Nedbank: ‘Tough’ the new normal in African mining project finance

Not only new gold ventures, but equity investment in almost all African commodity developments is increasingly tough to find in the current pricing environment. Debt finance is also much harder to raise and few of the multitude of African mining projects under consideration are likely to be able to be financed unless and until gold and commodity prices pick up strongly commented top Nedbank investment banker, Mark Tyler, at an Australian conference. – Lawrie Williams

By Kevin Skinner

Australia’s mining fraternity has been told to expect their involvement in sound resources projects in Africa to attract funding, but to not have the same expectation for funding new exploration as the commodity supply and price pressures of 2015 continue to crunch the sector.

Addressing the first day in Perth today of the Paydirt 2015 Africa Down Under Conference, infrastructure and banking specialist, Mark Tyler, said the outlook for Australia’s involvement in Africa’s mining sector had become a mixed bag in the past year.

“Things haven’t got worse in Africa in 2015 as tough is the new normal in equity markets,” Mr Tyler said.

An investment banker at London-based Nedbank Capital, Tyler said that despite the tough global sentiment on resources, traditional equity investors are still in the African market space and are still there looking for good investments.

“Debt however is becoming harder to source and the number of such institutions operating in Africa has dropped this year,” he said.

“Good developers and producers will get funded but that won’t be the case for exploration ventures which will find it very difficult to attract capital.


“Any review of world mining equity over the past five years will find a massive collapse from the highs of 2010 to probably roughly a quarter of that now – about $11bn annually.

“Mining equity in Africa has collapsed over that period along a similar vein and has been matched with numerous poor stock price performances for African based plays.

“An emerging consequence of this now is that equity fund investors will not readily invest in new African gold mining ventures, and this reluctance to put new money into gold mining has probably carried over into other commodities as well.

“Anecdotal evidence suggests that small amounts of money for Australian backed African mining ventures in Africa, can be raised.”

Tyler said it was clear that many of the African mining projects that were being investigated in the days of easily available equity could now not be developed in an environment in which shareholders demanded a reasonable return on investment.

“Few of the more than 1 500 resources prospects under consideration in Africa will be developed in the near future.”

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