Copper investors advised to keep an eye on Zambia

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copper cathods zambia

Amid predictions that the copper sector would remain buoyant this year from a pricing and project development perspective, professional services firm EY suggested that investors kept a close eye on Zambia, as it was the largest copper producer in Africa.

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“While Zambia has large quantities of copper resources, it is also relatively stable, politically and in terms of its legislative framework. Recent initiatives by the Zambian government seem to indicate a willingness to create an environment of predictability and transparency going forward. This potentially provides investors with a great deal of certainty,” said EY Africa advisory services mining and metals leader Mike Roy, who spoke to Mining Weekly on the sidelines of the event, in Cape Town, last month.

EY assurance director Louis van Breda added that mineral-rich West African countries, such as Côte d’Ivoire, Ghana, Sierra Leone, Mali and Guinea had the potential to significantly expand their mining operations. He cautioned, however, that all growth forecasts for these countries depended on political, social and legislative stability.

With regard to Southern Africa-based projects, Roy and Van Breda cited Namibia as an important country to watch, not only because of its large uranium reserves but also because of its developing base metals mining operations, which focus on iron-ore and manganese.

Further, Roy projected that there would be a slow upturn in the African mining sector this year and in potential consolidation among junior mining houses, owing to the juniors’ current inability to source additional capital.

“I would not be surprised to see capital flowing into the local mining sectors in the form of private equity funds,” he added.

Roy also maintained that some South African junior coal miners could potentially secure some of the private equity funding on offer.

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“I do not foresee the majors undertaking any significant new developments this year, as most of them are recovering from a difficult 2013 and will remain cautious about investing large amounts of capital in new projects,” he said.

Roy also highlighted the Chinese and Indian demand for iron-ore and coal as a developing trend for mining stakeholders to take note of in 2014.

Meanwhile, Roy and Van Breda agreed that Mineral Resources Minister SusanShabangu’s assertion, during her indaba keynote address, that beneficiation would not be forced on the mining industry was positive for mining companies, as it provided them with flexibility in their operations.

“Minister Shabangu is well aware that investors and mining companies have been concerned about the prospects of forced beneficiation and the seemingly diktat fashion in which her Ministry was going about the beneficiation discussion process. It is interesting to note a more measured approach in the Minister’s address,” said Roy.

Forum for Engagement

Van Breda described the Mining Indaba as an important forum for constructive engagement between industry regulators and mining companies.

However, he acknowledged that the lack of labour union representation at the Mining Indaba, particularly in light of the volatile labour climate in South Africa, was a serious shortfall for the conference.

“Nonetheless, I still think that the South African government, as the custodian of the economic wellbeing of the country, should facilitate such discussions and it is by no means the sole responsibility of the Mining Indaba organisers,” he clarified.

Roy added that, as someone who had been attending the Mining Indaba for many years, he observed a steady increase in the percentage of exhibitors that were service providers, as opposed to juniors or mining companies.

Moreover, Roy emphasised that the Mining Indaba needed to have greater emphasis on the rest of the African continent.

Concurring with Roy, Van Breda added that this was particularly important, as South Africa could lose its position as the largest economy on the continent, following Nigeria’s rebasing of its gross domestic product (GDP) data at the end of last month.

Nigeria may see its GDP increase from $262.6-billion currently to about
$424-billion by the end of 2014, according to projections by Russian investment banking firm Renaissance Capital in December. This would eclipse South Africa’s current GDP of $384.3-billion.

Edited by: Samantha Moolman
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