African Mining

EMJ_pg49-76:EMJ_pg49-76 2/25/08 9:03 AM Page 49 African Mining Recent reforms and increasing stability boost investment interest in Sub-Saharan region. A REPORT BY GBR FOR E&MJ MAY2007 2007 EMJ_pg49-76:EMJ_pg49-76 2/25/08 9:03 AM Page 50 AFRICAN MINING A New Age for Mining in Sub-Saharan Africa Regulatory and fiscal reforms throughout this historically turbulent region attract investor interest The global mining industry is experienc- mining companies, on the other hand, ration and production are thriving. In ing a mineral boom with the highest com- have generally come to terms with issues Tanzania, reform by the 1997 In- modity prices seen in over a decade, due concerning the allocation of long term vestment and the 1998 Mining Acts en- in large part to the industrialization of operating licenses. couraged exploration of old gold properties both China and India. Mining in the Since 2000, the SADC region has fol- and artisanal mines in the Archean Southern African Development Com- lowed this trend, making a series of regula- Greenstone Belts. This resulted in various munity (SADC) countries is a vast indus- tory and fiscal reforms in the mineral mines going into production, including try, contributing approximately 60% to industry and generally increasing the North Mara and Tulawaka. the total foreign exchange earnings and attractiveness for mining investment across The mineral investment sentiment in 10% of total GDP, though in some mem- the region, with a focus on South Africa, the region remains high with a sustained ber states it runs as high as 50%. The Tanzania, Zambia, Botswana, Mali, Ghana level of exploration. Investors and gov- region is an important player on the inter- and the Democratic Republic of Congo ernments are being rewarded with dis- national mineral market contributing (DRC). Almost half the world’s mined gold coveries of major profitable mines across between 11% and 45% of the world sup- is from the Witwatersrand in South Africa, a range of commodities. This current ply of eight major commodities, which and the majority of known platinum group trend should continue as older deposits include chromite, cobalt, diamonds, metal resources (PGMs) are in the Bush- reach maturity and world demand for gold, manganese, copper, platinum and veld Complex (South Africa) and the Great mineral resources continues to grow. uranium, and has considerable potential Dyke of Zimbabwe. Similarly, the Copper- Historically, mineral-rich African coun- in the dimension stone sector and other belt of Zambia and the DRC form a world- tries explored and mined their resource industrial minerals. class deposit. In long-established mining on their own, but a lack of capital and the Amazingly, South Africa was rated the areas the industry has matured, but there high-risk nature of investment meant that smallest recipient of net foreign direct remains great scope for future develop- development of new assets and infra- investment last year. That is obviously of ment. In South Africa, improvement in the structure lagged. By last year, most coun- great concern for the local industry but it gold price has enabled the development of tries in the Southern African region had also implies a huge opportunity for the new mines and a successful transition from generally evolved to assume the role of rest of the region, whose diversity and surface to underground mining. In Zim- facilitator and regulator to private sector richness of minerals was perhaps over- babwe, new PGM mines are planned near mining development. They have much to looked in the past. The number of con- existing mines at Ngezi, on the Great Dyke. gain from the development of their min- flicts on the continent has decreased In Zambia, one of the world’s largest unde- ing economies through taxation and other from roughly 25 in the early 1990s to veloped copper deposits is scheduled for benefits, with the primary risk being as- about 4 today. In addition to this, the commissioning later this year. Elsewhere, sumed by private investment. Securing majority of today’s youth/voters were not in Botswana and Angola there are very black empowerment, poverty alleviation part of the liberation struggle and have active exploration projects for diamonds, through job creation and training, dealing different priorities tending toward coun- while the development of offshore, diamon- with the HIV/AIDS pandemic and envi- try development and employment oppor- diferous gravels continues in South Africa ronmental conservation are high on the tunities. To exemplify this, of the 680 and Namibia. In Malawi, sandstone-hosted region’s mining legislation agenda. million people in the Sub-Saharan re- uranium deposits are of current interest. Generally speaking, progress in the gion, 45% are below the age of 15. Ilmenite is being successfully mined in SADC region has been good. One chal- There have been substantial changes Mozambique. In Madagascar, nickel explo- lenge relates to legislation, which is not in the governance of mining at an inter- national level over