Exploration sector “feels it” when sovereign risk rears head

Errol Smart, chief executive of Orion Minerals and chair of the Minerals Council of South Africa’s Junior and Emerging Miners Leadership Forum, said explorers and small-scale miners “feel it” every time there is negative press in a country.

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He participated in a panel discussion on Africa’s vacant exploration pipeline at the annual African Mining Investment Conference in Cape Town.

Smart said risks in Africa’s mining industry are highly cyclical. “Today, the Democratic Republic of Congo and Zambia are in their honeymoon phase. Here they go again. A few years ago, they were at the bottom (of the list of attractive mining targets).”

Although Africa holds 30% of the world’s mineral reserves, it is still considered a high-risk mining investment destination. According to S&P Global’s 2023 World Exploration Trends, Africa accounts for 11.6% of exploration allocations, below the global average.

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BHP Billiton chief Sonia Scarselli said the continent was crucial in the global race for green minerals to decarbonise, but investors believed it would be difficult to do business in Africa if available elsewhere Similar resources, they are more willing to put their money there. The Metal Exploration Department moderated the panel discussion.

Africa remains plagued by infrastructure gaps, frequent changes in regulatory frameworks and regime instability, she said.

Al Cook, chief executive of De Beers Group, said there was only a “1 in 10” chance of recovering money through exploration. Therefore, conditions above and below ground must be good. He mentioned that De Beers has resumed diamond exploration in Angola since December 2022, after a gap of ten years.

“We believe Angola has good underground conditions, world-class mineral deposits and reduced risk. We spent millions of dollars but we believe we will get our money back.”

Marna Cloete, president of Ivanhoe Mines, said mining companies can help shape the jurisdictions in which they operate. “We’re doing projects that improve livelihoods even before we drill underground.”

Cloete said there should be greater collaboration between mining companies operating in Africa and the sharing of insights. “For example, which mining codes work and what infrastructure is required.” She also believes there are opportunities for more collaboration on infrastructure projects.

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