AAMEG DEFENDS ASX LISTED RESOURCE COMPANIES IN AFRICA

Perth, Western Australia: The article, “Revoked permits, unstable regimes and insurgent attacks – what can go wrong investing in Africa?” published by the Sydney Morning Herald (SMH) this week concludes with the statement that Africa is “a sovereign risk jungle for investors”.

The Australia-Africa Minerals and Energy Group (AAMEG), the peak body representing Australian companies engaged in the development of Africa’s resource industry, takes exception to this statement and challenges its accuracy.  Consider the following:

• Political jockeying around critical minerals isn’t restricted to African countries.  Chile, Argentina, Bolivia, Mexico and Ecuador have all announced plans to nationalise their lithium assets. In addition, Indonesia and others have imposed bans on the export of raw critical materials.
• The world’s largest miners are all invested in the continent – and none of them move without paying careful attention to sovereign risk.  To illustrate:
  • BHP is investing in a new nickel project, Kabanga, in Tanzania, its first investment in Africa for 20 years.
  • Rio Tinto is developing the massive Simandou iron ore province in Guinea.  It has also spent big (+$40M) to acquire an interest in ASX-listed Sovereign Metals Ltd’s new discovery in Malawi.
  • Barrick Gold Corp is showing the transformative impact of mining in Tanzania.
  • Newmont Corp is expanding its footprint in West and Central Africa.
  • Fortescue Metals is building the Belinga Iron Ore Project in Gabon.

• Perseus Mining (ASX: PRU), with operations in Ghana, Cote d’Ivoire and Sudan, has been the best performing gold stock in the ASX over the last five years with West African Resources (ASX: WAF), with operations in Burkina Faso, not far behind. Both have consistently outperformed the ASX200 since January 2019.
• Sandfire Resources recently opened the Motheo copper mine in Botswana.
• The proportion of ASX-listed explorers with operations in Africa has grown from 10.9% in June 2013 to being 15.3% of the total sector in June 2023. (Source: BDO, Africa Down Under 2023).

As stated by White & Case, although the African continent is home to as much as 30% of the world’s mineral reserves, as of 2022 it accounted for less than 10 percent of global mining exploration spending and less than 5 percent of the sector’s global revenue.  Africa’s mineral wealth has therefore emerged as a key theatre in the race to secure the supplies needed to achieve decarbonisation.

The SMH article fails to consider that Africa is not a homogenous entity.  Each of its 54 countries have unique political circumstances and minerals endowments that the world will depend on as it moves to the green economy.

“Seasoned investors and mining companies operating in Africa are aware of the risks and have developed effective risk mitigation strategies,” says Roger Staley, CEO of AAMEG.

“They engage in rigorous due diligence, establish strong relationships with local authorities and diversify their portfolios to spread risk”.

It is simply not true that mining in Africa is a no-go zone for investors.

(AAMEG has approached the original article’s author and the SMH for comment but has yet to receive a response).

ENDS

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