"The ability of mining companies to create new opportunities for socio-economic development in the communities within which they operate is central to sustainability across the continent. This is a key factor that stretches from the context of private business through to government policy, and which includes a need for strong, active relationships between governments and mining companies."

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Dzingira Matenga

MANAGING DIRECTOR, DEVELOPMENT ASSETS, ERG AFRICA

November 15, 2018

Can you introduce our readers to ERG Africa’s (ERGA’s) development assets and outline how it operates relative to the global Eurasian Resources Group (ERG)?

ERG has developed a new operating division focused specifically on development assets within Africa, all of which are greenfield or near-term production projects. We are developing these projects with the objective of getting them to the production stage. If the asset is attractive to ERG’s vertical integration strategy, we will look to either bring it into the company's production portfolio or potentially take the project forward through co-investment. Otherwise we will divest them to other mining players who can bring them to production.

This division is currently most active within South Africa, Zimbabwe and Mali. What is guiding your interest in these specific regions?

Our regional focus has been determined by the strength of the deposits that we have acquired. In Mali, around two hours away from Bamako, we own Falea, the seventh largest bauxite deposit in the world, which is a 1.6 billion tonne reserve. This is the equivalent of 570 million tonnes of aluminum metal. In Zimbabwe, we own the fourth largest platinum mine in-country, with an estimated 4.3 million tonnes of platinum metal and additional significant chrome outcrops. We are seeking around US$150 million to develop the plant for downstream processing and the concentrator.

In South Africa, we own the largest known fluorspar reserve in the world, called Doornhoek; a 100 year plus deposit in North West province. This is a significant opportunity because the commodity has multiple applications in consumer growth driven markets ranging from lithium-ion batteries to gases used for refrigeration and air conditioning. We are in the development stage at this site, and we have signed a joint development agreement with a state owned entity in South Africa that will be the primary off-take partner.

What are the challenges and advantages of having a bauxite project in Mali rather than in Guinea, which has a tradition in bauxite mining?

In Mali, a lack of adequate infrastructure is the main challenge, specifically the rail system and power availability. The government is looking at investing in rail and there are adjacent ports such as Dakar in Senegal, but there are issues with port capacity.

In the recent past, companies in Mozambique invested in gas and coal fields and lost money because their logistics plan for the deposits was not compatible with the available infrastructure, and we aim to learn from those mistakes. We anticipate that despite these challenges, our bauxite mine in Mali will do well because it enjoys several distinct advantages; our mine is an unusually shallow deposit at 10m deep so we classify it as a stripping mine and the grade is also extremely high.

Another benefit of being located in Mali is that, as a nascent industry, the government is very open to assisting us and providing support in terms of regulations and legislation regarding transport and logistics they are always very helpful. We also have a close relationship with the President of the Chamber of Mines who is also a board member on our project and enjoy good working relationships with various ministries.

What do you consider the most critical issues facing the mining industry in Africa?

Issues with power are rife across many countries in the continent. On average, self-generated power is three or four times more expensive than grid power. Unlike the SADC, which has a well-developed power trading market (Southern African Power Pool), other regions do not have such arrangements. This means that importing power becomes a challenge due to limited transmission infrastructure, no power wheeling arrangements between neighbouring country power utilities and interconnectors.

In addition, the ability of mining companies to create new opportunities for socio-economic development in the communities within which they operate is central to sustainability across the continent. This is a key factor that stretches from the context of private business through to government policy, and which includes a need for strong, active relationships between governments and mining companies.

Beyond the attractiveness of an asset, which regions or countries do you believe have the most growth potential for mining in Africa?

West Africa does well in oil and gas, but is lagging behind in mining; their policies and regulations need to be better developed, and it is essential that they offer more incentives for the industry to grow. Furthermore in many instances investors simply have never been introduced to the opportunities in this region and governments and private sector players will really need to focus on practical investor promotion interventions to exploit the GDP generating potential of mining.

South Africa will need to urgently address the issue of developing a junior mining industry. Currently mining only contributes an estimated 7.4% to our national GDP but I have high hopes that projects such as Doornhoek will provide great case studies on building junior miners via innovative and aggressive off-take relationships with State and private sector players.

In Zimbabwe, I expect the industry to flourish over time as there is a long history of mining, an abundance of easily accessible skilled labour, equipment and geological knowledge which reduces the learning curve gradient for potential investors and new entrants into the country

How do you anticipate the company evolving over the next 3-5 years and contributing to the development of the mining industry across Africa?

We are currently developing a team of professionals who have a keen interest in applying themselves in challenging jurisdictions and working with a range of stakeholders to get our development assets investment ready. This has really energized ERG Africa and we hope to do our small part to push the industry forward. Everything we consume on earth requires mined materials and now is the time to re-position mining at the top table of global and African GDP growth.

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