Archive for the 'Mining' Category

BRVM bourse aims for specialist mining shares platform

The integrated regional stock exchange for West Africa is working with the miners’ favourite global exchange for raising capital in order to build a platform for listing mining shares. Bourse Regionale des Valeurs Mobilieres (BRVM), based in Abidjan, Côte d’Ivoire, aims to have a dedicated section for mining ready for business by 2018.

BRVM General Manager Edoh Kossi Amenounve told Bloomberg in an interview that the new mining exchange will be open for companies exploring or operating mines in the region. He explained that the BRVM is talking with Canada’s Toronto Stock Exchange (TMX Group) to set up a “technical partnership” between the two bourses and will “take inspiration” from the Canadian mining-exchange model. Discussions may be completed by the end of 2016.

He told Bloomberg: “Mining companies operating in the region only raise funds in foreign currencies.. Some of them have approached us to see how they could raise the resources they need in local currency. Some have even asked us for a dual listing with the Toronto stock exchange, but the regulating framework isn’t compatible at the moment.”

The BRVM links eight West African countries in an innovative exchange, including gold exporters Mali, Burkina Faso and Côte d’Ivoire (Ivory Coast), and the world’s fourth-largest uranium producer, Niger. Many want to boost their mining industries: Burkina Faso is developing new gold and manganese mines, while Côte d’Ivoire is diversifying from agriculture, including cocoa, and aims to develop its untapped mining deposits, including gold and iron ore, according to Bloomberg. The BRVM attracts investors partly because the countries are part of the West African Economic and Monetary Union (WAEMU) and so use the CFA Franc, which is pegged to the euro.

Amenounve said: “Most of the countries of the region have significant mining deposits… The development of the mining sector has been extremely important in the last few years. We want to support this development..  We need local, African shareholders to invest in the mining sector.”

The bourse currently dominated by banks and telecommunications shares. It is amending its listing regulations to accommodated the new mining platform. Currently listing regulations require two years of certified accounts. The BRVM exchange aims to list mining issuers, including new companies who are raising money for exploration.

Karma heap-leach project in Burkina Faso (photo:True Gold Mining)

Karma heap-leach project in Burkina Faso (photo:True Gold Mining)

Africa should be in your 2015 portfolio, including gold

[Contributed article] Africa is currently the second most-attractive investment behind the U.S. for a number of reasons. Seven countries – Ethiopia, Tanzania, Rwanda, Chad, Mozambique, South Sudan and Sierra Leone – have forecast growth rates over 7% a year for 2014-2016, according to the World Bank.

These are the 3 major drivers of Africa’s economic growth.

Rich in natural resources

Africa is very rich in natural gas, minerals, food and oil, and has some giant water resources. Its land mass is bigger than the U.S., India, China, and Europe combined. While oil is the major driver of Africa’s economy, other industries such as mining and technology are thriving and renewable sources of energy are being built throughout the region.

Expanding economy

Many of the economies are among the fastest growing in the world. In addition, many countries have lower debt to GDP levels than most developed countries. Yahoo! Finance reports that UK has a debt level of 77% of GDP compared to 16% in Nigeria.

Thanks to Africa’s young demographic, a lot of international companies are currently investing in the region. Because of its thriving economy, the middle class are growing, giving people more purchasing powers to keep Africa’s economy running.

Africa’s gold-mining industry

The gold-mining industry is huge in Africa. One country, South Africa, is the world’s 6th gold producer as of 2014, according to Investment site BullionVault.

Gold-mining output is declining all over the world. However, precious metal experts are confident that there are still many unmined gold resources in Africa. To take only one country from the aforementioned huge land mass, Nigeria still has a lot of underdeveloped land. With promising technology that makes it easier for miners to extract more gold from Earth, Africa can become the world’s number-one producer again in the future. Two of the deepest gold mines can be found in South Africa, including the TauTona mine in Carletonville and East Rand Mine in Boksburg. Gold demand is huge in China, which bodes well for Africa’s mining industry

Africa’s soaring growth seems set to continue for many years to come, and there are many good reasons why investors should add the region to their portfolio.

