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Cautious confidence and a presidential visit: impressions of Indaba 2019

21/02/2019

At a glance

The world’s mining execs enjoyed a week of networking at the recent Indaba Conference in Cape Town. This included Memery Crystal. Here is our verdict on the event and the general level of sector confidence…

It’s not often that an industry event can persuade a head of state to attend. But the organisers of the Indaba Conference went one better. They hosted two.

The annual expo in in Cape Town earlier this month saw official keynotes by Cyril Ramaphosa, President of South Africa and Nana Akufo-Addo, President of Ghana.

Their presence certainly added to the prestige of the occasion. And their positive addresses promoted a general sense of optimism among visitors.

This was exemplified by Roger Baxter, CEO of the Minerals Council. “This Indaba had a much better sentiment to it,” he said. “Though sentiment by itself doesn’t drive new investment decisions, what it does do is help shape people’s thinking around longer-term investment decisions. But there is still a lot of work to be done.”

One of the drivers of this considered optimism is gold. Without doubt, the gold sector has been through a period of poor capital discipline. However, more recently, gold miners have cut costs, improved balance sheets, and shifted focus from volume growth to shareholder value.

At one Indaba panel session, the participants argued that gold stocks have been in line or ahead of most markets since 2015. They added that a spate of recent mergers, along with the rising commodity price, have made gold an interesting proposition again.

It’s why companies such as Resolute are backing gold companies with good management teams to unlock the potential of finding greenfield discoveries. The company says it has invested $193 million in gold exploration and discovery since 2010.

Predictably much of the talk at the event was related to new technologies, not least electric cars. However, many panellists warned against the hype associated with the battery metals needed by these markets. They reflected that most of these minerals are not rare.

That said, they did identify cobalt as a good investment proposition, and cited Wheaton’s purchase of Vale’s Voisey’s Bay mine last year as proof. The mine should start producing cobalt from 2021.

While many mining companies now have stronger balance sheets, they are still competing for investor interest with many more ‘fashionable sectors. Cryptocurrency is one. Cannabis is another. The legalisation of the substance in Canada has prompted a dramatic rush to marijuana stocks.

Time will tell if this can be maintained. Until then, mining will have to work hard to attract investors, particularly for early stage exploration projects. Here in the UK, the majority of ‘heavyweight’ UK funds seem unwilling to invest in anything other than proven assets.

To give this analysis a positive spin, it is an opportunity for overseas companies with established operations that are looking for funding. From Memery Crystal’s perspective, this points to the benefit of dual listing.

In fact, a number of our recent clients that have gone down this route; Danakali’s recent application to seek a dual listing was particularly well received.

London is an obvious destination for mining enterprises. Its markets already host a vast number of international companies, and the city has a support ecosystem of experts who can help prospective companies achieve a listing.

Memery Crystal’s team can offer a range of services. We have specialist understanding and experience in public or private debt, equity, acquisitions or disposals. Along with Danakali, we have acted for Kropz, MOD Resources, Caledonia Mining Corporation and others.

Photo credit: Mining Indaba

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