In the 21st Century mining faces new challenges including the rising dominance of infrastructure and sustainability issues, with miners looking for fresh approaches to mine development solutions.
Distances, lack of infrastructure, underdeveloped communities, bureaucracy, graft, security risks and malaria. If you are going to mine in Africa, you will be grappling with these challenges.
An authoritative survey has indicated that over the past decade, just 2.5 per cent of major mining capital projects successfully achieved the desired outcomes in terms of cost, timing, scope and business benefits. (PWC 2012).
Sustainability and commercial issues are often the reasons cited for project failure. It is clear from a 97.5 per cent failure rate that mine development methods have failed to keep pace with industry trends and that we need a fresh take on things.
Each year the Fraser Institute conducts a survey that includes a ranking of the world’s most attractive regions for mining investment. The survey results consistently reinforce the importance of stable, transparent and predictable policies to attract globally mobile mining investment.
In the latest survey, over 36 per cent of respondents agreed that public opposition to mining had affected the permitting and/or approval process, and around 22 percent indicated project approval was denied.
The institute’s 2013 Investment Attractiveness Index ranking does not include any African countries in its top 20. Botswana takes top place at number 24.
Ghana, Namibia, Zambia, Eritrea and Burkina Faso, along with Botswana, make it into the top 50. South Africa ranked number 53.
The Investment Attractiveness Index is constructed by combining two other indices, a Policy Perception Index which measures the effects of government policy on mining companies' attitudes toward exploration investment, and a Best Practices Mineral Potential Index which rates regions based on their geological attractiveness.
Africa with its vast untapped natural resources offers attractive prospects for miners in search of future growth. However, these opportunities are not without challenge, particularly from the Policy Perception Index perspective.
Mining houses, accepting the welcome of African countries to help them realise the untapped potential of their natural resources, are nonetheless up against steep interference risks from the bureaucracy. This is especially true for legal, regulatory and contractual agreement repudiation risks as well as the approvals and social licence to operate processes.
The land acquisition required for the ore chain often lies on the critical path and can hold up first production and time to market. While generally a low cost process, by comparison with the overall project capital outlay, it is a key indicator of social licence.
As companies seek further growth and reserves they will often move into more challenging and unstable environments where problems like perimeter intrusion, illegal mining, corrupt officials, theft and organised crime are the norm. Political unrest, rebel groups and socio-economic driven strike action can add further significant security risks.
Mining companies in Africa also face decreased productivity, employee absenteeism, and increased health care spending because of malaria infection in company employees.
Despite significant drops in transmission rates over the past ten years, recent research still shows that up to 57 percent of Africa's population remains at moderate or high risk of contracting the deadliest form of malaria.
In terms of the harder infrastructure issues, the distance from the mine to the port is increasing, with the development of new mines taking place in ever more remote landlocked locations, with rugged terrain, extreme climates and underdeveloped infrastructure.
Fifteen years ago equipment (mining and process) dominated mine development costs. Today we find the balance heavily weighted to enabling infrastructure.
Power plants, buildings, laboratories and processing facilities, trucks, shovels and vehicles; all are needed during the life of the mine. The logistics of getting huge amounts of equipment and provisions to and from remote mine sites is no doddle.
The viability of resource projects requires robust export infrastructure. As the proximity from the port and users grows, infrastructure needs increase and ore chains become longer and more complex. The associated costs to gain approvals and licence to operate, construct, and transport grow exponentially.
Faced with underdeveloped roads, railways, airports, and ports, and a desire to be first to market, each mining house in the area will outline to the country’s government a plan for its mine. Plans include access to an export terminal, and often a dedicated rail corridor to get a direct line from pit to port.
This lack of collaboration between the miners is a challenge.
No government wants to grant permission for a number of rail lines all originating in the same area, travelling the same distance to the same destination. Nor would they encourage dedicated lines. They want to see one line, which is open for multiple purposes.
