Why Africa’s mining industry can weather the commodity-price storm – by Rolake Akinkugbe (Euromoney.com – April 2015)

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The correction in the global commodity cycle shouldn’t derail investors’ search for new exploration frontiers in sub-Saharan Africa (SSA), given the region’s high-quality mining and metal assets, and still-growing steel demand in China. In any case, efforts to boost local value-added processing should remain on track.

Minds have been refocused on sub-Saharan Africa’s (SSA) mining and metals sector since oil prices began their downward climb in June. Only 18 months earlier, the region’s mining industry had come under heavy scrutiny after a series of labour disputes and worker strikes in South Africa’s mines.

Meanwhile, iron-ore, gold and copper prices have been depressed, raising concerns over export revenues for a number of African mineral producers. Should growth in China, which consumes almost 50% of global metal supplies, stagnate, then Africa’s mining sector could be in for a protracted depression.

However, there is some cause for optimism. Despite global economic uncertainty over the past two years, the budget for non-ferrous metals exploration in SSA has remained relatively robust, helping to underpin continued industry investment.

The Democratic Republic of the Congo (DRC), for instance, remains a prime spot for exploration spending, while there was an increased focus on West African gold exploration in the period between 2012 and 2014 in the Sahelian region of landlocked Burkina Faso.

Parallels have also been drawn between West Africa’s iron-ore frontiers and Australia’s Pilbara region, rich in iron ore. Iron ore: a strong prospect Close to two dozen companies have commenced iron-ore projects in the region, as West Africa’s iron-ore deposits are globally reputed to be high-grade, generally attracting low processing costs, due to the low levels of impurities found in them.

Miners find these types of ores attractive due to the limited need to process them before export. However, depressed global iron prices have cast a shadow on the resilient appetite for Africa’s iron ore-rich frontiers. Still, as many current investment decisions are based on long-term price estimates, current prices for iron could still have only a limited impact on the supply side and investors’ search for new exploration frontiers in Africa.

Guinea’s Simandou region and Senegal’s Falémé region are two of the promising iron-ore frontiers on the minds of mining explorers focused on Africa, and deposits in both regions are estimated to be in the millions of tons. Guinea’s planned Simandou iron-ore project includes a mine, around 700km of trans-Guinean railway and the construction of a port south of Conakry, Guinea’s capital.

Iron-ore production could ramp up to 100-millon tons a year and the first shipment is possible in 24 months. Simandou is probably positioned to become the largest integrated iron-ore mine and infrastructure project in Africa. Overall, mining exploration targets in Africa have focused primarily on Burkina Faso, Ghana, the DRC, Namibia, Tanzania, Botswana, Mali, South Africa and Zambia.

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