Well managed mines promise big rewards
The mining sector has a promising future: demand for mined commodities is being driven up by increasing urbanisation throughout large parts of Africa, South-East Asia, India and China. Africa, being rich in minable goods, is particularly well placed to benefit across the board from this increase in demand. Rodney Nelson, KPMG Global’s mining leader for projects, is optimistic about African mining, believing there is much untapped socio-economic potential on the continent. He does however caution that this potential will only be realised if the continent’s mining leaders are able to govern existing and future mining operations with insight and dexterity.
The challenge facing mining leaders in Africa is to develop more streamlined, cost-effective and sure-fire ways of managing the complexities involved in Africa-based mining projects in order to ensure success and longevity. The universal challenges of mining – knowing how best to extract the raw material, accrue the required finances, develop necessary infrastructure, liaise with governments, communities and other stakeholders, and ensure safe and timeous transportation of goods to port cities for export, among other things – necessitate directors who are capable of understanding as well as managing the interplay of these multifaceted issues. Furthermore these leaders, in order to flourish in Africa, need to have the skills, experience and lateral thinking to develop good working solutions to the wide-ranging challenges that attend Africa-based mining operations specifically, such as water scarcity, paucity of infrastructure, geographical obstacles and transient governments.
From setup through to maintenance and development, mine managers cannot make informed decisions leading to success and growth if they do not have a comprehensive understanding of the context of their operations; no single business and operating model for mining can be superimposed anywhere in the world and be expected to produce favourable results. The politics, social mores, work ethic, climate and so on of a particular location all need to be factored in to develop a working model that will produce the best results.
As Nelson has said, “Derisking and properly managing a mining project will enable a mining company to meet market demands and bring a deposit into commercial production.”
Understanding context and collaborating with stakeholders
There is an increasing number of new mining operations all over Africa, including those in the Cameroon, Angola, the DRC, Mozambique, Zambia and South Africa. Transporting mined goods from a pit to the closest or most suitable port is a major challenge on a continent where infrastructure is often either poor, non-existent, irregular, unreliable or a mix of all these. Mining companies require safe, dependable and prompt transport, and in some instances this means building the necessary infrastructure themselves. Any such endeavour will demand an understanding of local policies and industry. Further to this, judicious directors will seek to develop good relations with the government of the country/countries in which the operations take place, as well as with the community affected and any other stakeholders that exist.
In the words of Nelson,
“The mining company and government need to understand what is important for the jurisdiction in which they operate: equally, governments need to understand the motivation behind mining companies’ actions and the way in which they operate. Only then will a project be successful.”
The onus is on the companies to develop this mutual understanding, not only with government but also with other stakeholders. It is in this way that companies can ensure buy-in on all fronts and so reduce the risks involved in pouring capital and time into mining ventures that might otherwise receive criticism, negative media and other backlash if the local community or country were to fell it was being short changed or maltreated.
For example …
The Brazilian mining group Vale, in order to develop its transport link between the Moatize mines in Mozambique’s Tete province and the deep water port near Nacala in Malawi, engaged in conversations with the presidents of both countries, agreeing to government concessions, the rehabilitation of existing railways, land acquisition compensations, and utilising a quotient of local labourers. Joyce Banda, President of Malawi, is on record saying that of a projected workforce of 4,500 as much as 70% will be Malawians. Projects that tick the boxes of wealth creation, job creation, infrastructure development and skill transfer are needed in the context of Africa to benefit both the mining company and its stakeholders.
A good way to do this, says Nelson, is to meet with the different stakeholders before operations begin to discuss everyone’s expectations and prerogatives. That way mining setups can be directed in such a fashion as to benefit the local community and country as well as the mining company.
Disruptive technologies and greentech
The face of mining operations has been changing, and rapidly, over the past decade. The buzz words in the industry are increased productivity, efficiency and cost saving and tech companies have accordingly been developing various disruptive and/or green technologies that help with power, fuel, maintenance, toxicity, emissions and water reductions. These pioneering technologies include hydrometallurgy, carbon sequestration, water treatment, and increased IT automation to name a few. Not only do they promise more cost-effective and efficient mining methods, but many also aim to reduce the impact of mining procedures on the natural environment.
While perhaps the majority of mine managers are nervous to try out new technologies that have not as yet stood the test of long use, some of these technologies might be the key to shifting Africa’s mining operations into high gear, especially where geographic, social, infrastructure and political constraints call for solutions offered by the new technologies. What is certain, as stressed by Nelson, is that African mines need to find a way to reduce costs if they are to prove economically sustainable.