CAPITAL MARKETS
RESOURCE FINANCING
projects very quickly. And because of good management systems, we will be highly efficient in terms of capital allocation.” Dhir ’s explanations are peppered with words such as “innovation” and “individual creativity”. “Delonex aims to become a world-class exploration and production company,” he enthuses. “We can do that with good science and operating practice.” There is, however, the matter of competition from some of the world’s largest oil companies. China National Offshore Oil Corporation and France’s Total are trying to move ahead with multibillion-dollar oil field, refinery and pipelinedevelopmentsinUganda’s Bunyoro region. Further south, Italy’s Eni, Norway’s Statoil and Britain’s BP are targeting the gas reserves in the deep waters off TanzaniaandMozambique.Again, these companies plan to invest billions to produce gas, liquefy it and export it across the Indian Ocean.
Explorers left looking for cash Concerns about metal prices and the end of quantitative easing caused a slump in mining financing in the second quarter of 2013
In both areas, much of the initial work has been done by smaller companies, such as Tullow and Heritage in Uganda. But there are plenty of problems ahead. The long discussions over how much of Uganda’s oil should be refined locally mean that Kenya, with its recent finds in the Lokichar Basin, could produce oil commercially before its neighbour. In Tanzania andMozambique,themultibilliondollar gas investment bonanza is already generating political tensions over accountability and how local communities will benefit. Warburg Pincus’s other African oilinvestment–inKosmosEnergy– has set a high bar despite some blips over its failed attempt to sell assets in Ghana to ExxonMobil three years ago. After its launch in 2003, Kosmos now estimates that it is worth well over $5bn with its stakes in Ghana’s two biggest oil fields. To repeat that kind of success in East Africa, Delonex Energy needs good technology and an acute political sense, as well as thatindividualcreativity thatRahul Dhir values so highly. ●
FINANC E SPECIAL
DEBT MARKETS STILL OPEN
A period of quantitative easing (QE) in the US helped to push up the gold price, as the Federal Reserve’s buying of $85bn worth of bonds a month kept investors fed with cheap money. But uncertainty about when the the US central bank will cut back on QE has begun putting downward pressure on the gold price, which was trading at around $1,290 per ounce on the spot market in mid-August, down from more than $1,690 per ounce in January 2013. Igor Klimanov, director for Africa at Nordgold, a Russian firm that listed a 15% stake on the London Stock Exchange last year and operates gold mines in Burkina Faso and Guinea, says the financing situation remains more acute for junior miners. “For established producers with cash flows, debt markets are still open,” he says. “It’s different if you are a junior company that needs to raise capital to develop something and there is no proof that you will spend your money well.” ● Gemma Ware
Nordgold opened its Bissa gold mine in January
Patrick Smith •
years between May 2011 and May 2013 for development funding, they raised just $829m to finance exploration. Gold dominated the exploration funding, representing 57% of the total, compared to 8% for copper, 7% for coal and 6% for iron ore.
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S E P T E M B E R 2 013
NORDGOLD
I
t is a difficult time to look for finance in the mining sector. Data released in early August by Stockholm-based analysts IntierraRMG showed that global miners received only $2.3bn in finance between March and June 2013, down 56% from the $5.2bn raised between January and June. The report pointed to a severe drought in capital markets and high levels of debt in the mining industry. IntierraRMG said the biggest companies were hit hardest, with the 555 companies on its IntierraLive Database raising just $1.4bn in the three months to June, compared to $4.1bn for the first three months of 2013. Some large-scale miners, especially those based in South Africa where there is uncertainty over cost cutting and wage negotiations, are coming under sustained pressure. In August, ratings agency Moody’s downgraded Anglo American from Baa1 to Baa2 in a move senior analyst Gianmarco Migliavacca said reflected expectations that the company would “generate lower operational cash flow and requirelarger-than-previously-anticipated debt funding” over the next 12-18 months, partly because of the restructuring of its South African platinum division. In another report focused on mine finance in Africa, IntierraRMG found that while companies raised $4.8bn in the two
ACCOUNTABILITY
THE AFRICA REPORT
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