It’s a tough time for African mining. The effect of fallen commodity prices, hit by slowing economic growth in China, has been felt across the mineral-rich continent. In Zambia, Vedanta Resources closed a copper mine in November, while Glencore cut 4,300 jobs. And in South Africa – where wage disputes troubled the industry before the current commodity downtrend – restructuring plans by companies like Anglo American and Lonmin have already resulted in thousands of job losses.
Analysts at rating agency Moody’s believe things are unlikely to improve anytime soon, with the supply-demand imbalance expected to widen further, diminishing hopes for a speedy recovery of base metal prices.
These challenges will most likely shape discussions at the annual Investing in African Mining Indaba, to be held next week in Cape Town. It is the world’s largest mining investment conference and is attended by thousands of industry stakeholders, from mining executives and investors to government officials from across the globe. This year’s theme is ‘investing beyond mining cycles’.
Jonathan Moore, the Mining Indaba’s vice-president and managing director, says the current climate will likely result in a decrease in the number of delegates attending this year – down from 6,700 in 2015 to about 6,000.
“We are seeing careful spending from companies and, in some cases, they are spending less in their participation in the Mining Indaba. This might translate into sending smaller delegations or having a smaller stand [at the exhibition].”
However, he adds, the event has not seen any significant reductions in the number of companies and industry leaders attending. “A mining company for example might send a smaller delegation, but their top executives are still participating.”
Investment interest suprisingly high
According to Moore, investment interest in the sector is higher than it has been in the recent past, although this is yet to translate into major fund inflows.
One of the ways this interest has been measured is through the Indaba’s VIP Investor Programme to help high-level investors connect with relevant mining executives on the types of projects they are seeking. The programme is only in its second year, but Moore says it has seen a considerable increase in participants from 2015.
“It is clear from our engagement with those investors that the interest in the sector is getting stronger and there’s a feeling that there’s an opportunity here, with valuations where they currently are, for investors to find very attractive opportunities.”
There has also been an interest expressed in meeting with early-stage exploration companies, suggesting that some investors are looking beyond the current supply excess in the commodity space.
“I think you will start to see those investors begin to put capital to work and say, ‘Hey, we have an opportunity to buy in what is a very attractive range.’… And I think you’ll start to see that the lack of investment in, and development of, greenfield projects will start to mean that there will be increased interest in those projects over the course of the year,” he highlights.