Global Competition For Metals Thrusts Africa Into Mining Limelight

The necessity to secure new sources of metals for the energy transition in the face of sanctions against top producer Russia has raised the risk appetite of large miners in Africa, who have few options to the resource-rich continent.

Companies and investors are exploring projects they may have overlooked in the past, while governments are looking to Africa to ensure their countries can obtain sufficient metals to fuel an accelerated net-zero push.

This year's Investing in African Mining Indaba conference, which runs May 9-12 in Cape Town, will feature the highest-ranking U.S. government official in years, according to conference organizers, as well as representatives from the Japan Oil, Gas and Metals Corporation (JOGMEC), a sign of rich countries' growing concern over supply security.

Steven Fox, executive chairman of New York-based political risk consulting firm Veracity Worldwide, remarked, "The reality is that the world's desired resources are often located in challenging regions."

He stated that the U.S. administration intends to position itself as a prominent proponent of battery metals projects in sub-Saharan Africa.

"While Africa provides obstacles, they are not more tough than the corresponding set of challenges in Canada. It may be easier to complete a project in Africa than in Canada or the United States "He continued.

The United States has expressed support for additional domestic mining, but projects have stagnated. For instance, Rio Tinto's (NYSE:RIO) Resolution copper project was halted due to Native American land claims and conservation concerns.

Mining in sub-Saharan Africa is fraught with danger. Last month, Russia's Nordgold abandoned its Taparko gold mine in Burkina Faso due to the escalating threat posed by extremists, highlighting the severe security problem facing gold mines in the gold-rich Sahel region.

Even in South Africa, the continent's most industrialized economy, declining rail infrastructure forces some coal companies to truck their goods to ports.

With Russia's 7 percent of the global nickel supply, 10 percent of the world's platinum, and 25-30 percent of the world's palladium off the table, Africa's huge resources of these metals become considerably more enticing.

George Cheveley, portfolio manager at Ninety One, stated, "As a mining company, there aren't many prospects, and if you want to grow, you'll have to consider riskier countries."

"Clearly, following Russia-Ukraine, people are more sensitive to geopolitical risk, and you cannot forecast which projects will succeed and which will fail," he continued.

In January, Kabanga Nickel, a Tanzanian project, received finance from the multinational mining company BHP, and its chief executive officer, Chris Showalter, reported an increase in demand from possible offtakers.

Showalter stated that Western sanctions against Russia for its invasion of Ukraine are driving a reconfiguration of metals supply chains along geopolitical lines.

"Not everyone will be able to obtain clean battery metals from a friendly jurisdiction, so I believe some unpleasant decisions will have to be made, and it will push people to make new considerations about where they want to source."