations in Africa to economic risk and reduces the operations’ expansion opportunities, as well as their opportunities to impact on the economies of their host countries. Dixon adds that host communities and governments expect mining companies to improve the socioeconomic conditions of host communities.

“However, as governments represent their citizens and mining companies represent their shareholders, there will always be differing priorities in this aspect. In recent years, governments have become more assertive about the need for the industry’s benefits to be more widely spread within host countries.

“Therefore, it is to be expected that governments and mining companies will need to consider the broader needs of the social, economic and natural environments when making decisions,” he advises.

Dixon believes the onus is on both sides to find common ground. He points out that the mining industry in Africa has been criticised for creating “islands of prosperity in a sea of poverty”, when they do not make concerted efforts to embed themselves in their host communities to spread the benefits of their operations.

He states, however, that governments can better leverage the positive impact on mining operations by collaborating closely with investors on how projects are planned and executed. This ensures that it meets investors halfway and extends the mine-related infrastructure to host communities, where possible, adds Dixon.

He highlights, however, that there have been milestones on a diplomatic level in terms of finding common ground, citing the endorsement of the African Union’s (AU’s) African Mining Vision (AMV) as an example.

Adopted by African heads of State at the February 2009 AU summit, the AMV aims to manage Africa’s minerals so that the sector can proactively contribute to development on the continent.

The AMV was formulated by African nations and puts the continent’s long-term and broad development objectives at the heart of all mineral extraction policymaking. The AMV stipulates how mining can be used to drive continental development.

Future Prospects
Dixon tells Mining Weekly that new developments in Africa’s mining sector can be expected from several commodity sources, including the copper sector in the Democratic Republic of Congo, the iron-ore sector in Guinea and the coal sector in Mozambique.

He adds that West Africa is fast becoming a mining hot spot, owing to large iron-ore deposits in countries such as Guinea, Sierra Leone, Liberia and Cameroon. West Africa’s supply of diamonds, manganese, gold and bauxite is also piquing investor interest, says Dixon.

“An important milestone has been the recent signing of an investment framework to develop iron-ore deposits in Guinea, after years of dispute over which companies were legally entitled to develop the deposits.

“A lesson to be gained from this project and its delays is the need for governance stability. Investors need to see stable governments, transparency in official mining company processes and stakeholders’ commitment to contracts as the foundation for long-term mining projects.

“Investors also need to see how large projects can be successfully rolled out to inspire more of this kind of investment on the continent. This could have significant knock-on effects on the host country’s economy and that of its neighbours,” he explains.

Meanwhile, Dixon points out that Southern Africa remains that world’s biggest platinum producer, with the world’s largest platinum resources in South Africa’s Igneous Bushveld Complex, in Limpopo, and Zimbabwe’s Great Dyke.

East Africa, with the Nubian belt in Ethiopia, contributes substantially to the world’s gold deposits, Algeria and Mauritania, in North Africa, remain the world’s traditional sources of iron-ore, while bauxite is sourced from Niger and phosphate from Morocco and Tunisia.

 

Edited by Samantha Herbst
Creamer Media Deputy Editor

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