Mine houses bullish about Africa

Janine Erasmus

Partnerships and power cuts were high on the agenda at the 13th annual Mining Indaba, held in Cape Town in early February.

The conference for natural resources professionals has evolved into a key forum for movers and shakers in the mining industry, offering presentations, panels and plenary sessions. There were plenty of networking opportunities, and the total market value on the exhibition floor, in which 240 companies took part, was around $1.7 trillion.

The event was attended by nearly 5 000 delegates, including mining ministers from 12 African countries and some 40 government delegations from Canada, Australia, China, the US and other countries.

There were also professionals from various key sectors of the mining industry, including miners, explorers, geologists, legal experts, project developers, mining analysts, fund managers, investment specialists, and financiers from almost 700 companies throughout Africa and beyond.

Millions injected into the economy

Conference organiser Tim Wood, vice president of International Investment Conferences, estimated that the Mining Indaba injected R500 million into South Africa’s economy every year, with R150 million going directly to Cape Town – all within a three-week period.

South African Minister of Minerals and Energy Buyelwa Sonjica said the indaba was as much about mining as about tourism in Cape Town, especially to Robben Island. The island has come to symbolise the suffering Africans have endured in this country – much of that taking place in the depths of South African mines.

While the theme was “partnership, progress, prosperity”, talk was dominated by recent electricity outages that led to the temporary shutdown of gold mines belonging to AngloGold Ashanti, Gold Fields and Harmony, and Anglo Platinum. These led to a sudden big jump in the price of both precious metals on world markets.

Recent acquisitions in the industry were also a hot topic. “There was a strong focus on the power issues affecting the South African mines,” said Wood. “There was a lot of attention paid to mergers and transactions going on worldwide, especially the events surrounding BHP Billiton’s bid for Rio Tinto.”

BHP Billiton is currently embroiled in a hostile takeover bid for rival mining company Rio Tinto, which has so far rejected all offers, stating that they do not reflect the true value of the company.

Another much-discussed topic was the possibility of a US recession, and the effect that would have on global economies. Experts agreed that the general positive growth rates in African countries would enable them to escape recession relatively unscathed.

Economist David Hale of Hale Advisers said Africa’s strong relationship with China would also help to buffer adverse effects because of the Asian country’s enormous growth rate globally, and its demand for commodities. “Africa benefits from this because its nations are able to help provide China with its increasing commodities needs,” he said.

Mining a cornerstone of African economy

In her keynote address Sonjica said the mining industry in Africa has built, and would continue to build, the economies of the continent

“Africa remains a leading producer of many critical commodities, such as diamonds, gold, platinum, chromium and vanadium. More importantly, the continent remains significantly under-explored, albeit with known reserves that surpass the rest of the world in terms of volumes in the ground, grades, ease of mining, and so on.”

With mineral production historically playing an important role in South Africa’s foreign earnings – and more to come, given the mineral reserves waiting to be exploited – as well as providing employment at home, Sonjica praised the efforts of companies such as Anglo American in their commitment to enhance the safety of workers and reduce mining-related deaths.

Bullish mood

The overall mood at the conference was bullish. International online mining publication Mineweb reported that “there is definitely a big range of exciting prospects and operations available to the industry across Africa, particularly in the current climate of high metal prices”.

Anglo American CEO Cynthia Carroll reiterated her company’s commitment to the African continent. “We see Africa as a land of unparalleled opportunity for the mining and extractive industries,” she said.

“First, the resources are here – the continent is estimated to have the best unexploited or under-exploited mineral reserves … Second, our industry over the years has proved we have the ability to turn these resources to account. Here in Africa – indeed within my own group – we have the world’s deepest mines; we have pioneered undersea diamond mining.”

Carroll mentioned Africa’s combined GDP growth of 5.7% a year since 2003 as a third reason, and concluded by saying that continued forward momentum in the political arena was a fourth reason for Anglo American’s confidence in Africa.

“African countries are working together to solve Africa’s problems – for example, in bringing a number of long-running conflicts to an end, most notably in the Democratic Republic of Congo,” she said.

Talking about electricity supply

Both Sonjica and Carroll addressed South Africa’s recurring power cuts in their speeches.

Sonjica conceded that the unwelcome situation impacted negatively on the planned output of South Africa’s mines. She urged stakeholders to continue their efforts to be as energy efficient as possible, and explore innovative ways of using electricity in mining.

“I therefore assure you that the permanent solutions to this challenge are being sought, in consultation with all stakeholders, including the mining industry as one of the largest consumers of the country,” she said.

Carroll expressed confidence in the country’s ability to successfully tackle the energy crisis, adding that they are not unique. “I don’t regard the problems regarding the security of energy supply here as a disaster. And South Africa is not alone: there are pressures on supply too regarding our expansion projects in Chile and Brazil.

“Sure, the problems here are serious, and overcoming them will require a lot of ingenuity, especially in energy efficiency and energy saving, as well as the development of alternative power supplies.

“But if all of us can forge strong partnerships to tackle the present situation, we will all come through – I hope relatively unscathed – at the other end.” It was necessary not to point fingers, but to work together in order to find solutions.

Key speakers at the indaba included Martin Murenbeeld, chief economist for the Dundee group; President Jakaya Mrisho Kikwete of Tanzania; Frank Holmes, chairman, CEO and CIO of US Global Investors; economist David Hale of Hale Advisors; Dr Martyn Davies, CEO of consulting firm Emerging Markets; Anglo American’s CEO Cynthia Carroll; and South African Minister of Minerals and Energy Buyelwa Sonjica.

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