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Lunding mining
Lunding mining

Mining

Between a rock and a rewarding place Add to ...

In the space of a few minutes, Paul Conibear showed why so many Canadian miners are finding Africa so alluring - and so maddening.

Mr. Conibear, a senior executive at Vancouver-based Lundin Mining Corp., gave a passionate account of his company's investment in the massive $2-billion Tenke project in Democratic Republic of the Congo, one of the world's richest copper projects and the biggest foreign investment in the history of the war-torn African country.

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Lundin is so enthusiastic about the project that it's ready to sink another $100-million into it this year. Yet in the same speech yesterday, Mr. Conibear acknowledged that his company is still trying to negotiate a solution to a long-running dispute with the Congo government over the mine's contract. And until the conflict is settled, its expansion is on hold.

"We'd like to expand this asset rapidly," Mr. Conibear told the Mining Indaba in Cape Town, South Africa, the biggest annual conference of African mining investors. "We're committed to being in Congo for many, many decades."

But the contract review, which was supposed to be finished last year, is still dragging on without a clear end in sight. The government wants to double its stake in the mine, in which Lundin currently has a 24.75-per-cent share. Another Canadian company, First Quantum Minerals Ltd., is facing a similar battle over its contract for a separate copper project in Congo.

Lundin's quandary in Congo is symbolic of Africa's vast appeal to Canadian mining investors - and the frustrations that go along with it.

At the mining conference in Cape Town this week, Canadian miners have been upbeat about Africa's enormous mineral resources, which are increasingly accessible and affordable. But the risks and obstacles are also clearly visible.

The chief executive officer of First Uranium Corp., based in Toronto, was scheduled to speak to the mining conference yesterday, but he cancelled his appearance at the last minute. A company official said the cancellation was owing to emergency meetings connected to the South African government's surprise withdrawal of an environmental permit for one of the company's projects. First Uranium said on Tuesday that its financial position could be "severely" compromised by the government decision.

Another company, CIC Energy Corp., is facing its own regulatory headaches that have delayed its African investments. The Toronto Stock Exchange-listed company, controlled by Toronto-based Tau Capital Corp., is developing a coal mine in Botswana and a power plant in neighbouring South Africa to supply the mine with power. But after spending $100-million on the project, the company has hit a brick wall: It must wait for the South African government to complete a new plan for energy resources in the country.

Despite a severe electricity shortage in South Africa, the company has been forced to delay its power plant until the new plan is drafted. "We've been very badly affected by delays in regulatory and government-related processes," the company said in a presentation to the mining conference yesterday.

Yet while some Canadian investors are facing difficulties in South Africa and Congo, many others are excited about growth in Africa, especially in West Africa, where political stability is strengthening.

"West Africa's got a huge untapped potential still," said Brian Chandler, senior vice-president of African operations at Iamgold Corp., a Toronto-based company with mining projects in four African countries.

"The politics have become more stable in lots of these countries. Places such as Burkina Faso, for example, are open for business and really keen. In some of the jungle areas, there's a lot of opportunity that hasn't been tapped because you can't see it that easily. As these countries become more open to encouraging mining, I think there's still a huge, huge potential there."

The company's gold project in Burkina Faso, the biggest foreign investment in the country, is being accelerated so that it will go into production in August, several months ahead of schedule. The company is also expanding its office in Dakar and looking for acquisition targets in Africa, Mr. Chandler said.

The confident mood of these Canadian miners was matched by AngloGold Ashanti Ltd., the South African company that remains the biggest gold producer in Africa. Its chief executive officer, Mark Cutifani, said Africa will be crucial to the future of global mining.

"If you are not positioned to be in Africa for the next 20 years, then you should be doing something other than mining," he told the conference.



'FAST AND FURIOUS'

Red Back Mining Inc. RBI-T, based in Vancouver, has been growing rapidly on the strength of its gold mines in Mauritania and Ghana. The company's president and chief executive officer, Richard Clark, says he expects it to produce 500,000 ounces of gold this year, almost double the production of 2008, and he expects $300-million in cash flow this year.

He predicted that its Mauritania project will soon be recognized as one of the biggest new discoveries in Africa. "We are drilling at a fast and furious pace," he said.

"It has been a great investment for us."

Geoffrey York

Follow on Twitter: @geoffreyyork

 

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