Both Andew Bahlmann, the CEO of Deal Leaders International, and Johann de Bruin, the founder and CEO of Erudite, an engineering, procurement, and construction management company are betting on bright mining prospects this year.
Bahlmann said in a statement on Monday that activity in the mining sector quickly recovered from the Covid-19 pandemic, as companies competed for business growth through asset acquisition.
“In 2022, the economic landscape changed somewhat. There has been the impact of Russia’s war in Ukraine and a decades-high inflation rate, a disrupted global supply chain and rising interest rates, making debt expensive – all adding to cost pressures for producers,” he said.
Rising inflation led to higher commodity prices as well as higher operating costs and capital expenditures. Some companies were reporting mining inflation in Africa at the level of about 20% mid-2022.
Bahlmann said because of the cost of debt, some companies were staying on the sidelines of new mining projects, as their creditors pulled back from making riskier loans for buyouts as interest rates rise, but that could change rapidly because of the amount of liquidity in the system.
“A resurgence may yet be quicker than people expect,” he added.
“Producers have seen their stock prices come down a fair bit. Such an environment leaves scope for M&A (merger and acquisition) consolidation, especially favouring miners with cash and a need to grow against a backdrop of growing demand for transition metals. Resource-rich Africa is well-positioned for what is a general shortage of raw materials.”
Bahlmann said this represented an opportune time for resource companies to invest in projects, through capital commitments and M&A activity.
“The flip side of this equation is that fears of a global recession may cool transaction activity – but I am of the opinion it will fuel opportunities, maybe not in the first quarter but by mid-year,” he said.
Meanwhile, De Bruin said on Monday that he expected significant growth ahead for Africa’s mining sector in 2023.
In a statement De Bruin offered four predictions for the mining sector this year.
Exchange rate slump
The rand was 8.47% weaker year-on-year against the US dollar in December, 2022. De Bruin said it seemed likely that the rand to dollar exchange rate would stabilise around current values over the next two years.
“While a weaker rand is less than ideal for the average consumer, it is beneficial for exporters. Local goods and commodities become less expensive for our international trading partners to acquire in comparison to competing markets, while the rand value for exporters is higher, which means producers receive more for the same goods,” he said.
The depth of South African mining skills and expertise remained in high regard with global investors, yielding substantial opportunity for local companies.
Supply chain recovery
As the world enters the final recovery stage from the post-pandemic slump, and countries adjust to and find workarounds for disruptions caused by the war in the Ukraine and the lingering tail of Covid-19 in the East, De Bruin said most of the supply chain issues plaguing the industry would largely continue through 2023.
However, he said the past two years had taught people to seek alternative solutions and challenge the unconventional. This placed us in an ideal position to add value to the wave of new projects in the local industry.
“South Africa, especially, has the opportunity to redefine its trading relationships in the coming year, finding partners with the ability to better supply us with essential products.”
A surge in new projects
As other issues are resolved globally, De Bruin believes that there would be a pronounced increase in industry investment for the exploration for new mineral deposits, the founding of new mining operations, and expansion of existing mines in the battery commodity market.
“The broader continent of Africa especially, has immense potential to quickly grow into a significant player in this market. Demand for electric vehicles and other electronic devices is expected to see a sharp increase in the next few years, and many African nations with large deposits of key battery commodities have the potential to dominate this space,” he said.
International opportunities
Extractive industries were driving the global post-Covid economic resurgence, regularly revealing new opportunities in the market.
De Bruin said as the war in Ukraine seemed set to further fuel global shortages of many commodities in 2023, Africa and South Africa, particularly, were poised to help resolve growing global demand issues.
“As an example, China’s severe congestion issues at industrial ports may reach the point of collapse in the coming year. The global reliance on Chinese exports is being tested, with most countries looking for alternative suppliers,” he said.
As China is the sixth largest commodities producer in the world, De Bruin said he believed that Africa had the potential to gain market share if China’s woes continue.
BUSINESS REPORT