Green(ish) shoots appear as Africa’s miners head to Cape Town

In Insight by Tavistock Resources

It is that time of year again where the international mining community from the UK, Canada and Australia briefly escape the northern hemisphere winter and head down to sunny Cape Town, where days of back-to-back meetings are followed by evenings of back-to-back receptions.


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Cyril Ramaphosa and ‘The Crocodile’ in Davos

Unfortunately, a 1,000-day drought has really started to bite the city, with day zero, when Cape Town becomes the world’s first metropolis to run out of water, a little over 9 weeks away. You will notice the severity of the situation even before you land as pilots read you the scripted water measure controls as you start your descent into Cape Town. Even the Indaba website has a water shortage measures page for attendees. Theewaterskloof Dam (below), source of roughly half of the city’s water is at a mere 13 percent of capacity.


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Theewaterskloof Dam

Don’t be surprised to see drained swimming pools at the villas, restrictions on bathing at your hotel, dusty cabs and a generally more brownish tinge to the landscape.


A fund manager who was down there recently, described a trip to the gym where water usage in the showers was monitored by a guard, and the swimming pool was so empty that his arms scraped the floor when doing front crawl.

  • Given this expected shortage of liquids, it comes as no surprise that Tavistock is expecting almost 500 attendees at its cocktail reception with Shore Capital and Memery Crystal, on Monday night and we look forward to welcoming you to what will be our 11th consecutive year at the conference.
  • Fortunately for the mining sector, the taps seem to be slowly turning on again in terms of new money flowing into the sector with a building improvement in sentiment as discussed in our 2017 Indaba blog:‘What doesn’t kill you makes you stronger’.
  • In fact, 2017’s two largest equity fund raisings in the UK (Base Resources’ £56m and Central Asia Metals £138m) only happened at the back end of the year and both were to fund acquisitions.

Meanwhile, in Canada, the market for IPOs totalled C$5.1 billion in 2017, a five-year record as revealed in a recent PwC survey.

Palladium ended the year as the best performing mainstream commodity with a gain of 56%, and is now trading higher than platinum. In the base metals, it was aluminium that topped the charts, adding 32% in the year.

Commodity prices have also had a good start to the year, copper is over $7,000/t, nickel touched $14,000/t this week, the highest levels since 2014; iron ore is above $70/t, still some way off its highs a decade ago, and the gold price is teasing $1,350/oz, almost $100/oz above the 2017 average price.

The annual LBMA forecast for 2018 has just been released with the yellow metal expected to average $1,318/oz (2017 actual average ($1,257/oz), platinum at $1,000/oz ($948.50), palladium at $1,080/oz ($869/oz) and silver at $17.81/oz ($17.05).

Several years of cost cutting and balance sheet repairs, mean that miners enter this period of higher prices in relatively good shape, with some decent 2017 numbers already being reported to the market. Share prices, however, still haven’t caught up to historical levels.

We expect little appetite for M&A in the short term, but with very little exploration spending for some time, the sector continues to play into the historic cyclical trends which can only see demand begin to outstrip supply and a race for resource potential starting up again.

Mining Indaba MD Alex Grose recently told Mining Review that investor visitor numbers are expected to grow even more this year from the 7,000 delegates in 2017; this is largely down to the renewed investment focus for the event. There will also be about 25 African mining ministers at this year’s event, as well as a junior mining showcase.

The 121 Mining conference at Welgemeend in Cape Town has also grown into a strong investor event in its own right which has seen it sold out, even with its successful expansion last year, with 85 mining companies and 350 investors and analysts attending.


All change down in southern Africa

At the back end of last year, southern Africa’s political landscape experienced a major overhaul with both Zimbabwe and South Africa experiencing a change of leadership. Immediate in the case of the former, and in-waiting for the latter.

While Cyril Ramaphosa’s election as the new President of South Africa’s ruling ANC party was part of regular five-year cycle, the ousting of Robert Mugabe as the near 30-year reign as president of Zimbabwe in a peaceful coup was much more of a surprise.

Unfortunately for those heading to South Africa to spend their forex, the rand has strengthened strongly since Ramaphosa’s victory, meaning the seafood and wine tab may come in a bit higher than expected a few months ago at ZAR16.99/£1.


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The Ramaphosa effect on the rand since December

Jacob Zuma remains the country’s president until the next elections (unless he is pushed out before then). Those sticking around until Thursday will notice some major road closures in town as the annual State of the Nation address takes place at parliament that evening.

Further north, in the DRC, new mining laws, which include a ‘super profit’ tax and potential jump in royalties on metals like cobalt, have just been implemented. Another hot discussion topic for the conference.

Struggling to find your meeting location? There is an app for that

Finally, we at Tavistock have discovered a very nifty navigation app that could come in quite handy down in Cape Town.

The team over at What3Words have split the entire planet up into 3x3m squares and then named each one of them individually. If you are standing at a booth, meeting someone at the Cullinan Hotel, or just trying to find someone at a cocktail party, you can send your precise location.

In case you were wondering, the entrance to our cocktail party on Monday night is at reacts.deceiving.moonwalk.

The following members of the Tavistock team will be in Cape Town if you need us:

Jos Simson                          jos.simson@tavistock.co.uk       

Charles Vivian                    charles.vivian@tavistock.co.uk 

Barnaby Hayward            barnaby.hayward@tavistock.co.uk

Gareth Tredway               gareth.tredway@tavistock.co.uk


Live coverage of the event

www.BDLive.co.za         

www.MiningMX.co.za

www.MiningWeekly.co.za


Indaba conference highlights

Monday

9.10am Keynote welcoming address by SA minister of mines Mosebenzi

11.30am Fireside chat with Anil Agarwal of Vedanta and Evy Hambro of Blackrock on strategies for long term shareholder value

Tuesday

9.05am The investment case for gold: An Interview with Mark Bristow

12:35pm Panel on Diamonds: How will the industry adapt to millennials and synthetics?

Wednesday

9am A Keynote speech by Robert Friedland of Ivanhoe Mines

9.10am on Stage C - What will mining look like by 2050?


121 Mining Investment meeting highlights

Monday

9am Panel discussing outlook on investment in 2018

11.10am Gold mining investment panel on outlook and opportunities in the current investment cycle

3pm Private equity investor panel

4.10pm Fund manager panel on opportunities and risks across Africa

Tuesday

10am Diamond panel

11.30am Base metals review

2pm Sources and structures for financing a mine through to production


Sport on TV to have on in the background while working in your hotel room

Sunday

Australia Big Bash T20 cricket final 7.15am

World Rugby Sevens Final in New Zealand 9am Supersport 1

Six Nations Rugby: Italy vs England 5pm Supersport 1

PGA Tour Waste Management Phoenix Open Day 4 8pm Supersport 1

South Africa vs India 2nd ODI 10am Supersport 2

Crystal Palace vs Newcastle 4.15pm SS3

Liverpool vs Tottenham Hotspur 6.30pm SS3

Monday

Watford vs Chelsea 10pm SS3

Wednesday

 Australia England T20 cricket 10.40am

South Africa vs England one-day cricket in Cape Town 1pm