How important is Africa to Australian mining?

Australian mining companies now have more projects in Africa than in any other region outside of Australia. While our mining companies have been part of Africa’s mining industry for years, the last several years have seen a dramatic increase in the level of direct investment into the broader African resources sector.

The Chinese are no less ambitious in their interest in African projects, being engaged in almost all of Africa’s 54 countries – either as miner, trader, offtaker, engineer or lender. More recently, a trend has emerged of Chinese entities seeking control of ASX listed vehicles with African assets.

At this time of increased focus on mining investment into Africa, highlighted at the recent Commonwealth Business Leaders Forum held in Perth as part of the build-up to CHOGM – Freehills’ partners Justin Little, John Tivey and Gemey Visscher, as well as representatives from our alliance firm in Beijing (TransAsia), are gearing up to speak on the importance of fostering greater ties between Chinese and Australian companies looking at investments in African mining projects at the 3rd annual China Overseas Investment Fair in Beijing next month.  The Investment Fair will be attended by all of the major Chinese SOEs and government agencies, including those such as the China-Africa Development Fund, which have a mandate to support investments into Africa.

Australia’s bullish approach to investing in regions once considered to be on the wrong end of the sovereign risk spectrum is certainly supported by recent statistics, comments recently made by the Foreign Minister, Kevin Rudd, and by a recent Australian Trade Commission Survey:

• there are now approximately 230 Australian mining and oil & gas companies operating about 650 projects in approximately 43 countries within Africa.  In total, these projects account for around $24 billion worth of investment 
• 143 new projects were added in 2010 alone and approximately 100 new projects (sponsored by roughly 20 companies) have been added since the beginning of 2011
• of the 700 or so mining companies listed on the ASX, 127 (or 18%) have their primary asset in Africa, spread across 400 projects
• Recent examples of Chinese entities bidding for companies with African-focussed mining projects include:
• Minmetals $6 billion bid for dual Australian and Canadian listed copper miner Equinox
• Minmetals friendly $A1.3 billion takeover of Congo-focused copper miner Anvil Mining; and
• Hanlong Mining’s recent takeover bid for Sundance Resources which has an iron ore project in Africa

Freehills’ has acted in both of the recent Minmetals’ transactions referred to above and for other Chinese entities seeking cornerstone or strategic investments in ASX-listed mining companies with exposure to African projects.

The China Overseas Investment Fair is scheduled to run for two days from 8 – 9 November 2011.