Capital crisis triggers mining M&As ­- report


The potential for mergers and acquisitions (M&A) in the mining sector is seen rising this year in all regions in Africa, including Zimbabwe, as the resources industry ropes in new investors into their expansion and rehabilitation projects, the 2010 Africa mining survey report shows.
But navigation in the M&A market is considered a risk.
The survey — conducted in September and October last year — elicited responses from mining companies, investors, investment banks, exploration and development companies, contractors, suppliers, governments, consultancies and law firms across the globe.
Eighty-three % of the respondents agreed that consolidation in the mining industry was now “inevitable” and would intensify during this year owing to challenges in raising and accessing capital for investment in promising projects.
The global economic crisis has stocked risk aversion and induced conservative lending in international capital markets, starving investors who had lined up numerous pipeline projects to ramp up back to previous optimality levels.
Despite this, Africa’s resources industry is still tipped to absorb the greatest proportion of whatever money private equity funds, mutual funds, asset managers, private banks and proprietary banks would make available.
Recently, these players have taken a keen interest in mid-tier mining companies many of which are aiming to grow into senior corporations.
According to the survey, 83,3% of the respondents said they are evaluating new projects in Africa with a long term view.
South Africa — which dominates the potential for new large-scale projects in Africa — is expected to capture the bulk of the new potential investments, followed by resource-rich Botswana, Ghana and Tanzania.
Zambia, Namibia and Congo have also been ranked ahead of Zimbabwe, which sits on the 8th position in terms of the wealth of mining investment opportunities. Nigeria and Morocco complete the league of 10.
The report noted that apart from funding constraints, political and geo-political factors and risks threatened to hold up potential projects in troubled spots.
Zimbabwe’s perceived country risk has been stocked by the controversy surrounding planned amendments to the country’s mining legislation and indigenisation requirements.
Other deterrents include finding new deposits, attracting new investment and implementing more environmentally-friendly procedures and practices.