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Africa’s hotspots blossom, SA wilts
David McKay
Posted: Thu, 09 Feb 2006
[miningmx.com] -- OF the 40 or so companies and agencies presenting at this year’s Indaba Mining Conference, a mere six were South African. Clearly, all the investment dibs are heading ‘north of the border’, into the rest of Africa.
In part, this has much to do with cooling political tensions in former conflict hotspots, and the sheer prospectivity of countries like the Democratic Republic of Congo (DRC), Mali, Zambia and even Nigeria, a surprise fresh face at this year’s conference.
But the preference for non-South African mining projects also has to do with the difficulty of investing in the country relative to its African peers.
Buying a South African mining property also means having to worry shareholders with difficult regulatory uncertainties. The strictures of empowerment, particularly when applying for prospecting rights, are prohibitory; one rule facing
international investors in South Africa is that they must cede control of an exploration property to a black partner before being granted the right to explore virgin ground.
In contrast, the rest of sub-Saharan Africa is falling over itself to accommodate offshore investment.
“We have entrenched this system of mining cadastre so that the granting of access into the sector is not based on the discretion of the minister any more.” So says Nigeria’s solid minerals minister, Obiageli Ezekwesili, who is hoping to breathe new life into the country’s minerals sector which has been occluded since the 1950s by oil.
How this differs from South Africa where the granting of so-called new order mining licenses remains the executive decision of the minerals and energy minister, Linidwe Hendricks, her deputy minister, and senior departmental officials.
South Africa’s case wasn’t helped by the minister either. Forty minutes late for her presentation at the
Indaba, scheduled to officially kick off proceedings, the minister also failed to attend another presentation that had been arranged for the following day. “It’s not a very good message is it?” said Peter Leon, an attorney for Webber Wentzel, the firm that is helping Ezekwesili further improve Nigeria’s mining code.
Away from South Africa, this year’s Indaba was lit up by the enthusiasm surrounding the DRC. For years, locked in civil conflict, the country is but months away from democratic elections. The successful conclusion of these events will vastly improve sovereign risk of a country that contains millions of tons of mineral wealth in copper, cobalt, diamonds and gold.
Adastra Minerals, long considered sniffily in certain quarters because of its exposure to the DRC, is now the subject of a hostile takeover by First Quantum Minerals, a company operating in neighbouring country, Zambia. The hostile takeover attempt is as complimentary about the DRC’s strides as
it is about Adastra’s.
It’s a fantastic opportunity for Africa, helped by the thriving commodities market, itself functioning on forecasts of large supply deficits in most minerals. Ian Cockerill, CEO of Gold Fields, makes the case for investing in high risk areas. Although he was commenting about Gold Fields’ decision to buy a prospect in Venezuela, he highlighted the importance of finding “the next Ghana”.
“Several years ago, Ghana was considered politically risky. Now it’s considered stable. So what are the Ghanas of tomorrow?,” he asked. Mining companies financed in Toronto and London are responding: Burkina Faso, Ivory Coast, even Zambia which, in hindsight, was ludicrously abandoned by Anglo American no less than four years ago.
This is the mining market at its speculative best. “God had a strange sense of humour,” said Cockerill in his presentation of the Essakane prospect in Africa’s little known Burkina Faso. “He put some of the world’s best
known gold deposits in some the most inhospitable places.”
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