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Mining on Top 2014: Africa mining sector needs diplomacy and transparency to attract investors

By Antonio Torrisi
Published: Wednesday, 25 June 2014

By convening on these two key factors for the development of a stable and long-term profitable mining sector, Africa’s government representatives and mining companies seem to agree on a common strategy to boost investors in the mining industry.

Transparency and dialogue are key factors in attracting investment in Africa’s mining sector, African countries representatives and mining companies said today at the Mining on Top: Africa London Summit.

Meanwhile, companies urged for more transparency in the governments to eradicate corruption within the mining sector.

Kevin Fox, managing director of exploration for Africa, Europe and Asia at Rio Tinto, said that there are a range of challenges related to corruption in African countries.

“We have an internal business ethics, according to which we do not seek compromises [in presence of bribery acts] and avoid corruption,” Fox said during the event.

Rio Tinto operates the Richard Bay Minerals project, which mines titanium and zircon from its mineral sand deposits in KwaZulu-Natal province, South Africa.

The Anglo-Australian group also owns 80% of QIT Madagascar Minerals (QMM) mineral sands mining operation, with 20% owned by the government of Madagascar.

However, attempts of corruption from local governments can bring long delays in obtaining social licences and mining permits, which ultimately affected the feasibility of mining projects in terms of costs, Fox explained.

Rio Tinto said that corruption is a major factor in the company’s decision to abandon jurisdictions where lack of transparency determines long delays and high costs in projects development.

In 2006 the African Bank Group endorsed the Extractive Industries Transparency Initiative (EITI), in line with the UK Bribery Act, to push African countries to adopt greater transparency and better governance in the mining sector.

Ghana, Zambia, Mali and Tanzania are among those which took part in the initiative, but whether this and other initiatives are effective in eradicating corruption in the African mining sector “is tricky to say”, Fox said.

The Minister of Land and Natural Resources of Ghana (Alhaji Inusah Fuseini) said that companies should operate in a transparent way within Africa, both in the way they define project objectives and in setting tariffs.

Fuseini added that governments should also operate in a transparent way, specifically underlying the legislation process.

“Ghana does not think it is getting the best from mining investments in the country. These should do more to create shared values and sustainable business,” Fuseini said at the summit.

The Minister of Land and Natural Resources said that many companies which invest in the country are only interested in examining and proving resources, to acquire asset values, without developing the projects.

“We don’t want to create situations where mining companies walk away, but we can negotiate on taxes and royalties,” Fuseini said.

Constructing a dialogue

Richard Morgan, international government relations advisor at Anglo American, said during the event that, in order to attract investors in the sector, both governments and mining companies should keep an open dialogue and look at the bigger picture where projects are concerned.

“It is important for mining companies to get involved with local communities, to build infrastructure, hospitals, water pumping, and deliver transferable skills in the country in which they operate,” Morgan said.

James Hopkinson, director of UK-based risk management company, Assaye Risk, said that companies need to understand both natural and social environment of the region where they develop their assets, in order to receive social and local support to their projects.

“It takes a long-term approach to build up this support, but it is absolutely vital to obtain social licences, which are a key component to take the projects into operation,” Hopkinson said.

Hon. Musa Mohammed Sada, Nigeria’s Minister of Mines and Steel Development, said that the African country expects companies to form good partnerships and look for reciprocal understanding with investors.

“Too strong and tight regulations [in the mining sector] are not useful as you end up regulating nothing,” Sada said.