opportunities within africa's mining industry
DESCRIPTION
This presentation will provide an informed overview of Africa’s mining sector and will highlight the continent’s key mining growth regions, as well as provide a brief discussion of the African mining industry challenges and market drivers. The presentation also includes an overview of key opportunities for both domestic and global mining value chain stakeholders, including recommendations on how existing and potential industry participants can fully benefit from the identified opportunitiesTRANSCRIPT
Opportunities within Africa’s Mining Sector
Urbanisation and Industrialisation to Drive Regional Mining Sector Growth
30th April, 2013
Frost & Sullivan International is a Level 3 BBBEE Contributor
James Fungai Maposa
Programme Manager
Mining – Africa
2
Functional Expertise
6 years experience in growth consulting and market research, consisting of the write-up of over 30 market intelligence reports and 20 consulting engagements on a country, regional and global scale. Particular expertise in:
- Research on South Africa’s heat exchanger, low voltage switchgear, valve & actuator, industrial automation, welding and measurement and instrumentation product markets
- Research on Sub-Saharan Africa’s metals, minerals and mining industries including in-country mining sector analyses and metal commodity production and investment trend analyses
- Research on production and investment trends of Southern Africa’s process industries including the cement manufacturing, pulp and paper, food and beverage and chemicals and petrochemicals sectors
- Commercial due diligence within the retail, facilities management, mining and durable goods sectors
- Growth and strategy consulting experience on a sector, country and regional level on market penetration, market entry, product placement, investment and expenditure trend and revenue channel analyses
Industry Expertise
Experience base covering a broad range of sectors through the leveraging of long-standing, working relationships with executives’ of leading market participants
- A strong focus on South Africa’s industrial automation, heat exchangers, welding and switchgear markets
- Investment and expenditure trends in Southern Africa’s mining, pulp & paper and food & beverage industries
- Consulting engagements on automation, mining and mining equipment, transport, domestic appliance, facilities management, infrastructure and real estate industries
What I bring to the Team
Research expertise on the mining, manufacturing, automation, heat exchanger, welding & switchgear markets
Growth and strategy consulting experience in the areas of mining, cement, welding, heat exchangers, automation, automotive, domestic appliances, real estate and facilities management sectors
Career Highlights
Ran own beverages business in Bulawayo (Zimbabwe) from 2006 to 2007
Started professional career with Frost and Sullivan in 2008 as a Research Analyst
Promotion to Industry Analyst in 2010, Senior Industry Analyst in 2011 and Team Leader in 2012
Education
MBA, Edinburgh Business School, Scotland (In progress)
MCom. University of Cape Town, South Africa (2010)
James Fungai Maposa
Programme Manager
Mining, Manufacturing &
Industrial Automation
Frost & Sullivan
Africa
Cape Town
James Fungai Maposa
3
Focus Points
Focus Point #
Analyst biography 2
Overview of key African mining countries 4
Heat Map of key countries by region 5
Key challenges to doing business in Africa 6
Comparison of mining Investment destinations by region 7
Financing of mining investments in Africa 8
African mining sector growth drivers 9
Key growth sectors by commodity, region, country and company 10
Countries supporting Africa’s mining sector boom 11
Overview of the Opportunities within Africa’s mining sector 12
Key Takeaways 14
Conclusions 15
Contacts 19
4
Africa’s mining sector is a key contributor the continent’s
economic growth and progression
KEY MINING COUNTRIES (AFRICA), 2013
1) Ghana (Gold, Bauxite)
