What do investors and corporate financiers consider when evaluating Greenfields projects? Modern Mining spoke to Peter Major, director at Modern Corporate Solutions, for insight into early-stage projects the investor is mulling over.
“As a corporate financier, we weigh different commodities, the quality of the asset, location and market appetite for each resource. In particular, we favour commodities that we have intimate knowledge of, such as base-metals, gold and silver. However, given the logistical challenges associated with bulk metals (coal, iron ore, manganese, chrome), projects in this category have been placed on the back-burner for the moment. We are also staying away from new-age energy metals: lithium, graphite and rare earths because they are too new and too difficult to refine and market. For us at this time anyway,” says Major.
Importantly, Modern Corporate Solutions is keen to consider projects that are set to deliver near term benefits – in other words, projects that have the potential for development sooner rather than later and that can be taken up the value curve in less than two years.
Stand-out projects on the radar include base metal projects in the Northern Cape, a gold project in the Piet Retief area of South Africa, two gold properties in Zambia and the Kabwe lead zinc project also in Zambia.
“The Kabwe lead zinc project was the world’s richest zinc deposit for 90 years, (1904 - 1994) before it closed in 1994. Together with Modern Corporate Solutions, junior miner, Leopard Exploration and Mining, which owns the project, believes there are more ore bodies in Kabwe that have yet to be been found. We are in the process of raising funds from the London market and will soon be making an announcement related to project exploration.”
The company has rich data sets of existing orebodies, but given that markets require greater certainty for new orebodies, Leopard Exploration and Mining is busy with an exploration programme aimed at discovering anomalies that will point to more new large-scale orebodies.
“Leopard Exploration and Mining is preparing to undertake extensive geophysical surveys and resource definition using drone surveys, followed by confirmatory drilling programmes to allow it to increase the mineral resource and thereby attract investment in the project,” says Major.
Modern Corporate Solutions is also upbeat about gold mining in Zambia, a renowned copper belt destination, believing that artisanal miners are key indicators illustrating the significant potential for gold mining in the country.
The financier also has its eye firmly set on two Greenfields projects in the Northern Cape, with moderate, but high-tech exploration - Northern Cape Base Metals (NCBM) and Northern Cape Lithium Tungsten (NCLT).
“Using the available data-set, our experienced geophysicist has picked up some really large anomalies and he is convinced these are Black Mountain type anomalies - only bigger,” enthuses Major, who explains that the investor is also seriously considering a tin project north of Pretoria.
According to Major, financiers and investors would rather fund projects outside of South Africa, preferring to invest in a satisfactory project in Africa than a great project in South Africa, given the red-tape and myriad challenges miners in South Africa face. The country continues to receive a bad rap for the legislation, energy, logistics, administration, rule-of-law, and lack of cadastral system in place, which has seen many projects stalled and miners frustrated by what seem insurmountable challenges.
Highlighting what he considers to be attractive commodities at the moment, Major explains that two commodities stand out – namely, copper and gold.
This is underpinned by ease of identifying, exploring, mining and refining as well as robust demand for gold and copper.
“These are easy commodities to find – in fact, it is easy even for artisanal miners to identify, mine, refine and sell gold and copper. These commodities tick all the right boxes, unlike bulk commodities, such as iron ore, chrome and manganese, which face massive logistical challenges.”
Commodities performance
While gold has been a star performer, trading at well above $2000/oz, battery metals have lost much of their shine, with lithium proving to be volatile and experiencing a massive price drop from its high of $80 000/t to $12 000/t over the past 12 months.
“PGMs, nickel and cobalt have also slid over 60% from their highs. Why are the prices of these minerals, used in battery metals and electric vehicles and touted by the pundits to skyrocket, falling? Is it because these commodities ran too far ahead too fast? Is there more in the supply pool than initially thought,” he questions.
According to Major, whereas demand is immediate, supply can take months or years to catch up and by the time supply does catch up, “demand isn’t as great once new supply reaches the market and this subsequently leads to a decline in the price of that particular commodity.
“Even though key commodities, such as nickel and cobalt, underpin the drive for clean energy, the prices of these commodities have not held up nearly as well as anticipated.”
Major says that an increasing number of miners are selling the by-products from their primary mining sources, which is having an adverse impact on some operations.
“Indonesia is now recovering nickel from its iron nickel deposits, which has put primary nickel producers out of work. This is the same scenario faced by miners of pure silver mines in Idaho, as miners in Mexico and Peru, who mine base-metals that produce silver as a by-product, are now selling silver into the market. This has devastated the pure silver mines of Idaho, which now lie idle.”
Attracting mining FDI
Africa is rich in resources, resources the world needs, but does the continent offer foreign investors ease of investment?
“Investors are like kids with money – they are looking for easy opportunities to grow their wealth and mining majors, and juniors alike, are happy to explore for minerals in Africa. But many countries on the continent, particularly South Africa, make doing in-country business really challenging.”
According to Major, countries in Africa need to take a leaf out of the Canadian and Australian way of doing business.
“Both these countries encourage mining companies to explore, mine and beneficiate. In fact, Canada arguably has the best exploration databases in the world. This is how Canada adds to its coffers and miners are happy to do business in Canada because of the ease with which one can do business there.”
South Africa and Zimbabwe, on the other hand, which were once the darlings of foreign investors because of their wealth in key commodities such as gold, silver, diamonds, platinum and manganese, have such investor unfriendly policies and challenging operating environments that they now deter investors. The dire rate of new mines and valuable prospecting operations these past 20 years attests to that fact.
