No risk no reward

As commodity prices further strengthen and profit margins increase, established mining companies and junior exploration companies are once again looking at Africa to diversify their portfolios, writes Leon Louw.

Several junior exploration companies were present at this year’s Investing in African Mining Indaba, held in Cape Town, South Africa recently, with gold projects in West Africa, and the development of battery minerals throughout the continent dominating the exploration space. Big players like Barrick Gold, AngloGold Ashanti, Rio Tinto and B2Gold, among others, are looking at expansion and/or exploration to further strengthen their position on the continent.

Africa, however, remains a high-risk mining destination, and present several challenges. According to a number of speakers at this year’s Indaba, political instability and regulatory uncertainty often hamper investments into Africa. To enter African countries, companies need a strategy which includes an in-depth risk assessment and local support and knowledge. Junior exploration projects often fail because the companies do not have a genuine understanding of local operating conditions. Sourcing accurate information about African countries, its political and economic landscape, and operational challenges, is vital. Investing in African countries and fragile states remains a risky undertaking, but the rewards are extremely high.

Leon Louw specialises in African affairs and mining. For more about doing business in Africa, mining and mining operations in Africa and the political risk of operating in Africa, follow Leon on Twitter and Linkedin, subscribe to Mining Mirror and African Mining, or follow the two magazines online.