Mining in Africa: Communication is key to navigating Africa’s complexities
As developers look for opportunities in larger mining projects in Africa, developers are faced with various levels of complexity that place new hurdles in their path.
Andrew van Zyl believes the mining future holds great prospects for mineral development beyond the historical focus on gold and diamonds.
Speaking at SRK Consulting’s 360 Mining Perspectives last month, Van Zyl said that a mine site in which the end-product can be easily flown out lends itself to a “fairly small operational footprint, a reasonably controlled environment, and a manageable number of interactions with the stakeholders around the mine,”.
It is only when a developer moves towards bulk commodities will the complexity of the situation materialise.
“With commodities like iron ore, mining operations start developing a substantial footprint – often becoming a strategically significant player in the host country’s economic landscape regarding energy and water provision.” Said Van Zyl.
A large initiative in a small economy, such as the Sundance iron ore project, on which SRK served as technical advisors to the government of Cameroon, was conceived as a $7 billion project in a $25 billion economy, which “immediately becomes strategically important to the host country”.
“A mining company taking on this scale of project must address myriad technical and contractual complexities that can’t simply be contracted out; the relevant government agencies are going to want to interact with you directly on these matters, and you must have the insight and capacity to take on this responsibility.”
This means more interaction with government and communities over detailed issues such as compliance and infrastructure, resettlement, employment policies and social investment.
In developing economies, the legal framework often does not accommodate the contractual minutiae that a large mineral project will entail.
“This makes certain activities or arrangements neither legal nor illegal,” he said. “The starting point is then to be part of creating the legal basis for establishing whether and how the details of the project can be implemented. An example might be the mine’s sharing of responsibility with state departments for a train line and load-out port.”
For a clearer picture of local pressures, mining companies must understand broad global trends.
As an example, of Africa’s population is still going to grow relatively rapidly, this will drive the demand for water, food and electricity.
Alongside this, communication technologies are getting faster, simpler, better and more effective.
“We need to ask: How is this going to affect the mining industry in general and the project in particular?” said Van Zyl.
“Most of the world’s as-yet-uncultivated arable land is in Africa; a growing population across the continent will compete for this with outside countries wishing to secure their own long-term access to food. Africa’s low energy consumption per capita is another factor that will change dramatically as more capacity is installed, driving higher standards of living, better education and life expectations.”
With rapid growth comes what Zyl describes as a “valuable opportunity for companies to talk to governments, regulators, communities and other parties about projects and their implications”.
“This process can lay the foundation of understanding who needs to be engaged, what the legal framework looks like, what kind of contracts need to be in place, and what level of capacity-building must be done.” Said Van Zyl.
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Global iron ore production to recover by 5.1% in 2021
Global iron ore production fell by 3% to 2.2bnt in 2020. Global production is expected to grow at a compound annual growth rate (CAGR) of 3.7% to 2,663.4Mt between 2021 to 2025. The key contributors to this grow will be Brazil (6.2%), South Africa (4.1%), Australia (3.2%) and India (2.9%). Key upcoming projects expected to commence operations include South Flank in Australia (2021), Zulti in South Africa (H2 2021), Serrote Da Laje in Brazil (H2 2021) and Gudai-Darri (2022), according to GlobalData, a leading data and analytics company.
Vinneth Bajaj, Associate Project Manager at GlobalData, comments: “Declines from Brazil and India were major contributors to the reduced output in 2020. Combined production from these two countries fell from a collective 638.2Mt in 2019 to an estimated 591.1Mt in 2020. The reduced output from the iron ore giant, Vale, was the key factor behind Brazil’s reduced output, while delays in the auctioning of mines in Odisha affected India’s output in 2020.
“Miners in Australia were relatively unaffected by COVID-19 due to effective measures adopted by the Australian Government, while a speedy recovery in China led to a significant 10.4% increase in the country’s iron ore output.”
Looking ahead, the global iron ore production is expected to increase by 111.3Mt to 2,302.5Mt in 2021. Rio Tinto is expected to produce up to 340Mt of iron ore, while BHP has released production guidance of 245–255Mt, supported by the start of the Samarco project in December, which is expected to produce between 1–2Mt.The company has retained its guidance for Australian mines at 276–286Mt on a 100% basis, due to scheduled maintenance work at its ore handling plant and tie-in activity at the Area C mine and South-Flank mine.
Bajaj added: “The remaining companies are expected to produce more than 600Mt of iron ore, including FMG, whose production is expected to range between 175–180Mt supported by its Eliwana mine that commenced operations in late December 2020, and Anglo American, which is expecting to produce between 64–67Mt. Vale is expected to resume 40Mt of its production capacity, taking its overall production capacity to 350Mt in 2021, with production guidance of 315-335Mt.”