Its fantastic to finally see an African investment firm looking into African mining assets and investing. African Finance Corp (AFC) of Nigeria is one of the few African investment firms announcing this move in West Africa. If national economies want the full benefits of mining investment, they need a level of national investment and not all foreign investment. The challenges with small and large international investors, although they have the expertise and ability to raise money to develop mines quickly, once the mine is operational and infrastructure paid for, they pay the legislated taxes and royalties and then want to take their full profits out-of-country back to their shareholders on international exchanges (TSX, ASX, AIM) whom now have high dividend expectations (of all mining companies) as well as re-investment into their other international projects. The end result national governments see large amounts of profit leave their country and not get re-invested into their national economy, this ultimately creates conflict with national government v’s international mining company and can lead to increased government frustration and sometimes legislative changes (Tanzania, Zambia, South Africa, DRC, Sierra Leone etc) to try and peel more money back for the development of their economy and people. The legislative changes are then interpreted as instability by the foreign investment companies and they start to retreat from African nations. Developed mining nations can afford open market funds flow in/out of country as they also have sophisticated stock exchanges also making them money from mine assets held in undeveloped nations via share taxation. Inversely, African nations cannot afford open markets nor do they have sophisticated mine stock exchanges, they essentially need the mine profits to develop their countries infrastructure and economies.

We need to see more African’s investing into their own mining industries at a national level to truly create the sustaining transformation and uplift governments expect from mining assets. Once mined the opportunity no longer exists. African governments therefore need to bear some of the cost burden on implementing methods which attract national investment, this is usually done by tax incentive particularly for exploration same as is done in the developed mining nations.

 African lender eyes unloved neighborhoods in mining drive

ABUJA – African Finance Corp (AFC) will invest in countries disregarded by other companies as part of a plan to double its exposure to the mining industry, the firm’s head of investments said.

The Nigeria-based development-finance firm is mulling mining and refining opportunities in Mali, Burkina Faso, Gabon and the Democratic Republic of Congo. The sector remains attractive despite the US-China trade dispute dragging down global commodity prices, senior VP of investments Begna Gebreyes said.

AFC currently has about 10% of its long-term assets in mining and will increase that to 20% in three to five years, Gebreyes said in an interview Tuesday on the sidelines of a mining conference in the Nigerian capital, Abuja. At the same time, the company plans to more than double its overall balance sheet to $10-billion by 2025, he said.

“We are not accelerating indiscriminately, we are picking our spots,” Gebreyes said. “We see a lot of great untapped assets in what others may consider unattractive neighborhoods.”

Ultra-low or negative interest rates in developed economies will help sustain gold prices, while a global shift to renewal energy will likely bolster the value of battery minerals such as cobalt, nickel and manganese in coming years, Gebreyes said.

AFC is considering investing $500-million in mining and smelting projects to help add value to the resources produced in Africa, said AFC’s head of natural resources, Osam Iyahen. He declined to identify the targets.

The company is also concluding a $78-million debt-equity package with Vancouver-based Thor Explorations to develop an advanced gold project in southwest Nigeria in what would be the largest ever investment in the nation’s mining industry, Iyahen said. AFC also plans to create a fund to finance feasibility studies of early-stage Nigerian projects, he said.

Known for its vast oil reserves, Nigeria has large deposits of minerals including iron-ore, gold, zinc and lead. The nation doesn’t have any large-scale industrial metal production in a sector that contributes less than 0.1% of gross domestic product, according to the National Bureau of Statistics.

Article Published by Boomberg 18th October 2019.

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