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ADU: Plenty of talk

but all of it valuable

As you will see from our extensive for those who have been dominated by a single commodity.
event coverage (starting on page 18), Potential investors need compelling reasons to head to a
last month’s Africa Down Under (ADU) country. There is only so much an African government
was an enormous success with more could justifiably spend on pre-competitive data – none of
than 1,200 delegates in Perth for the them will, or should, be copying WA’s Exploration Incentive
conference. Scheme anytime soon – but whatever they can afford and in
ADU has grown into a multifaceted partnership with surveys from other countries, and with funds
forum down the years but its prime function has remained the same; from international institutions, will be well received
convincing investors, media and shareholders that African projects • Dropping beneficiation requirements. There is still talk of val
can be developed, built and operated successfully and to the benefit ue-addition and beneficiation and in some cases it shows
of all stakeholders. signs of being a success but for the most part African coun-
However, it can still be difficult for an African-focused company to tries don’t have the infrastructure capacity to build downstream
convince investors of the merits of financing a project on the continent. value-addition industries and forcing miners to undertake
Prosecuting any investment case is about stripping away the layers such activity will only send them running for the hills. Better
of preconceived doubt investors may hold. For a gold project in a well- to focus on how new mining projects can help build associated
trodden part of Western Australia, the layers are few and a company service industries
may only have to strip a few layers away (resource, engineering, met-
allurgy) to reveal the investment case. • Policy stability. Mike Christie of First Quantum Minerals Ltd
In Africa, the layers are much denser. As well as resource, engi- went straight to the point when discussing the company’s
neering and metallurgy layers, there are political and infrastructure Zambian experience; three major policy shifts in the last
risks, a community dimension and security concerns. Projects with a decade is no way to attract new investment. Existing operators
non-precious or base metals focus bring further individual risks. have to busily rework their assets to see if further
It can be an unenviable task and no matter how good a project or investment is worthwhile and no new foreign investor is going
the management’s sales pitch, it is impossible for a company to strip to be attracted by highly unstable fiscal environments.
away all these layers alone. To unveil the investment case, African The evidence was at the conference that if countries do adhere
miners need support from government. to international standards and do provide open, clear and transpar-
The problem is, the traditional relationship is one of mistrust. Gov- ent investment climates they can succeed in building their industries
ernments see foreign investors as rapacious, investors see govern- quickly.
ments as corrupt. In this scenario, the idea of partnership is one When I first visited Cote d’Ivoire in 2008 it was on the verge of fall-
where the partners have an arm around each other, reaching into one ing back into civil war. There were few mining operations and despite
another’s back pocket. having 22% of the known Birimian greenstone belt, it was flagging
So, what can African governments, who are often cash-strapped well behind neighbours in the pursuit of gold exploration investment.
and in no position to provide any financial support, do to help a miner When I returned to the country a year ago, I visited one of six operat-
produce a successful investment case? ing gold mines and one of more than a dozen exploration projects.
Speaking at ADU, West Australian Minister for Mines and Energy Neighbouring Burkina Faso is even further ahead. It has grown
Hon Bill Johnston neatly summed it up: its gold sector from nothing to a 13 commercial gold mines in less
“Providing clear and consistent regulatory framework is, in our view, than two decades on the back of sound, stable transparent mining
essential for providing industry with the certainty that’s required to get policies and tax regimes.
long-term investment decisions,” he said. Companies, of course, have their own role to play.
“A comprehensive and transparent mining approvals process Resolute Mining Ltd’s John Welborn was first to offer an olive
that takes into account the impact of the environment, occupational branch at ADU.
health and safety, and the impact on other land users is critical for “Resolute has recognised the difference working in Africa to Aus-
ensuring a sustainable resource industry.” tralia,” Welborn said.
Of those governments present at ADU, there was a consistent un- “In Australia, the relationship with government is distanced and
derstanding of what needed to occur to create such an environment. purely under a tax framework. In Africa it is very different…it is about
While each country has unique circumstances and individual chal- balance and where the benefits of the mine go and need to go.
lenges, there are a number of common levers which can be pulled to “Responsibility is two-way; it needs transparency and faith from
create a climate conducive to resources investment: governments, but companies need to demonstrate that as well. It
is a challenge for all companies; are we there to bring genuine first
• A strong online cadastre system. This not only allows inves world standards or exploit various advantages we can achieve?”
tors to make applications from their own offices but offers a Johnston and Welborn’s comments were a nice summation of
level of transparency old systems cannot match. Investors are what Paydirt has always set out to achieve with ADU; demystify the
more willing to commit to exploration in a country if they know continent for investors and demystify the industry for governments.
the licensing system is fair and transparent
• Better pre-competitive data. This is particularly pertinent to
those countries just starting out on their resources journey or dominic@paydirt.com.au @DominicPiper

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