Africa: New Mining Growth Frontier


BMI View : Africa will become an increasingly important player in the global mining sector over the coming years as we forecast rapid growth in iron ore, coal, bauxite and nickel output. Indeed, whilst much of the world is experiencing declining grades, several countries in Africa posses high-grade mineral reserves which will provide companies with opportunities for greater margins. However, there are a plethora of risks, the most pertinent being political and infrastructure.

We expect Africa to become an increasingly important player in the global mining sector. At present, Africa is only a fringe producer in the mining of most metals as security and political risks, as well as poor infrastructure have held back investment across the continent. Whilst these issues will remain, we expect significant growth across the board in mineral output over the coming years. We have covered the growth in West African iron ore and booming coal production elsewhere, and thus here we focus on nickel in East Africa, iron ore in Central Africa and bauxite in West Africa (See 'Coal: Southern African Exports To Boom' and 'Iron Ore: West Africa To Be Key Growth Area' BMO Online) .

Africa's Share Of Global Mining To Rise
Africa - % Share Of Global Mined Output & % Point Change

Iron Ore: Central Africa Joining The Boom

We expect West Africa, notably Sierra Leone and Guinea, to become a major driver in global iron ore exports over the coming years, however, we also expect rapid growth in Central Africa. Whilst Central Africa has received very little attention and will not rival West Africa in terms of output, we forecast it to become a major exporter in the coming years. The Republic of Congo will be the main driver of this growth as several huge deposits come online. The region's high-grade reserves should ensure the country continues to attract investment, despite higher energy prices and falling company margins. Cameroon and Gabon also have significant mined supply coming online over the period to 2017. The combination of West and Central Africa's iron ore supply will see Africa's share of global iron ore output rise from 4.7% in 2012 to 9.0% in 2017.

Congo To Drive Regional Growth
Republic of Congo - Iron Ore Mines

Nickel: East Africa To Dominate Africa's Output

Africa is set to see the fastest rates of growth in nickel production over the coming years as the continent's share of global output increase from 3.8% in 2012 to 6.3% in 2017. This growth will mostly occur in East Africa, a region where mining is still in its infancy. Tanzania's nickel output is set for dramatic growth as development of the north west of the country commences . This region is home to some of the largest untapped high-grad e nickel deposits in the world which we expect will transform the country's mining sector and reduce Tanzania's dependence on gold as an export earner. Tanzania currently produces negligible amounts of nickel, but has the potential to become A frica's largest producer by 2017 .

Infrastructure Investment To Assist Mining Sector Growth
Tanzania - Map Of Nickel Mines & Railways

Aside from Tanzania, Burundi could see significant growth in nickel output over the coming years. There are several projects currently in operation, wh ich although small on a global level, could mark a significant increase to Burundi's mining output. Most notable of these is Nyoto Minerals ' Muremera nickel mine. The company has yet to give details on production figures but is planning to spend US$2mn over the next two years, a significant sum in the country. Burundi is estimated to contain 4.2mnt of nickel reserves and thus this project could be the start of greater nickel exploration in the country.

Steady, But Constant Growth
Africa - Mining Industry Value & Growth

Bauxite: Growing Investment In Guinea & Sierra Leone

We expect Guinea to become the third largest bauxite miner by 2017 and be the second biggest contributor to bauxite output growth over the period. Guinea has the world's largest bauxite reserves but has been held back by insufficient infrastructure. However, the development of road and rail links to assist growth in iron ore output should have a positive knock on affect on its bauxite sector.

Guinea To Ramp Up Output
Select Countries - Bauxite Output (mntpa)

Sierra Leone also has substantial bauxite reserves which are beginning to attract interest. As yet, there have been no major announcements regarding output figures, but we expect the country to become Africa's second largest producer in the coming years given its wealth of resources. Furthermore, the government is eager to attract investment into the country, to reduce its dependence on iron ore and diamond revenue.

Infrastructure & Political Risks Most Prevalent

Throughout Africa, t he main risk s to our bullish production outlook is a lack of adequate infrastructure and resource nationalism . In Tanzania, the major nickel deposits are located in the north west of the country, far from ports such as Dar Es Salaam and Mombasa. Whilst there are planned railways and projects to boost power capacity, they have been beset by delays, which could hinder development of the projects. This is a similar situation in Guinea and Central Africa, where poor transport routes and a lack of adequate electricity supplies will continue to delay projects. The other key risk to rapid growth is political as throughout the continent government's are seeking a greater stake in their mining sectors. In Tanzania, the ruling party has proposed a 35% super tax on mining companies' profits, whilst in Guinea and the Republic of Congo, the governments have stalled on implementing mining reforms which has created uncertainty that is not conducive towards investment.

Africa - Major Frontier Projects
Source: BMI, Company Announcements
Country Company Mine Metal Details
Burundi Nyota Minerals Muremera Nickel Planned expenditure of US$2mn on exploration.
Cameroon Cameroon Alumina Limited Ngaoundal Bauxite 9mntpa in 2013
Cameroon Sundance Resources Mbalam Iron ore 35mntpa in 2014
Cameroon Afferro Mining Inc Nkout Iron ore Reserves: 700mnt
Cameroon Geovic Nkamouna Nickel 20ktpa in 2013
Guinea Compagnie De Bauxite Dian Dian Bauxite 5mntpa in 2013
Guinea BSG Resources Labé Bauxite 9mntpa in 2014
Guinea Guinea Alumina Corporation Boké Bauxite 8mntpa in 2015
Guinea Anglo Aluminium Boké Bauxite Reserves grading around 45%
Republic of Congo Core Mining Avima Iron Ore Reserves: 1.1bnt, average grade 69%
Republic of Congo Equatorial Resources Mayoko Iron Ore Reserves: 1.5bnt, average grade 45%
Republic of Congo Xstrata/MPD Zanaga Iron Ore Reserves: 500mnt, average grade 34%
Tanzania Continental Nickel Nachingwea Nickel Reserves: 607kt, average grade 1.02%
Tanzania African Eagle Resources Dutwa Nickel Reserves: 603kt, average grade 0.98%
Tanzania Barrick Gold & Xstrata Kabanga Nickel 40ktpa in 2014
This article is tagged to:
Sector: Mining
Geography: Africa, Africa