By Nevin, Tom

Generally speaking there is virtually no mineral that Africa does not have in exploitable quantities but the continent tends to follow its economic nose and root out those that are the money-making flavours of the day. Tom Nevin digs out the story Strategically, energy-generating coal and uranium will be Africa’s most important minerals in the decade ahead, followed by gold for the sheer flow of revenue it is generating. Right now we live in a world that turns on electrical power, and one that is building a seemingly unquenchable thirst for the means to spin turbines. And Africa has more of energy generation’s wherewithal than anywhere else.

Coal

The International Energy Agency (IEA) reports that world energy demand will grow by two thirds over the next 30 years with a third of that growth in China and India and coal, as the most abundant and affordable of all fossil fuels, will be used to meet the demand. As the most important fuel for electricity generation, it will have a major and vital role to play, along with other fossil fuels.

Coal prices reached a record high of $77.87 in July 2004. The following three years, coal prices saw a steady decline until they reached the same figure again in July 2007. From then, they improved, reaching an all-time high of $128.40 in November, an increase of 65% in only four months, according to Miningmix. com, an influential voice in the South African extraction industry.

“These incredible ARA (Antwerp-Rotterdam-Amsterdam) prices have been followed closely by the Richards Bay Coal Terminal ‘free on board’ (FOB – i.e. delivered to the vessel) prices that during the week of 30 November 2007 were at $100.45, an increase of more that 50% in two months,” it says.

Energy focus

Small wonder coal is now as much in the focus of investors as of national energy policymakers. In South Africa, eight new thermal power stations are to be built on one huge coalfield. Botswana is looking at two massive coal and gas projects, Zimbabwe is planning to exploit some of its vast and untouched coalfields, Mozambique has a $2bn black coal project on the go, Zambia is homing in on coal as well, and Malawi is looking for coal mining investors. This activity is mirrored around the rest of the world because the word ‘energy’ has relentlessly forced its way to a state of almost universal top- of-mind awareness and worry, and coal has become the cure.

In Africa, coal presents a fairly lopsided resource picture, but that will change. Virtually all of the continent’s known coal reserves lie south of the equator, while oil resources generally lie north of the line. The single largest coal export terminal in the world, South Africa’s Richards Bay Coal Terminal (RBCT), now has the capacity to export 76m tons a year of coal, up from 72m, according to spokesman Zama Luthuli (see Logistics page).

The increase, which came into effect on 1 January, is part of a larger capacity-expansion project, which will grow RBCT’s annual export capacity to 9lm tons a year by mid-2009, at a cost of R1.2bn ($170m). The terminal received 64.7m tons of coal during 2007, but was able to export 66.15m tons during the year by reducing stockpiles. However, the figure still fell short of the 66.47m tons shipped in 2006. “The industry needs to readjust itself to the new circumstances and rules and regulations,” says industry spokesman Xavier Prevost. “It now also needs to take cognisance of the fact that environmental laws and regulations to control the level of the release of emissions will soon be announced. This fact will make coal mining and usage more expensive than ever.

Uranium

The atom is undoubtedly the favourite child of the energy age and is the great hope of annihilating the world’s dependence on fossil fuels for its electricity and other power needs. That realisation has focused greater attention on the need for the rapid identification and exploitation of such nuclear fuel raw materials as uranium and other less well known radioactive minerals.

Namibia, particularly, came under the spotlight last year with investors from Canada, Russia, China, Japan and even South Korea arriving in droves to secure their place in the uranium-rush.

Roessing, Namibia’s 30-year-old uranium mine, has extended its lifespan to 2026, despite being slated for closure two years ago. The mine is developing two newly discovered deposits east of its existing workings. An environmental impact assessment (EIA) for the new developments is currently being drafted.

Zambia and Botswana tell similar stories with exploration and prospecting companies scrambling for concessions. Malawi reports some interesting new finds and is revisiting old strikes considered non-viable before the spike in global interest in atomic power plants sent uranium prices rocketing. Tanzania and Uganda have proven reserves of the mineral and indications of viable reserves have come from the DRC and Burundi.

Niger is Africa’s senior supplier and is rapidly expanding its export capacity through a new round of licensing foreign miners. The north African nation is thought to hold the world’s biggest uranium reserves although the extent of deposits is yet to be accurately explored and assessed.

