Exploration slows

Travel restrictions, supply chain disruptions and risk aversion since the start of the Covid-19 pandemic have slammed the brakes on mining exploration in Africa, jeopardising the minerals supply pipeline.

Inward investment is the key focus at the annual Investing in African Mining virtual conference, which started yesterday and continues today, with companies looking to capitalise on higher metals prices and the transition to green energy.

Without exploration, the continent’s rich mineral resources are at risk of being unutilised as older mines become unviable.

Mining companies’ exploration budgets for Africa fell 10% to a four-year low last year, according to S&P Global Market Intelligence.

“Covid-19 has had an impact on all aspects of the mining value chain, and exploration is no exception,” said Alex Khumalo, head of social performance at the Minerals Council South Africa, an industry trade group.

While Africa did not fare as badly as Latin America, where budgets fell by 21%, the decline was in marked contrast to the 1.5% dip in the US and Canada.

In many cases companies have been turning towards their home jurisdictions and what they see as safe-haven investments, said Chris Galbraith, senior metals and mining analyst at S&P Global.

“With many of these companies based in Canada, the US and Australia, more of their exploration has been focused on domestic exploration ... and oftentimes that has come at the expense of African development,” he said.

For junior explorers and miners, raising capital on public markets has been a challenge while the pandemic has made it more difficult to access private equity capital. –