October 23, 2017

Mines need collaboration for survival, growth

 

Gone are the days when mines in Africa could afford to ‘go it alone’ by building their own infrastructure, according to global engineers and scientists SRK Consulting; survival and growth now needs a foundation of collaboration with governments.

Speaking on the sidelines of the Investing in African Mining Indaba in Cape Town, SRK partner and principal consultant Andrew van Zyl said the consensus at the event seemed to be that the depth of this commodity slump – and the likelihood that structural changes in the economy will result in the forecast recovery not leading to prices as high as in the previous peak – suggest that future mining profits will not support ‘business as usual’.

“While many operations in Africa found it necessary or preferable to provide their own road, rail, energy or water services, most will be compelled to find partners to make this affordable in coming years,” he said.

Van Zyl said the hard times in commodities may also encourage governments to be more proactive in their dealings with mining companies – given their importance as sources of taxes and royalties.

He said governments often secured financing for national infrastructure on the strength of off-take agreements with large mining firms – whose credit ratings were usually better than the countries’ themselves. Balance sheet pressure, lower credit ratings and a reluctance to leverage would mean other options would have to be explored.

“Planning infrastructure with a number of stakeholders, however, is more complicated and takes much longer – as negotiations must deal with various legal and technical details,” he said. “So the time to start talking is now – ideally with mining companies looking at growth opportunities within existing regional or national development initiatives.”

The other benefit of this collaborative process is that it could include stakeholders like communities, who also stand to benefit from infrastructural and mineral projects. Furthermore, increased competition for land, water and energy resulting from economic and population growth will make it harder for companies that do not take a more collaborative approach.

“A more cooperative approach ensures that different parties engage early on in the conceptual planning process, before there are firm plans or financing in place,” he said. “This feeds a vital requirement for mines: helping them build their social licence to mine and thereby mitigate what has become a key risk to companies in this sector.”

SRK’s recent work for the government of Cameroon showed the value of multi-stakeholder partnerships, said Van Zyl, allowing legal, technical and other issues to be addressed at length and by experts in each relevant field – with each party ensuring that their constituents received value from proposed developments before they were pursued.

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