AMN - Juniors well placed to benefit from resurgence – comment by Yolanda Torrisi

Junior miners operating throughout the continent of Africa appear well placed to take advantage of improving commodity prices, according to Shumba Energy chairman Alan Clegg, although whether juniors in South Africa benefit as much remains to be seen.

Speaking at Junior Indaba in June, Alan Clegg said the general sentiment was that a recovery was under way in the resources sector and for the mining sector to secure a sustainable future, smaller projects were the way forward.

“After several years of downturn in the mining and mineral resources sector, green shoots continue to appear on the back of a recovery in commodity prices, which began in 2016 with a corresponding improvement in investor sentiment.”

No doubt many miners will be encouraged by his statement: “The bottom line is we are in a new ‘bull’ market that is just moving into the second innings and will this time likely be hot for the next 8 to 10 years.”

He told delegates that juniors were well placed to take advantage of the better-performing commodities, including gold, copper, silver, nickel, tin and zinc, as well as lithium and graphite, however, the performance of companies would be hampered by the urgent need throughout much of the continent for more and better infrastructure.

Alan Clegg was a less enthusiastic about the prospects of the mining industry as a whole in South Africa. “South African mining is at a tipping point with ongoing political and regulatory uncertainty and recent ratings downgrades adding more fuel to the fire. South African juniors are likely to feel the ramifications of recent events even more acutely than the majors.”

He said the major obstacle in the country remained “resource nationalism encompassing unrealistic and unsustainable political ideologies propagated by the government and organised labour expectations”.

He concluded: "Hopefully post 2019 we will see a reversal that will once again attract FDI into the sector. But until then forget South Africa and major capital investments that make a difference. Local majors will continue to either consolidate with mergers, shut down unprofitable operations or divest in favour of offshore assets in more supportive jurisdictions in Africa and globally.”

Yolanda Torrisi is Chairperson of The African Mining Network and comments on African mining issues and the growing global interest in the African continent. Contact:yolanda@yolandatorrisi.com