Gold

Gold is pulling prices not seen for 25 years, and will probably do even better in 2008 if supply remains as tight and the oil price continues to knock economies around (see View from the City page 26). All being equal, analysts say they won’t be surprised if gold cracks the $1,000 barrier in the year ahead. It might even go higher.

For Africa, this is good news tinged with the not-so-good. Some say the price of gold is at such heady levels because there is not as much of it around as there was. According to the International Gold Council, global mine output Is falling – down a full 3.1% in 2006 and was nearly flat in 2007. This is certainly true for South Africa, and a number of other African gold producing nations.

Equally, gold production is rising in some places. China, for instance, could overtake the US this year as the world’s second biggest gold producer.

Hou Huimin, second in command at the China Gold Production Association, says output could rise 8% to a record 260t in 2008 from 240t in 2006. On the other hand, further once rich sources are petering out. South Africa is busy losing its crown, producing just 134t in the first six months of last year, dropping a third in the last five years as the costs of digging deeper begin to bite. Today, South African production is at its lowest since 1922.

“One reason why South African production isn’t ramping up with gold prices is there are fewer mining companies,” says Sean Broderick, Moneyandmarkets’ contributing editor. “The 20-year bear market in gold forced many marginal mines to close. And over the past 15 years, a wave of mergers has created a bunch of mega-sized gold miners.

“While the top five miners each produce between 3.5m and 7m oz every year, they’re more likely to concentrate on working their existing mines and buying up other mines, and focus less on new exploration. These are just several of the forces that will help power gold into the stratosphere during 2008.”

Ghana is Africa’s second biggest producers and it is awaiting clearer signals of what will happen to the gold price a few years from now. At around 63 tons a year, Ghana has quickly become the continent’s second-biggest producer. Although gold does not play a large part in the country’s overall GDP, it is its single most important source of foreign currency and thus price and output fluctuations affect external accounts. Over 90% of the country’s output originates from underground mines in the Ashanti region.

Zimbabwe is a significant producer, but accurate output statistics are difficult to come by because large tonnages are smuggled out of the country by small-time miners to bypass having to sell the metal to the government.

Big producers are stagnating. While global prices for gold have hit new highs with handsome profits elsewhere, Zimbabwean firms are struggling. They must sell their gold at a fraction of the market price to the government. Just 60% of the money they receive in return is paid in hard currency while the balance comes in the increasingly worthless local Zimbabwean dollar.

And now Zimbabwe’s mining firms are anxiously waiting to see if Zimbabwe’s President Robert Mugabe is as good as his word in nationalising companies that he accuses of letting gold be smuggled out of the country as part of a Western plot to bring down his government. Mark Verden, chief executive officer of the Zimbabwe Chamber of Mines, says the mining industry is trapped in a “vicious circle because we are not benefiting from these high international prices”. He adds that some of Zimbabwe’s gold miners are not paid for months disrupting their import of essential raw materials for processing.

Audited production in Zimbabwe for 2007 is expected to drop to about 8.7t from 11.3t last year. Its peak turnover of 27.0t was in 1989.

Mali is regarded as Africa’s most up-andcoming gold-producing country. Following the opening of several new mines, including Morila and Yatela in 2001, Mali has become Africa’s third largest gold producer after South Africa and Ghana.

In 2005 gold production in the country reached just over 49t, generating more than half of the country’s foreign currency. Mali has enormous potential for further gold discoveries with its potential reserves estimated at this juncture at 350t a year. Major international mining companies operating in Mali include Randgold Resources and Anglo Gold, with lAMGold partnering AngloGold. Six gold mines are currently in full operation.

Platinum

Demand for platinum has grown much faster than supplies during the last five years. The Chinese platinum jewellery market has boomed along with a robust return to platinum in autocatalysts and other industrial application, resulting in a series of annual supply deficits.

By virtue of its persistent high price and long-term demand in a number of applications, platinum has become one of Africa’s most important strategic minerals. The platinum group includes palladium, gold, rhodium, osmium, rhenium, iridium and ruthenium.

South Africa is thought to have 70mkg of the world’s total platinum reserves of 80mkg. Its sales accounted for 33% of the country’s dollar export revenue in 2003 with 148,348kg of the exotic metal being produced. Unlike gold, platinum markets are relatively low risk, with constant demand from Japan and the USA.

