Exploiting Africa's wealth

Africa has huge reserves of untapped natural resources. Africa is increasingly becoming important a global producer of oil and has massive future potential in areas such as platinum, copper, cobalt and iron ore. Of course, as to precisely what there is, where it is and how much there is remains a matter of speculation.
There are currently constraints in terms of transport and energy, but there is no doubt that the continent will become increasingly important for industry in the coming years.
Encouragingly, the market identified as being of particular significance for Africa are iron ore (accounting for around half of the world's $45obn annual mining revenues; copper and cobalt (copper accounts for around 18% of revenues); and the share of gold (14%) and precious metals is not far behind.
In other words, the opportunities Africa possesses are precisely in those minerals the market values most highly. Iron ore prospects are particularly interesting because there are likely to be a lot of recoverable reserves available and China's ability to produce enough itself for its steel production targets is diminishing.
China is now importing more ore than before, despite falling steel production--presumably because of declining ore quality. The Tonkolili project in Sierra Leone, for instance, is an example of a vast iron ore deposit and then attracting the attention of steel-hungry China.
Part of the deal is that the Chinese company CRMCC is able to buy 40% of the iron ore produced--4m to 8m tonnes a year over the next 20 years. CRMCC provides much of the iron ore and steel required for China's railways and is considered a likely investor in Tonkolili's second phase, expected to start in 2013 and requiring $2.5bn of finance.
African Minerals has estimated reserves of 5bn tonnes of ore and may soon double, as more thorough analysis is undertaken.This move is indicative of a trend by China to source iron ore away from the big three producers, Vale, Rio Tinto and BHP Billiton, who together control 75% of the sector. Recent years have also seen an increase in spot-priced trade rather than through the more usual mechanism of the annual price benchmark negotiations.
Iron ore is a low margin, high volume commodity that requires very capital-intensive investment and a life cycle of many years. It requires the right kind of investment climate and a stable country politically and economically if it is to be successfully exploited.
Base metals, particularly copper and nickel, are to a large extent dependent on China and the country consumes half of the world's iron ore output. The massive gains seen over the last year are premised on the continued aggressive growth of China.
In the short term at least, the potential exploration and extraction of minerals in Africa is likely to largely depend on the ability of China to continue to grow rapidly and consistently. Because of the high costs of entry in the mining industry, the speculative costs of finding deposits and the capital-intensive nature of exploiting them, the industry has seen significant consolidation. The major 149 mining companies control 83% of all mining.
Increased investment from China, on a scale much in excess of that we have seen so far, is likely to be a major driver in the future of African minerals--the extraction of the copper-cobalt of Katanga and Zambia, the platinum of South Africa, the gold of Ghana, Mali and Tanzania and the vast arrays of iron ore from several African countries.