By Chris Bishop
Next week almost 7,000 delegates from 90 countries will descend on Cape Town for the biggest mining gathering on the planet in the hope that the gloom could soon lift from one of the big drivers of African growth.
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For years South Africa – the biggest mining nation on the continent – has been in decline losing tens of thousands of jobs amid economic and regulatory uncertainty. The Mining Indaba, a place where investors and the industry meet, has mirrored this downturn. In recent years there has been a deathly quiet in some quarters of the Cape Town International Convention Centre where once there was noisy bustle. This year could prove a little brighter, according to some delegates who have booked their flights to Cape Town because of more stability in South African mining and an uptick in commodity prices.
“I am excited this year and I think it will be a lot less gloomy than last year, “says Tawanda Madondo the Senior Coverage Banker Natural Resources at Absa Corporate Investment Banking. Madondo cited the increase in prices for rhodium and palladium as part of the drive to cut down car emissions. Palladium, a by-product of platinum, touched record highs of $2500 in 2019, an increase in the price of 19%.
More junior miners are expected at this year’s Mining Indaba – a bellwether for the mining industry. Junior miners are the scouts of the mining industry. They are nimble companies with low-cost bases that find mining projects that the big operators may miss and grind them through to bankable feasibility. Junior miners then sell to the major miners who pour in the required hefty load of capital.
“They are the in the front line and we are seeing a lot of interest this year from Australian junior miners, especially when it comes to West Africa,” says Wickus Botha, Energy & Natural Resources Leader for Africa at Ernst and Young.
Both delegates agree that West Africa is seeing a lot of interest from junior gold miners attracted by the shallow reefs of the region. The West African gold fields promise less risk and capital and can be swifter to set up. Veteran South African miners, who are used to negotiating narrow shafts up to four kilometres, are finding West Africa a happy hunting ground.
Madondo also believes there could be a lot of interest in so-called ESG investing – that is investment that takes into account environmental, social and governance issues – this year. The carrot for these investors is that they could ease pressure on the environment at the same time as helping South African mines to free themselves from expensive, production disrupting, power cuts.
“The electricity costs for mines are at about 25%. If you look at projects that will create green energy, through solar and wind, to fill that need – I think it could be very attractive for ESG investors at the Mining Indaba this year,” says Madondo.
One of the ESG investors in Cape Town this year will be the Church of England with its multi-million-pound pension fund for its vicars, bishops and deacons. If it decides to invest in green energy in the mines the environment of South Africa could have a prayer.