Zimbabwe is second to South Africa in platinum reserves and output. However, nervousness prevails in the Zimbabwe mining sector because of President Robert Mugabe’s stated intent to partly nationalise the industry.

Smaller deposits occur in Brazil, Russia and Canada while recently encouraging Platinum Group Metal (PGM) indications have been found in Sierra Leone.

Base metals

The past decade has seen a tremendous revival of the base metal industry in Africa. Simultaneously, base metal commodity prices have seen an unprecedented increase.

In response to a quickening of the global economic tempo and persistent strong demand from China and India, Africa’s base metals particularly copper, zinc, nickel, iron, lead and manganese – have recharged treasuries and done much to attract a stream of investors.

Zambia has scored royally on the demand for base metals, more especially from the east, that has seen commodity prices at unprecedented highs. A levelling off in prices has done little to curb mining companies’ appetites for exploration and new mines.

According to Unctad’s World Investment Report 2007: Transnational Corporations, Extractive Industries and Development, Africa raked in $36bn in total FDI inflows. Of this, $8bn was from the extractive industry and most of it from the least developed countries (LDCs). This was $2bn more than the 2005 figure. The most significant increases among LDCs took place in Burundi, Djibouti, Guinea- Bissau, Somalia, Madagascar, Ethiopia, Cape Verde, Gambia and Sudan, where FDI inflows for new oil exploration and mining activities, as well as in the services sector, increased.

The boom in these countries has not escaped other southern African countries. Recent media reports indicate that Mozambique has chalked a 100% cash inflow increase in its mining industry.

Gemstones excluding diamonds

Kenya in recent years has become Africa’s premier ruby producer, with workings in the Great Rift Valley producing high quality gems. Exciting the jewellery world is a recent find on the north coast of colour-change garnet that transforms from blue or green in daylight to pink or red in incandescent light. Kenya also produces economic quantities of amethyst, iolite and aquamarine.

Tanzania is Africa’s most important sources of coloured gemstones, employing over 500,000 small-scale miners countrywide. The gem that put Tanzania on the world precious stone map was its namesake tanzanite, a blue zoisite found solely near the town of Arusha in northern Tanzania. Other gems mined in Tanzania include ruby, sapphire, tourmaline, tsavorite and alexandrite.

Zambia has overtaken Zimbabwe as Africa’s emerald mining centre, deriving 15% of its export earnings from the coveted green stone. Emeralds are recovered by thousands of licensed diggers and a few commercial operations north of the Copperbelt region.

While emerald is the country’s biggest gem export in value terms, amethyst is the biggest export by volume at around 700t a year. Other significant gemstones mined in Zambia include aquamarine, garnet and tourmaline.

With the depletion of reserves of Zimbabwe’s famous Sandawana emeralds, the country now concentrates on its deposits of aquamarine, chrysoberyl, alexandrite, tourmaline, and yellow, green, and pink beryl.

Conflict in the Democratic Republic of Congo made gem production sporadic, and the source and value of gemstones extracted difficult to determine. Most prolific is gemquality blue to green tourmaline.

Madagascar’s gemstone production boomed in the 1990s and remains profitable and sustainable. The main gem export is pink and blue sapphire, along with sapphire, ruby, garnet, beryl, alexandrite, aquamarine, morganite, amethyst and rose quartz.

Malawi’s gemstone mining in Malawi is almost exclusively an artesanal basis, used by locals to supplement their income. The giant ruby and sapphire mine at Chimwadzulu Hill is the exception, producing the bulk of the country’s gemstone exports. Other gems include aquamarine, beryl, garnet, amethyst and rose quartz.

Mozambique is Africa’s most promising precious stone prospect. It already produces top quality aquamarine, tourmaline, amethyst, emerald, morganite, and rose quartz in the northern Nampula and Zambezia provinces. The international gem mining industry describes Mozambique’s potential as “huge”.

Namibia’s coloured stone production is relatively small when compared to its diamond output, but profitable with potential nonetheless. The country primarily produces demantoid garnet, aquamarine, topaz, garnet and is said to have vast quantities of bluegreen tourmaline.

