ANDREW LANE Regulatory uncertainty continues across Africa, which causes nervousness among international investors
This year has been tough for the African mining industry, owing to ongoing challenges and threats, such as resource nationalisation, regulatory uncertainty and labour unrest, says Deloitte energy and resources leader Andrew Lane.
“Regulatory uncertainty continues across the continent, which causes nervousness among international investors, as they are reluctant to put their money into an environment characterised by policy vagueness,” he tells Mining Weekly.
Lane adds that the protracted labour unrest that impacted on South Africa’s platinum industry in the first quarter of the year played a major role in blemishing the country’s mining industry.
“Add to this the rising cost of doing business in Africa [as a whole], and you have a long list of factors that are making mining on the continent a daunting prospect.”
Lane highlights that most of the mining companies operating on the continent face significant challenges, including a lack of port and rail infrastructure. For example, he cites diversified miner Exxaro’s impairment of its investment in iron-ore development company African Iron’s Mayoko iron-ore project, in the Republic of Congo, which occured after Exxaro was unsuccessful in signing an infrastructure deal with the country’s government.
Lane also highlights mining major Rio Tinto’s sale of mining company Riversdale Mining in Mozambique as another example of a mining company divesting owing to a lack of infrastructure. Rio Tinto faced significant challenges in terms of moving mined coal from the pit to the port.
Another challenge currently facing mining companies operating in Africa is the need to “have proactive and constructive dialogue with mining communities” to ensure that mining operations are accepted and supported by local communities.
Lane believes that mining companies can deal with most of their challenges by engaging with key stakeholders, such as local governments and communities surrounding their operations. They also need to engage with their respective workforce to develop stronger workforce engagement methods, he says.
Lane adds that, to survive, mining companies will need to use their financial resources effectively and implement innovative ways of reducing their workforce and reliance on combustible energy.
Meanwhile, Lane highlights that platinum miner Anglo American has put its platinum assets on the market, as it aims to sell a major part of its platinum mining operations in South Africa, while mining giant BHP Billiton has announced a split of its base metals assets from its core business.
“Further, gold mining major AngloGold Ashanti recently decided not to proceed with its proposed restructuring and capital-raising plans, as several shareholders have expressed concern about the quantum of the equity capital raising needed for the restructuring to be implemented in accordance with regulatory and other requirements,” he concludes.