2) Niger (Uranium)
3) Mali (Gold)
4) Guinea (Iron Ore, Bauxite)
5) Sierra Leone (Iron Ore, Diamonds)
WEST AFRICA
1. Egypt (Copper)
NORTH AFRICA
1. Tanzania (Gold, Diamonds, Tanzanite)
EAST AFRICA
1) South Africa (Platinum, Gold, Copper,
Coal, Uranium & Diamonds)
2) Zimbabwe (Platinum, Coal)
3) Botswana (Coal, Diamonds)
4) Namibia (Diamonds, Uranium)
5) Mozambique (Coal, Aluminium)
6) The DRC (Copper, Cobalt)
7) Zambia (Copper)
8) Angola (Diamonds)
SOUTHERN AFRICA
Africa’s mining industry is poised for strong growth over the next few years driven by:
the continent’s largely untapped resource base
an anticipated rise in Asian (China and India) demand for energy (coal and uranium), base (copper, iron-ore, nickel, zinc
and aluminium) and precious (gold, platinum and diamonds) minerals
5
Heat Map of High Growth Mining Economies
(Southern Africa), 2013 – 2030
High Growth: > 7.0%
Medium Growth: 4.0 – 6.9%
Low Growth: <3.9%
Heat Map of High Growth Mining Economies
(West Africa), 2013 – 2030
Heat Map of High Growth Mining Economies
(East Africa), 2013 – 2030
FDI into Africa’s mining sector has risen and contributed to
significant growth of the region’s mining sectors
EAST AFRICA
Asian investment into Tanzania’s mining industry is on the rise
Key developments include:
China National Gold Corporation’s interest in Africa Barrick Gold’s gold
mining assets (worth an estimated USD 3.05 billion)
The Sichuan Hongda Group’s proposed USD 3.00 billion investment in
developing the Mchuchuma coal and Liganga iron ore projects
WEST AFRICA
West Africa’s large scale iron ore and infrastructure upgrade projects
will attract significant foreign direct investment inflows The Mount Nimba iron ore deposits that stretch from Ivory Coast, Guinea
and Liberia hosts approximately 6.00 billion tons of high quality iron ore reserves
In 2012, 15 iron ore development projects worth a collective USD 37.00 billion were being developed within West Africa
SOUTHERN AFRICA
Mozambique, Botswana and the DRC’s governments are driving
strong growth of these respective economies’ mining sectors
The Mozambican government announced plans to grow it coal sector to
export >100.0 million tons by 2020
Botswana is also looking to export 40+ million tons of coal by 2015
Canadian investment into the DRC continues on an upward trend
Going forward, most of the region’s economies will continue to rely
on foreign investment to develop the continent’s mining industry
6
Although strong growth is forecast for Africa’s mining
sector, major challenges exist
6. Skills shortages
7. Safety and environmental concerns
8. Tax rates and regulations
9. Increasing social responsibility
1. Capital project deceleration
2. Combating corruption
3. Infrastructure constraints
4. Government bureaucracy
10. Merger and acquisition threats
5. Resource nationalism threats
Fraser Institute’s Global Survey of Mining Companies (2013) identified access to
financing, corruption, infrastructure constraints and government bureaucracy as the most significant challenges
facing mining companies in Africa
0 5 10 15 20
Access to financing
Corruption
Infrastructure constraints
Government bureaucracy
Tax rates
Skills shortages
Inflation
Policy instability
Tax regulation
Restrictive labour regulations
Foregin currency regulations
Crime & theft
Government instability
Poor health
Number of respondents
KEY CHALLENGES TO DOING BUSINESS IN AFRICA (2013 – 2020)
7
Despite the challenges, Africa remains one of the world’s
largest mining investment destinations
Southern Africa will be Africa’s largest mining investment destination followed by West Africa and Central Africa
regions
PROJECTED MINING INVESTMENT BY
COUNTRY (AFRICA); 2013 – 2031
0.00
1.00
2.00
3.00
4.00
5.00
6.00
7.00
8.00
9.00
Inv
estm
en
t (U
SD
Billio
n)
Country
South America41%
Australia27%
Africa12%
North America11%
Asia7%
Russia2%
PROJECTED MINING INVESTMENT BY REGION (GOBAL);
2013 – 2031
8
What are the factors that are driving the African mining
sector’s growth?
