The state of mining: Africa and Latin America
The current state of the mining markets in Africa and Latin America was discussed at a recent Association of Mining Analysts event in London, UK.
Chris Hinde, Editorial Director at IntierraRMG, opened his presentation with the warning ‘have your hankies ready’, and it soon became clear why. A general downward trend in global drilling activity, the unpredictability of commodity prices, an increase in resource nationalism, and a drop in forecasted capital expenditure in 2014 so severe that even predicted rises in 2015 and 2016 won’t reach the level of 2013, all contributed to a gloomy picture.
Hinde concluded that the situation had to improve, with ‘long-term demand certain’, but reminded delegates that global use of bauxite, copper and energy fuels are unsustainable at current levels, a concern that ought to be factored into future planning. Finally, he warned that waste in the industry was a real issue, with 13,000Mt of waste produced for every 7,000Mt produced from metals mines, and 7,000Mt waste for every 8,000Mt from coal mines.
40% of Africa’s mining revenue comes from gold and coal. Gold drilling has dropped significantly since 2012 but is still ‘the only real show in town’, according to Hinde, with 56.4% of capital raised for exploration in 2012 going towards gold.
3/10 Africa’s largest gold mines in South Africa
10/10 Africa’s largest coal mines in South Africa
South Africa is no longer the force in gold that it once was. Despite being the leading gold producer in Africa, its industry has collapsed in recent years and it has dropped from the world’s largest producer to the fifth largest. However, it remains the biggest global mining player on the continent.
25% Guinean Government total income from mining
35% Government share of capital of mining companies in Guinea
West Africa saw a relative boom of interest in 2012, with Burkina Faso, Ghana and Guinea leading the way. It is estimated that Guinea possesses almost half the world’s bauxite reserves, as well as four billion tonnes of iron ore and nearly 400 tonnes of additional gold resources. However, the country saw a full suspension of gold drilling activity in 2013, as well as complications in the largest integrated iron-ore mine and infrastructure project ever developed in Africa, at Simandou in south east Guinea – both largely due to concerns about resource nationalism and infrastructure issues.
The picture here is more promising than in Africa, although the continent has also been severely affected by the downward trend in mining. Drilling activity peaked at nearly 250 distinct prospects in January 2012, but had dropped to just over 50 by June 2013. Copper, gold and iron ore are the predominant forces in Latin American mining.
Chile leads the continent in copper and gold production, with estimated additional resources of 992t and 1,545t, respectively. Investorfriendly mining laws mean the country is well positioned to benefit from an improvement in the market.
14/20 Latin America’s largest copper mines in Chile
33% Chilean Government income from copper exports
Although Brazil’s reserves of gold and copper are significantly smaller than some of its neighbouring countries, it makes up for this with its production of iron ore – the country has eight of the continent’s 10 biggest producing mines. The recent discovery of huge offshore oil and natural gas reserves should put it in a comfortable position despite the current market, but fears of resource nationalism might prevent investment on the scale required to fully exploit its potential.
2 Brazil’s ranking worldwide in iron ore production
20/20 Latin America’s largest iron ore mines in Brazil