AS Middle Eastern oil powers follow China’s lead in investing heavily in Africa’s resource-rich landscape, major Western mining companies find themselves grappling with risk aversion, leaving them trailing in the race to tap into the continent’s critical raw materials.
The annual African Mining Indaba, set to begin on Monday in Cape Town, will see executives, bankers, and government officials converging to address the pressing issue of attracting capital for copper, cobalt, nickel, and lithium projects across Africa. However, for listed Western mining giants like Rio Tinto and BHP Group, convincing board members to greenlight investments in high-risk countries proves to be a challenging task.
Negotiations for potential deals in the Democratic Republic of Congo, the world’s leading cobalt supplier and the third-largest source of copper, have hit roadblocks in the boardrooms of Rio Tinto and BHP Group, according to insider sources. The hesitation is attributed to the boards’ concerns about shareholder focus on Environmental, Social, and Governance (ESG) issues and the history of scandals in high-risk countries.
In an effort to overcome these challenges, major mining companies have engaged in talks with Ivanhoe Mines about potential partnerships in its Western Foreland project in Congo, known for its substantial copper deposits. While Rio Tinto and BHP have explored informal discussions, Anglo American has also shown interest in projects within Congo, particularly in Eurasian Resources Group’s assets.
Despite the potential benefits of tapping into Africa’s reserves for the transition to cleaner energy, Western mining companies must weigh these advantages against political instability, corruption risks, and inadequate infrastructure in countries like Congo.
‘Any mining company knows that it will face tough questions from shareholders if it makes a move into the DRC,’ warns Patrick Edmond, Managing Consultant for Africa at advisory firm J.S. Held. ‘The majors especially will need to think very carefully about how to answer investors’ questions and how to build strategies to succeed in the DRC in a way where the rewards for shareholders outweigh the risks,’ he told Reuters.
Beyond Congo, Western mining giants like Rio Tinto, BHP, and Anglo American have started advancing projects in other African countries such as Guinea, Angola, Malawi, Rwanda, Tanzania, and Zambia. However, the rising costs of securing stakes in critical mineral-rich areas, coupled with increasing competition from Middle Eastern oil powers, pose significant challenges.
Oil-rich nations like Saudi Arabia and the United Arab Emirates, unburdened by the same risk aversion as their Western counterparts, are emerging as significant players in funding and investing in African mining projects. Chinese miners have also expanded their presence in Africa, further complicating the landscape for Western companies.
While Western miners face challenges in Latin America, including adverse weather conditions, water scarcity, poor ore grades, and regulatory hurdles, Middle Eastern nations continue to strengthen their foothold in Africa. Saudi Arabia, in particular, is positioned as a neutral player with substantial financial resources, potentially becoming a vital source of funding for Africa’s mining projects.
As the mining industry landscape undergoes a transformative shift, Western mining giants must navigate a complex terrain of geopolitical challenges, environmental considerations, and shareholder expectations, while their Middle Eastern counterparts leverage their financial strength to secure a strategic position in Africa’s resource-rich future.