African mining needs 'cheap, reliable' power

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Access to cheap and reliable power is expected to remain a key success factor for mining companies in Africa, according to Mark Buncombe, head of mining and metals at Standard Bank Group.

He said in a statement that, as the cost of solar power comes down and new storage technologies are developed, it makes solar more viable as a source of power for the mining industry in Africa.

Despite escalating trade wars keeping commodity prices in check as well as increased regulatory challenges across the continent generally, Standard Bank's mining team anticipates that 2019 will see miners continue to cautiously pursue emerging pockets of opportunity across the continent.

Over the last 18 months, the focus in the mining sector has been on debt reduction and balance sheet repair. The results of this consolidation have been largely successful, with a few miners paying dividends for the first time in some years. As such, "efficiency improvements and portfolio and asset optimisation are expected to continue into 2019 as companies remain committed to moving down the cost curve in response to the 2013 to 2015 downturn", according to Buncombe.

He expects 2019 will see a renewed focus on mergers and acquisitions.

"The positive reception afforded the Barrick-Randgold merger in late 2018, for example, has encouraged other management teams to look more seriously at mergers and acquisitions as an option," commented Buncombe.

In his view, optimism levels across the continent will ultimately, however, mirror the regulatory environment, "with more investment expected where policy makers have actively encouraged investment".

For him Ghana was a case in point in 2018.

In South Africa, the finalisation of the Mining Charter and the shelving of controversial amendments to the Mineral and Petroleum Resources Development Act, for example, are expected to similarly accelerate corporate activity and the commitment of capital to the local mining sector in 2019.

Other increasingly favourable legislative environments on the continent include Namibia, Botswana, Mozambique and Ghana, in his view.

"Despite ongoing currency volatility and uncertain global macro and commodities outlooks, other options to maximise value and drive growth and investment are available for miners in Africa's more favourable legislative environments," said Buncombe.

"Africa's miners are increasingly seeking to optimise cost, liquidity and working capital requirements using additional products like asset financing, invoice discounting and inventory financing.

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