Friday, May 2, 2014

2011 Africa - Investment Destination for Miners (Part I)


2011 Africa - Investment Destination for Miners (Part I)

The end of 2010 is marked with a noticeable shift in M&A transactions into Asian and African Region. This recent Bloomberg’s report mentions: “Larger-cap miners are cash-rich and looking for new revenue pipelines,” said James Holt, who helps manage about A$40 billion ($40 billion) at BlackRock Investment Management (Australia) Ltd., including BHP and Rio shares. Africa could be a focus, he said.” It further analyses current announcements about Russia’s Rosatom Corp. buyout of Mantra Resources Ltd. for A$1.6 billion to gain access to the Mkuju River uranium project in Tanzania; transactions of Freeport-McMoRan Copper & Gold Inc. in the Democratic Republic of Congo; of Rio Tinto in Mozambique; Xstrata’s in West Africa.

In our previous posts we tried to look into some specific countries in regards to mining investments:  Investments in Mining: South Africa, Investments in Mining and Energy: Zambia , Zambia: Another Look on Mining Investments . Here let us have a closer look at Africa in general.
A while ago, the United States  produced this scheme that denotes Africa and its challenges:

 Source: U.S. Africa Command Mission Statement UNCLASSIFIED
However, the times, they are-a-changing and now The Standard Bank provides this slide:

And resources-oriented opportunities:
Generally speaking, investments in mining companies are subject to the following risks factors:

Source: The Equator Principles - David Glenister, International Sales Manager, Systems & Services Certification, SGS
Standard Bank  analytics summarize the following financing availabilities for different types of commodities at this time:

Source: Funding for the African Miner Today - Vaughan Wickins, Mining and Metals, Standard Bank
If you are interested in the subject, the same Standard Bank’s presentation concludes that currently the debt financing is prevailing in financing of mining companies. However, when we talk about equity financing there is an interesting table that shows African mining companies in the Toronto Stock Exchange Presentation:
These results are summarized in the Toronto Stock Exchange Presentation:
New Financings for African Projects First Nine Months 2010:

  • Red Back Mining: $600 million for gold in Ghana, Mauritania
  • Semafo: $120 million for gold in Guinea, Niger, Burkina Faso
  • Nevsun Resources:  $117 million for gold/silver/copper/zinc in Eritrea and Mali
  • Perseus Mining:  $91 million for gold in Ghana, Côte d'Ivoire
  • CGA Mining:  $86 million for gold/copper in Nigeria and Zambia
  • Volta Resources:  $34 million for gold in Burkina Faso
  • Avion Gold:  $28 million for gold in Mali
  • Canaco Resources:  $25 million for gold/silver in Tanzania
  • Hana Mining:  $24 million for copper/gold/silver in Botswana
  • MagIndustries:  $23 million for potash in DRC
From investor’s point of view African Mining companies perform pretty good:
Source: Funding for the African Miner Today - Vaughan Wickins, Mining and Metals, Standard Bank

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