$183bn of M&A in Africa in last 10 years, Britain leads

The total value of mergers and acquisitions deals in Africa by foreign investors was $183 billion over the ten years 2003-2012, up threefold on the previous decade, according to a story this week on Reuters. There were a total of 2,417 transactions, double the previous decade (up 109%). Britain was the largest investor with 437 deals worth $30.5bn.
The information is available in figures compiled by Freshfields Bruckhaus Deringer, an international law firm. Other major investors were France (141 deals worth $30.47bn) and China (49 deals worth $20.8bn). South Africa is the most active African investor in the continent outside of its domestic market and invested $6.2bn across 153 deals.
According to the Freshfields Bruckhaus Deringer press release: “International investors now account for half of the total value of African M&A, completing 255 deals worth $20.0bn out of a total of $39.5bn and 758 deals in 2012. This is up from $6.4bn and 122 deals in 2003.”
Most of the M&A action was in metals and mining, with 752 deals worth $33.9bn, followed by oil and gas (299 deals worth $29.6bn) and wireless telecoms (33 deals worth $25.4bn). Reuters quotes Bruce Embley, corporate partner at the law firm, who says the emphasis could be changing: “Extractives and mining opportunities have been big drivers of growth. However, consumer-related M&A could take the limelight as GDP per household continues to grow, the middle class in Africa expands and consumer demand rises.”
According to the press release: “Consumer-facing industries such as telecoms, retail and food and drink are beginning to rival natural resources with $58.0bn invested across 569 deals. The value of investment targeting consumer industries has doubled in the last ten years with $3.8bn across 71 deals invested in 2012 (up from $1.9bn and 33 deals in 2003).”
Top deal destinations over 2003-2012 were South Africa ($59.1bn of investment over 836 deals), Egypt ($46.5bn for 266 deals) and Nigeria ($22.1bn across 90 deals).
China overtook the USA as Africa’s largest trading partner in 2009, according to a U.S. Government Accountability Office report released in February. African economic growth is forecast at 4.8% in 2013 and 5.3% in 2014, according to the African Economic Outlook 2013 report released on 27 May. The growth will be fuelled by commodity exporters such as Nigeria, Ghana and Cote d’Ivoire, all in West Africa. The annual AEO report is produced the African Development Bank (AfDB), the OECD Development Centre, the Economic Commission for Africa (ECA) and the UN Development Programme (UNDP).

World Bank says 4.8% growth for sub-Saharan Africa in 2012, cuts earlier forecast

The World Bank has cut its growth forecast for sub-Saharan Africa. Earlier in the year it forecast 5.2% growth overall for SSA economies in 2012, but yesterday (4 Oct) it cut this to 4.8%. World Bank said in its bi-annual Africa’s Pulse report that Africa is still vulnerable to a fragile global economy and a slowdown in China, although high commodity prices and an increase in exports from countries that have made mineral discoveries are likely to underpin growth for the rest of 2012.

Africa achieved 4.9% growth in 2011. According to the study, excluding South Africa, the continent’s biggest economy, growth is likely to hit 6% in 2012. Strong performers are expected to include countries such as Mozambique, home to some of the world’s biggest untapped natural gas reserves, and Sierra Leone which has started exporting iron ore, according to a story on Reuters. Foreign direct investment (FDI) is projected to rise to $48.7 billion by 2014 from $31bn in 2012, as investor interest in Africa soars. African exports rebounded in the first quarter of 2012, growing at an annual pace of 32%, up from the -11% pace recorded in the last quarter of 2011.

World Bank Vice-President for Africa, Makhtar Diop, said in a press release: “A third of African countries will grow at or above 6%, with some of the fastest growing ones buoyed by new mineral exports and by factors such as the return to peace in Côte d’Ivoire, as well as strong growth in countries such as Ethiopia. An important indicator of how Africa is on the move is that investor interest in the region remains strong.. despite difficult global conditions.”

