Mining Indaba preview
Further to this, companies have to anticipate
that with any change in government or
regulations, there will be changes that they
will have to undergo and absorb into the
planning processes and financial models so
that the mine is able to cope and take any
financial changes into their business plan
and objectives.
In my view, Zimbabwe is geared to
become one of the biggest mining
countries in Africa and the world. It has
the largest residues of platinum, diamond,
gold, and coal that have not been fully
explored due to the political regime in
the past couple of years. I believe that
with the new government and policies
Companies investing in Africa need to
ensure that they do a proper socioeconomic
risk identification and impact management
to be able to understand all the risks that
have the potential to disrupt mining, and
build these into their financial model. The
biggest challenge is that companies are not
aware of some risks that will impact on their
operations during the budgeting and planning
phases. Consequently, they are caught off
guard and have to direct some capital aimed
at mining, to then address social issues.
SSC
Fred Arendse: group chief executive, SSC Group
Fred Arendse. Marcin Wertz.
that President Mnangagwa is introducing
into the country while relaxing some
regulations, will give Zimbabwe the
necessary investment into this sector from
foreign investors, who have been waiting
for change. Ghana, Botswana, and South
Africa are busy recovering but they all
have big deposits of different commodities. Marcin Wertz: partner and principal mining
engineer, SRK Consulting
Gold will continue to do well and the
introduction of lithium batteries in some
vehicles by the Chinese should cause a rise
in the platinum price and will perhaps be
a catalyst for some platinum mines that
are under care and maintenance to be
reopened. Also, copper, zinc, iron ore, and
met coal — it can take years to bring new
capacity online.
Political instability, and concern regarding
regulatory and policy uncertainty, together
with a weak judicial system, still present
a fundamental risk, and therefore play a
substantial role in investment decision-
making. In our experience, despite these
concerns, there are still a number of
investors interested in Africa because of
the potential return on investment, which
is, in many instances, still preferable and
better than competing continents such
as South America, and Africa’s growing
working-age population. The view is that the
growing working-age population will create
opportunities, including employment and a
greater consumer base.
In addition to political and regulatory
uncertainty, other key risks and concerns
include the ability to access funding,
www.africanmining.co.za
Warren Beech: partner and head
of mining, Hogan Lovells
Warren Beech.
safety and security, business integrity, and
corruption and irregular processes.
These risks, whether perceived or real, can be
mitigated by a process of informed decision-
making, which relies on accessibility to good
information and advice. Provided investors have
access to realistic and unemotional information,
good investment decisions can be made.
The new year brings grounds for guarded
optimism about improved investment levels
in mining in Africa, although there are signs
that resource nationalism may be driving new
tax regimes in countries like the Democratic
Republic of Congo and Zambia; while legal
action in Tanzania between government
and a large miner is also causing some
apprehension among potential investors.
Where regulatory or tax issues make projects
more difficult or costly, mining companies
may begin to think twice about investing.
Where country risks are higher, mining
companies have to raise their hurdle
rate to create a larger ‘buffer’ in case of
unexpected factors disrupting their plans
and operations; under these conditions, the
result may be that a sovereign risk premium
is built into the project criteria, requiring
a higher return to be delivered. This then
tends to exclude from consideration all
those potential projects with relatively
modest returns — and in effect deprives
that country of that possible investment.
As mining projects face increasing regulatory
pressure to localise their professional and
management levels on mines, this can create
a growing risk if not managed closely. The
expectations of the host country must be well
understood, and these must be practically
addressed in the mine planning process.
While a number of African countries have
considerable mine management expertise
available locally, others may require mining
companies to invest in training and
mentoring as they move from an initial
reliance on expatriate skills to indigenous
management. This could involve substantial
budgetary and scheduling considerations.
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