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Whopping $90bn needed to unlock Africa’s mining potential

14th November 2014

By: Anine Kilian

Contributing Editor Online

  

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It would take $90-billion to unlock Africa’s mining potential, International Finance Corporation investment officer in the mining division Muhammed Carim said earlier this month, citing World Bank estimates.

He was speaking at the third yearly Junior Mining and Exploration Conference, in Johannesburg.

Attracting such a huge investment would not be too difficult, given the multifold benefits that would ensue.

He told delegates that Africa was a frontier region that had massive underlying mineral reserves – accounting for about 30% of all global mineral reserves – and was a major producer of cobalt, platinum-group metals, diamonds and chromite.

He added that mining projects had the potential to change the African landscape.

Carim believes large investments in Africa will result in greater supply of minerals and materials to the global market, as well as contribute to the overall development of the continent.

The ever-expanding global middle-class will continue to drive the growth in demand for precious metals and gemstones.

“Data from the United Nations Population Fund report indicated that [the population in] developing countries would reach 7.5-million by 2040, which means that overall demand will remain robust going forward. However, there is still volatility in the short term,” Carim pointed out.

Meanwhile, geopolitical tensions and the outbreak of Ebola in some West African countries are fuelling short-term volatility and impacting on mining profitability, which is evident in recent movements in the gold price.

“The price of gold has slid back from its 2012 highs owing to ongoing geopolitical tension; however, this could be moderated in the medium term,” he explained, adding that the reduction of capital costs, as well as operational challenges, was putting mining companies under financial strain.

He further commented that margin pressure was impacting on mark-ups, which was directly affecting junior miners.

“Junior miners use their own risk capital trying to create value from mineral resources. Mining is a long-term business and feasibility studies can take between 5 and 20 years,” Carim noted.

He emphasised that a lack of long-term investment would lead to supply shortages and that companies that had the ability to invest in exploration would profit once dynamics shifted, noting that there were very few operations currently exploring greenfield projects.

“This presents an opportunity for midtier and junior mining operations to plug that gap,” he said.

Edited by Martin Zhuwakinyu
Creamer Media Senior Deputy Editor

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