This year’s annual mining Indaba in Cape Town had more of a buzz to it, in comparison with 2009. Zimbabwe’s potential gained a particularly high profile; many see opportunities in this geologically rich terrain that has experienced little modern exploration. As more than one project developer notes, first one looks at the geological potential and only then does one assess the country political and other risks.
As we enter the second decade of the millennium, or approach it (for the purists who remind that the decade actually technically starts with 2011) it is worth briefly considering what has happened in the continent’s mining sector over the past 10 years.
Taking into account the experiences of a variety of groups, ranging from banks to engineering companies, a few clear trends have emerged in Africa’s mining sector.
I think few would disagree that 2009 has been a rough year in Africa’s mining sector, but strangely, in the 15 or so years I have been following the industry, it does not seem like the worst.
I read with great interest this week that global mining mergers and acquisitions – which are down more than 50% this year – are set to recover in the first quarter of 2010 as metal prices surge on signs that the worst recession since World War II is easing.
Having spent a good part of the past month in conversation with a variety of senior executives of both major and junior gold producers in the United States, Canada, England, Australia and South Africa, it has become quite clear to me that the majority of them not only believe a new star has emerged on the international gold scene – they are putting their money where their mouths are.
The big exception to the commodities downturn we have seen over the past year is gold, which always has been somewhat a counter cyclical commodity. It did not thrive as much as hoped for during the run up to the last commodities peak, but overall over the past couple of years gold miners have been in a good space, in terms of price and demand economics.
The big exception to the commodities downturn we have seen over the past year is gold, which always has been somewhat a counter cyclical commodity. It did not thrive as much as hoped for during the run up to the last commodities peak, but overall over the past couple of years gold miners have been in a good space, in terms of price and demand economics.
Commodity prices are down, demand for commodities is for the most part down, and finance is that much harder to obtain than a year ago. In these times the mining industry is understandably subdued.
Mining is one of the few sectors where the continent of Africa holds its own globally in economic terms. Some 13% of the global mining sector’s economic activity takes place in Africa, comparable to the continent’s percentage of the global population.
Africa’s broad transition from a collection of states undertaking largely disastrous socialist experiments to a more stable democratic continent is no more than two decades old. Many of its countries have adopted investor friendly mining codes. Mining and exploration projects are underway in the majority of countries across the continent.
The attrition in mining projects over the past few months has been notable, though perhaps not unprecedented. Particularly hard hit has been the base metals sector, with high profile copper and cobalt projects being suspended in central Africa.
Spending some days in Toronto in late October, during what was hopefully the height of the global financial meltdown though many financial analysts suggest we may not be so fortunate, was an interesting time to be speaking to junior exploration and development companies.
With the ongoing fallout of the sub prime crisis in the US, the impacts of high commodity prices themselves, oil in particular, on economic growth, and the recent strengthening of the dollar, commodities have lost some of their steam over the past few months.
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