May 17, 2020

Africa’s mining markets show momentum for investors

mining
mining investments
African mining
african investme
Admin
3 min
Jean-Claude Bastos de Morais, Founder and Chairman of the Advisory Board, Quantum Global Group - an investment firm that focuses on Africa
By Jean-Claude Bastos de Morais, Founder and Chairman of the Advisory Board, Quantum Global Group

It seems almost as if there are two parallel economi...

By Jean-Claude Bastos de Morais, Founder and Chairman of the Advisory Board, Quantum Global Group

It seems almost as if there are two parallel economic worlds right now. In the developed economies, commentators and policymakers are bouncing from one moment of turbulence to another (the latest being Brexit) – whilst Africa undergoes structural, industrial and economic change. Africa’s policymakers and regional bodies have moved quickly to find new funding avenues to support industrial growth and drive socio-economic change.

Despite the enormous impact of the collapse of oil and metal prices, industrial growth and economic diversification are coming from perhaps an unexpected quarter: mining. The evidence for optimism in the sector is plain to see.

Firstly, we must remember that African investment is heavily developmental – so despite what is happening farther afield, the job of nation building must continue. But development needs to be smart: value for money with the promise of low-risk medium-to-long-term returns. And of course, metal prices are at an all-time low, presenting an opportunity to buy at the bottom of the valuation cycle.

 This is why Africa’s mining industry is gaining momentum – perhaps counterintuitively - presenting investors with superb opportunities. China is the world’s largest importer of metals and the country’s relative slowdown is obviously still a cause for concern (in 2015 China experienced the lowest GDP growth since 1994).

However, smart structural and funding models being adopted in some African countries – and the support of industry bodies – is paving the way for much more lucrative opportunities in the mining sector.

The mining industry in Africa now benefits from a greater level of regulatory oversight. Regulatory changes help to achieve greater levels of productivity and efficiency for investors, particularly in areas such as labour law: strikes can be avoided and employees can become better motivated through the provision of skills training and global standards of health and safety legislation.

In 2009, the African Union Commission (AUC) adopted a treaty that encourages cooperation between the public and private sectors. It also created the Africa Mining Vision (AMV), which sets out, ‘Africa’s own response to tackling the paradox of great mineral wealth existing side by side with pervasive poverty.’ AMV believes that mining companies and governments have a duty to work together in the collective national interest, to ensure that the industry actually contributes to local socio-economic development through skilled training, environmental protection and fair contract negotiations with multi-nationals. It means integrating mining into industrial and trade policy.

Integration means that African mining can contribute to multiplier industries – moving away from being an exporter of raw materials to a region that manufactures metals and creates knowledge-based services. This is smart government that protects the interests of African communities and contributes to economic diversification.

Look out for part two of this feature on Monday!

The November issue of Mining Global Magazine is live!

Follow @MiningGlobal

Get in touch with our editor Dale Benton at [email protected]

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May 6, 2021

Copper, iron ore surge as Chinese investors unleash demand

Copper
Iron ore
Renewables
EVs
3 min
Iron ore broke $200 a tonne for the first time, while copper approached a record high as Chinese investors unleashed fresh demand following May holiday

The reopening of major industrial economies is sparking a surge across commodities markets from corn to lumber, with tin climbing above $30,000 a tonne for the first time since 2011 on Thursday.

In the wake of mounting evidence of inflation fuelled by higher raw materials prices, investors are also increasingly focused on when the U.S. Federal Reserve might start throttling back its emergency support.

Copper

Many banks say the rally has further to run, particularly for copper, which will benefit from rising investment in new energy sectors. Copper is at the highest in a decade, fueling bets it will rally further to take out the record set in February 2011. Steel demand is surging as economies chart a path back to growth just as the world’s biggest miners have been hampered by operational issues, tightening ore supply.

“The long-term prospects for metals prices are ‘too good’ and point to higher prices in the next few years,” said Commerzbank AG analyst Daniel Briesemann. “The decarbonization trends in many countries, which include switching to electric vehicles and expanding wind and solar power, are likely to generate additional demand for metals.”

Trading house Trafigura Group and several major Wall Street banks including Goldman Sachs Group Inc. and Bank of America Corp. expect copper to extend gains.

Copper rose as much as 1.6% to $10,108.50 a ton on the London Metal Exchange before trading at $10,080 as of 4:07 p.m. in London.

Bloomberg

Iron Ore

Benchmark spot iron ore prices rose to a record, while futures in Singapore and China climbed.

The boom comes as China’s steelmakers keep output rates above 1 billion tons a year, despite a swath of production curbs aimed at reducing carbon emissions and reining in supply. Instead, those measures have boosted steel prices and profitability at mills, allowing them to better accommodate higher iron ore costs.

Spot iron ore with 62% content hit $201.15 a ton on Thursday, according to Mysteel. Futures in Singapore jumped as much as 5.1% to $196.40 a ton, the highest since contracts were launched in 2013. In Dalian, prices closed 8.8% higher.

Erik Hedborg, Principal Analyst, Steel at CRU Group commented: “Recent production cuts in Tangshan have boosted demand for higher-quality ore and prompted mills to build iron ore inventories as their margins are on the rise. Iron ore producers are enjoying exceptionally high margins as well, around two thirds of seaborne supply only require prices of $50 /dmt to break even.”

China

Still, some analysts including Commerzbank’s Briesemann expect a short-term correction as metals become detached from fundamentals. There’s also a risk that China could engage in policies that may cool demand for iron ore and copper.

The metals rally has boosted concerns about short-term Chinese demand. Some manufacturers and end-users have been slowing production or pushing back delivery times after costs surged, while weaker-than-expected domestic consumption has opened the arbitrage window for exports.

Tin climbed as much as 2% to $30,280 a ton on the LME, boosted by rising orders for the soldering metal. Tin is at the highest since May 2011, with a 48% gain this year making it the best performing metal on the LME.

 


 

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