Investing in Africa’s mining sector

Africa's mining sector is considered a critical catalyst for economic growth if effectively harnessed. Business leaders in the mining industry are currently gathering in South Africa's Cape Town city for this year's mining indaba. The event aims to elevate the mining sector through deal sourcing and corporate matchmaking, specifically focusing on the African continent. Sameh Shenouda, Chief Investment Officer at AFC, highlighted the organization's prioritization of critical minerals as a key focus area. AFC's approach extends beyond just mining, encompassing the infrastructure supporting mining operations and the enhancement of the value chain through beneficiation. At AFC, the investment strategy revolves around three key pillars - the actual mining of critical minerals, the development of infrastructure surrounding mining operations, and the augmentation of the value chain through beneficiation initiatives. Shenouda emphasized the importance of addressing challenges such as power supply shortages and evacuation plans for mining projects. By investing in these pivotal areas, AFC aims to bolster its presence on the continent and attract additional funding inflows. A significant aspect of AFC's current investment focus lies in critical minerals, including gold and special minerals like lithium and cobalt. Shenouda disclosed plans to sign multiple Memorandums of Understanding (MOUs) and projects with governments and the private sector. These initiatives span across various African countries, such as Nigeria, Zambia, and South Africa, demonstrating a diversified investment portfolio catering to both public and private projects. Prior to the announcement of new agreements, AFC had already injected approximately one billion dollars into the African mining sector through a combination of debt and equity investments. The organization adopts innovative financing solutions to mitigate early-stage risks associated with mining projects, positioning itself as a solution provider rather than solely a funder. By implementing creative approaches like streaming instruments, AFC plays a pivotal role in de-risking projects and attracting third-party capital. The concept of 'bankability' within the mining sector and related infrastructure projects was a focal point of the discussion. Shenouda underlined the importance of assessing the full supply chain, including resource reserves, regulatory frameworks, infrastructure capabilities, and value addition potential. By strategically enhancing the industrial aspect of projects and capturing additional value through refining and processing stages, AFC aims to drive job creation and boost local value retention. An illustrative example provided by Shenouda showcased the significant value shift within the electric vehicle supply chain. By vertically integrating processes such as refining and precursor manufacturing, a substantial portion of the value creation within the sector can be retained locally, reducing dependency on external markets and enhancing economic sustainability. The conversation pivoted towards beneficiation, with Shenouda highlighting AFC's active role in translating discussions into tangible action. An investment in a manganese mine in Gabon that includes the construction of a refinery exemplifies AFC's commitment to value addition and supply chain integration. This proactive approach distinguishes AFC as a key player in driving beneficiation initiatives across the continent. Addressing concerns about the risks associated with investments in African mining projects, Shenouda emphasized the importance of risk management and dispelling perceived risks. By highlighting Africa's track record of lower default rates compared to global infrastructure projects, AFC aims to reshape perceptions and attract further investment into the sector. Despite acknowledging currency risks and economic challenges in certain regions, such as Nigeria, Shenouda iterated the resilience of the sector, particularly in dollar-denominated markets like gold. The success story of Thor Gold in Nigeria, now a listed company on the London Stock Exchange, serves as a testament to the feasibility and profitability of strategic investments in the African mining landscape. Shenouda's insights underscore the potential for growth and transformative impact within Africa's mining sector, positioning AFC as a key partner in unlocking the continent's mineral wealth.