Mixed outlook for African mining

South Africa’s mining sector also looks set to benefit from robust platinum prices. Sibanye- Stillwater, the world’s biggest platinum miner, said the price of the metal could climb more than 80 percent over the next four to five years as the global economy recovers and supply dwindles. According to CEO Neal Froneman, demand for platinum- group metals has already rebounded to prepandemic levels as the Chinese car industry recovers and global supplies suffer disruption.

After almost doubling from an 18- year low in March, “there is no reason why platinum will not eventually trade at $ 2,000 an ounce and probably even higher,” Froneman told Bloomberg in mid- January.

Meanwhile, international iron ore prices started 2021 at their highest point for almost a decade, rising 80 percent last year as China imported a record 1.2bn tonnes, up 9.5 percent on 2019, as a result of government stimulus measures. This benefited producers in South Africa and Mauritania in particular, while encouraging the development of still untapped reserves in Central Africa. Chinese demand is crucial for mining commodities in general but even more so for iron ore, which it imports in greater quantities than the rest of the world combined.

One half of the giant Simandou iron ore project in Guinea is moving forward, although more slowly than both the government and the developers would like. The deposit is believed to contain the biggest untapped iron ore reserves in the world, at 2bn tonnes, but has been dogged by years of delays and legal cases over ownership.

One of the main stumbling blocks has been transport, given the difficult terrain that separates Simandou from the coast. However, in November the government of Guinea approved the development consortium’s rail and port plans. The pace of development is likely to depend on the strength of iron ore prices over the next two years.

The project to develop Simandou blocks 1 and 2 is being developed by the Société Minière de Boké- Winning ( SMBWinning) consortium, which comprises two Chinese companies – Yantai Port Group and aluminum producer Shandong Weiqiao – Franco- Guinean firm United Mining Supply and Singaporean shipping line Winning, with the Guinean government’s stake held by state- owned Société Guinéenne du Patrimoine ( Soguipami).

SMB- Winning plans to invest $ 1.5bn in mine development in the first instance and $ 2bn in Phase 2 but the financial demands of the required transport infrastructure are even greater. A new deepwater export port will be built at Matakong at a cost of $ 1.5bn, while $ 5bn will be invested in the railway to connect the mine and port.

At 200m tonnes/ year, the line will have the capacity to match the most important heavy haul railways in the world, although a more modest 60m tonnes/ year will be needed in the first phase mine development, rising to 110m tonnes/ year in Phase 2. This leaves enough spare capacity to serve Simandou blocks 3 and 4, if and when they are developed, or possibly other mining projects.

Elsewhere, the pandemic and its associated impact on demand for mining commodities has exacerbated delays to projects to develop bauxite and iron ore projects in Central Africa. In December, the government of the Republic of Congo withdrew Sundance Resources’ permit to develop the Mbalam- Nabeda iron ore project because of a lack of progress in developing the deposit, which extends across the border into Cameroon. The Australian company is pursuing legal action against Brazzaville in an attempt to secure compensation, while the government is reported to be planning to award the permit to Chinese investors. However, progress is being made on the Minim Martap scheme across the border in Cameroon, which is being developed by another Australian firm, Canyon Resources. Unlike some other prospective deposits in Central Africa, Minim Martap is located close to an existing railway, just 50km from the Camrail line that runs to the port of Douala. Canyon has now decided to export ore via Douala in the first instance but will switch to the deepwater port of Kribi when a new railway is built to connect it to the Camrail line. Work on upgrading the existing line to allow it to handle mining commodities began last year. Kribi’s far deeper harbour will allow it to handle much bigger ore carriers, while the use of Douala in the mine’s Phase 1 development will allow the export of 5m tonnes/ year to help finance the rest of the project.

According to S& P Global Ratings’ Industry Top Trends 2021: Mining and Metals, there are reasons for both optimism and caution for mining prices in 2021.

The report, published in December, notes that “prices are bouncing back” due to supply cutbacks and improving demand and predicts that a “weaker US dollar should support higher base metal prices, but could also point to lower precious metal prices”. However, it warns that the pace of recovery will vary across commodity markets and regions and that it could take until 2022 for demand to return to pre- pandemic levels. Much will depend on sustained demand from China.“We see a vastly improving outlook for most metals going into 2021,” write the authors. “However, the road to the recovery and the potential for prolonged economic weakness remain a key source of uncertainty. This could undermine growth, weaken market sentiment, and increase volatility in commodity prices.”