Cross-country collaboration key for African mining success

8th November 2013

By: David Oliveira

Creamer Media Staff Writer


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One of the key challenges the African mining industry faces is insufficient collaboration between countries, natural resources and development solutions company SRK Consulting South Africa tells Mining Weekly.

Chairperson Roger Dixon argues that collaboration between African countries is important “to jointly develop their mining sectors, as the lack of enabling infrastructure on the continent makes it difficult for an African country to develop standalone projects”.

He says Africa’s mining industry is prospective, as its mineral deposits are not readily available, but notes that these deposits need to be developed to harvest the potential, adding that he believes Africa’s mining industry will prosper even though growth may not be as rapid as predicted.

“The economic growth required to sustain Africa’s population growth can be achieved only with a thriving mining industry. If sustainable growth is to be maintained, infrastructure will have to be developed regionally.

“A large part of the growth on the continent is being fuelled by developments in the oil and gas industry,” says Dixon, noting that these developments are contri-buting greatly to Africa’s economic growth.

However, he highlights the continent’s lack of power and transport infrastructure and its limited government capacity as serious challenges for emerging African mining countries. Meanwhile, countries such as South Africa and Zambia have a distinct advantage in securing mining projects, as they have established fiscal and legal systems that have been built around mining, he explains.

“It is highly unlikely that one project will provide the financial returns required to justify all the associated infrastructure requirements. Therefore, a cooperative approach is required so that developers in a particular region share the risks and rewards associated with developing the required infrastructure,” argues Dixon.

Meanwhile, SRK attended the sixth West and Central Africa Mining Summit and Expo at the Accra International Conference Centre, in Ghana, on September 17 and 18.

Several service providers also attended the exhibition and most speakers on the first day were government representatives from the Congo, the Democratic Republic of Congo (DRC), Ghana, Mauritania, Gabon and Senegal. However, mining companies were underrepresented at the exhibition, comments Dixon.

“The second day included more input from service providers, with a particularly interesting presentation on compliance, bureaucratic challenges, Ministry inspec- tions and the successful brokering of mining permit renewal by emerging mineral producer Cominco Resources corporate social responsibility manager Madeline Young,” he says.

“West and Central Africa have, like most regions of the world, been affected by the slowdown in merger and acquisition activity in the commodities markets. Some major mining companies are aiming to offload some of their project pipelines, while other companies are seizing the opportunity to progress their projects. The spate of write-downs on large projects has led financiers to demand more stringent due diligence studies before approving funds,” says Dixon.

SRK Consulting Ghana country manager John Kwofie notes that new projects in West Africa will most likely focus on commodities such as manganese, bauxite and diamonds. This is due to investors trying to avoid the insecurity associated with gold mining activities, as a result of constantly fluctuating gold prices.

Dixon notes that even though investors are trying to avoid the gold sector, it remains “of keen interest to entrepreneurs”. However, he says, the greatest potential for growth in West Africa is in iron-ore and steelmaking ingredients.

“There are many outstanding iron-ore, gold and manganese deposits in several West and Central African countries. The secret is getting all the interested and affected parties to sit down and agree on a solution that will result in developing these deposits in the best possible way that will also best serve the interests of all stakeholders and the entire region,” says Kwofie.

Meanwhile, Dixon says that, like other regions in Africa, Central Africa finds it challenging to obtain funding for proposed projects. “Finance is tight and only robust projects will progress – those that have access to existing infrastructure will have the advantage,” he comments.

Dixon adds that the DRC mining industry has been affected by the general slowing in demand for commodities and the unrest in the east of the country, where rebels from militia movement M23 have created uncertainty for project developers.

“The large number of artisanal miners operating in the country is also a challenge. Not only are they operating on licences awarded to project development companies but they are also making it difficult to establish whether the mineral products are ‘conflict-free’ – an issue that remains signifi-cant in the DRC,” explains Dixon.

SRK Consulting DRC country manager Susa Maleba adds that lack of infrastructure, such as an established road network to remote project locations, is another concern for the DRC. Dixon adds that the unreliable supply of electricity presents challenges to any mining company operating in the country.

“However, SRK is consoled by the fact that it is even more of a challenge for con- sulting companies from outside the DRC, which do not have a base in the country, to conduct business,” he comments, noting that SRK’s DRC office was established in 2010.

Copper is still a strong market for the DRC, particularly in Katanga province, in the south, which has one of the largest copper deposits in the world, Dixon says.

Maleba notes that cassiterite – a tin oxide – found in the north-east of Katanga and in the east of the country, is another potentially strong market for the DRC. “SRK is conducting environmental- and social-impact studies and biannual audits for some of the large companies active in Katanga,” Maleba highlights.

He explains that SRK also expects growth in geological work in the country, as most of the DRC government-owned companies have changed their status to become commercial entities and, therefore, need to certify their resources to meet international reporting standards.

“A major challenge to providing consulting services in Central and Western Africa is the bureaucracy involved in interactions with governments. It is a complex sphere, as Ministries in the same government often have different views on how the relevant laws should be applied to mining projects. This is further exacerbated when the project involves two or more countries, as is often the case, because rail lines and other infra- structure need to be developed across national boundaries,” concludes Dixon.

Edited by Samantha Herbst
Creamer Media Deputy Editor



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