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Mining Indaba trends: transparency, stability, sustainability

mining2-bigOne trend noted at the Mining Indaba is the need for responsible mining and sustainable development Energy and vibrancy emanated from the exhibition hall during the Investing in African Mining Indaba, which ran from 3 to 6 February at the Cape Town Convention Centre. The Indaba is an annual event that brings together the world's leading mining and mining services companies and executives.

Delegates spoke informally of more deals being made and a far more positive outlook this year than at the previous Indaba, and a key trend coming out of the conference this year was the critical need for policy stability in Africa, and particularly in South Africa. Some commentators have said policy changes have driven away investors, who have sought more stable jurisdictions in which to operate.

General feelings among delegates were that miners needed to know the rules of the game, and they needed to stay the same; Cameroon, Botswana and Malawi were stable. Mindful of this, Mineral Resources Minister Susan Shabangu tried to allay fears in her opening address, saying the Mineral and Petroleum Resources Development Act (MPRDA) Bill was before the parliamentary portfolio committee. "We are confident that it will be concluded during the tenure of the current legislators. The MPRDA Bill will not create an uncertain regulatory regime," she stressed.

Responsible mining

Another key trend was responsible mining and sustainable development, with several sessions – and the full final day's programme – devoted to the topic. A large delegation from Western Australia that included the premier of the state, Colin Barnett, brought offers of expert assistance in building a sustainable mining model. Barnett said this required a sound regulatory environment and that "not a single grain of mineral or a single molecule of oil or gas should leave Africa without being paid for, at a fair price. This is a long-term goal that should be shared by host governments and foreign investors."

Australia would also offer help in building capacity to gather scientific and geoscience data, and in skills development.

Speaking on the final day, Archbishop Njongonkulu Ndungane did not deny the need for a profit motive to drive business, but he called for increased moral responsibility among stakeholders to build businesses where all interests were taken into account, including the environment and communities. It was necessary to "make personal and business sacrifices" for the common good.

"Environmental issues are among the most important moral issues facing the world today… we need to change our behaviour. Over-population, over-consumption, pollution; all have devastating consequences."

Speaking about the imperative for mining to choose a path to sustainable development, he said development must meet the needs of the present without compromising meeting future needs. "There is a clear roadmap for the future: eradicating poverty is the greatest global challenge and is necessary for sustainable development."

His comments were widely hailed, with the expert panel agreeing on the need for access to information, communication and the need to find solutions jointly in mitigating conflict between communities and mining houses.

Transparency was a common thread throughout the Indaba, as an imperative for sustainable development and forming a balanced social contract. Trust needed to be created between the mining company and the community, said Clare Short of the Extractive Industries Transparency Initiative.

Investment uptick

The Indaba came after a gloomy year in the industry, with most commodity prices falling in 2013, among them gold, silver, platinum, nickel, aluminium, copper and tin. Palladium was one of the few that moved upwards, rising 1.7%. However, Jonathan Moore, mining director of the Mining Indaba, was upbeat on forecasts for the industry.

Andrew Monk, chief executive at VSA Capital in London, said at the pre-conference Investment Discovery Forum that "2012 and 2013 were horrible years; there was no investment. [But] there is definitely money coming into the mining sector at this stage."

Tom Butler, global head of mining at the International Finance Corporation, said Africa's global mineral reserves were estimated to be about 30% of the world's reserves. "There are huge opportunities, and new discoveries have opened new opportunities. The World Bank projects an investment of $87-billion in Africa in the next few years, with economic growth at 5%."

Well-received was news of the $1-billion fund from the World Bank, to map Africa's resources. Reuters reported that the bank anticipated launching the fund in July.

Beneficiation

Beneficiation was brought up at the very beginning, with Shabangu pointedly saying that continued exportation of unprocessed minerals denied "South Africa the possibility for skilled employment, skills development and contribution to the fiscus needed to address our developmental imperatives". She added that no mining company would be required to beneficiate, nor would be forced to subsidise the manufacturing industry, but exports of needed raw materials must be secondary to supplying local requirements.

Various opinions were heard regarding value add. Beneficiation and downstream value add was key, said Lumkile Mondi, the Industrial Development Corporation's vice-president and chief economist, on the sidelines of the event. "For Africa to industrialise, we need to ensure that there is mining manufacturing, because manufacturing brings a lot. We must bring value add. Raw materials fetch low prices, but it is important to see that there is value add from the electricity that has been supplied. There are other multipliers, such as the water that has been used, the coal, solar, wind.

"More importantly, we know that not only does manufacturing increase the value of the output, it also has a huge impact on job creation, skills and development."

At the Weber Wentzel Panel Discussion, Peter Leon, head of Webber Wentzel's Africa mining, energy and projects practice, said beneficiation should only occur if, on a case by case basis, it was economically feasible.

Finally, according to a visitor survey run by professional services firm EYAfrica, 35% of delegates placed resource nationalism as the number one business risk in Africa. It also suggested that mining sentiment would improve in 2014, with more mergers and acquisitions, and higher capital availability.

South Africa

About South Africa in particular, Ivanhoe Mines founder and executive chairman, Robert Friedland, said the country had always been one of the world's greatest mining countries, with a very good constitution. Exxaro Resources chief executive officer, Sipho Nkosi, was even more positive, saying mining in South Africa was not a sunset industry, but had a "mighty rosy future".

Speaking on the same panel, Neal Froneman, chief executive officer at Sibanye Gold, gave the country an eight when asked for his opinion of a Mining in Africa Confidence Index. Nkosi opted for an eight, while Friedland awarded South Africa a resounding 10.

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