Most of SSA “middle income” by 2025
The majority of sub-Saharan Africa’s 48 countries could also achieve middle-income status by 2025 though their dependency on natural resources is likely to continue in the medium term, it added. Shantayanan Devarajan, the World Bank’s chief Africa economist, said that this highlights the need for governments to spend their resource wealth wisely and focus on public investment: “Resource-rich African countries have to make the conscious choice to invest in better health, education and jobs, and less poverty for their people because it will not happen automatically when countries strike it rich,” he said.

Diop said there was an opportunity for “strengthening economic transparency and financial controls around the new discoveries, to leverage their full potential through development policies that increase economic growth, create jobs, reduce poverty, and improve health and education especially for young people and future generations, while balancing the immediate needs.”

The World Bank said that after 10 years of economic advancement, 22 of Africa’s 48 countries have officially achieved middle-income status and another 10 could reach middle-income status by 2025 if current growth trends continue. It warned that recent soaring prices for wheat and corn were a concern, after the worst U.S. drought in 50 years. Africa’s Sahel region is already suffering from higher food prices, high rates of malnutrition and recurring crisis and insecurity. Furthermore, swarms of desert locusts and the ongoing conflict in The Sahel also undermine the region’s food security, including Mali and Niger.

Development gains – poverty and child mortality down
Child mortality has also been declining. Between 2005 and 2008, for the first time the absolute number of people living on $1.25 a day fell, as poverty rates on the continent have been falling faster than one percentage point a year. With fast population growth Africa is urbanizing rapidly and 41% of Africans live in cities, with an additional 1% every 2 years. By 2033, Africa – like the rest of the world – will be a majority urban continent. The bank says this has deep implications for social and economic opportunities as urbanization and development go together and it claims that no country has ever reached high income with low urbanization.

Botswana’s rise as world diamond centre – Stanchart “money laundering” woes slow P1.8bn OPIC financing

A large centre of the world’s diamond trade is moving to Botswana, the world’s top diamond producer. De Beers’ Diamond Trading Corporation (DTC) has successfully moved from London to Gaborone in August and De Beers estimates that some 32 million carats of diamonds worth US$6 billion – about 40% of world diamond sales – will be aggregated in Botswana each year. The “sights” by which De Beers sells packets of diamonds to selected buyers ten times a year, will also move to Gaborone from London.
The US Overseas Private Investment Corporation (www.opic.gov) has been trying to join the action, with a BWP1.8bn ($234m) deal to finance the 21 diamond manufacturing companies operating in Botswana, according to this report on Mmegi Online. OPIC is aiming to work with US diamond and jewellery company Lazare Kaplan Botswana. Finalization has slowed since relations between Standard Chartered bank and the US after allegations of money-laundering schemes worth $250m of Iranian funds. The deal was initially set up with ABN Amro bank, which established a Gaborone office as part of the first deal, but the stakeholders reportedly fell out.
The diamond trade switch will have a huge effect on the fast-growing Botswana economy and comes after tough negotiations between De Beers and the Botswana Government. Production from all of De Beers mines across Namibia, Botswana, Canada ‎and South Africa will be sent to Gaborone and mixed and sorted into various ‎categories before the “sightboxes” are sent to London for distribution to 66 London and two Canadian sightholders. Boxes will go to Johannesburg for 10 South African sightholders and to Windhoek for 13 DTC Namibia sightholders.
The first of 85 diamond sorters, who mix the sightboxes, have already gone to Gaborone. De Beers said the move of the aggregation operation, after nearly 80 years in London, was two months ahead of schedule, although three years since the initial deadline passed after tough and prolonged negotiations with ‎the Government of Botswana before a 10-year supply agreement was agreed in 2011.
By the ‎end of 2013, the 10 “London sights” a year will move to Gaborone and sightholders will travel. De Beers says US$22m will be invested to get DTCB Building ready for the first sight. Banks which lend to sightholders, such as ABN Amro, Bank of India and another Indian bank, are setting up and Stanchart is expanding its diamond financing division. A division of jeweller Tiffany & Co. already has cutting and polishing operations in Gaborone.

