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Africa is home to the latest mineral rush, with potential for great riches–and catastrophe.
When rebels in Mali launched a surprise push south toward the capital, Bamako, last month, the Canadian mining industry took notice.It’s got nearly $500 million in assets there.
As international forces landed in the West African nation to fend off the Islamist advance, Vancouver-based Nevsun Resources was hit with allegations that forced labour built its Bisha mine in Eritrea, a pariah state on the other side of the continent.
Just last week, Canadian gold giant Barrick Gold attributed $3.8 billion (U.S.) of its massive writedown to its struggling Zambian copper operation, in part due to the southern African country’s government doubling royalties. Kinross Gold took a $3.2 billion (U.S.) writedown, mostly due to its Tasiast mine in Mauritania.
The Canadian government has made no secret of its support for miners investing in the continent — 54 countries, each vastly different from the next — in what some have called the latest ‘scramble for Africa.’ But recent events — conflict, human rights complaints, regulatory changes — highlight that while the continent holds staggering mineral wealth, it can come at a price.
In Mali, most mining assets are in the country’s southwest, far from the conflict region. Companies weren’t overly skittish, though some halted exploration or evacuated foreign workers.
“(It’s) part of the nature of the beast, as far as we’re concerned, being miners,” said Neil Woodyer, CEO of Endeavour Mining, at the time.
But some analysts of the country long heralded as one of West Africa’s most stable began to change their advice to: get out.
Instability and crime, weak governance, rising “resource nationalism,” poor infrastructure and reputational risks means work in some African countries can be tricky and investors, daunted.
“You gotta go out there and work among some very difficult political jurisdictions,” said Mark Schroeder, Africa expert at global intelligence firm Stratfor. “Be prepared for an environment that’s not going to be a vanilla ice cream environment (or) stable for the next 5, 10, 20 years.”
Ross Gallinger, executive director of the Prospectors and Developers Association of Canada (PDAC), said in an email that corruption, lack of electricity, roads and ports, skilled labour and water supply can also hamper mineral development. Those also drive up costs.
But it hasn’t deterred the Canadian mining industry, or the government.
“Canadian mining companies are a major player on the African continent, together with Australian mining companies, they are some of the companies most willing to take risks on the continent,” said Robert Besseling, deputy head of Africa forecasting at the political risk firm Exclusive Analysis, recently acquired by IHS.
Canada is one of the world’s largest mining nations. In 2010, Canadian-listed companies raised nearly 60 per cent of the equity to finance exploration and mining around the world. More than 40 per cent of money budgeted for exploration came from companies with their headquarters in Canada.
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