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Absa Insights 2020

It’s slowly but surely getting less risky to fund mining in Africa

15 September 2020 1:17 PM

Many countries on the Continent are increasingly providing investors with the stability and regulatory certainty they seek.

Investors seek a stable political environment and regulatory certainty. In this regard, the Continent has seen some improvements of late.

“In South Africa, regulations are becoming clearer,” says Shirley Webber, Coverage Head of Natural Resources at Absa Group Limited.

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Capital providers have in the past been wary of supporting junior miners, according to Ilja Graulich, Head of Investor Relations and Communications at Tharisa.

“That has changed,” says Graulich. “We received very good support from capital markets, particularly on the debt side.

“But it’s not easy. And that, quite frankly, is why I remain bullish on commodity prices.”

Long timeframes add to risk, and some regulatory uncertainty remains

Long lead times greatly add to risk, warns Tawanda Madondo, Principal Coverage Banker for Natural Resources and Energy at Absa CIB.

“For example, for some platinum mines to get to profitability can take about seven years.”

“When we funded the Jubilee field in Ghana, from discovery to production was five years – extremely quick!” concurs Webber. “Five years was such a dramatic achievement.”

Some governments in Africa are not really helping to ease the minds of risk-averse investors, according to Bevan Jones, CEO of African Source Markets.

“Regulations are still muddled,” says Jones, “but there are exceptions

Oil-dependent economies remain at risk

“When will we get out of this oil glut?” asks Tawanda Madondo, Principal Coverage Banker for Natural Resources and Energy at Absa CIB.

“It’s really around how long Covid-19 will be around.”

Sustainability is key

The role of banks when funding mining projects have evolved to ensure communities and the entire value chain benefit in a sustainable way.

“Sustainability” has become a critical aspect of the entire funding journey as shareholders increasingly push back against projects that don’t consider environmental impact.

“Everyone must benefit,” says Webber.

“Sustainability does not only refer to carbon emissions. For us, it also means the end of hunger and improved education. We must be responsible when lending.”

For more detail, listen or watch the discussion below.

Watch the entire, unedited discussion below.

15 September 2020 1:17 PM

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