Diamond trading shift to make Botswana economy sparkle
© Sergydv | Stock Free Images & Dreamstime Stock Photos

The Botswana Government has set up Okavango Diamond Company (ODC) and this will also start selling diamonds in 2013, with the right to buy 12% allocated supply from Debswana in 2013, rising to 15% by 2016. Debswana produced 22.9m carats in 2011, so ODC would get 2.7m – 3.4m carats (US$300m – US$583m a year) to sell, rising as Debswana production climbs. It is be first time full revenue on some Debswana production will be channelled entirely to the Botswana Government and not shared with De Beers. Industry expert Martin Rapaport says ODC will be among the world’s top 6 or 7 diamond suppliers and will be able to brand “Botswana diamonds”, attracting a stream of tourists and buyers. It recently appointed diamond veteran Tony Frears as Managing Director. The sales will also provide the Government with market intelligence. ODC may eventually start trading polished diamonds. Firestone Diamonds and Lucara Diamonds have also sold rough diamonds.
OPIC’s financing is to help diamond-manufacturing companies in Botswana to finance purchase of rough for processing and help a financial sector support development of the cutting and polishing sector. According to Mmegi, there are 21 Botswana sightholders and the amount allocated will rise from the current $550m to $800m.
Philippe Mellier, De Beers chief executive, said: ‎‎“As De Beers shifts more and more of its sales operations to Botswana over the next ‎year, we will solidify the long-term future of the partnership and work to transform ‎Botswana into one of the world’s leading diamond trading and manufacturing hubs.” He added that it should not affect South Africa and Namibia’s activities “There is no risk. In fact, we believe there will be an overflow effect on South Africa’s industry and in Namibia as well.”

Hana Mining could speed trans-Kalahari railway

The dual-listing of Hana Mining Ltd last week on the Foreign Venture Capital Board of the Botswana Stock Exchange (www.bse.co.bw) could bring a giant new cross-Africa railway closer. Hana is also listed on the Toronto Stock Exchange venture board and the Frankfurt exchange. It plans a copper-silver mine near Ghanzi.

The company’s shares started trading on the BSE on 23 May, according to an announcement. On 14 May the company released its most recent (NI 43-101 compliant) preliminary economic assessment which calls for US$285.5 million initial capital expenditure to create a 10,000 tonne per day open-pit mining and milling operation. This is expected to produce approximately 66.4m pounds of copper and 878,000 ounces of silver annually over a minimum 13-year mine life. It says the Ghanzi property is one of Africa’s premier future copper-silver resources.

Hana Mining’s CEO and Chairman, Marek Kreczmer, was quoted as saying: “The listing of the company’s shares on the BSE is an important step in enhancing the relationship of the Company with the government of Botswana in that it allows the people of Botswana to invest directly in the company and gives the company access to some of the largest investment funds in Africa. Also, by establishing a listing in Botswana, we are aligning the goals of the Company with the people of Botswana.”

The Ghanzi Project covers 2,149 square kilometres in the centre of the Kalahari Copper Belt in northwestern Botswana. Favourable geology extends over an estimated strike length of 600 kilometres. The closest existing railhead to port is at Gobabis, in Namibia, approximately 550 km away. A feasibility study has been carried out with funding from the World Bank and the governments of Botswana and Namibia on completion of a rail link to connect Botswana with the Namibian port of Walvis Bay, on the Atlantic coast. More mining projects will make the railway more likely.

Construction is well advanced on a 600MW expansion of the government-owned Moropule Power Plant, which secured US$825m project funding in May 2009. The Trans-Kalahari highway passes within 15 km of the Ghanzi property, which is also near local population centres and workforce.