Based on the anticipated rise in global mineral commodity demand, Africa, which produces more than 60 metal
and mineral products, has significant growth potential with respect to mineral reserves exploration and
production
Increasing global energy demand1
Asia’s (China and India) industrialisation growth2
Global vehicle demand increase3
Anticipated recovery of the US & European
economies4
Rapid urbanisation of the developing world5
Relatively underexploited mineral resource base6
KEY AFRICAN MINING SECTOR GROWTH DRIVERS
(AFRICA); 2013 – 2020
COAL DEMAND BY SECTOR (WORLD); 2010 – 2030
0.00
0.50
1.00
1.50
2.00
2.50
3.00
3.50
4.00
4.50
5.00
20
10
20
11
20
12
20
13
20
14
20
15
20
16
20
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20
18
20
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20
20
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22
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23
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20
25
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26
20
27
20
28
20
29
20
30
Bil
lio
n t
oe
Year
Other
Industry
Power
9
Which African mining industries are poised to witness
strong investment & development growth from 2012 to 2030
Africa hosts an estimated 30% of the world’s total mineral reserves and even a higher share of deposits of
diamonds, vanadium, manganese, platinum, cobalt and gold
COMMODITY ESTIMATED RESERVES, 2012 KEY COUNTRIES KEY COMPANIES
COAL 6% of world reservesSouth Africa, Mozambique,
Botswana, Tanzania, Zimbabwe
Anglo Coal, BHP Billiton, Vale, Rio
Tinto, Morepule Collier, Hwange
Colliery Company Limited
PLATINUM 77% of world reserves South Africa, Zimbabwe Anglo Platinum, Lonmin, Implats
GOLD 17% of world reservesSouth Africa, Ghana, Papua New
Guinea, Mauritania, Tanzania, Mali
Anglo Gold Ashanti, Goldfields,
Great basin Gold, Newmont,
Newcrest, Barrick
IRON ORE 4% of world reservesSouth Africa, Mauritania, Algeria,
Zimbabwe and Morocco
Kumba Resources, Sphere
Investments, ZISCO,
COPPER 10% of world reserves Zambia, South Africa, Congo, Egypt
First Quantum Limited, Glencore
International, Konkola Copper
Mines, Rio Tinto, Equinox
NICKEL 4% of world reservesSouth Africa, Botswana,
Madagascar
Anglo Platinum, Lonmin, Implats,
Norlisk Nickel, Sherritt, Sumitomo,
Korea Resources, SNC Lavelin
ALUMINIUM 5% of world reserves South Africa, Mozambique, Egypt BHP Billiton, Rio Tinto, Valco
ZINC 2% of world reservesMorocco, South Africa, Namibia,
Algeria and Tunisia
Vedanta Resources, Rio Tinto,
Kumba Resources, Anglo
American, Breakwater Resources
10
Which countries are already taking advantage of the African
mining sector’s growth opportunities?
Other key countries investing into Africa’s mining sector include Brazil, Russia, India and Japan
As of 2011, there was an estimated 155 Canadian companies operating in 39 African
countries. The aforementioned companies combined assets were worth an estimated
USD30.80 billion
Canadian mining companies are most active East Africa (USD 12.7 billion worth of investment up to
2011), West Africa (USD 9.9 billion) and Central Africa (USD 3.4 billion)
Key countries where Canada has sizeable investment include Zambia, Mauritania, South Africa,
Madagascar, the DRC, Ghana, Tanzania, Mali, Senegal and Eritrea
Over 230 Australian mining and exploration companies developing projects in Africa’s
mining sector
Australian investment into Africa tripled between 2005 and 2011
143 new African projects commenced in 2010 and a further 100 were added to this number in 2011
Between 2010 and 2011, Australian mining companies have raised nearly $4 billion to support the
development of respective African projects
China has shown a growing interest in southern Africa’s mining belt which includes
countries such as South Africa, Zambia, Tanzania, and Mozambique
Chinese companies made seven major investments in the African mining sector in 2011, totaling
USD14.7 billion
According to the Mining Review, Chinese investment into Africa may rise by 70% to US$50 billion by
2015 from 2009, as the nation invests in acquiring more resources, namely cobalt, coal, platinum,
copper and iron ore
CANADA
AUSTRALIA
CHINA
11
In terms of investment, Australian and Canadian companies
are targeting Cu, Fe, Pt and U resource-rich countries
AUSTRALIAN AND CANADIAN MINING INVESTMENT
DESTINATIONS (AFRICA), 2000- 2013
A total of USD 2.35 billion in equity finance earmarked for African mining projects was raised from four (4)
main world stock exchanges in 2012
Copper, iron ore, platinum, uranium and coal are likely to remain the key commodities to attract Australian and Canadian
investment during the 2013 to 2030 period
Exchange
Listed Mining
Companies
Operating in
Africa, 2012
Mining Equity
Finance for Africa
Projects Raised in
2012
Hong Kong Stock Exchange 7 USD 53.0 Mln
Johannesburg Stock Exchange 60 USD 110.0 Mln
London Stock Exchange /AIM 100 USD 250.0 Mln
Toronto Stock Exchange/
TSXV
200 USD 1.70 Bln
Australian Securities Exchange 207 USD 239.0 Mln
TOTAL 574 USD 2.35 Bln
KEY STOCK EXCHANGE FINANCING MINING
INVESTMENT (AFRICA), 2012
LEGEND
Australian Companies Canadian Companies
12
What opportunities are out there for stakeholders with a
vested interest in developing Africa’s mining sector
The African mining industry offers significant growth opportunities for both local and international
investors, mining companies, EPCMs, mining contractors, infrastructure developers and beneficiation
companies.
