This has led to a shortage of equity and growth capital across the continent that should allow well informed and experienced investors to the continent to access superior risk-adjusted returns.
Resource demand growth has been a key driver of investment and wealth creation
in large African economies and others with significant resources. Strong demand for natural resources, driven by China’s increasing energy and commodity needs and a US desire to reduce reliance on Middle East oil, is expected to stimulate further economic growth and increase the regions’ strategic value to foreign governments. Oil-exporting African countries contributed 53.3% and 61.4% to the continent’s total GDP and GDP growth rate in 2008, respectively.
The World Bank estimates Asia now receives 27% of Africa’s exports, triple the amount in 1990 and recently surpassed the US as Africa’s top trading partner. China’s overall trade with Africa has increased tenfold over the past decade, hitting USD $107 billion in 2010. Africa’s exports are primarily focused around mineral extraction but are also expanding to include the supply of non-traditional goods such as processed commodities, light manufactured products and household consumer goods to Chinese and Indian firms and consumers.
Resource rich region
Discovery and exploitation of African mineral resources has occurred since the start of documented history, from mining of copper and gold in the Sinai Peninsula; in Nubia (southern Egypt and northern Sudan) as far back as 2,613BC; and the extraction and trade in gold in Zimbabwe starting between 1,200 and 1,300AD and continuing until the present day.
More recently, as in the past 200 years, several world class deposits have been discovered in Africa, including gold in the Witwatersrand Basin and in the central African greenstone belts, Platinum Group Metals in the Bushveld Complex and in the Great Dyke of Zimbabwe, both Kimberlitic and alluvial diamonds in several southern African countries, copper/cobalt in the Central African Copper copper belt, and tin/tantalum in the Central African tin belt.
While these world class deposits have been largely confined to southern, central and west Africa, the entire continent is well mineralised and remains highly prospective.
In 2006 BHP Billiton estimated Africa was host to 30% of the planet’s currently economic mineral resources. BHP Billiton provided a list of new mining opportunities that are likely to be discovered:
• Bauxite: Guinea, Sierra Leone, Ghana
• Copper/Cobalt: DRC, Zambia, Mauritania, Botswana, Tanzania
• Zinc-Lead-Silver: South Africa, Zambia, Tunisia
• Nickel: Tanzania, Angola, Madagascar, Cote d’Ivoire
• Platinum: South Africa, Zimbabwe
• Ferrochrome: South Africa
• Manganese: South Africa, Gabon, DRC
• Gold: Ghana, Mali, Burkina Faso, DRC, Tanzania, Algeria, South Africa
• Diamonds: Angola, DRC, Botswana, Zimbabwe, Namibia, Mauritania
• Mineral Sands: Mozambique, Madagascar
• Agricultural Minerals: Kenya, Republic of Congo, DRC, Senegal,
• Uranium: Namibia, Malawi, Tanzania, Niger, CAR, RSA
• Iron Ore: Guinea, Liberia, Mauritania, CAR
Africa is a major producer of many commodities and is the world’s largest producer of vanadium, manganese, platinum, chromium and cobalt, as well as being
a significant producer of industrial and gem quality diamonds, gold, phosphate, palladium, titanium, uranium and zircon.
There are in excess of 1,000 mining and exploration projects currently in progress
in Africa. Gold is the current favourite, with exploration for the precious metal taking place in many different African countries. Other favourite commodities currently being explored in African countries are copper, uranium, diamonds, nickel, and iron ore.
South Africa and Zimbabwe dominate global PGM production, and until 2005, South Africa was the world’s largest gold producing country. This position has subsequently been eroded by declining reserves associated with increased mining depths. However, the combined gold production of South Africa, Ghana and Mali makes Africa the largest individual contributor to global gold production.
South Africa also ranks first in the world in terms of manganese production, followed by Gabon, which ranks fourth. South Africa and Mozambique together produce 22% of global titanium production, with South Africa the second largest producer after Australia. Africa currently accounts for 18.5% of global uranium output, with Niger, Namibia and RSA being the dominant producers. In 1980 the combined production from RSA, Niger and Namibia placed Africa as the largest producer in the world. Ethiopia and Rwanda/DRC are the dominant tantalum producers with a handful of other countries contributing to Africa’s overall 19% of global production. Although well off their peak production levels, Zambia and the DRC are Africa’s dominant copper producers, currently accounting for only 3.5% of global output.
Mining
The level of mining activity is high on the continent, with the gold mined in 24 different African countries. Diamonds are being mined in 13 different African countries, and phosphate in 10 different countries.
During the past 10 years, 64 new African mines have commenced production, at a cost of USD$21.5 billion. Major mining companies account for 38 of the new mines while junior and mid tier miners account for the balance.
Gold mines dominate the new openings with 27 new mines. New mines were opened in Mali and Tanzania at the start of the decade; more recently Burkina Faso and Cote d’Ivoire have been the site of new production.
Strong demand for platinum group metals (PGM’s) has also resulted in the opening of 10 new PGM mines in Africa. South Africa dominates the new production. Ten new base metal and nickel mines have been opened across the continent during the past decade. The DRC has been the major beneficiary of the new production. However, more recently new production is coming from previously ignored Eritrea and Madagascar.
The level of interest in diamonds remains high, with the opening of seven new diamond mines during the past decade, in Angola Botswana, South Africa and Zimbabwe. The opening of new uranium mines in Namibia has followed significant exploration activity there; exploration activity remains high and we anticipate further new production during the current decade.
In spite of superb market fundamentals and significant exploration effort, only one new iron ore mine has been opened in Africa during the past 10 years. The current decade should see new iron ore mines being developed in Mauritania.
Other new production during the past decade includes three new coal mines in South Africa and Mozambique, a new phosphate mine in Senegal, and two new titanium mines in Mozambique and Madagascar.
