Nigeria Mining Week Digital Event investment session

“We hope to move projects to further stages where financiers are more comfortable to get involved”

A presentation by Nigeria’s Solid Minerals Development Fund (SMDF) during a session on financing operations in the country’s burgeoning mining sector created a lot of excitement on Tuesday during Nigeria Mining Week’s Digital Event.

“The SMDF has been structured and positioned and is ready to invest $500-million to unlock $1.5-billion in third party investments and financing in the mining sector,” said Hajia Fatima Shinkafi, executive secretary at the Solid Minerals Development Fund, “we are here to promote private sector-led investments, although we do have a social investment angle to the fund.”

She was part of a panel discussion focused on the key challenge of funding mining operations, namely the perceived high risk by financiers.

The official mandate of the SMDF is to: “Act as a catalyst to spur development of Nigeria’s mining sector by undertaking targeted sustainable, profit-oriented investments and interventions in key areas, in close coordination with stakeholders in the sector.”

Hajia Shinkafi said it is very clear why financiers are wary and private capital will remain a challenge as many of the projects in Nigeria are at stage 1 or 2, “which are the stages where exploration and the feasibility studies take place. We hope to move projects to further stages where financiers are more comfortable to get involved.

“We need to do things differently. Often implementation is the problem and an innovative approach is needed such as a combination of tools to solve the problems in the mining sector.

“Now, with post-COVID I am very hopeful, the human race is resilient. We need to be innovative with regards to finance.

“The fund will address the financial gaps across the mining value chain, including geoscience activities, exploration, equipment financing, mine development, production, infrastructure and capacity building,” she explained, adding that the SMDF was not a bank, but a partner, “we co-fund projects.”

Some key take-aways from the SMDF presentation:

  • Estimated mineral endowment from available data suggest a value between $700-billion to $1-trillion under the ground in Nigeria.
    • “If we were to match the oil and gas production levels,” Hajia Shinkafi explained, “the sector would generate annual revenues of $15-billion. This is not something we can continue to ignore.”
  • The gold estimated value has been scaled up from 1-million ounces (from the Nigerian roadmap) to 60-million ounces based on an estimated ratio of inferred reserves to inferred resources.

  • Nigerian gold valued at $1.3-billion has been illegally taken to Dubai in the last two years.

  • Informal exports indicate tremendous potential: $2.2-billion worth of gold, tin and lead illegally exported out of Nigeria from 2016-2018.

  • Despite subdued private investments in the gold sector and the absence of an operating gold mine, Nigeria’s artisanal gold production has almost doubled since 2015. To date, Nigeria accounts for just 2% of the total gold production volumes in Africa with an estimated 854 tons.
    • “There is huge opportunity for growth there” – stated the SMDF executive secretary.
Nigeria Mining Week SMDF presentation

Source: Solid Minerals Development Fund (SMDF)​

To view the full presentation and the session, register here

Huge interest in working with SMDF
Not only did the SMDF information create a lot of excitement and interest from the many attendees of the live online session, Hajia Shinkafi’s fellow panellists all expressed interest too in pooling resources and possibly working together on projects in the future.

“I can see collaborative opportunities listening to Hajia Fatima Shinkafi,” commented  Abiola Osho, senior associate investment at the Africa Finance Corporate: “It’s an interesting time. We are active in the sector and there are still a lot of projects coming on-stream.

“Nigeria is a natural investment destination already, so why is the capital not flowing?

A major issue is project preparation and availability of data. We try to focus on solutions to put capital at the earlier stages to help sponsors to complete the requisite drilling and geotechnical work and metallurgical testing and crystallise that into a bankable feasibility study that capital can back, as it were.
So, we are putting a lot of effort into that and doing a lot of background work.”

“I look forward to collaborate with my fellow panellists from Commodity Port, AFC and SMDF on mining projects. The more the merrier,” said Olayinka Mubarak, Group Head, Solid Minerals And Metals, Large Enterprises Directorate at the Bank Of Industry.

The bank also supports artisanal miners with its Artisanal and Small Scale Miners Support Fund: “Artisanal miners are the natural pathfinders of the sector in Nigeria,” Mubarak added.

“The sector is now at a crucial junction and private and public sectors have to move in the same direction. We see opportunities in long-term private equity projects in the SME value chain in the mining sector in Nigeria,” said Laide Gana, Director at Commodity Port Limited.

The discussion was led by Kunle Amida, Partner, Deals Advisory at PwC, a founding partner of Nigeria Mining Week.

  • The Digital Event is continuing until Friday, 16 October and upcoming sessions include project highlights in the country, a masterclass investment guide for mining in Nigeria and formalising ASM amongst others. Register here to join the conversation: https://www.nigeriaminingweek.com/register