Unless there is a definitive turn in the commodities cycle, coupled with stronger global growth, the challenging short-term outlook for the Mozambique mining industry will not change in a positive sense, states commodities consultancy Core Consultants and its partner, business consultancy Core Africa. Both agree, however, that the industry’s medium-term outlook is “very attractive”.

Core Africa CEO David Creamer explains that the Mozambique mining industry is, relatively speaking, in a similar position to any other commodities producer after the commodities supercycle – which ended towards the end of 2013 – and amid low commodity prices.

However, he comments that the country’s poor and ageing infrastructure, including railways, ports and the electricity grid, has ensured that it has faired slightly worse than some of its contemporaries. “Historically, the industry has been forced to build its own infrastructure,” Creamer says, citing mining major Vale’s construction of a railway line that connects its Moatize coal mine and the Nacala-a-Velha deep-water port, 912 km away, to supply its coal terminal.

He says, in all likelihood, the mining industry is still largely responsible for developing infrastructure to support its operations, as he has not seen any evidence that indicates that the state of infrastructure in Mozambique has changed since Vale’s railway project, which concluded in 2014.

“However . . . a lot of planning is being undertaken by government to realise infrastructure development projects, including power, port and transport infrastructure, specifically roads and bridges,” he adds.

Aside from infrastructure, which will remain a challenge in the immediate future, Creamer notes that the mining industry also has to contend with the relatively low commodity prices and corruption in certain public and private entities, “which will always be a disincentive for any investor”.

Referring to the 2016 Mozambique debt crisis, he highlights that government has “admitted some guilt” in this issue and, therefore, believes that the country’s longer-term future looks “slightly more positive”.

Core Consultants MD Lara Smith agrees, adding that Mozambique remains an ideal source of minerals supply for Asia, but particularly India.

Further, she points out that mining-sector activity contributed about MZN4 272-million ($71.5-million in today’s terms) to the country’s gross domestic product in the fourth quarter of 2016, compared with the MZN6 186-million ($103.5-million in today’s terms) it contributed in the third quarter, which shows a significant decline in terms of mining activity for the quarter, on an upward looking trend.

Mozambique has an abundant supply of resources, including coal, iron-ore, gold, tantalite, copper, platinum, phosphates, uranium, lead, copper, zinc and graphite. Smith says these commodities are in various stages of production and/or exploration, which “certainly makes Mozambique a significantly attractive investment destination”.

Creamer says the country’s three main mineral commodities “have to be coal and tantalite, in terms of production, and phosphates, based on historical interest”.

He adds that, while he has in the past advocated that Mozambique is the rising star of Africa, “unless there is renewed price strength and demand, it is a case of mining companies extracting what they can to recoup in the investment”. He comments that this does not bode well for any mining destination nor any specific commodity, except perhaps precious metals, which have a historically high level of investment.

He notes that, in the depressed environment, an alternative revenue-generating strategy for junior mining and exploration companies is to become a target for acquisition. He cites Japanese general trading company Mitsui, which bought a sizeable stake in Vale’s Tete operation last year, as evidence of the value to be found in existing operations.

“Mitsui’s investment in Tete coal is very significant for Mozambique and the region, and supports my view of Mozambique’s appeal,” he adds.

Another significant project is that of aluminium producer Mozal, as it continues to contribute much-needed foreign exchange and remains the benchmark for successful investment in Africa, Creamer states.

Smith notes that Mozambique is of particular interest to Core Consultants, which continues to monitor and report on the African and global mining industries, adding that, while its consulting services have touched on Mozambique in years prior, “we expect to focus more . . . on Mozambique in the future, given the gradual resurgence in the sub-Saharan African commodities market”.

Creamer notes that Core Africa adds another dimension, as it provides businesses that want to operate in Mozambique with operational solutions such as expertise on the regulatory framework, solutions on cross-border flows into and out of the country, and deep insight into the macroeconomic situation.

He concludes that his experience in Mozambique and the rest of Africa, including working with Mozambique’s big investors, such as Mozal, Vale and Anadarko, ensure that Core Africa and Core Consultants can reliably advise clients on mining activity in Africa.