Download PRESS RELEASE African mining prospects remain intact despite

PRESS RELEASE
African mining prospects remain intact despite cautious 2015, Standard Bank says
Cape Town 9 February: 2015 will continue to be challenging for the global mining industry.
Commodity prices are not anticipated to exhibit material improvement, impacting on sector
valuations and the ability to raise financing. But, amid a more sober outlook, the prospects for
mining in Africa remains essentially intact over the medium term, according to Standard Bank,
Africa’s biggest lender by assets.
“The broad fundamentals of the African mining narrative are still firmly in place,” said Rajat
Kohli, Head, International Mining and Metals, at Standard Bank. “The reality is that the continent
still boasts an abundance of natural resource deposits which are relatively underdeveloped
compared to the likes of Australia or Latin America. The continent may be experiencing a
cyclical slowdown in new investment but, as the global economy recovers, Africa remains well
positioned to benefit from any increase in investment and consumption.”
Standard Bank research shows that African mining remains underexplored. In 2013, African
exploration accounted for 17% of the worldwide exploration budget despite the fact that the
continent holds more than 30% of the world’s mineral resources.
Capital spending in the sector peaked in the first half of 2013 as investor criticism of lacklustre
returns in the sector and lower commodity prices motivated producers to limit spending on new
projects. The focus now is on cutting costs, restoring weakened balance sheets and optimising
asset portfolios, to improve cash flow generation and, hence, returns. With growth in China to
continue, albeit at a lower rate (but off a larger base), the medium-term prognosis appears more
optimistic.
“A sustained recovery in demand growth, coupled with limited investment, will provide the
ingredients for a recovery in the sector’s fortunes.” But, in the next 12-24 months, the outlook is
less secure. “If producers can withstand challenging market conditions, they should be set fair to
benefit from an economic recovery.”
Commodities ranging from iron ore to crude oil have slumped to multi-year lows amidst a
combination of slower global economic growth and a stronger US dollar. “Mining has always
been a cyclical industry and Standard Bank is of the view that what we are currently
experiencing is a cyclical correction, we’re either at the bottom of the cycle or very close to the
bottom,” said Mr Kohli.
Financing challenges have also arisen, especially for mid-tier and junior miners. Public equity
markets are highly discreet and lending terms have tightened. In this environment, Mr Kohli
says, private capital has emerged as a growing source of funding for new mine investment in
Africa, which is partly driven by the fact that resource assets can currently be acquired at
relatively attractive prices. Furthermore, this will spur an increase in M&A activity.
“One of the positives of the decline in commodity prices is that you’re able to pick up natural
resource assets at attractive valuations at the moment,” said Mr Kohli. “Our expectation is that
the bulk of these assets are likely to be far more valuable in 5-10 years than they are now,
which makes for a very good investment proposition.”
ENDS//
PRESS RELEASE
Notes to Editors:
About Standard Bank South Africa
Standard Bank South Africa is the largest operating entity of Standard Bank Group, Africa’s
largest bank by assets. Standard Bank Group had total assets of R1 694 billion (about USD162
billion) at 31 December 2013, while its market capitalisation was R209.4 billion (about USD20
billion).
In South Africa, Standard Bank provides the full spectrum of financial services. It’s Corporate
and Investment Banking division serves a wide range of requirements for banking, finance,
trading, investment, risk management and advisory services. Corporate and Investment
Banking division delivers this comprehensive range of products and services relating to:
investment banking; global markets; and global transactional products and services.
Standard Bank’s corporate and investment banking expertise is focused on industry sectors that
are most relevant to emerging markets. It has strong offerings in mining and metals; oil, gas and
renewables; power and infrastructure; agribusiness; telecommunications and media; and
financial institutions.
Standard Bank’s personal and business banking unit offers banking and other financial services
to individuals and small-to-medium enterprises. Standard Bank has more than 720 branches
and over 7 100 ATMs in South Africa. Independent surveys of customer satisfaction consistently
place Standard Bank at or near the top of their rankings.
Standard Bank’s personal and business banking products include mortgage lending, instalment
sale and finance leases, card products, transaction and lending products, and bancassurance.
For further information go to http://www.standardbank.co.za/cib
FOR MORE INFORMATION CONTACT:
Ross Linstrom
Standard Bank Media Relations
Email: [email protected]
Mobile: 083 262 1882
OR
Hayley Crane
Standard Bank Media Relations
Email: [email protected]
Mobile: 083 795 7422