African risks eas­ing: PwC

The Australian Mining Review - - NEWS: INTERNATIONAL - El­iz­a­beth Fabri

“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”.

Im­age: New­mont Min­ing.

New­mont’s Akyem project in Ghana.

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