African mining – outstanding geology or corruption?
There is an urgent need to refill the mining project pipeline of African countries with early stage exploration projects of all shapes and sizes.
Those are the words of Martin Potts, Director of Mining Research at finnCap as he released his latest research notes looking at the rankings of the various countries in Africa that have a significant exposure to mining.
In the notes, finnCap takes a look at the 25 (roughly) countries in Africa that host significant operating mines or have advanced exploration projects. The report looks at the Transparency International corruption ranking, but modifies it for geological potential and then current security risk.
So, who ranks where?
Ghana, Botswana, Namibia, Lesotho and Senegal – all sit highly in the top five. To drop a few names, Kennedy Ventures (Tantalite Valley tantalum mine) and Weatherley (Tschudi copper mine) operate in Namibia, while Firestone Diamonds (Liqhobong diamond mine) and Gem Diamonds (Lesteng diamond mine) operate in Lesotho.
Turn the scale upside down and the bottom five countries are Eritrea, Kenya, Zimbabwe, Guniea and Angola. Once again, to look at some of the most notable names across those countries – Avocet (Tri-K gold project) in Guinea, ASA Resource Group (Freda Rebecca gold mine and Bindura nickel mine) and Caledonian (Blanket gold mine) in Zimbabwe and Base Resources (Kwale mineral sands mine in Kenya.
“Looking at these results, it appears that the Canadians value geology highly, whereas the reality is that for investors the ability to successfully operate a mine in any particular country depends much more on the degree of corruption and insecurity,” says Potts.
The underlying question for investors is the risk/reward balance. Does outstanding geology beat corruption and security issues including but not limited to the threat of the radical Muslim insurgencies? This mostly comes down to the quality of company management and their in-country experience. Interestingly, many of the higher scoring countries were once part of the British Empire.”
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Zimbabwe targets £8.8bn mining industry by 2023
Zimbabwe’s government plans to fast-track exploration, evaluation and digitalisation of selected reserved mining areas under the Ministry of Mines and Mining Development as part of wider measures to achieve a £8.8 billion mining industry by 2023, according to a senior government minister.
Information Minister Monica Mutsvangwa said other plans include stopping the issuance of special grants in the reserved areas under the Ministry of Mines and Mining Development until the exploration and evaluation is complete and a robust value addition program for diamonds is implemented.
Mutsvangwa was speaking at a post-cabinet media briefing on December 15.
She adds that the issuance and renewal of special grants for energy should also be based on the financial and technical capacity to value add all types of coal, as well as for ideal exploration of Coal Bed Methane.
For renewal of special grants, consideration should take into account the period the Special Grant has been held as well as plans with milestones for value addition of the special grant, Mutsvangwa says. She adds that the Zimbabwean government expects gold to drive the mining sector in order to achieve the ambitious target, with the precious metal expected to contribute approximately £2.96 billion to the overall target.
Mining is one of Zimbabwe’s major contributors to its economy, alongside agriculture, which is the mainstay. The mining sector accounted for more than 60 percent of the country’s foreign currency receipts in 2019, and contributed around 16 percent to national Gross Domestic Product, the Chamber of Mines says.
The country’s mining industry is focused on a diverse range of small to medium mining operations. The most important minerals produced in Zimbabwe include gold, asbestos, chromite, coal and base metals.
Zimbabwe expects its economy to expand by 7.4 percent in 2021 from a projected contraction of 4.5 percent this year, due to the effects of drought and the COVID-19 global pandemic.
When presenting the 2021 National Budget in November this year, Finance and Economic Development Minister, Professor Mthuli Ncube, said that the mining sector is projected to rebound by 11 percent next year after surviving a COVID-19 induced shock that saw the sector contract by 4.7 percent in 2020. In September, mining bans in national parks were introduced, according to news agencies.
He added that the National Budget would allocate £1 billion towards the operations of the ministry for planning, promotion and exploration, data capturing, and automation, among other key mining processes.
Other factors necessary for the achievement of the £8.8 billion target include a stable macroeconomic environment, policy consistency, and availability of long-term capital to fund mining projects along the entire mineral value chain, the minister said.
Stopping "illicit financial flows" from gold smuggling is another key issue to address, according to media reports.