Tanzanite miner Richland heads for Dar-es-Salaam bourse listing

Tanzanians are set to share the gains of the exciting blue-violet gems that bear their country’s name, tanzanite. Richland Resources Ltd (richlandresourcesltd.com), listed on the London Stock Exchanges’s AIM market (ticker: RLD) says that it plans listing at the Dar es Salaam Stock Exchange (www.dse.co.tz) by April, according to local press reports reprinted on the company’s website today (8 Feb).
According to one report in East African Business Week, Dotto Medard, the firm’s corporate and PR manager, said: “We are in the final stages of listing on the Dar bourse, largely to avail opportunity to as many Tanzanians to be part of the tanzanite industry.” Apparently all Richland’s issued capital will be freely traded on the DSE and will be available to Tanzanians to buy and sell on the market without any restrictions on the number or shareholding available for Tanzanians. Another report in Tanzania Daily News says the listing will be completed by April and there may be a float of 20% of the share capital.
On 6 Feb the coloured gem stone miner announced that new tests have indicated the life of its Mereleni mine in Tanzania could be extended by 30 years. The total indicated resource of the mine is now estimated at 105 million carats, up from 72m carats. Between 2004 and 2011 the mine produced over 11.5 million carats from around 266,000 tonnes of material. The new tests have made the asset “JORC compliant”, conforming to internationally recognised measurement standards.
The company is involved in tanzanite mining, processing, cutting and distribution. The local subsidiaries are Tanzanite One Mining will continue to operate with its name along with Tsavorite One Mining Limited, Tanzanite One Trading Limited, Tanzanite Laboratory Limited and Urafiki Gemstone EPZ Limited. It has recently moved into other coloured gemstones, including tsavorite and sapphire. It says TanzaniteOne Mining has been one of the largest mining contributors to tax in Tanzania. It has invested over US$100m through mine acquisition, development and ongoing mining activities and directly employs 650. Mr. Medard pledged: “the Company will continue to support significant growth in the Tanzanian economy, through export earnings, tax and royalty payments.”
It is the largest miner and supplier of rough tanzanite and uses its position to influence the entire channel, from mine to market (it markets tanzanite globally), ensuring maximum stakeholder value at each stage. It requires large capital investment as tanzanite mining is currently operating at down dip depths of over 900 metres and needs sophisticated equipment and experience. Other expansion plans include a modern plant for cutting and polishing the tanzanite stones under the supervision of Urafiki Gemstone Ltd.
Richland backs successful community projects including support to primary and secondary schools, medical dispensary, community centre and water for people and livestock. It also provides assistance to small-scale miners including geological, mining, surveying, safety and logistical. tanzanite gem is its unique beauty, plus the finite nature of a single known resource at the foothills of Mount Kilimanjaro in northern Tanzania.

JSE seeks more African equity listings in 2012, targets telecoms, mining and financials

