Speaker: Sarah Thomas Mining On Top: Africa - London Summit 25-26 June | London

1. Securing Infrastructure for Mining in
Africa
Key trends and observations
Infrastructure Panel Session
Mining on Top Summit
26 June 2014

2. Setting the Scene
• Key trends
– Interplay between Infrastructure and Mining
– Comparison against BRIC & other countries
– Chinese Investment in Africa
• Practical Examples
– South Africa
– Mozambique
– Guinea
• Themes for discussion

3. Interplay between Infrastructure and Mining
Investment
• “Africa’s infrastructure deficit is both a
potential bottleneck for mining development
and a development challenge. There is
increasingly an overlay between the
geography of mining deposits and where
there is lack of available transport, power and
water. Multi-use infrastructure can be an
opportunity for mining to enhance its
development impact on countries and regions
for the long term as they serve as critical
anchors for road, rail, port, water, power and
even telecommunications investment.”
Bernard Sheahan, International Finance Corporation (IFC), Director of Infrastructure and
Natural Resources for Africa and Latin America (February, 2013)

4. Interplay between Infrastructure and Mining
Investment
• Acute demand for infrastructure in the mining and natural
resources sectors
– 60% of all Capex Expenditure on natural resource projects is
infrastructure related – on some new build mining projects this
figure can be higher
– USD50bn of rail infrastructure investment required if the
continent's natural resources are to be exploited for wider
economic benefit
– Standard Bank has identified 15 major rail network projects,
together with roads, ports and power infrastructure that need to
be procured to ensure continued exploitation of resource wealth
(Standard Bank, January & February 2013)

5. Interplay between Infrastructure and Mining
Investment
• Continuing infrastructure deficit
– USD 93bn infrastructure gap with other developing regions
(AICD, January 2013)
– In lower-income countries, infrastructure is a major constraint on
doing business, and is found to depress firm productivity by around
40%
– The negative impact of
deficient infrastructure is at
least as large as that
associated with corruption,
crime, financial market and
red tape constraints
(World Bank Fact Sheet)
– Opportunities for miners

6. Comparison with BRIC Countries
• African economic
growth reflected
in FDI into
Projects
• Surpassed
Russia and
catching up with
China and India
• Enough to bridge
infrastructure
deficit and
capitalise on
mining wealth?(Ernst & Young, Africa Attractiveness Survey, 2012)

7. Chinese Investment in Africa
• Deepening Sino-African trade links:
– 2013: USD200bn (forecasted) with 22% y/y monthly
increase
– 2012: USD166bn
– Africa is China's fastest-growing trade partner,
accelerating faster than Latin America and Asia
(Standard Bank, February 2013)
• Continued focus on infrastructure
• Developing mining experience
– 2011: Jinchuan purchased Metorex, a South African
miner listed in Johannesburg
– 2013: Jinchuan invested in Wesizwe Platinum's
Bakubung mine in South Africa

8. South Africa (Developed Market – coordinated
approach to new infrastructure)
• Developed market and home to
the biggest names in mining:
– Anglo American, Xstrata, Rio
Tinto Group and BHP Billiton
and AngloGold Ashanti
• Transnet to spend USD40bn on
rail infrastructure over seven years
to encourage further investment
• South African Government's
National Infrastructure Plan,
including 18 Strategic Integrated
Projects (SIPs)

9. South Africa
• SIP 1
• Exploit mineral
wealth
• Build out
accompanying
rail, road, water,
power
infrastructure
• Urban
development
and logistics
corridor

10. Mozambique (Developing Market – example of
multiple interests)
• Developing market well placed for exports to Asia-Pacific
• Large untapped deposits of coking coal
• Could be producing 100 million tonnes of coal a year
after 2015
• Lack of infrastructure inhibiting growth: USD20bn
required
• Vale Moçambique, Rio Tinto, Jindal, ENRC, Beacon Hill,
Ncondezi Coal Mining and Anglo-American all producing
or intending to produce coal
(Mining Weekly, April 2013)

11. Mozambique • Sena line
currently only
export route
from Tete
• Capacity could
be doubled to
12m tonnes by
2018, well short
of miners‟
predicted output
• Miners have
proposed
different routes
as options
• Government
wants multi-use
infrastructure
assurances

12. Guinea
(Developing Market – Integrated Project model)
• Simandou Project
– An iron ore mine of 95
million tonnes per year at
full production
– A Trans-Guinean railway of
approximately 670 km to
transport the ore from the
mining concession to the
Guinean coast
– A new deepwater port south
of Conakry in the
Forécariah prefecture

13. Guinea
• Simandou Project
– Government of Guinea, Rio
Tinto, Aluminium Corporation
of China and the International
Finance Corporation
– PPP delivery model for
infrastructure
– Cost doubled to USD20bn –
two times original estimate
– Despite recent difficulties in
negotiations with the Guinea
Government, the project has
received praise from the IFC:
“The economic effects around such
multi-use infrastructure can be
enormous, perhaps stimulating as
much GDP growth as the
infrastructure itself”
Bernard Sheahan, International Finance Corporation (IFC), Director of
Infrastructure and Natural Resources for Africa and Latin America
(February, 2013)

14. Some themes for discussion
• Strategic, integrated planning and cross
border co-operation – lack of joined up
thinking?
• Contract Models – innovative Guinea PPP
structure
• Access to funding – over-reliance on users?
• Exclusive use – security, maintenance, access (Queensland model)
• Trickle down effect - local procurement – labour, materials
• Social licence and stakeholder issues – resettlement, water, welfare
• Environmental and regulatory framework
• Differentiate between utilities and transport infrastructure
• Length of procurement process, access to different procurement models
and capacity building
• Rising fuel costs and renewable options

15. The Panel
• Sarah Thomas
Partner, Infrastructure & Natural
Resources, Pinsent Masons LLP
Sarah.Thomas@pinsentmasons.com
• Roland Janssens
Fund Manager, Frontier Markets
Fund Management
Roland.Janssens@frontiermarketsfm.com
• Manuel Duggal
Director, MCD International
Energy Solutions
manu.duggal@mcdie.com
• Andrew Dixon
Deputy Director, Mining Services,
Parsons Brinckerhoff
andrew.dixon@pbworld.com
• Dr Gachao Kiuna
CEO, Transcentury
gachao@transcentury.co.ke

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