Green shoots of recovery in African mines may spur Middle East investments

“If it’s not grown, it’s mined,” said the Anglo American chief executive Mark Cutifani on the activity’s economic importance. Halden Krog / Bloomberg

Mining may be unloved by environmentalists but it remains central to the modern world, driving more than 45 per cent of the world economy, according to Mark Cutifani, the chief executive of Anglo American, a London-listed global resource producer.

The lifeblood of mines, though, is money, something in short supply over the past few years, said Tim Biggs, the metals and mining leader at Deloitte in London. “The mining sector has been through a massive long burn, caused by the collapse of major commodity prices.”

Change, however, is in the air.

“This year we’ve seen a significant rebound in base metals such as iron ore and coal. Also for lesser metals such as zinc. All the indications are of green shoots.”

Mr Biggs added that the crying need for capital could be an opportunity for Middle East investors looking to get into the sector. “There are a lot of junior miners struggling to get finance,” he said, referring to the industry term for small operators that may have mining permits but not the capital to build an actual mine.

“I see no reason why Middle East finance could not find its way into mining. Much like oil and gas, mining is an industry that is accustomed to tough environments. With the right appetite for risk, it provides a good return.”

At its peak in 2011, the world mining industry was worth around US$2,5 trillion dollars, says Bloomberg. A rapid slide in commodity prices led by a slowing Chinese economy saw it tumble and by 2015 was valued at less than $1tn, less than the combined worth of technology companies Google and Apple.

With a global population headed to 9.5 billion people by 2050, demand for minerals will recover. “If it’s not grown, it’s mined,” Mr Cutifani said at the annual Mining Indaba in Cape Town last week. Everything from medicine to cars to solar panels depended on raw materials extracted from the earth. What is needed he said, was better ways to do it, using less water and making it safer for people around operations.

The centre of mining finance now is London, where all the major producers are listed. It is also where juniors go to find capital. “London is where anyone wanting to get into resource financing should go. It has a clear legal system to sort out any problems and a long history of investing in minerals and energy,” Mr Biggs added.

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