“All eyes are on Zambia,” says Peter Major, mining director at Mergence Corporate Solutions in South Africa. Major spoke in Cape Town in October as he prepared for a mining investment trip to Zambia. With the new president, Hakainde Hichilema, he said, the country has “a real businessman” in charge.
Besides copper, whose industrial mining in Zambia dates back to the 1930s, the country has significant potential in gold, manganese, emeralds and coal, says Major. There has been a historical lack of exploration since the nationalization of the mines after independence, he says. In the past five years, in particular, there has been “no motivation to prospect”.
A functioning cadastral system gives Zambia a crucial advantage over Ghana and the Democratic Republic of Congo, Major points out. But the question mark over the Hichilema administration is how it will handle its review of existing mining licenses. “We need to see people come out on the other side of the pipeline,” Major says. Once that starts, he predicts, there will be a “rush” to explore and mine in Zambia.
According to Irmgard Erasmus, senior financial economist at Oxford Economics in Cape Town, Hichilema and his mines minister, Paul Kabuswe, are likely to adopt a “more pragmatic and market-oriented approach” in their dealings with mining companies, as opposed to “tough and tough posturing”. interventionist” under former President Edgar Lungu. Zambia’s Chamber of Mines has welcomed plans to reform the tax code, saying it will mark a break with the old “money grab mentality”.
Strike while the copper is hot
Mining was the only sector of the Zambian economy to decline in the second quarter of 2021, when copper production fell by 9%, affected by the impact of Covid-19 and the rainy season in the first quarter. That meant the country was unable to take full advantage of high copper prices, which peaked in May, according to economist Yvonne Mhango of Renaissance Capital.
Erasmus predicts that copper prices going forward will experience a moderate but sustained decline, amplified by the normalization of monetary policy in the United States and the risk of a Chinese slowdown due to tensions in the country’s real estate sector. These headwinds, according to Erasmus, will ensure that Hichilema will remain “aware of the urgency of bolstering copper production”.
Major contrasts the Zambian outlook with that of South Africa. He criticizes President Cyril Ramaphosa’s cautious approach. Hichilema has shown a willingness to purge figures associated with the old regime, Major says: “The purge is necessary. But Ramaphosa is not purging. He promotes. South Africa needs a radical change in governance. Zambia is showing South Africa the way.
Ghana overtook South Africa as the continent’s biggest gold producer in 2019. Major sees little chance of that reversing. The Ghanaian government “recognizes the problems and is taking steps to help the industry,” Major says, citing its efforts to keep AngloGold Ashanti in the country.
In 2016 AngloGold’s general affairs director John Owusu was killed in a riot by artisanal miners at the company’s Obuasi mine, but AngloGold stuck with the project. “There is no more gold in Ghana than in South Africa, but there is a better legal framework,” Major says.
Ghana is rated 69 out of 100 in a 2021 ranking by the Natural Resource Governance Institute (NGRI) – an improvement of 13 points since 2017. Tax governance has improved, mainly due to the power of the Ghana Revenue Authority to audit all companies, including mining companies. Regarding compliance with environmental and social impacts, Ghana scored a maximum of 100 on the NGRI index, with all gold mining companies now disclosing environmental and social impact assessments and management plans. environmental mitigation for new projects.
Refining for mining
National fiscal governance has improved through the adoption and adherence to fiscal rules, according to the NGRI. Yet the report says the extractives sector is being held back by a lack of online data portals and weak adherence to open data standards. The government currently has no policy in place to publicly disclose contracts in the mining sector, although there are mandatory contract disclosures in the oil and gas sector.
Sulemanu Koney, CEO of the Ghana Chamber of Mines, is convinced that Ghana’s mining sector can boost the country’s industrial development. For this, he argues, Ghana needs to move up the value chain and start refining its raw materials. He wants to end the use of imported rubber for mining components and is in talks with a multinational to refine Ghanaian rubber.
“Extractive industries cannot be a silo or an enclave,” says Koney, a chemical engineer by training. “Deliberate thought is needed to connect the themes.” One example, says Koney, is the extraction of caustic soda from brine, which is used by the mining industry as well as in aluminum production and in detergents.
Ghana, argues Koney, needs a “mineral-based industrialization strategy”. The challenge, he says, is to “leverage the presence of the mining industry for the good of the country” by promoting training and investment in technology. “It’s my raison d’etre. Otherwise, I would have given up a long time ago.
The United States is desperately trying not to buy rare earths from China.
In Mozambique, the coming year will be crucial for consolidating progress against the radical Islamic insurgency in the north of the country, which has delayed plans to develop the region’s natural gas resources. Progress in countering the insurgency means “sentiment has changed dramatically” for the better in recent months, says Hermano Juvane, head of oil, gas and value chain banking at Absa Bank in Mozambique.
Support for the Mozambican military, particularly from Rwanda and the Southern African Development Community, has helped the improvement, Juvane says. People were able to return to their homes in Palma, in the northern province of Cabo Delgado.
TotalEnergies announced in September a two-year postponement first onshore production of liquefied natural gas in Mozambique, with first production now scheduled for 2026. TotalEnergies declared force majeure for its $15 billion project in April, but project activity is now expected to restart in 2022. Juvane considers the new calendar to be realistic. “There are about four years of work left,” he says.
Absa in Mozambique focuses on financing extractive industry contractors, says Juvane. He sees opportunities for Mozambique in heavy sands, titanium, coal, lithium, graphite, aluminum and rubies.
Mining rare earth minerals, a set of 17 metallic elements used for high-tech applications such as cell phones, computer hard drives and electric vehicles, may be an African industry of the future. China dominates the global supply of rare earths with an estimated 85% to 90% share, but tensions related to Covid-19 and the United States and China have reinforced the need for the world to find sources not Chinese.
A rare earth opportunity
“The United States is desperately trying not to buy rare earths from China,” Dublin-based TechMet technical director Simon Gardner-Bond said in an October briefing. “The whole world is getting more and more nervous about China controlling the supply chain.”
TechMet invests in critical metal development projects for the transition to renewable energy and counts Rainbow Rare Earths among its investments. Rainbow, which is listed on London’s alternative investment market AIM, owns Africa’s only operating rare earth mine at Gakara in Burundi.
But the Burundian government stopped production in April because he wants to renegotiate the mining convention, and meetings between Rainbow CEO George Bennett and President Évariste Ndayishimiye have so far not solved the problem.
Rainbow also plans to produce rare earths from gypsum stockpiles generated by hard rock phosphate mining near Phalaborwa in South Africa’s Limpopo province and is exploring the economic viability of potential rare earth deposits in the northern Zimbabwe. Bennett is still confident that a deal with Burundi can be reached. “There will be give and take,” he says. “We will find a win-win solution.”