Pre-Indaba: Mining topics on the table for 2019 | Fieldfisher
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Pre-Indaba: Mining topics on the table for 2019


Africa, France, United Kingdom

As the international mining industry prepares to descend on Cape Town for the annual Mining Indaba conference, Fieldfisher partner Jonathan Brooks* gauges sector sentiment ahead of Africa's largest...

Next week's Investing in African Mining Indaba kicks off the annual mining investment calendar and for many, this year's event will be their first concerted marketing push since what was a rather lacklustre end to 2018.

With many deals paused or overrunning their timetables, there will be an added urgency to the 2019 gathering and certain topics will be high on the agenda.

Below, we review some of the top talking points likely to come up in Cape Town.


Economic anxiety

After two consecutive years of strong metals prices, 2018 turned out to be a fairly tough year for mining equities.

With the Chinese economy showing clear signs of weakness, fundamental uncertainty in the Eurozone and the arrogation of aluminium and steel as weapons of trade wars, sentiment in the global mining industry felt decidedly cool at the end of last year.

Early indications for 2019 are more promising, not least in Africa, where the IMF expects several countries are to register accelerated economic growth over the next two years, but much hinges on the direction of economic policy and market sentiment.

Against this ambiguous macroeconomic backdrop, investors remain understandably cautious.


Emerging markets

A slight softening of the US economy and a weaker dollar should see more liquidity flowing back into commodity-hungry emerging markets and there are occasional hints of progress in US-Chinese trade relations.

In China, a revival of economic stimulus measures could be on the cards to boost GDP and national morale ahead of the 70th anniversary of the founding of the People’s Republic of China on 1 October.

This is potentially good news for Africa's mining industry, as it may free up cash for the infrastructure investment needed to de-risk projects in many of the continent's mineral-rich areas.

However, the mining industry must continue adjusting to a period of slower economic growth than it has become used to over the past three decades of rapid globalisation.


Deal activity

The mining industry as a whole, but particularly the top end of the sector, is in better shape than it has been for a long time.

After a period of rigorous spending discipline, there are signs that the industry may be coming to the end of a period when investing in growth was a red line for shareholders.

Companies that have focused on reducing their debt and paying dividends over the past five years are starting to evaluate their next steps.

While investors remain wary of corporate M&A, asset-level deals that do not require significant debt financing look increasingly logical.

Consolidation is clearly the big story in gold at the moment, with the Barrick/Randgold and Newcrest/Goldcorp mergers setting the pace for deal-making.

Whether other mega-mergers will follow remains to be seen, but the long-term trend has to be for the acquisition of smaller gold producers, as the majors chase too few assets.

Additionally, we can expect divestment of non-core assets by the new combined groups, potentially adding to deal activity among junior companies.

African assets are likely to make up a significant share of the project shop window in the near term, especially if we see more big mergers between companies with significant African exposure and moves by newly enlarged groups to narrow their focus on selected metals and minerals.


Funding exploration and development

Life remains tough for explorers and developers and they will persist in casting their nets wide for finance to bring their projects into production.

Alternative finance providers will continue to do the heavy lifting as equity markets and project finance banks remain uninterested in new and early-stage projects.

Local financing sources will increasingly come to the fore, particularly in Africa as companies tap into the growing wealth across the continent.

Whether they are high net worth individuals, family offices, asset managers or banks, such funders have a more positive outlook on local political risk than international investors and can help reinforce the company's relationship with, and benefits for, the host country.


ESG becoming key

Both generalist and natural resources funds are increasingly adding environmental and social governance (ESG) filters to their portfolios.

There is a large and growing pool of capital that is ESG-focused and portfolio managers are putting more pressure on boards to make sure they are doing the right thing from the environmental and social points of view.

This is being felt most acutely by the majors and the larger mid-caps, but the effect is trickling down to the smaller end of the market and these companies need to be ready for increased scrutiny.

There is also a growing body of research suggesting that companies with good ESG are better run, more successful companies. Those which do not have good ESG will start to lose investors' interest and could see forced selling of their register.


Keeping promises

There continues to be a sense of investor fatigue towards "jam tomorrow" promises from the mining industry.

Notwithstanding the fact that 2016, 2017 and H1 2018 were good periods for the industry as a whole, distrust of the mining sector is proving difficult to shake off.

As such, discipline needs to be maintained and mining companies need to show they can use investors' money sensibly, or give it back to shareholders.

Liquidity in the sector outside the majors is fairly tight, so investors in small and mid-cap mining companies are keenly aware that they will have to wear their decisions.


Developing mining and metals projects: how Fieldfisher can help

The Fieldfisher mining team provides an expert, comprehensive and integrated service to clients across the full life cycle of a mining project. In 2018 alone, we advised on over US$1 billion of mining deals.

Supporting clients on their mining, energy and infrastructure transactions in English and French-speaking Africa is a major area of focus for the firm.

With experts in commercial, M&A, financing, restructuring, construction, tax and dispute resolution matters, our expertise in Africa is an added advantage for international companies seeking to penetrate the African market or to intensify their operations in the continent.

At every step of their development, our dedicated team, backed by regional expertise and a network of local independent lawyers and experts, offers clients a unique understanding of local African markets.

For more information on accessing capital in the mining sector, download Fieldfisher's updated guidance paper: Alternative financing 2.0: The next phase of mining funding?

*Jonathan Brooks is the head of mining and metals at European law firm, Fieldfisher. He will be attending Mining Indaba 2019 with colleagues from the firm's mining, ECM and finance practices in London and Paris. If you would like to arrange a meeting, please email



Image: By EKSRX - Table Mountain, CC BY 2.0,

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Mining and Metals