Nigeria has, over the years, intermittently produced some of the world’s most impressive gemstones, more particularly rubellite tourmaline, aquamarine, spessartite garnet, morganite, goshenite, along with sapphire, amethyst and white, blue, and yellow topaz.

South Africa is best known for its diamonds and produces little by way of coloured gemstones.

Diamonds

At 50% of global output Africa is the world’s largest producer of diamonds and shows no sign of relinquishing the throne. Southern Africa worked towards claiming a bigger piece of the diamond pipeline through beneficiation and the suppliers really had no choice.

South Africa, Botswana, and Namibia each acted to ensure that a minimum supply of diamonds mined in their respective countries will be cut and polished locally.

“While these processes were a long time coming, they really took shape last year as South Africa’s State Diamond Trader was established to start supplying in 2008, and De Beers’ Diamond Trading Company (DTC) partnered with the governments of Botswana and Namibia to supply rough at separate sights to local companies,” says the Rapaport Diamond Report. “The rush to find diamonds was made all the more attractive as demand for diamond jewellery soared in emerging markets. Global production was outpaced by diamond jewellery demand causing rough prices to rise.”

Historically, the continent has extracted over 1.9bn carats worth $158bn – some 75% in value of the world’s diamonds. Angola, Botswana and South Africa are leading producers of diamonds, followed by Namibia and the DRC. Ghana, Tanzania, Cote d’lvoire, Lesotho and the Central African Republic are producers of significance. Several foreign junior mining companies are making good progress in exploiting South Africa’s lucrative inland alluvial resources and the shallow marine resources located along the west coast.

Namibia produced 1.4m carats in 2003, the majority by De Beers’ Namibian subsidiary, Namdeb. However, a new producer in Namibia is Canadian-listed Namibian Mining Corporation (Namco) which has made impressive progress with its marine mining operations. With the rapid influx of diamond exploration companies, in particular marine operators, Namibia has legislated a new Diamond Act to further control and regulate the production and sale of rough diamonds.

Angola is the third largest producer of diamonds in Africa, although only 40% of the country has been geologically explored. It has encountered difficulty in attracting foreign investment because of corruption, human rights violations, and diamond smuggling.

Production rose by 30% in 2006 and Endiama, the national diamond company of Angola, expected production to increase by 8% in 2007 to 10m carats annually. The Angolan government estimates that it loses $375m annually from diamond smuggling, and in 2003 launched Operation Brilliant, an anti-smuggling investigation that resulted in the arrest and deportation of some 250,000 smugglers.

Botswana, the world’s biggest diamond miner by value, produced 31.9m carats of rough diamonds in 2005. It has introduced a domestic diamond polishing industry with four new plants granted licences. The focus remains on rough diamond prospecting and mining although large-scale coal mining is being established.

The Democratic Republic of Congo has seen a modicum of stability return to its diamond mining capability, recovering 32m carats in 2005. The only commercial diamond producer in the DRC is Miniere de Bakwange (MIBA), a joint venture operation between Belgian company Sibeka and the DRC government, which holds an 80% stake. De Beers markets around 30%.

India eyes Africa’s coal and uranium

India, trailing China in chasing its share of the African resources it needs to fuel its high-flying economy, has entered 2008 with a powerful new investment and procurement vehicle dedicated to acquiring vast supplies of foreign coal. It can dip into an annual government-funded war chest of Rs10bn. It is also looking for uranium mining deals in Africa, but problems abound.

The new special-purposes organisation, Coal ventures international Ltd (CVIL), is supported by an amalgam of Indian mining and energy parastatals and has invited expressions of interest from bankers worldwide. CVIL’s broadly-based terms of reference underline the urgency the Indian government is placing on procuring massive tonnages of coal and sub-equatorial Africa is in the crosshairs, especially Botswana, Mozambique, Zimbabwe and South Africa. It has carte blanche to negotiate private equity deals with unlisted companies, partners and owners having coal assets across the world. It is also open to acquiring mining licences to develop coal mines globally.

India’s bid for African uranium With its uranium deal with the US heading for the rocks, the Indian government is also looking to Africa for uranium supplies, particularly in Namibia and Niger. A Mumbai-based company, Taurian Resources, has been licensed to explore for and mine uranium in Niger, the world’s fifth largest producer.

