http://www.ft.com/intl/companies/mining
Mining companies’ excitement over Africa is being cooled by fresh five-year lows in commodity prices — resulting in cuts to investment in even the most resource-rich countries.
When the commodities supercycle was in full swing, Africa was a frontier of choice, offering investors some of the best but least-explored mineral resources. Miners scrambled for choice assets, exemplified by Rio Tinto’s $3.7bn acquisition of a coal project in Mozambique in 2011. But, in sharp contrast, the past year has been bitter for miners. South Africa’s platinum sector endured a five-month strike; iron ore mines closed in Ebola-hit Sierra Leone; and copper-rich Zambia crossed swords with global companies over a tax rise.
This stark reversal of fortune was highlighted when Rio sold out of Mozambique for just $50m last year, cutting its heavy losses on a hasty deal. In in recent weeks, the outlook has turned even more ominous, as commodities prices reached their lowest in more than five years fuelled by oversupply and fears over Chinese demand.
“When you look at the prices, obviously all of the mines are seriously concerned,” says Jackson Sikamo, president of the Zambian Chamber of Mines. “The Chinese economy is affecting everybody around the world. The Chinese economy sneezes and all of us catch a cold.”
Lower commodity prices are not just a setback for miners’ profits. They affect countries’ shares of royalty and taxes; deter inward investment and exploration; and may lead to mine closures. Glencore, for instance, has said in recent days that it was considering closing some of its South African coal operations.
The downturn provides a sobering backdrop to one of the continent’s main gatherings of resources investors, the Mining Indaba in Cape Town this week.
Just days ago Zimbabwe’s President Robert Mugabe railed against foreigners wanting to exploit the continent’s minerals — but the bigger problem now may be finding the friends that Mr Mugabe says are still welcome.
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