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Egypt’s oil production has been in decline for almost two decades; however this has been offset by the development of the natural gas industry. In fact, natural gas production has increased fivefold since the mid-1990s. Up to around 2004, gas production had increased by just enough to cater for rising consumption levels. Between 2005 and 2006 there was a surge in production, contributing to significantly higher hydrocarbon exports and growth of the region’s GDP.
According to the US EIA, Algeria had proven natural gas reserves of 159 trillion cubic feet (Tcf) in 2012. At current production levels, this would provide output for another 57.7 years. More than half of these reserves are located in the Hassi R’Mel field. Algeria’s production of marketed gas placed it in 10th position on a global basis in 2011. Algeria is also the third largest supplier of natural gas to Europe. However, after peaking in 2005, gas production has decreased over the past few years, contributing to the contraction of the hydrocarbon sector.
Africa is home to some the world’s fastest growing economies, many of them buoyed by new oil and gas finds. Ghana is one of these economies. The country discovered its first large-scale, commercially viable oil field in June 2007. The Kosmos Energy team discovered the Jubilee oil field following the drilling of the Mahogany-1 exploration well in Ghana’s deep waters. A string of discoveries in the Jubilee offshore oil field from 2007 onwards has resulted in Ghana’s confidence in a reserve of around 1.5 billion barrels, with a potential upside of 2 billion barrels from adjacent sites.
Africa’s economies have been expanding robustly as new discoveries of coal, oil and gas look set to create substantial business opportunities and transform the continent’s economies. The continent not only is a major producer of diamonds, nickel and uranium, but also holds 40% of the world’s gold, 60% of cobalt and 90% of its platinum reserves. Africa’s growth, however, results from more than a resource boom, having been supported (amongst other factors) by external trends such as its’ increased access to international capital and ability to forge economic partnerships with foreign investors.
Algeria presents one of the largest oil and gas opportunities in Africa. Algeria is extremely reliant on its hydrocarbon sector, as it accounts for almost 40% of GDP, 98% of exports and 70% of fiscal revenuesAccording to the US EIA, Algeria had an estimated 12.2 billion barrels of proven oil reserves at the end of 2012 – the third biggest in Africa. That said, Algeria’s full hydrocarbon potential still has to be reliably established.
The hydrocarbon sector remains Angola’s main engine of economic growth, accounting for more than 96 percent of exports, 80 percent of government revenue, and in excess of 60 percent of GDP. Accordingly, any volatility in oil production and global oil prices tends to have a direct influence on the performance of the economy.
Nigeria has substantial reserves of both oil and gas, even when compared on a global basis. It accounts for around 95% of export receipts, around 15% of GDP and over 80% of fiscal revenue. As a result, the Nigerian economy is left vulnerable to oil price or crude production volatility.
Mozambique is viewed to be one of the African countries that will be most able to boost its share of foreign direct investment inflows to the continent over the medium-to long-term. Apart from the large-scale expansion of coal production, natural gas exploration activities and plans to build LNG plants have helped to boost foreign investment.
Accurate short term prediction of iron ore pricing is said to more an art than a science, yet many financial institutions and mining companies are making decision on projects with 10 year development time and 30 year life with this price volatility front of mind.
While the world may have seen tougher economic times, it can be said that the South African economy was not previously as connected and global in impact as now. The South African economy is primarily resource-driven and there is a marked impact when the energy and natural resources (ENR) sector does not perform well.
In February 2013, KPMG in Chile published the Quarterly Commodity Insights Bulletin, focusing on Copper. With overall copper demand expected to increase 3.6% in 2013 and 4.3% in 2014, the following are some of the insights gleaned from the Bulletin… World copper mine production increased 2% year-on-year to 16.60Mt in 2012. Production from Chile, the world’s largest copper producer, increased 4% year-on-year to 5.48Mt, after a lower mine production in 2011 due to a series of labour disputes, extreme weather, and declining ore grades.
