Africa should profile its mineral wealth to attract investors

Over the last two decades, mining has become a focus for many African countries seeking to widen their wealth base away from just agriculture.

During that period, Africa’s economic fortunes have changed dramatically, driven by robust growth in mineral rich countries.

Africa boasts of large reserves of the world’s most sought after minerals such as bauxite, cobalt, industrial diamond, phosphate rock, platinum-group metals (PGM), vermiculite, zirconium and rare earths.

But the continent remains at the very foot of the technological and skills ladder that it needs to exploit the deposits opening a window for external players to get in. One such country that is offering Africa the mining technology, skills and best practice is Australia.

As part a 2014 deal with members of the Common Market for Eastern and Southern Africa, the Western Australian government is running a knowledge sharing programme across the fields of mining, petroleum and agriculture.

Dr Tim Griffin, the deputy director-general in the Western Australian Department of Mines and Petroleum, was recently in Nairobi for a training session and spoke with the Business Daily on the future of Africa’s mining industry.

Here are the excerpts.

What is your assessment of Africa’s mining industry?

My take is that the industry has immense opportunity because the geological resource is very diverse and with a large sediment of resources. The challenge is identifying what each country has.

What are the key gaps in the African mining sector?

Geological information is generally lacking  and is a big concern. Exploration is a risky venture and Africa needs to package its mineral profile to attract investment. Investors want some level of certainty because of the high level of risks involved.

Canada and Australia started by providing comprehensive data to investors and are today some of the world’s top mining nations. Comprehensive geological information promotes exploration investment by improving efficiency and reducing risk.

What specific programmes do you have for Kenya?

Our goal is to carry out an Africa-wide capacity building initiative so that government systems can be better coordinated to develop their respective mining programmes.

We have training programmes such the one we have just held here in Nairobi and we also have exchange programmes that enable Kenyan officials to go to Australia to experience and borrow from best practice.

R&D and collaboration within the mining industry is receiving a lot of attention at the moment. How do you see these influencing the future of the sector?

Research and development has proved a game-changer in the mining sector because it helps build on efficiency and overall productivity. It is very critical that African mining projects pick new technologies and acquire competing skills.

You should not stick to old technologies that will deny you an opportunity to compete with the best. Technology change-over can be costly and it would be prudent to go for the latest ones in the industry to avoid inconveniences.

Is the legislative framework sufficient for the growth of Africa’s mining sector?

The mining laws in Africa are work in progress and are being refined from time to time. What needs to be done is to analyse their impact and design implementation in a phased manner that would not compromise stability of the mining industry.

Investors want constant standards and therefore changes should be friendly to allow for continuity and not heavily inconvenience investors.
For example, a fair, consistent and appropriate value of mineral resources must apply when calculating royalties.

A strong regulatory framework provides certainty and should be fair, balanced and secure.

With commodity prices continuing to fluctuate, what do miners need to bear in mind when conducting operations cost modelling?

Every investor must incorporate the risk factor in any mining business because of the cyclical nature of commodity markets. You, however, need to note that it is not always on the bad side.

Commodity prices fluctuation can also come with immense opportunities.

For instance, in Australia currently able to get drilling rigs at 40 per cent the initial cost because of lower demand in the current phase of low commodity prices and that is an opportunity for the industry to grow its production side of the business at a cheaper cost. So it’s a mixed scenario that would keep changing by the day.

What role will technology play in the future of the African mining industry’s global competitiveness?

Safety and efficiency is critical to the success of any mining venture and this is one key area that is being addressed by technological advancements.

It is no longer the number of employees that are engaged in a venture that matters but the level of safety and spin-offs.

Africa needs to take advantage of new technologies that can provide safer, cleaner and a more productive mining environment.

New technologies can not only provide significant benefits to the operation of a mining company but also lead to changes in community and government expectations.

Most projects in Africa are facing serious headwinds from opposing communities mainly on the land question and compensation and health and environment, how can this be addressed to guarantee further investment?

This is one area where governments and industry need to expand stakeholder participation. Having everyone on board helps to diffuse tensions and misunderstandings.

All projects must clearly provide for value-proposition such that the project communities feel part and parcel of them. Effective community engagement is a critical component in dealing with land use and land access issues.