FINANCE FORUM
MORE HOPE DESPITE
PLENTY OF UNCERTAINTY
will be a one-way bet; it is still uncertain which minerals will be
favoured, as the technology is still developing.
There is still considerable
uncertainty that plagues the global
economy going into 2020, but
times are looking better for the
mining sector this year and next,
writes Joe Keenan, managing
director of BME.
In South Africa there are many good reasons to hope
that the mining business will be looking up next year.
Industry and government are on track for better
collaboration, although real progress will be built on
local firms investing more, which will encourage the
real game changer: foreign direct investment.
Key risks
Let’s not forget the elephant in the room. For the second
year in a row, consulting firm EY has ranked the social license
to operate – and the disruption arising from not having
it – as global mining’s number one risk. An extended period
M
ining is a difficult business at the best of times, with
a terrifying cyclicality and very little predictability.
Miners, it is said, are among the world’s optimists, so it
is always important to recognise the good signs in the sector.
At the moment, these include rising capital expenditure by
mining companies, and better global exploration spend.
The world’s 20 leading mining companies will reportedly spend
USD60-billion in capex in 2019, increasing from just over
USD50-billion in 2018. This followed an average annual decline
in capex spending of almost 17% from 2013 to 2017.
The other important indicator – global mineral exploration
spend – increased by about 20% in 2018 and continued during
2019. The leading country destinations in 2018 included Canada,
Australia, the United States, Chile and Peru. Africa’s leading
exploration target was the Democratic Republic of Congo (DRC),
attracting 2% of the global budget – and 15% of Africa’s total.
Uneven spread
The trade wars between the US and China have unsettled the
markets and contributed to commodity price volatility. More
interest than usual will be on the upcoming elections in the
US in 2020, as this will no doubt have a bearing on mining’s
fortunes. A number of countries in West Africa continue to
attract mining projects, while security concerns in others have
driven off any interest in mining.
Battery technology will also affect demand for battery minerals
like lithium and cobalt. However, do not assume the demand
42
African Mining April 2020
These trends certainly underpin a more encouraging outlook for
the sector than we have seen in some time. In looking ahead to
2020, though, it is clear that the anticipated growth in mining
will not be evenly spread. It is likely to be specific to certain
commodities, and to certain countries. This is a function of more
geo-political instability, not just in Africa but extending to the
world’s leading players.
Despite global headwinds, mines will continue producing the
tonnes in 2020.
www. africanmining.co.za