Focus on African resources at Mining Indaba

Mining Indaba
Delegates at the 20th annual African Mining Indaba at the Cape Town International Convention Centre on Monday 3 February. (Image: African Mining Indaba)

The Investing in African Mining Indaba got off to an energetic start in Cape Town on Monday 3 February, with a number of parallel sessions and a busy exhibition hall.

Now in its 20th year, the Mining Indaba is hosting 7 800 delegates at the Cape Town International Convention Centre, representing 110 countries across six continents, with the majority – 61% – from Africa.

With #MiningIndaba trending on Twitter, the morning was given over to workshops and discussions focused was on transparency in the extractive industry, and on the scramble for Africa’s resources – the continent accounts for 30% of global resources, much of it untapped.

Experts at the indaba agreed it had been a challenging year for mining, with a commodity demand stabilising and prices dropping. But they forecast an uptick globally. There was plenty of growth potential, they said, particularly in China. The message out of the Securities Exchange Panel, for instance, was that a month into 2014 things were “unquestionably getting better” for mining financial markets.

Red Door Research’s managing director, Jim Lennon, said in the next five years, “expect recovery in non-Chinese demand. China provides ground to get bullish again about commodities.” China represented almost 50% of the global commodity demand, though there was “no question” we were in a much slower growth period in China, but growth would remain strong in volume terms.

China represented close to 50% of demand for commodities, but, he asked: Would the next 50 years be Africa’s period? “Possibly, if challenges are overcome.”

David Cox, from analysts SNL Metal Economics Group, had a gloomier outlook, predicting a 15% to 20% decrease for exploration in Africa in 2014. At present, Canada drew 14% of world mineral exploration spending; South Africa only 1%. Spending on exploration was at $2-85-billion, although Africa was still lagging behind Latin America, while Canada continued to lose ground.

Worldwide exploration in 2013 was led by Latin America at 26.7%; the rest of world took 16.5%; Africa took 16.5%. Adding copper shifted Africa to second place, however.

Some good news came from Professor Magnus Ericsson, executive director at research group IntierraRMG, who said iron ore prices were expected to remain steady well into 2030, hovering around $120. And MoneyGold’s James Turk put the case for a return to gold as money in the 21st century. It retained its purchasing power over a long period, he pointed out.

Social compact in mining

The Mining Ministerial Forum, running alongside the indaba, was opened by Mineral Resources Minister Susan Shabangu, who focused on the need for a social compact between companies and communities. Africa had high exploration potential, requiring local and international partners and investment to unearth.

She called for responsible investment on the continent, “not based on exploitative principles centred solely on expectations for unrealistic rates of returns that are disguised on the principle of high risk – high return. As you know, mining is a long term investment and not about quick wins. Those who balance Africa’s mineral development with growth will ultimately receive the greatest reward in the long term.”

Enduring partnerships, community development, nurturing human capacity growth and development, as well as institutional collaboration on joint technology development and deployment were strong themes in her remarks.

“We also have to be cognisant of the fact that in order to effectively and comprehensively address the plight of the African continent, a gigantic shift and transformation in traditional mining jurisdictions is required,” the minister said. “This should entail a shift from exporting of largely raw materials to ensuring that minerals serve as a catalyst for accelerated industrialisation through mineral value-addition. This will also require development corridors that are a subject of multi-purpose infrastructure development.”

Such investment required partners to agree on a creative win-win formula for financing of infrastructure that would deliver “Africa’s promise” and enable the emergence of a resilient African continent. The outlook for growth in the medium to long term was extremely positive, but Africa must speak with a single voice. “The African Mining Vision is indeed that voice. However, it is important that the Mining Vision be driven and led by Africans, who must ensure that Africa’s mineral resources are exploited in an equitable and optimal manner that underpins a broad-based sustainable inclusive growth and socio-economic development.”

‘Make the most of what we’ve got’

In his keynote address at the main indaba, Phil Newman, the chief executive of consultancy CRU Strategies, said he was optimistic. “I think we are due another game change.” He was speaking about the changing face of world mineral supply. His key point was that changing mineral supply was not new, and was something that would always change. It was important, however, not to miss it, and to remember that necessity was the mother of invention. “We can all learn from the ability of China to make the most of what we’ve got.”

Mineral supply was affected by a number of drivers, two of which were technology and political will, or interference. Technology was going to become more and more important to mining, and innovation was key. He would not make any political predictions, but concluded by saying: “I believe technology will surprise us this decade – if only I knew how.”