LONDON, January 30, 2017 /PRNewswire/ --
Indaba remains the largest mining event in Africa
The Investing in African Mining Indaba, or Mining Indaba, is dedicated to the successful capitalisation and development of mining interests in Africa. Having run for over 20 years in Cape Town, the event brings together investors, mining companies, governments and other stakeholders from around the world.
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This year, Roskill will again be exhibiting - starting 6th February 2017. Visit booth #1102 or contact us directly to arrange a meeting on the side-lines of the conference. Roskill is a leader in international metals and minerals market research and consultancy focussing on minor metals, steel alloys and industrial minerals.
Developments in the DRC could have major implications on metals and minerals markets
The DRC is the 11th largest country in the world and the third-largest in Africa. Given its scale, it is perhaps unsurprisingly blessed with vast natural resource endowments including cobalt, copper, diamonds, gold, iron ore, manganese, phosphate, niobium, tantalum, tin, and zinc.
The mining sector in the country faces several difficulties. Infrastructure and energy supply issues continue to hamper mining and processing operations, as well as the wider economy. Despite the country having huge hydropower potential, the energy sector remains a major inhibitor to economic development and social inclusion. Further, the DRC's restrictive railway and road infrastructure continues to impact negatively on the country's economic growth.
A key issue likely to impact the sector is the potential of a political crisis. In 2006, the DRC held its first multi-party elections and in 2011, President Kabila was re-elected for a second term. Elections were due to be held in November 2016 but in January that year, the Independent National Electoral Commission of the DRC released a statement announcing that it would require a further 18 months to update the country's voters roll. Further, the Minister of Interior declared that several new electoral laws would need to pass through Parliament before an election could take place. These announcements were perceived by the opposition as strategy of glissement (sliding), seeking an indefinite delay of elections.
The next Presidential election in the DRC is highly important as it marks the end of the maximum term that can be held by Joseph Kabila, whose second, and constitutionally last, term ended on 19th December 2016. Suspicion has continued to mount that, as has been the case in Burundi, Congo-Brazzaville, Uganda and Rwanda, Kabila is seeking to delay the electoral process in an attempt to extend his 15-year tenure. As of Q1 2017, the most likely fixed deadline for the next election, as set out in a 2016 national dialogue agreement, is April 2018. The delays have exacerbated local tensions and led to protests, subsequent crackdowns and fatalities.
Any disruptions in the DRC are likely to impact the cobalt market more than any other. The DRC has by far the greatest cobalt resources of any country and accounted for roughly 65% of world mine supply in 2016. As such, it is the principal source of global feedstock for refined cobalt - consumed mostly in lithium-ion batteries.
In South Africa, it remains an uncertain period for ferroalloys producers
It has been an interesting period for the South African mining sector and for ferroalloys producers in the country. Several producers have reduced output, others have entered business rescue, and some have closed completely.
Like the DRC, the country's mining sector faces several challenges that are by no means new. Energy prices, which will probably see double-digit percentage increases in Rand terms, remain an issue - and could eventually put pressure on ferroalloys producers. It is not clear whether higher coal prices (and maybe higher oil prices) will mean even higher electricity prices. Of course, owing to Eskom's infrastructure and generation issues, energy availability will also remain a factor. With regard to infrastructure, Transnet still has issues to resolve, in particular with regard of getting sufficient bulk commodities out of Port Elizabeth.
In the vanadium market, the closure of Evraz Highveld in 2015 represented the most important supply-side development in the sector in recent years. In 2014, South Africa accounted for roughly 20% of global vanadium feedstock production but this figure dropped to below 10% in 2016. It remains to be seen if South Africa can remain a dominant force in the vanadium market. Glencore's Rhovan mine and plant remain in operation, and there are some projects out there - such as those of Ironveld and Bushveld Minerals.
The chrome market has been very interesting in recent months. By Q1 2016, prices were at six-year lows and market conditions brought about the closure of several ferrochrome operations, many of which also struggled without a stable supply of ore. However, the price recovery in H2, driven by Chinese demand for South African ore, has seen chrome ore and ferrochrome prices recover to their highest levels since the global financial crisis. A series of takeovers, and price recovery, have started to consolidate and revive the South African sector as bigger producers acquired the assets of smaller, struggling operations. Traxys acquired Tata Steel KZN's ferrochrome plant in Q2; ASA Metals accepted an offer from Tubatse Ferrochrome in Q3; and in Q4, Samancor Chrome restarted production at the plant formerly owned by IFM, after acquiring the operation earlier in the year. More consolidation could occur over the coming months.
The manganese market also started 2016 with prices at considerable lows. South African ore producers attempted to take action and adjust to lower demand by idling around 3Mt of capacity last year. Prices started to recover in late July, and surged through the second half of the year on the back of higher demand from China and because of Transnet's tippler loading constraints in Port Elizabeth restricting exports. Prices have fallen back in early 2017 but still remain well above 2015 and 2016 averages.
In African countries with less developed mining sectors, there remains huge potential
In Mozambique, for example, the extractive sector currently represents less than 4% of economic activity but has scope to grow considerably. The recent discovery of huge reserves of mineral resources, combined with ongoing reforms and subsequent improvement of the business climate in Mozambique, provide good opportunities for the transformation of the country into a middle-income nation. The country is host to mineral sands (zircon, ilmenite), gold, copper, nickel, iron ore, bauxite, graphite, rare earth minerals, lithium, bismuth and antimony, as well as world-class coal deposits and both onshore and offshore natural gas deposits.
After decades of under investment, geographic challenges and outdated legislation, neighbouring Malawi's mining industries remain underdeveloped. However, this may all be about to change. Following the country's fifth successive democratic elections in 2014, the new government has set its sights on expanding the nascent sector, and with the completion of a World Bank sponsored geological survey in 2015 and the anticipated release of the new liberalised mining code, the development of Malawi's extractive industries may be about to accelerate.
Compared to Mozambique and Malawi, Namibia has a long-established mining sector, which has been developed as a consequence of three key factors: an endowment of a wide array of natural resources, a stable pro-business government and an impressive transport infrastructure. As of 2016, the country had active mines extracting diamonds, uranium, gold, lead, zinc, manganese, iron ore, silver and copper. There is also a diverse pipeline of projects being developed. The launch of offshore diamond mining has reinvigorated diamond production levels, and output is forecast to increase in the coming years. What's more, reliance on diamond mining is likely to fall as several large uranium projects come online. The country has the recognised potential to produce over 10% of the world's uranium output and, should demand and prices recover, the supply capacity will be in place to exploit higher margins.
Roskill will be exhibiting at the Investing in African Mining Indaba starting 6thFebruary 2017 in Cape Town. Visit Booth #1102 to find out more about our market analysis and consulting.