In Feburary of this year, copper prices were steady at about US$3.70/lb with underlying support primarily driven by demand from continued Chinese government expenditure on construction and infrastructure projects. Overall copper demand is expected to increase 3.6 percent in 2013 and 4.3 percent in 2014.
The future of mining in Africa depends on the short to medium-term outlook of all commodity prices and government tax reform initiatives. These factors will determine whether gold and coal miners succeed in countries like Ghana and Mozambique, and can seriously affect the future growth of the industry.
There is no question that poor infrastructure development is one of the greatest inhibiting factors for economic and social development across Africa, or that the continent’s rich natural resources are its best leverage for turning this situation around …
Anglo Gold Ashanti, the world’s third-biggest gold producer, and its partner, Stratex International, are expected to begin drilling for the metal in Djibouti in September, an energy ministry official has said. The companies, which obtained 10 exploration licences in the Horn of Africa country.
The global mining industry has seen an increase in the number of mergers and acquisitions (M&A) recently – driven by demand fundamentals that remain sound across the globe. Deal value during the first quarter of 2012 was dominated by the long-anticipated US$53B Glencore-Xstrata merger proposal, which if successful, would represent the largest mining transaction in history. According to KPMG’s recently published Mining M&A Quarterly Report First Quarter 2012, more than 81 mining transactions were announced during the first quarter of 2012, compared to a fewer than 50 during the previous quarter, representing an increase of 75% in volume-a strong rise even without the Glencore-Xstrata announcement.
When compared with other continents, Africa is not as competitive as it could be in the global mining industry, as more global investment is flowing into South America and China, says global advisory firm KPMG mining in Africa services head Ian Kramer. However, the African mining industry continues to grow significantly in West Africa, as gold projects are being developed in Ghana, Mali, Côte d’Ivoire, Burkina Faso, Guinea and Mauritania.
Everywhere in the world where there is a growth in the mining industry, a vacuum quickly develops around education and skills development. Simply put, there is simply not enough human resources in the mining industry globally to cater for the significant growth in the industry. Ghana is not escaping the huge pressure its mining industry faces when it comes to education and skills development.
I am of the view that Ghana, as a country, is at a tipping point, when it comes to foreign investor decisions as to whether the country is a friendly or hostile investment destination. As everywhere else in the world, investors in the mining industry require clarity and certainty around government’s support to the industry. Major tax reforms similar to the ones proposed and currently enacted in Ghana does not assist in providing such certainty.
The value of Canadian mining mergers and acquisitions plunged 50% in the first quarter compared to the prior three months, with only one deal topping $1-billion.
Gold accounted for 60% of deal volume and value for the period. During the three months ended March, KPMG counted 25 deals worth more than $10-million in the Canadian mining sector, which was comparable to the December quarter’s deal volume.
The future of mining in Ghana is dependent on the short- to medium- term outlook of the gold price, which will determine whether gold miners in the country are successful, and the government initiatives around tax reforms that have the potential to seriously affect the growth of the industry.
Ghana has been viewed as an investor-friendly mining destination in the past, but this perception may be challenged, says KPMG energy and natural resources advisory practice director and Mining in Africa services head, Ian Kramer.
A KPMG survey entitled Responses to the Climate Change Debate: KPMG Mining Industry Survey covered North America, the Asia Pacific region, Africa, the Middle East, and South America.
Ian Kramer, Director and Head of Mining in Africa for KPMG, says that the report found that less than 20% of global mining sector players believe that climate change is a significant driver for new initiatives in their organisation, with almost 50% of the sector reporting that their organisations had not quantified the potential cost of climate change into their business.
According to mining in Africa director, Ian Kramer, there will be significant opportunities and projects coming on stream in the African mining industry regardless of the decrease in demand experienced by various markets.
“Massive growth will be experienced in the next six months to a year and beyond – for example, investments in the coalfields in Mozambique, as well as the iron-ore market and existing and new investments in Guinea, but these may take longer than a year to come to fruition.”