Africa’s local banks offer mining lifeline where others fear to tread – by Stephen Eisenhammer (Reuters India – December 12, 2013)

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LONDON, Dec 12 (Reuters) – African banks are playing an increasingly significant role in the continent’s new generation of mines, providing cash for projects considered too risky or expensive for rattled markets and cautious international lenders.

Central and West Africa is home to some of the world’s largest untapped deposits of gold, iron ore and other minerals, but the promising mine projects often require billions of dollars to be spent on bridges, roads, railways and ports.

That level of investment, combined with the perceived risks of corruption and political uncertainty in Africa, is proving too much for under-pressure equity and debt markets and twitchy overseas banks undergoing enforced belt-tightening since the financial crisis.

A solution, however, appears to be on the mining companies’ own doorsteps, with recent deals suggesting that local banks could provide a lifeline for the region’s junior miners.

In West Africa, banks such as Togo-based Ecobank and Ivory Coast’s Banque Atlantique are moving in on mining projects, emboldened by the expert local knowledge gained from their extensive branch networks.

Ecobank agreed a $63 million loan with Burkina Faso-focused gold miner Avocet, which has a market value of $44 million. It also increased its share of a $200 million loan with Sierra Leone iron ore miner London Mining, equivalent to four fifths of the company’s market value.

IMIC, an investment company that is buying Cameroon-focused miner Afferro , signed a loan facility with Banque Atlantique worth $27 million. Afferro has a market value of $150 million.

RAPID EXPANSION

Ecobank, listed in Nigeria and Ghana, has expanded rapidly and operates in 35 African countries. Banque Atlantique operates in eight countries, with a focus on French-speaking Africa, once dominated by the likes of BNP Paribas, SocGen and Credit Agricole, who have cut back overseas lending to boost their capital strength.

Chinese investment, though present in companies such as iron ore miner African Minerals, has also failed to live up to expectations.

Yet Africa’s burgeoning banks are ready to pick up some of the slack, says the head of corporate and investment banking at Standard Bank, the continent’s largest lender.

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