Breaking New Ground

With the EV revolution quickly gaining pace, and sourcing new metal supplies now a crucial consideration, leveraging opportunities in Africa is an attractive prospect for explorers and miners in the West and China.

John Meyer, Partner and Head of Research at SP Angel, gives his views on how African countries can help feed demand for stimulus projects around the world.

Africa set to gain from COVID-19 stimulus as East and West compete for metals in the new COVID-super cycle

• Africa offers significant opportunities for explorers and miners to provide the discoveries and minerals required for modern-day growth
• The continent remains largely unexplored in many areas and still offers the prospect of high-grade resource discoveries
• New infrastructure in recent years has opened up new areas that were previously tough to access and difficult for exploration with local chieftains often keen to welcome mine development
• Explorers are actively looking for copper in Zambia, the DRC, and Botswana as the supply of new copper projects to develop dries up with the majors watching closely for new discoveries

We are increasingly seeing the major miners cooperating with junior companies for pole position on new discoveries

Majors increasingly supporting juniors

• We are increasingly seeing the major miners cooperating with junior companies for pole position on new discoveries
• The juniors have been quick to take licenses in prospective areas, often with good quality geological data on where to target new discoveries
• Many areas across central and southern Africa host significant geological structures offering high-grade minerals
• Ore deposits are often in areas of sparse population with no previous economic activity, making their development much easier from a social perspective
• Local populations are also keen for the work offered, seeing jobs on mine sites as high-quality, status-enhancing employment, while local and regional administrations are often grateful for the infrastructure and facilities which accompany mine construction
• China is naturally pulling back its African development funding to focus on domestic development, leaving the space open again for Western companies to step into the vacuum

Demand from stimulus projects and new EV and power metals are key drivers

• Globally, stimulus funding of around US$19-20T is driving new infrastructure growth with new projects in planning in the West to generate new demand in competition with rising Chinese consumption
• Acceleration of the transition to electric vehicles will also require the development of many new mines to feed their very specific material demand and we expect deficits to form in key metals — mainly EV, Li-ion and VRFB metals NCM + Li, and graphite
• Africa will naturally provide the lithium, cobalt, copper, nickel, manganese, and rare earths required for production lines in the West due to the presence of higher-grade mineralization of most ores on the continent
• We also expect many African nations to enable the more rapid development of mines from new discoveries due to easier permitting regimes and less bureaucratic licensing processes

Engineering skills

• Southern Africa particularly benefits from the engineering skills around Johannesburg offering generations of expertise on the doorstep of its neighbouring and near-neighbour nations as South African engineers increasingly look outside their home territory for business
• Access to these skills is essential for the development and efficient operation of new mines with easy connection with the copper belt in Zambia and the DRC
• The ability to utilise these highly skilled South African resources is essential for Africa’s mineral development as contractors from other regions often don’t understand the sensitivities and challenges present across the continent
• South African engineers know how to operate on the limited infrastructure in many areas and with a lack of nearby support given the lack of infrastructure

Africa to fill the gap

• Africa has the opportunity and resources to fill the gap in new metal supply that will be needed as the West ramps up demand while China presses ahead with its new Dual Circulation policy and stimulus infrastructure projects
• China’s partial pullback to focus on the restoration of domestic growth gives Western explorers better opportunity to capitalize on the resources Africa has to offer and the U.S. and Europe recognize the implication of “resource nationalism” and the threat it presents to Western manufacturers which are increasingly competing with China for increasingly critical raw materials