Africa is endowed with great mineral wealth, but not with the financial wealth required to develop mines to extract minerals – such as gold, diamonds, platinum-group metals, cobalt, manganese and uranium – says financial services provider Nedbank Corporate and Investment Banking (CIB) mining and critical minerals head Nivaash Singh.

To address this imbalance, significant industry events – such as the Africa Down Under (ADU) event, which will be held in Perth, Western Australia, from September 3 to 5 this year – present an ideal opportunity for commercial banks and investors to display their intent to provide cogent financing solutions for mining projects in Africa.

Singh adds that, in many cases, the financial equity required to establish mining projects in Africa comes from the developed world, particularly Europe, Australia and Canada, while conversely, the debt component comes from commercial banks in Africa and the rest of the world.

While Nedbank is headquartered in Johannesburg, South Africa, he says it can compete with other international banks in so far as the African continent is concerned, as the bank has successfully provided debt capital for mining finance transactions in 22 African countries across various commodities.

“We provide the debt out of our Johannesburg office using our skilled team of 16 bankers who have a combined 130 years’ experience in the mining sector. Our team comprises mining engineers, geologists and chartered accountants [who] are all focused on the mining sector,” he explains.

Nedbank’s CIB team will travel to this year’s ADU event to meet with mining companies and investors that want to develop mining projects in Africa to indicate interest in providing the debt component of the funding package.

Investment Criteria, Challenges

Despite some key investment indicators that Nedbank considers when financing mining projects in Africa, Singh notes that the quality of management is integral to successful mining projects.

He notes that the quality of a project takes second priority, as a good management team can make a bad mining project work, whereas a bad management team can destroy a good mining project.

Nedbank also assesses a company’s access to equity markets, whether it is publicly listed and the quality of the relationship with the host government.

“We prefer backing mining companies that have solid relationships with their host governments and relationships that are mutually beneficial and not one-sided.”

Political uncertainty is a major financing challenge because of factors such as political instability, poor policy formation, generally poor governance and, ultimately, government interference, adds Singh.