Opportunities within Africa's Mining Industry


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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 opportunities

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Opportunities within Africa's Mining Industry

  1. 1. Opportunities within Africa’s Mining SectorUrbanisation and Industrialisation to Drive Regional Mining Sector Growth30th April, 2013Frost & Sullivan International is a Level 3 BBBEE ContributorJames Fungai MaposaProgramme ManagerMining – Africa
  2. 2. 2Functional Expertise 6 years experience in growth consulting and market research, consisting of the write-up of over 30 marketintelligence 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 sectoranalyses and metal commodity production and investment trend analyses- Research on production and investment trends of Southern Africa’s process industries including the cementmanufacturing, 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 analysesIndustry Expertise Experience base covering a broad range of sectors through the leveraging of long-standing, working relationshipswith 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 industriesWhat 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 sectorsCareer 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 2012Education MBA, Edinburgh Business School, Scotland (In progress) MCom. University of Cape Town, South Africa (2010)James Fungai MaposaProgramme ManagerMining, Manufacturing &Industrial AutomationFrost & SullivanAfricaCape TownJames Fungai Maposa
  3. 3. 3Focus PointsFocus Point #Analyst biography 2Overview of key African mining countries 4Heat Map of key countries by region 5Key challenges to doing business in Africa 6Comparison of mining Investment destinations by region 7Financing of mining investments in Africa 8African mining sector growth drivers 9Key growth sectors by commodity, region, country and company 10Countries supporting Africa’s mining sector boom 11Overview of the Opportunities within Africa’s mining sector 12Key Takeaways 14Conclusions 15Contacts 19
  4. 4. 4Africa’s mining sector is a key contributor the continent’seconomic growth and progressionKEY MINING COUNTRIES (AFRICA), 20131) Ghana (Gold, Bauxite)2) Niger (Uranium)3) Mali (Gold)4) Guinea (Iron Ore, Bauxite)5) Sierra Leone (Iron Ore, Diamonds)WEST AFRICA1. Egypt (Copper)NORTH AFRICA1. Tanzania (Gold, Diamonds, Tanzanite)EAST AFRICA1) 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 AFRICAAfrica’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, zincand aluminium) and precious (gold, platinum and diamonds) minerals
  5. 5. 5Heat Map of High Growth Mining Economies(Southern Africa), 2013 – 2030High Growth: > 7.0%Medium Growth: 4.0 – 6.9%Low Growth: <3.9%Heat Map of High Growth Mining Economies(West Africa), 2013 – 2030Heat Map of High Growth Mining Economies(East Africa), 2013 – 2030FDI into Africa’s mining sector has risen and contributed tosignificant growth of the region’s mining sectorsEAST AFRICAAsian investment into Tanzania’s mining industry is on the riseKey developments include: China National Gold Corporation’s interest in Africa Barrick Gold’s goldmining assets (worth an estimated USD 3.05 billion) The Sichuan Hongda Group’s proposed USD 3.00 billion investment indeveloping the Mchuchuma coal and Liganga iron ore projectsWEST AFRICAWest Africa’s large scale iron ore and infrastructure upgrade projectswill attract significant foreign direct investment inflows The Mount Nimba iron ore deposits that stretch from Ivory Coast, Guineaand Liberia hosts approximately 6.00 billion tons of high quality iron orereserves In 2012, 15 iron ore development projects worth a collective USD 37.00billion were being developed within West AfricaSOUTHERN AFRICAMozambique, Botswana and the DRC’s governments are drivingstrong growth of these respective economies’ mining sectors The Mozambican government announced plans to grow it coal sector toexport >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 trendGoing forward, most of the region’s economies will continue to relyon foreign investment to develop the continent’s mining industry