This in turn presents a challenge to miners who want both the optimum operational efficiency that comes from a dedicated line and the control of the line for their own product to market purpose.
As mine logistics chains lengthen, the definition of a mine’s community extends well beyond the mine boundary to a wide variety of stakeholders involved in these chains.
Many of the communities along the road to the port are underdeveloped and the people lack the knowledge and access to information that can help them decide what is in their best interest and what action to take. Community relations and a social licence to operate become paramount in keeping the transport chains open and operating.
There are many ways to overcome the pit to port challenges.
One way is greater collaboration between the expanding numbers of stakeholders in the ore chain.
Today’s partnerships extend beyond governments and mining companies to include outside investors, infrastructure developers, international non-governmental organisations (NGOs), community groups and local businesses. Collaboration between these varied stakeholders is vital to helping Africa succeed.
A second way is for mining houses and mining suppliers to have a strong local presence, represented by an experienced team who understand the prevailing legal framework and the culture.
As the largest multi-disciplinary engineering consultancy in South Africa, Aurecon has 12 large offices across the continent. Through its work over the past 30 years the Company has gained a strong understanding of the complex nature of developing the continent’s mining resources.
A third way is to broaden the number of people with an interest in seeing the project succeed.
Berger notes: “We are committed to working with our clients to identify and develop initiatives that enable them to join forces with governments and communities to deliver sustainable economic growth in a particular region, country and community, as well as identifying and realising business value for shareholders, employees and stakeholders.”
The emphasis of sustainable mining development is on engaging communities and supporting self-sustained growth to break the cycle of poverty.
Community involvement in mine and infrastructure development can occur through labour–intensive projects for low–tech infrastructure construction and maintenance, such as roads and mine housing, providing Socio–Economic Development (SED).
Aurecon leads this field in Africa through South African Value Education (SAVE), which is part of its training group and a recognised leader in construction and community development training. SAVE projects include use of Asset Based Community Development (ABCD) 1 models.
Finally, automating industrial processes –like blasting, drilling, ore handling and transportation– and mine sites, to rely on remote monitoring and control by experienced employees thousands of kilometres away, will not only minimise exposure to hazardous mining environments, improving mine site safety, and generally creating a more attractive work place for all, it will also potentially transform the way mining houses extract value from their resources.
A number of West Africa states are emerging from civil conflict and now want to tap into their rich natural resources to start building a prosperous economy for their people. Major miners are starting to view West Africa as the next significant iron-ore region.
While the venture of doing business in Africa is not without significant challenges, increased mining investment and the securing by some mining interests of long-term concessions for railway lines on their own in order to ensure a consistent route to export markets, is starting to change the environment.
In fact regarding the iron ore deposits around Republic of Congo, Gabon and Cameroon, and the distance to the coast, observations are this could one day be the “Pilbara” of Africa.
The challenge for Africa is to get public infrastructure benefits from this potential, using mining as the catalyst, while allowing mining companies sufficient ownership to drive efficiency and control of their investments.
The mining industry plays a central role in helping drive economic and social development in Africa.
Working with governments, international agencies, community groups and NGOs to coordinate efforts to maximise broad-based economic growth and extend prosperity, the industry can use its collective experience to form partnership that bring together state communities and employees as shareholders.
The unsustainably high project failure rate indicates the need for a fresh approach which integrates the trends of rising infrastructure proportion of costs, and the importance of non-technical aspects, into the mine development process.
We understand the value that optimisation of infrastructure, integrated with the mine and process planning in the initial stages of mine development planning, can bring to a project’s outcomes. Our approach combines our world-leading skills and experience in transport, materials handling and ports for mining products with an understanding that infrastructure is trending to a larger cost component in the 21st century by comparison with mine development methods from previous centuries and a holistic understanding of sustainability issues. It integrates infrastructure with mining and processing decisions to maximise realised value for our clients and avoid the capital and operating cost penalties of building the biggest hammer.