Mining for industrial minerals in Africa remains a profitable
business proposition, but companies will have to continue
to look elsewhere for finance and markets, industry
participants at the 20th Mining Indaba Conference in
Cape Town told IM this week.
The 20th Mining Indaba Conference is taking
place in Cape Town, South Africa, this week.
The African continent plays host to several industrial
mineral projects, including potash in the
Republic of Congo (ROC), phosphates and vermiculite
in Uganda, rare
earths and mineral sands
in South Africa and rutile in Sierra Leone, but presently lacks
the capacity to process or consume many of the minerals it can
"There is still good money to be made in industrial
minerals, particularly in Africa," Ilja Graulich, investor
relations manager for ASX-listed potash junior,
Elemental Minerals Ltd, told IM.
"Potash is one of the easiest minerals to get returns on
because it has clear uses and relatively transparent pricing,"
Elemental is developing the Sintoukola potash project in
ROC, West Africa, which has combined proven and probable ore
reserves of around 152m tonnes, and aims to be in full
production by 2018.
Yet even with production at least four years away and
international agreement on the evident need for investment in
agriculture in Africa, Elemental does not envisage being able
to sell its potash production within the continent.
"We would love to sell our production on our doorstep in
Africa, but the market isnt there yet," Graulich, who is
a native South African, said, adding that Elemental is looking
to ship its potash to China and Brazil as established consumers
of fertiliser minerals with a keen eye for new supply
At the moment, ROCs economy is heavily reliant on its
established petroleum industry. This has provided companies
like Elemental with the necessary fundamentals, in terms of
infrastructure and business ethic, to explore some of the
countrys largely untapped mineral reserves, but has
arguably held back the development of its mineral or
The money to develop Sintoukola has also been sourced from
outside Africa. As well as raising cash via a listing and share
placements on the ASX, the company has received cash loans
through its Hong Kong-listed partner, Dingyi Group.
"Investors on the ASX have an awareness and appetite for
African mining projects, plus there is confidence that
Australian-run companies can succeed in Africa, because many of
the physical operating conditions are the same as they are back
Australia," Graulich said.
Turning the tide
Despite the premise of the Mining Indaba meeting, now in its
20th year, which is to connect foreign investors
with African mining projects, local businesses and politicians
alike admit that old habits, with regard to exploitation of
Africas resources, die hard.
During a ministerial briefing, Peter Lokeris, Minister of
State for Mineral Development in Uganda, told delegates that
Uganda boasts vast reserves of minerals, including phosphate,
vermiculite and silica sands.
But while there is plenty of interest in developing these
deposits, and the government is extremely vocal about its
"open door" policy with respect to mining investment, the
country is struggling to ensure that it receives downstream
value from mineral projects.
"Around 75% of our population is below the poverty line,"
Lokeris said, "so if you, as miners, decide to do some of your
beneficiation in Uganda, we will be very pleased with you,
because our people need jobs."
South Africa is also failing to
get the best returns from its mining industry, particularly
from a financial markets perspective.
The country is one of the
worlds most important mining destinations, and is the
sector leader within the continent as a whole with established
mining firms, technology companies, professional services and a
financial arena for fundraising.
But it has underperformed peers
including Australia owing to a combination of factors including
difficult labour-management relations, rising costs,
infrastructure bottlenecks and policy uncertainty.
The Johannesburg Stock Exchange
presently has a total of 67 listed resource companies, around
35 of which are dual listed. This compares to more than 1,000
resource firms listed on the ASX and over 1,600 on the TSX and
According to Patrycja Kula,
business development manager for the JSE, the Johannesburg
market is actively looking to grow, but is pursuing a different
growth model to its competitors.
"We are not looking to challenge
other commodity based exchanges," she told IM,
"instead we are looking to promote the many advantages of
"If a mining company is listed
elsewhere, and this is that companys primary exchange,
then the JSE is a very flexible option for a dual listing since
we do not stipulate any additional requirements other than that
the company must have a South Africa-based broker," she
In a notable coup for the
exchange, last year saw the newly formed mining-trading giant,
GlencoreXstrata, list on the JSE, although even this, Kula
admitted, did not act as a catalyst for other new listings.
"It is a pity that we do not have
more African companies listed," she said, but pointed out that
IPO market has been difficult for mining companies
globally, so muted activity in the JSEs relatively young
commodities market is unsurprising.
"We remain optimistic that we can
increase the number of mining companies listed on the JSE,"
Kula added, stressing that "our growth will be African
In common with, but to a lesser
extent than Africa as a whole, South Africa remains something
of a discount store for internationally-raised money to take
away goods at bargain prices, meaning that the country can come
away feeling short changed from mining deals.
As Steven Beresford, chief
geologist for Canada-headquartered First Quantum Minerals
pointed out, "international mining companies come to Africa
because of the perception that it will be easier to develop
projects here than it is in first world countries."
However, the government of South
Africa, like many others across the continent, is attempting to
reform its mining industry legislation to implement what it
deems to be fairer and more transparent requirements that
ensure African nations get an equitable cut of the mining
"This year is the tenth year of continuous implementation of
major regulatory reforms introduced through the Mineral and
Petroleum Resources Development Act (MPRDA). The introduction
of the MPRDA as mining law in 2004 took all of us into
unchartered territories," Susan Shabangu, Minister for Mineral
Resources in South Africa told delegates during her opening
address to the 20th Mining Indaba.
Shabangu used her opening speech to assure investors about
the prospects for mining in South Africa and to outline the
strides made by South Africa over two decades of democracy to
create a far larger, more open, diversified and
competitive mining industry.
Her remarks received widespread criticism from analysts,
however, who noted that she missed an opportunity to decisively
address underlying labour relations concerns.
The speech reflects a trend that is prevalent in the
rest of the continent as various countries try to bring
stability to their regulatory framework and give certainty to
investors, Tony Zoghby, partner and Southern Africa
mining leader at professional services firm Deloitte, said
following the speech.
He noted that such reassurance is unlikely to be forthcoming
when mining in the country remains overshadowed by
industrial action, although he considered that changing
patterns of ownership being brought about by legislative review
should not be a cause for uncertainty, if properly managed.
Others, including Lauren Patlansky, managing director of
Grant Thorntons Asia Business Services, pointed out that
the Ministers positive address failed to mention how
labour costs continue to rise while commodity prices are
"This paints a clear picture that mines in South Africa are
not even breaking even, she said.