  6. 6. 6Although strong growth is forecast for Africa’s miningsector, major challenges exist6. Skills shortages7. Safety and environmental concerns8. Tax rates and regulations9. Increasing social responsibility1. Capital project deceleration2. Combating corruption3. Infrastructure constraints4. Government bureaucracy10. Merger and acquisition threats5. Resource nationalism threatsFraser Institute’s Global Survey of Mining Companies (2013) identified access tofinancing, corruption, infrastructure constraints and government bureaucracy as the most significant challengesfacing mining companies in Africa0 5 10 15 20Access to financingCorruptionInfrastructure constraintsGovernment bureaucracyTax ratesSkills shortagesInflationPolicy instabilityTax regulationRestrictive labour regulationsForegin currency regulationsCrime & theftGovernment instabilityPoor healthNumber of respondentsKEY CHALLENGES TO DOING BUSINESS IN AFRICA (2013 – 2020)
  7. 7. 7Despite the challenges, Africa remains one of the world’slargest mining investment destinationsSouthern Africa will be Africa’s largest mining investment destination followed by West Africa and Central AfricaregionsPROJECTED MINING INVESTMENT BYCOUNTRY (AFRICA); 2013 – 20310. America41%Australia27%Africa12%North America11%Asia7%Russia2%PROJECTED MINING INVESTMENT BY REGION (GOBAL);2013 – 2031
  8. 8. 8What are the factors that are driving the African miningsector’s growth?Based on the anticipated rise in global mineral commodity demand, Africa, which produces more than 60 metaland mineral products, has significant growth potential with respect to mineral reserves exploration andproductionIncreasing global energy demand1Asia’s (China and India) industrialisation growth2Global vehicle demand increase3Anticipated recovery of the US & Europeaneconomies4Rapid urbanisation of the developing world5Relatively underexploited mineral resource base6KEY AFRICAN MINING SECTOR GROWTH DRIVERS(AFRICA); 2013 – 2020COAL DEMAND BY SECTOR (WORLD); 2010 – 20300.000.501.001.502.002.503.003.504.004.505.00201020112012201320142015201620172018201920202021202220232024202520262027202820292030BilliontoeYearOtherIndustryPower
  9. 9. 9Which African mining industries are poised to witnessstrong investment & development growth from 2012 to 2030Africa hosts an estimated 30% of the world’s total mineral reserves and even a higher share of deposits ofdiamonds, vanadium, manganese, platinum, cobalt and goldCOMMODITY ESTIMATED RESERVES, 2012 KEY COUNTRIES KEY COMPANIESCOAL 6% of world reservesSouth Africa, Mozambique,Botswana, Tanzania, ZimbabweAnglo Coal, BHP Billiton, Vale, RioTinto, Morepule Collier, HwangeColliery Company LimitedPLATINUM 77% of world reserves South Africa, Zimbabwe Anglo Platinum, Lonmin, ImplatsGOLD 17% of world reservesSouth Africa, Ghana, Papua NewGuinea, Mauritania, Tanzania, MaliAnglo Gold Ashanti, Goldfields,Great basin Gold, Newmont,Newcrest, BarrickIRON ORE 4% of world reservesSouth Africa, Mauritania, Algeria,Zimbabwe and MoroccoKumba Resources, SphereInvestments, ZISCO,COPPER 10% of world reserves Zambia, South Africa, Congo, EgyptFirst Quantum Limited, GlencoreInternational, Konkola CopperMines, Rio Tinto, EquinoxNICKEL 4% of world reservesSouth Africa, Botswana,MadagascarAnglo Platinum, Lonmin, Implats,Norlisk Nickel, Sherritt, Sumitomo,Korea Resources, SNC LavelinALUMINIUM 5% of world reserves South Africa, Mozambique, Egypt BHP Billiton, Rio Tinto, ValcoZINC 2% of world reservesMorocco, South Africa, Namibia,Algeria and TunisiaVedanta Resources, Rio Tinto,Kumba Resources, AngloAmerican, Breakwater Resources
  10. 10. 10Which countries are already taking advantage of the Africanmining 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 Africancountries. The aforementioned companies combined assets were worth an estimatedUSD30.80 billion Canadian mining companies are most active East Africa (USD 12.7 billion worth of investment up to2011), 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’smining 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 thedevelopment of respective African projects China has shown a growing interest in southern Africa’s mining belt which includescountries such as South Africa, Zambia, Tanzania, and Mozambique Chinese companies made seven major investments in the African mining sector in 2011, totalingUSD14.7 billion According to the Mining Review, Chinese investment into Africa may rise by 70% to US$50 billion by2015 from 2009, as the nation invests in acquiring more resources, namely cobalt, coal, platinum,copper and iron oreCANADAAUSTRALIACHINA