The JSE Ltd (www.jse.co.za), South Africa’s securities exchange, is hoping to attract more listings from the rest of Africa in 2012 and to expand its range of products and services. This year should also see the JSE installing its equity trading system in Johannesburg, to avoid dependence on a transatlantic cable connecting it to the London Stock Exchange.
Nicky Newton-King, who took up her post as CEO last week after succeeding Russell Loubser and the first woman to hold the post, told Business Day newspaper the plan was to offer more access to African companies and products such as exchange-traded funds products that enable people to access new investments: “With the rules of inward listing being relaxed, we would also like to attract more inward listings.” Besides IPOs, Newton-King said she expected to see more types of products, such as depository receipts and derivatives linked to companies being offered.
The JSE is in “good conversation” with several companies elsewhere in Africa over more potential listings. Last November she told Reuters: “We’ve got good conversations going … particularly on the continent.” She said the bourse is targeting mining, telecommunications and financial services: “Our approach is to look at issuers that need capital — need investors where their home markets might be too small. So we’ve got a lot of different segments we are looking at, but we are looking at particular issuers rather than trying to speak to everyone.”
The JSE already has 14 African companies listed, with 4 different debt instruments and 1 African ETF. Last year Reuters highlighted that some growing African firms preferred other international exchanges, particularly the London Stock Exchange and its AIM market, over the JSE for raising capital and listings, as highlighted in stories on this website. The JSE seeks closer cooperation with other African exchanges as it competes with other world bourses: “Clearly we need to be trying to find a way to cooperate with African exchanges, with African issuers to bring more African product to the table here in SA, where we have a lot of international investors everyday.”
The JSE attracted a total of 16 listings last year, with a combined market capitalisation of more than R35 billion (US$4.3bn), according to data from the JSE’s director of issuer services, John Burke. There were also a number of initial public offerings from the property sector. About 15 companies de-listed last year and 21 were on the suspended list. The number of new IPOs worldwide is lower since the start of the global financial crisis. Newton-King said there is a pipeline for potential listings in 2012: “Definitely there’s a pipeline, there’s always a pipeline. We never talk about the number since how many companies actually list and when they list is very much dependent on the economic circumstances of the country and whether the companies themselves are ready to list.
“We are looking forward to being able to attract a wider range of companies and investment opportunities on the JSE.”
The plan is still to use the same computer provider, Sri Lanka’s Millennium IT which is a subsidiary of the LSE. In terms of a February 2011 press release, the JSE is to migrate to a new system Millennium Exchange™, which the LSE has also adopted, in the first half of 2012. Millennium IT systems are used on many African stock exchanges.
Newton-King told Business Day she hoped this will minimise the outages experienced last year, which were linked to technical issues on the transatlantic cable. The JSE halted trading on its equity markets at least twice last year, which led to the exchange attracting criticism from trading houses, which often spoke anonymously to the media.
She said: “We are critically dependent on information technology (IT) and invest heavily in IT to ensure it is robust and able to handle increased volumes as the JSE grows. Our equity systems are run in London and there’s been some trading outages in the lines between us and London…. We are bringing the systems back to avoid that. We will continue to look at whether our technology is robust enough to withstand volumes.”
She did not give much information on rumours that the JSE is talking with SA Treasury on starting a trading market for carbon credits but said the JSE was looking at the possibility and how it would work with others.
Of the type of environment that she envisions at the JSE, Ms Newton-King says: “In 2012 I would like the JSE to be recognised as a place of excellence, a place where SA’s top talent would come and work, where our clients recognise that we provide products and services that are valuable to them.”
Her former post as deputy CEO no longer exists and duties that fell to her are being given to other people so that they can also grow.

IFC invests in Côte d’Ivoire’s mining through Sama Resources

The International Finance Corporation (www.ifc.org), a member of the World Bank Group, on 20 Dec agreed to invest some CAD1,250,000 (Canadian dollars, equivalent to US$1.2million) in nickel and copper exploration. Sama Resources Inc (www.samaresources.com) will use the funds raised to advance the Samapleu project in eastern Côte d’Ivoire, near the border with Guinea, which it hopes will provide future jobs and government revenues to Côte d’Ivoire. The transaction is set to close in December.
The country has significant mineral resources but development of the mining sector has been hampered by political and military crisis during the past decade. IFC’s support to the Samapleu project will help promote good environmental and social standards in the country’s mining sector and send a positive signal for future foreign direct investment in the country.
IFC will work with Sama to ensure that exploration and any subsequent mine development is carried out in an environmentally and socially sustainable manner.
Dr. Marc-Antoine Audet, President and CEO of Sama, said in a press release (search “samapleu” on IFC website): “Sama is pleased to welcome IFC as a shareholder and partner on the Samapleu project. We look forward to drawing from IFC’s expertise to help ensure that the progress at Samapleu follows global best practices for the mineral exploration industry, the environment, and for working with local communities.”
Tom Butler, IFC Global Head for Mining, added: “We are excited to be making IFC’s first mining investment in Côte d’Ivoire through Sama, a company we believe has the leadership and resources to make the Samapleu project a success. This investment aligns with our strategy to support early-stage exploration companies with financing and advice.”
IFC offers mining clients in developing countries a broad range of financial and advisory services throughout the mining life cycle. Its early-equity investment programme is to help exploration-stage companies, such as Sama, with financing and advice on best practice in environmental and social management.
IFC is the largest global development institution focused only on the private sector. In fiscal 2011, investments climbed to an all-time high of nearly $19 billion.
IFC is acquiring 3,968,254 units, each of 1 common share and 1 warrant, out of 5,105,539 units offered by Sama to IFC and 2 other investors in a private placement. Each warrant entitles the holder to purchase 1 common share of Sama at an exercise price of CAD0.4725 per common share for a period of 4 years, subject to Sama’s right to accelerate the expiration of the warrant.
The issue price per unit is CAD0.315 Canadian dollars. It is expected that after completing the subscriptions to IFC and the other 2, there will be 66,013,174 Sama common shares outstanding and IFC will directly hold approximately 6.01% of the outstanding share capital and approximately 11.34% of the outstanding share capital if it exercises all its warrants

