Mining: where to invest in 2020?
With one-sixth of the world’s land surface, Africa accounts for 30% of the world’s mining reserves. This considerable geological wealth is based on a few leading countries and minerals, studied in detail in the latest Where to invest in Africa 2020 report by the South African investment bank Rand Merchant Bank (RMB). An overview.
Countries that are rated
- Democratic Republic of Congo
The DRC is a real « geological scandal », one is used to say to evoke its mining potential, indisputably among the richest on the planet with a subsoil teeming with almost all mineral resources. The figure traditionally put forward to quantify this potential is $24,000 billion, but estimates vary greatly according to sources and studies, with very disparate data. In any case, the strength of the sector in the country (over 80 per cent of export earnings) is self-evident, as is its strong growth prospects. This figure reflects both the strength of the sector in the country (more than 80% of export earnings) and its strong growth prospects. At the forefront of Congolese mining specialties is cobalt - of which the DRC is the leading producer with 60% of global supply - a strategic mineral for the automotive industry, whose global needs are constantly growing. As a result, despite an often restrictive operating environment (difficulties in water and electricity supply, poorly performing mineral disposal infrastructures) and a new mining code - promulgated in March 2018 - less favourable to the mining industry than the previous one, the Central African giant remains, due to the size and diversity of its resources, an unavoidable destination.
- Namibia
Located in southern Africa, Namibia draws its strength from a rich and diversified mining sector: diamonds, copper, but also uranium with the Husab site, the third largest open-pit uranium mine in the world. In fact, estimated at 1.8 billion dollars in 2019 according to the rating agency Fitch, the Namibian mining sector contributed 12.1% of the national growth. The country also offers an excellent level of protection to foreign investors, as well as solid infrastructure and proven political stability. This explains why Namibia is rated very highly by the Fraser Institute (80/100), an index that takes into account the mineral potential and mining policies in place in the countries concerned.
- Burkina Faso
Long a small mining powerhouse, Burkina Faso is now attracting growing interest from investors, particularly in the gold sector. From less than one tonne per year in the early 2000s, the country’s annual gold production now fluctuates between 50 and 60 tonnes (52.66 tonnes in 2018, excluding artisanal production, which the authorities estimate at around 10 tonnes) and, according to World Bank statistics, represents 17% of the value of the country’s exports. This level is expected to increase further in the coming years with the operationalisation of the Wahgnion mine operated by Teranga Gold (estimated reserves of over 37 t) and the construction of the Bomboré (estimated reserves of over 28 t) and Sambrado mines. The only downside is that prospecting is currently hampered by the country’s tense security situation.
In addition to the three countries mentioned above, RMB also mentions the continent’s other safe havens, namely South Africa, Africa’s leading mining power, and Cameroon (bauxite, nickel and iron), which could soon have the world’s largest proven bauxite reserves, with an estimated potential of around 2 billion tonnes, Guinea (bauxite and iron) - ranked as the world’s most attractive mining jurisdiction in terms of mineral potential by the latest Fraser Institute survey - Ghana (gold), which in 2018 will become Africa’s leading gold producer, and finally Eritrea with the major Colluli potassium sulphate project, presented as a major asset for reviving the national economy.
Minerals that are popular
- Gold
At the time of writing, an ounce of gold peaks at $1,660 on international markets. A spectacular increase of more than $400 in one year, dragging the most ambitious projects in its wake. The Namdini gold mine in Ghana, operated by the Cardinal Resources mining company, could produce 4.2 million ounces of gold (130 t) over a 15-year mine life. If financial close is achieved as expected in the first half of 2020, the site is expected to deliver its first gold bar in the second half of 2022.-
- Cobalt
In 2020, the price of cobalt continues to rise. Driven by strong global demand that is set to rise steadily over the long term, this ore is particularly popular with the automotive industry (manufacture of electric cars), whose needs could rise from 90,000 tonnes/year to 122,000 tonnes/year by 2025.
- Palladium
Used, among other things, to make catalytic converters for gasoline and hybrid cars in order to reduce polluting emissions, palladium has been on an upward slope since last year, when for the first time in its history it crossed the $2,500 per ounce mark, higher than gold. The « lesser-known precious metal » thus recorded a 60% increase in 2019 and has been on the rise (+42%) since the beginning of 2020. In Africa, it is mainly produced in southern Africa, particularly in South Africa, which accounts for around 40% of world production, on a par with Russia.
- Rhodium
Still unknown a few years ago, rhodium very quickly established itself as a highly strategic metal. It is highly prized in the automotive industry for its anti-pollution virtues (it is mainly used in the manufacture of catalytic converters, as it limits the emission of polluting gases, particularly nitrogen oxide), and has recently seen its price soar to the point where it is considered to be the most expensive metal in the world. Since 1 January, its price has almost doubled from $6,000 to $11,500 per ounce, seven times higher than gold. South Africa alone mines between 80% and 85% of the world’s gold production, with the rest divided between Russia and the rest of the world.
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To these minerals to be closely monitored in 2020, we will add the long list of rare earths, widely used in new technologies (mobile phones, electric cars, military industry…) and boosted by an ever-increasing global demand (see our article: Rare earths: Africa, the new Eldorado?). These are all mining assets that are prized the world over and which African countries are full of. It remains to be seen whether they will really be able to take advantage of this windfall, as the uncertainties linked to the business environment, the infrastructure deficit, sometimes whimsical taxation and the financial inclusion of local populations remain challenges that are more topical than ever.