•Engineering and technical skills shortages will create several opportunities for local and international EPCMs
•Africa intends to attract skills and technology that will enable the continent to further process locally mined commodities
•A maturing mining industry in the developed world has resulted in several first world mining companies expanding geographically
•Due to losses incurred in 2012, investment banks are preferring to invest in the smaller and less riskier mining project
Investment Banks
&
Private Equity
Mining Companies
Engineering,
Procurement,
Construction &
Management
Companies
Beneficiation Companies
13
Increasing emphasis on beneficiation offers Australian
companies opportunities to produce steel and jewellery
Africa’s mining industry is increasing looking up to Australia and Canada for the development and
construction of new mines, provision of finance and technology
KEY AUSTRALIAN & CANADIAN INVESTMENT BANKS IN AFRICA KEY AUSTRALIAN & CANADIAN MINING COMPANIES IN AFRICA
KEY AUSTRALIAN & CANADIAN BENEFICIATION COMPANIES IN
AFRICAKEY AUSTRALIAN & CANADIAN EPCMs IN AFRICA
1. Greenhill and Company Ltd (Platinum-SA)
2. CIBC Ltd (Gold- West Africa)
3. Macquarie Investment Bank Ltd (Southern Africa-Gold)
1. BHP Billiton Ltd (South Africa)
2. Barrick Gold Ltd (Tanzania, Zambia)
3. Rio Tinto Ltd (South Africa, Guinea)
4. Paladin Energy Ltd (Namibia, Malawi)
5. First Quantum Minerals Ltd (Zambia)
6. Aquarius Platinum Ltd (South Africa)
7. Perseus Mining Ltd (Ghana)
8. Coal of Africa (South Africa)
1. Increasing emphasis on mineral beneficiation and value
addition by African governments will potentially offer
Australian and Canadian companies opportunities to produce:
a) -Steel and stainless steel
b) -Gold and platinum jewellery
c) -beneficiated nickel products
d) -beneficiated coal products
1. Ausenco Ltd (Gold projects in West & East Africa)
2. Lycopodium Ltd (Gold & copper projects in West & Southern
Africa)
3. SNC Lavalin Ltd (Uranium Projects in Southern Africa)
4. Amec Min Proc (Uranium Projects in Southern Africa)
14
What are the key takeaways?
Africa’s mining industry contributes between 8 – 10% to the regional economy’s GDP
Although Africa has a vast wealth of untapped mineral resources, standout challenges
include funding constraints, corruption, infrastructure constraints and demand uncertainty
The African mining sector’s key growth drivers include a maturing mining industry within
the developed world, higher extraction and production costs within the developed world,
rapid urbanisation and industrialisation of the developing world and an expected recovery
in mineral commodity demand growth of the developed world
Spurred by these drivers, significant opportunities exist for both local and international
companies with a vested interest within Africa’s mining sector
In terms of regions, high growth potential regions include Southern, West and Central Africa
1
2
3
4
5
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Before investing into Africa’s mining sector key financing, trade, operating, sourcing and
distribution partnerships should be established
Conclusions
Most mining majors are revisiting their planned investment projects due to losses incurred in 2012
with the immediate focus being channeled towards improving operations of existing operations
Mining Juniors vs. Mining Majors
In light of the losses incurred by several of the world’s major mining companies in 2012, investors
are shying away from the larger and riskier investment deals
Financing Considerations
Strategic Partnerships
16
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For Additional Information
Samantha James
Corporate Communications
+27 (0)21 680 3574
Wonder Nyanjowa
Industry Analyst – Mining
+27 (0)21 680 3216
James Fungai Maposa
Programme Manager – Mining
+27 (0)21 680 3203
Guillaume de Bassompierre
Director – Business Development
+27 (0)21 680 3203