Vale now active in Southern, Central and West Africa – by Keith Campbell (Mining Weekly – September 2, 2011)

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JOHANNESBURG (miningweekly.com) – In June, Brazilian diversified mining major Vale, the world’s second-biggest mining company by market capitalisation, reaffirmed that it is set to make major investments in Africa by 2016.

“Our current investment proposal in Africa is to expend more than $12-billion over the next five years, subject to board approval,” Vale Zambia exploration manager Ian Hart told the recent first Zambian International Mining and Energy Conference and Exhibition, in Lusaka.

The peak year in this programme will be 2012, which should see the company invest $3.3-billion in the continent. As of April this year, Vale’s investment in the continent totalled $2.5-billion, reported the Financial Times.

Back in October, then Vale CEO Roger Agnelli proclaimed in London: “I am falling in love with Africa.” He added that the continent was second only to Brazil in terms of iron-ore production potential. “Africa will be a completely different continent in five to ten years.”

Not that Vale is interested only in iron-ore. Earlier that same month, it was announced that Vale and its 50:50 joint venture (JV) partner in the Konkola North copper mine, in Zambia, South Africa’s African Rainbow Minerals (ARM), would jointly invest $1-billion in the operation over the following three to five years.

In between these announcements, and in New York, Agnelli told reporters: “[The] discovery of new world-class deposits is increasingly dependent on Africa. Africa will be very big in 10 to 15 years.” Agnelli was in New York for the ‘Vale Day 2010’ briefing at the New York Stock Exchange (NYSE). In his presentation, Agnelli stated that one of the four elements in its strategy of delivering strong and steady growth and value was developing an asset base in Africa. (The other three elements were a focus on organic growth, “massive investment” in developing world-class assets facilitated by the expansion of the company’s own infrastructure and improving its competitiveness in the Asian market.)

Regarding Africa, he affirmed that the continent was the new mining frontier but warned that the days of “easy” discoveries were over. “The discovery of new world-class deposits is increasingly dependent on Africa,” he stated. “Vale is taking steps to build a large African asset base.”

There are both positive and negative stimuli to Vale’s interest in Africa. On the negative side, elsewhere there are declining grades and increasing stripping ratios, environmental licensing restrictions which cause delays, higher taxes and natural resources nationalism which discourage investment. On the positive side, there is the ever-rising demand of the Asian markets.

Agnelli highlighted that China’s urbanisation rate last year was the same as South Korea’s in the early 1970s and Brazil’s in the mid-1950s. In 2005, China had 41 000 km of highways; in 2009, this had risen to 65 000 km and, by 2020, they are expected to total 100 000 km. Likewise, China’s railway track totalled 75 437 km in 2005, 86 000 km in 2009 and should reach 120 000 km in 2020. The country had 140 airports in 2005, 166 in 2009 and is forecast to have 244 in 2020.

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