The African mining industry has a bright future owing to its largely untapped resources base, which is supported by the bullish outlook for China’s critical minerals demand in late 2013 and/or early 2014 and the expected recovery of the global economy, says global advisory firm KPMG head of mining for Africa Jacques Erasmus.

The significant resources and production output of coal, dia- monds, copper, iron-ore and gold in Mozambique, Botswana, Zam- bia, the Democratic Republic of Congo (DRC) and Guinea, respectively, which are critical commodities in Asia for infrastructure and technology develop- ment, will create a positive economic outlook for Africa, he explains.

China’s commitment to urbanisation and industrialisation should give the global copper market a healthy boost in the coming years, Chilean State-owned copper producer Codelco CEO Thomas Keller told Dow Jones Newswires during an interview in November 2012.

KPMG’s ‘Quarterly Commodity Insights Bulletin for June 2012’ expected copper demand to slow in line with the Chinese economy growing at a slower rate last year. However, the report stated that copper demand is expected to recover this year, with recovery in the eurozone supporting demand driven by China and other emerging Asian markets.

This bodes well for large-scale copper mining projects in Zambia, which are expected to increase sub-Saharan Africa’s copper production from 1.2-million tons in 2011 to 1.7-million tons by 2015, consulting firm Frost & Sullivan mining industry analyst Wonder Nyanjowa told Mining Weekly in July last year.

Zambia, followed by the DRC and South Africa, was the largest contributor to the about 1.22-million tons of copper mined in Africa in 2010, states Creamer Media’s Research Channel Africa ‘Base Metals 2012’ report. Other African countries that mine copper include Botswana, Mauri- tania, Morocco, Namibia, Tan- zania and Zimbabwe, although production from each of these countries is relatively small when compared with the world’s major copper producers.

Meanwhile, it is forecast that steel demand in China will reach 666-million tons this year as the nation’s economic growth gets back on track, according to a report by the China Metallurgical Industry Planning and Research Institute, released in November 2012.

The report also states that actual consumption of steel in China was 640-million tons in 2012 – an increase of 3.6% on the previous year.

South Africa is Africa’s principal producer of iron-ore, the main component of steel, and produced an estimated 55-million tons of iron-ore in 2011, states the United States Geological Survey. South Africa has more than one-billion tons of iron-ore reserves, the largest of which is located in the Sishen and Postmasburg area, in the Northern Cape, and in Thabazimbi, in Limpopo.

China’s current modest growth rate of between 6% and 7% is similar to the double-digit growth rate it achieved a few years ago, when compared with previous growth rates on a yearly compounded basis, explains Erasmus.

Many economists saw China’s economy growing at a lower trajectory in future, despite its expansion at a blistering pace of more than 10% a year on average during the past decade, AMP Capital’s chief economist Shane Oliver told Reuters in November last year. He added that China’s official target of 7.5%, which was more in line with what was being seen, would be consistent with commodity prices holding up at reasonable levels.

In light of this, however, the economic slowdown in China has driven down the prices of iron-ore and coal, forcing miners to cut jobs, scale back on operations and shelve expansion projects.

Economists say this is a result of the Chinese economy being too dependent on investment and exports to drive growth, instead of encouraging domestic consumption of the country’s resources.

Other challenges that may also hamper the outlook of the African mining sector are the tenure of mineral rights; the social licence to operate; the level of government involvement, either through partial ownership of assets or through taxes and royalties; poor electricity and transportation infrastructure; as well as unskilled labour, says Erasmus.

Further, the current global economic climate is adding to Africa’s challenges, as governments’ tax revenues are decreasing. He points out that, as a result, African governments are promoting investment by foreign mining companies to fill the gap.

It also appears that major mining companies are focusing only on core projects and are satisfied to either dispose or postpone marginal projects to keep their own balance sheets strong, Erasmus says.

In terms of production margin and investment, he says Africa has lost some ground to South America owing to the political instability in many regions.

“However, the DRC has been able to change this perception of the continent in the last six months, which has resulted in several clients actively exploring opportunities in this country.”