About Sama Resources

Sama is a growth-oriented resource company focused on exploring and developing nickel-copper-sulphide and laterite resources in West Africa. Its goal is to become the first poly-metallic producer in the region along side its joint venture partner SODEMI (Société pour le Développement Minier de Côte d’Ivoire – www.sodemi.ci). Its key assets are Samapleu project in Côte d’Ivoire and Lola project in Guinea, both in exploration phase. Future production from Samapleu will be managed by a joint venture controlled 66⅔% by Sama Nickel Corporation, a wholly-owned subsidiary of Sama, and 33⅓% by SODEMI. The licence encompasses 449 square kilometres and hosts nickel-copper and nickel-cobalt rich laterite deposits, and the newly discovered massive chromites occurrences.
The Lola project is 100% owned by Sama and encompasses 1,212 square kilometres adjacent to the Samapleu project. The Lola project has strong potential for nickel and copper mineralization and nickel-cobalt rich laterite.

Chinese hunt Africa mine bargains

In an article this morning (30 Sept), FT Tilt writer highlights a swift move by a state-backed Chinese company to acquire upstream mining assets in Africa. Writer Denise Law says Hong Kong-listed Minmetals Resources (MMR – www.minmetalsresources.com), part of China’s biggest metals trader, has offered C$1.3 billion ($1.25bn) for Toronto-listed Anvil Mining (www.anvilmining.com), with an all-cash offer for Anvil at C$8 per share, a 39 per cent premium to its closing price in Toronto on Thursday (29 September). The deal is subject to shareholder approval.
In April MMR bid $6.5bn for Equinox Minerals with mining assets in Saudi Arabia and Zambia but was outbid by Canada’s Barrick Gold and withdrew.
The author comments “underlining how state-backed Chinese companies were becoming increasingly reluctant to over-pay for overseas assets.” The article quotes Mark Hinsley, analyst at Foster Stockbroking in Sydney as saying the Chinese are keen to buy and current worries of slower global growth and extreme market volatility are giving them opportunities to buy up cheaper assets: “Chinese mining companies with strong balance sheets will use this opportunity to pick up assets as equity markets get pushed back and valuations fall.” He added that Africa will be an attractive destination for the Chinese, “given the supply/demand dynamics of copper and the huge exploration potential and operating cost landscape of Africa”.
Anvil’s main asset is the Kinsevere mine in DRC, which produces 60,000 tonnes of copper cathode a year. According to an MMR statement, the takeover would increase MMR’s copper output by 60%: “Anvil’s copper operations are an excellent fit with MMR’s strategy to build an upstream, international diversified base metals company. Anvil provides a sound platform and experienced management and operations team for MMR to further expand into the Central African copper belt and Southern Africa.”
A note by Foster Stockbroking says it is unlikely that a rival will emerge with a bigger bid for Anvil given that MMR’s offer is attractive. It notes how fast MMR is working to close this deal, from announcing a strategic review on 4 August to takeover bid, a total of 8 weeks. “This demonstrates the pace at which the Chinese can move to act on a strategic C$1.3bn deal. In our view, the valuation is compelling and unlikely to be trumped.”
Other Chinese mining companies looking to expand further in Africa, especially in DRC, include China Non-Ferrous Metal Mining and Jinchuan Grou as regional consolidation in the copper industry continues to play out. Hanlong Mining is also currently trying to acquire Sundance Resources, which has iron ore assets in Cameroon.