African risks easing: PwC
“Increasing commodity prices, the levels of global investment pouring back into resources projects, and the market rebound for mining services companies, shows positivity has clearly returned to the sector.”
SOVEREIGN risks linked to mining investment in Africa are declining, according to PwC Australia-Africa practice leader Ben Gargett.
Speaking at day two of the 2017 Africa Down Under mining conference, Mr Gargett said the political environment in Africa “had stabilised”, in turn reducing the risks attached to mining investment across the continent.
“Africa is changing,” Mr Gargett said. “Despite the challenges the mining industry has faced in recent years, increasing commodity prices, the levels of global investment pouring back into resources projects, and the market rebound for mining services companies, shows positivity has clearly returned to the sector,” he said.
“Against this increasingly positive backdrop, opportunities abound for African countries to capitalise on this market environment and attract the capital to develop the resources of their continent.”
However, Mr Gargett said the industry was seeing some African governments increasingly look for larger returns from foreign mining operations through increased taxes, royalties and increased free-carry stakes in the mines.
In July, the Tanzanian Government, for example, passed new laws allowing it to tear up and renegotiate contracts with natural resources companies, which caused widespread concern for ASX-listed miners in the region.
Mr Gargett said the question remained on how African countries could capitalise on the positive market conditions, while allowing sufficient returns.
PwC’s recently released report Two steps forward, one step back – the African tax landscape undertook an economic study examining a standard gold mine operation in Tanzania, Namibia, Ghana and Egypt under the same conditions with the same assumed capital and operating costs.
Mr Gargett said Namibia took top spot out of its sampled countries for foreign mining investment, as it was the “only country which generated a sufficient Internal Rate of Return (IRR)” to allow a clear decision for the mine to go ahead.
The same analysis showed no mining project would be viable in Tanzania given its recent changes to its tax laws.
Mr Gargett said while mineral resources in the ground were not mobile, capital that funds the development of those resources were, so the race was now on between nations “to attract the investment dollar”.
Newmont’s Akyem project in Ghana.