African Mining Sector Investment To Rise Significantly in Q3 This Year

SEATTLE (Scrap Monster): The investments in African mining sector is likely to see significant increase during the third quarter of the current year, despite recent policies by several governments to reserve larger share of its mineral resources within the country of operation. The industry overview report published by BMI Research states that such changes in policies are unlikely to deter further investments in the region.

The report mentions the new mining code recently proposed by the Democratic Republic of Congo (DRC) which substantially increases the cost of doing business in the country, by way of miners requiring paying higher royalties to the government. Incidentally, Mali too had recently announced its intention to formulate a new mining code this year. At first sight, it may seem that implementation of the new mining code may pose downside risks to the country’s mining sector. However, BMI does not foresee any major negative impact on account of this in the forthcoming quarters of 2018. On the contrary, DRC and other countries in the region are likely to benefit from the series of mining mergers and acquisitions in pipeline.

BMI Research predicts improved profit margins for major African miners including AngloGold, Randgold and Impala Platinum, mainly on the back of rising commodity prices. Improved balance sheets may result in significant pick up in merger and acquisition activity. The report further predicts highest free cash flow in six years for miners.

According to BMI, all major mining markets across African region are likely to face growing risks from illegal mining activity in the forthcoming quarters. The lack of resources to address illegal mining will limit government’s efforts to stop the practice. Country-wise, Ghana will be the most affected. DRC also remains at risk, BMI notes. In general, gold-producing countries will be more affected.