“The progress by Taurian Resources is bold and encouraging,” reports an Indian government official, although he concedes that actual mining of uranium there could take years to yield results, and that India’s standing in the global nuclear club could be a problem.

Both Namibia and Niger, as non-Nuclear Suppliers Group (NSG) countries, are signatories to the African Nuclear Weapon Free Zone Treaty. As members, Niger and Namibia could dig in their heels against transferring nuclear material to states that are not party to the Nuclear Non-proliferation Treaty, including India. The NSG has a powerful voice in global nuclear commerce, controlling close to an estimated 80% of the world’s uranium reserves and about 78% of its production.

Niger and Namibia, along with Uzbekistan, are the major producers. Niger recently issued some 20 permits to mainly Canadian and British firms with Taurian being the first Indian company to secure a licence. China is already a big investor in Niger’s uranium producing sector.

Coal is still the world’s major source of energy generation and Africa possesses hundreds of millions of tons of it.

Coal – the poor man’s oil

Coal is the major source of the world’s energy generation with nuclear a distant but distinct second, overtaking hydro as big dams fall from grace. So, way out in front is that atmospheric marauder called coal, and around the world we can’t dig out enough of it. It is a kind of plentiful poor man’s oil and it will bring riches to the countries that have plenty of it, especially when its price begins to respond to shortages looming in an energy-desperate world.

Should not Africa’s big producers be thinking of creating an Organisation of Coal Exporting Countries, Ocec for short, with the same aims as Opec, its cousin in the oil business dedicated to w keeping crude prices sky-high by manipulating demand and holding the world to ransom?

Ocec could install a made-in-Africa price setting mechanism that would spread, in Opec style, to distant coal fields in Australia (the world’s biggest), Russia, China, the US, EU and a rash of smaller producers.

Taking oil as a cynical correlation, Ocec could hoist the global price of coal from the $100 a ton it is now to three times that in a few years.

Installing new drill machines at the Cominak uranium mine in Niger. Niger is Africa’s main supplier for the raw material for nuclear power.

South Africa is the world’s biggest gold producer and China, its biggest trading partner, an increasingly important market for the precious metal.

The Far East is a major market for African platinum jewellery. This golf putter and golf ball was crafted by a Japanese jeweller out of the white metal and encrusted with white and pink diamonds.

Gateway’s vital role in African mining

The power of being ‘plugged in’ to an efficient communications infrastructure is essential to every country’s economic competitiveness. It provides a spur to growth, makes a country more attractive for private investment, leads to vastly improved service delivery and most importantly, helps Africa to participate and compete in the global economy.

No African country can afford to be without efficient, reliable and cost-effective communications – and when it comes to mining, this is even more critical.

The challenge is that mines are often not able to access conventional communication methods because of the remote location of some of their operations. When they can, the service angle on some of these systems can also be a problem. Satellite communications are often the only choice to provide the high quality, reliable connectivity needed to run commercial operations in remote regions.

Gateway Communications is the biggest private network operator in sub-Saharan Africa and began providing services over a decade ago. At Inception it was the only international communications company with local service engineers on the ground across Africa.

Through the development of long-term relationships with clients in the region, Gateway Communications is now the largest communications provider for the mining sector in West Africa servicing approximately 80% of mines in the region. Clients include Goldfields Ghana Ltd, Newmont Mining Ghana, Resolute, Redback Mining, Orezone (Burkina Faso) and Moolman LTA (in Mali and Guinea Conakry as well as other countries in other regions across Africa).

Dedicated VSAT connections are set up at the most remote locations, while those within microwave range of Accra or several other Ecowas capitals can be connected to the SAT 3 fibre optic cable (which travels from London down the West Coast of Africa to South Africa). From the sat 3 cable the mines obtain secure connections into London and onwards to the rest of the world. This allows a direct link between each individual gold mine and their respective international corporate headquarters.

Specialist companies like Gateway Communications offer solutions that can fit these challenging situations. For example Gateway Communications provides African mines with local phone services via radiowave, also known as broadband wireless local loop, which connects the mines to Gateway’s own secure panAfrican network and provides ‘always-on’ connections to all the world’s major phone networks as well as the public internet.

All the world’s most precious and semi-precious gemstones, used for the world’s most desirable jewellery, can be sourced from Africa.

Beginners Guide to Gold and Silver Investing – Free

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