Nigeria’s chances of harnessing its vast solid mineral endowments for reviving and repositioning its slowing economy following a two-year poor showing in the oil market are threatened.
This is as the performance of the global market for solid minerals, where the country intends to take root, continues on a downward trend since 2010, posting a $27 billion loss just in 2015.
The year 2015 was a race to the bottom with many new records set by the world’s 40 largest mining companies, according to the annual mine report released by PricewaterhouseCoopers (PwC) last Tuesday, and seen by BusinessDay.
The 13th in PwC’s industry series analysing financial performance and global trends, the report reveals a first ever collective net loss of $27 billion for the top 40 miners, with market capitalisation falling by 37 percent and effectively wiping out all the gains made during what it called “the commodity super cycle.”
With a further $53 billion of impairments in 2015, miners have now collectively wiped out the equivalent of 32 percent of their actual capital expenditure since 2010, which also represents a hefty 77 percent of this year’s capital expenditure, it further notes.
Nigeria is said to have at least 44 known mineral assets, including precious minerals, base metals, bulk minerals, as well as rare earth minerals.
But President Muhammadu Buhari, in his inaugural speech, said his government would exploit available opportunities in the solid mineral and agricultural sectors in rebuilding a struggling national economy with decades of over-reliance on oil, currently and historically devalued in a chaotic global market.
Kayode Fayemi, minister of solid minerals development, equally buys into this vision and has since resumption of office rolled out some far reaching strategy to revamp the crawling sector.
Current industry data show that the country’s solid mineral sector contributes a paltry 0.34 percent to gross domestic product (GDP), amounting to only N400 billion.
“What you notice is that when oil prices go down, Nigerians talk about diversification into the mining sector and the minute oil prices start climbing up again, that interest wanes, which is, for me, why we need to sustain what we are now entering into,” Fayemi told BusinessDay in an exclusive interview recently.
“And I can tell you that President Buhari is not a frivolous person and it has come at a time that oil prices have gone considerably down, but history teaches us that there is always opportunity in adversity…it is not only oil prices that are down, commodity prices are also down. Iron ore price is almost $50 per ton, coal is also down. The only thing that is not really down is gold, even steel is struggling.
“And, for us, we see our responsibility therefore in ensuring even a better understanding of the sector, because what the sector even suffers from first and foremost, is the destination problem, nobody sees Nigeria as a mining destination. If you talk to any investor, Nigeria is seen as an oil and gas destination.”
Another major constraint is that the banking industry’s lending to the mining sector in Nigeria is less than one percent.
In order to remedy the funding challenge, Fayemi says a constructive mechanism has been started with the Central Bank of Nigeria (CBN) and commercial lenders, with the aim of raising at least N500 billion so as to broaden lending options for Nigerian miners.
But as Nigeria struggles with liquidity issues in its mining sector, the global industry also contends with the same financial hurdles.
Available data also showed that the top 40 were more vulnerable and carrying heavier debt loads than in prior years, said the PwC mining expert.
According to Michal Kotzé, mining industry leader for PwC Africa, “last year was undoubtedly challenging for the global mining sector, as the top 40 companies experienced their first ever collective net loss, their lowest return on capital employed, a significant drop in market capitalization, and an overall decline in liquidity.”
The report analyzed 40 of the largest listed mining companies by market capitalization, with four new entrants in this year’s top 40 being Chinese companies, even as China accounts for about 40 percent of the overall global solid mineral commodity demand.
Although the names of all the companies involved have not been stated, the report noted that AngloGold Ashanti has reemerged in the top 40 for the first time since 2013, while the number of emerging companies included in the list has increased by two and now totals 19.
The financial information for 2015 covers the reporting periods from April 1, 2014 to December 31, 2015, with each company’s results included for the 12-month financial reporting period that falls into this time frame.
YANGE IKYAA
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