  11. 11. 11In terms of investment, Australian and Canadian companiesare targeting Cu, Fe, Pt and U resource-rich countriesAUSTRALIAN AND CANADIAN MINING INVESTMENTDESTINATIONS (AFRICA), 2000- 2013A 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 Canadianinvestment during the 2013 to 2030 periodExchangeListed MiningCompaniesOperating inAfrica, 2012Mining EquityFinance for AfricaProjects Raised in2012Hong Kong Stock Exchange 7 USD 53.0 MlnJohannesburg Stock Exchange 60 USD 110.0 MlnLondon Stock Exchange /AIM 100 USD 250.0 MlnToronto Stock Exchange/TSXV200 USD 1.70 BlnAustralian Securities Exchange 207 USD 239.0 MlnTOTAL 574 USD 2.35 BlnKEY STOCK EXCHANGE FINANCING MININGINVESTMENT (AFRICA), 2012LEGENDAustralian Companies Canadian Companies
  12. 12. 12What opportunities are out there for stakeholders with avested interest in developing Africa’s mining sectorThe African mining industry offers significant growth opportunities for both local and internationalinvestors, mining companies, EPCMs, mining contractors, infrastructure developers and beneficiationcompanies.•Engineering andtechnical skillsshortages will createseveral opportunitiesfor local andinternational EPCMs•Africa intends to attractskills and technologythat will enable thecontinent to furtherprocess locally minedcommodities•A maturing miningindustry in thedeveloped world hasresulted in several firstworld miningcompanies expandinggeographically•Due to losses incurredin 2012, investmentbanks are preferring toinvest in the smallerand less riskier miningprojectInvestmentBanks&Private EquityMiningCompaniesEngineering,Procurement,Construction &ManagementCompaniesBeneficiationCompanies
  13. 13. 13Increasing emphasis on beneficiation offers Australiancompanies opportunities to produce steel and jewelleryAfrica’s mining industry is increasing looking up to Australia and Canada for the development andconstruction of new mines, provision of finance and technologyKEY AUSTRALIAN & CANADIAN INVESTMENT BANKS IN AFRICA KEY AUSTRALIAN & CANADIAN MINING COMPANIES IN AFRICAKEY AUSTRALIAN & CANADIAN BENEFICIATION COMPANIES INAFRICAKEY AUSTRALIAN & CANADIAN EPCMs IN AFRICA1. 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 valueaddition by African governments will potentially offerAustralian and Canadian companies opportunities to produce:a) -Steel and stainless steelb) -Gold and platinum jewelleryc) -beneficiated nickel productsd) -beneficiated coal products1. Ausenco Ltd (Gold projects in West & East Africa)2. Lycopodium Ltd (Gold & copper projects in West & SouthernAfrica)3. SNC Lavalin Ltd (Uranium Projects in Southern Africa)4. Amec Min Proc (Uranium Projects in Southern Africa)
  14. 14. 14What 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 challengesinclude funding constraints, corruption, infrastructure constraints and demand uncertainty The African mining sector’s key growth drivers include a maturing mining industry withinthe developed world, higher extraction and production costs within the developed world,rapid urbanisation and industrialisation of the developing world and an expected recoveryin mineral commodity demand growth of the developed world Spurred by these drivers, significant opportunities exist for both local and internationalcompanies with a vested interest within Africa’s mining sector In terms of regions, high growth potential regions include Southern, West and Central Africa12345
  15. 15. 15 Before investing into Africa’s mining sector key financing, trade, operating, sourcing anddistribution partnerships should be establishedConclusions Most mining majors are revisiting their planned investment projects due to losses incurred in 2012with the immediate focus being channeled towards improving operations of existing operationsMining Juniors vs. Mining Majors In light of the losses incurred by several of the world’s major mining companies in 2012, investorsare shying away from the larger and riskier investment dealsFinancing ConsiderationsStrategic Partnerships
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  19. 19. 19For Additional InformationSamantha JamesCorporate Communications+27 (0)21 680 3574Samantha.james@frost.comWonder NyanjowaIndustry Analyst – Mining+27 (0)21 680 3216Wonder.nyanjowa@frost.comJames Fungai MaposaProgramme Manager – Mining+27 (0)21 680 3203James.maposa@frost.comGuillaume de BassompierreDirector – Business Development+27 (0)21 680 3203Guillaume.deBassompierre@frost.com