the past 20 years with the most significant changes being Southern African Development Community implemented over the last 10 years. The Southern African Development Community (SADC) traces its roots to the early Programs such as the Extractive In- 1980s. The initial aim of the community was to coordinate development projects dustries Transparency Initiative (EITI) in order to lessen economic dependence on the then apartheid South Africa. support improved governance in re- With the ending of apartheid and the welcoming of South Africa into the com- source-rich countries through the verifi- munity, the organization counts Angola, Botswana, DRC, Lesotho, Madagascar, cation and full publication of company Malawi, Mauritius, Mozambique, Namibia, South Africa, Swaziland, United Re- payments and government revenues from public of Tanzania, Zambia and Zimbabwe as members. oil, gas, and mining. EITI works to build It has a vision of economic and social integration through free movement of multi-stakeholder partnerships in devel- trade, capital, and labor; policy harmonization and project coordination; and oping countries in order to increase the eventual creation of a common market and a unified Southern Africa. Key details accountability of governments. Private of implementation protocols have yet to be negotiated. 50 E&MJ • MAY 2007 www.e-mj.com EMJ_pg49-76:EMJ_pg49-76 2/25/08 9:04 AM Page 51 AFRICAN MINING always developed with a long-term per- spective, thereby creating onerous obliga- tions on mining companies in down- TABLE OF CONTENTS cycles. Tension relating to this can be seen in Zambia, where mining companies have South Africa: Balancing Riches............................................................52 been under pressure by the government, in light of quadrupling copper prices, to Democratic Republic of Congo: Entering a New Era of increase the share of proceeds going to the Peace and Prosperity? ........................................................................56 central treasury. It is important that governments develop policies that ensure Zambia: Regaining Former Copper Glory ............................................60 them sufficient benefit in the good times, while maintaining a realistic view to the cyclical nature of mineral prices. Tanzania: The Sleeping Giant No Longer..............................................64 Mark Bristow, CEO of Randgold Re- sources, believes the gold industry in Af- Botswana: The World’s Largest Diamond Producer by Value..............66 rica is not taking a long-term approach to profits and hence is in an unsustainable Show Me the Money: Consultants, Contractors and Suppliers............68 situation. Bristow outlined his view on the industry at this year’s mining INDABA in Cape Town: “Because we’re in a bull market which rewards production rather than This report was researched and compiled by Global Business Reports (www.gbreports.com) for profits, nobody is focusing too much on Engineering & Mining Journal, and is responsible for its content. Editorial was researched and writ- this financial underperformance, but ulti- ten by Anna Stark ([email protected]), J.M. Peralta ([email protected]) and project coordination mately it’s not a sustainable situation. Stakeholders expect rewards and their by Leanne Arendse ([email protected]). patience is not infinite. When host governments, for example, see that mines are not producing the promised profits, and there- fore not paying the anticipated taxes, it prompts them to tax through royalties.” A staunch supporter of social development plans with a long-term perspec- tive he concludes, “Africa is changing and if you can be flexible enough to change with it, it has huge opportunity. Africa is vastly unexplored and needs mining revenue and infrastructure more than any other continent.” Randgold Resources is focused on the African continent mostly in the West where it has two mines, a feasibility stage project and exploration projects in Mali, Senegal, Burkina Faso, Côte d’Ivoire and Ghana, as well as Tanzania in the SADC region. There have been discussions and efforts put toward creating a vision of a sin- gle economic entity within the region through more profound legislative integration to facilitate cross border investment, but this has yet to materialize into anything significant. Because of the inherent com- plexity of the regulatory regimes, prudent investors may find it beneficial to inde- pendently review the mining and tax laws and other regulatory policies of the specif- ic country in which they are interested. This report will focus on South Africa, Tanzania, Zambia, Botswana and the DRC. www.e-mj.com MAY 2007 • E&MJ 51 EMJ_pg49-76:EMJ_pg49-76 2/25/08 9:04 AM Page 52 AFRICAN MINING South Africa: Balancing Riches While South Africa boasts infrastructure comparable to most developed countries, its cost structure is dis- tinctly third world. At around 1.70 US cents per kilowatt-hour, it has one of the cheapest electricity costs in the world, even though its generating ca- pacity is stretched.

Load more