The need to secure new metals supplies for the energy transition, along with sanctions against Russia’s biggest producer, has raised Africa’s risk appetite for large miners, who have few other options.
Companies and investors are looking at projects they would not have considered before, and governments are turning to Africa to guarantee their nations can acquire enough metals to support an accelerated net-zero drive.
The highest-ranking US government official in years will attend this year’s Investing in African Mining Indaba conference, which runs May 9-12 in Cape Town, according to organizers, as will representatives from the Japan Oil, Gas and Metals Corporation (JOGMEC), in a sign of rich countries’ growing concern about securing supply.
“The fact is that the resources the world wants are usually found in tough regions,” said Steven Fox, executive chairman of Veracity Worldwide, a political risk consultant based in New York.
According to him, the US government wants to be seen as a big proponent of battery metals projects in Sub-Saharan Africa.
“While Africa has its own set of issues, they are no more tough than the challenges that Canada faces. It may be easier to bring a project to conclusion in Africa than in Canada or the United States “He continued.
The US has shown interest in additional domestic mining, but plans have stagnated. The Resolution copper project, for example, was terminated due to Native American land claims and environmental concerns.
Mining dangers in Sub-Saharan Africa are unquestionably substantial. Last month, Russia’s Nordgold abandoned its Taparko gold mine in Burkina Faso due to an increased danger from extremists, highlighting the serious security problem that miners in the gold-rich Sahel face.
Even in South Africa, the continent’s most industrialized country, declining rail infrastructure is forcing some coal companies to ship their goods to ports by truck.
However, with Russia’s 7% of global nickel supply, 10% of global platinum, and 25-30% of global palladium off the table, Africa’s huge supplies of those metals begin to appear a lot more appealing.
“There aren’t many prospects as a mining firm, and if you want to develop, you’ll have to look at riskier nations,” said George Cheveley, portfolio manager at Ninety One.
“Clearly, people are more sensitive to geopolitical risk following Russia-Ukraine, and you can’t foresee which projects will succeed and which will fail,” he continued.
Kabanga Nickel, a Tanzanian project, received finance from major miner BHP (BHP.AX) in January, and CEO Chris Showalter said potential offtakers are showing greater interest.
According to Showalter, Western sanctions against Russia for its invasion of Ukraine are driving metals supply networks to reorganize along geopolitical lines.
“Not everyone will be able to obtain clean battery metals from a friendly jurisdiction, so I believe some difficult decisions will need to be made, and it will require individuals to reconsider where they want to source.”