Dedicated African infrastructure investment institution, the African Finance Corporation, has spent the last 10 years investing in projects on the continent that stimulate in-country economic growth and development – primarily infrastructure (which includes mining-related ventures)
Dedicated African infrastructure investment institution, the African Finance Corporation (AFC), has spent the last 10 years (since it was first established) investing in projects on the continent that stimulate in-country economic growth and development – primarily infrastructure (which includes mining-related ventures). This more recently includes a major investment into an emerging bauxite project in Guinea which fulfils another important AFC-criterion – delivering financial assistance to reignite business in Africa’s post Ebola-stricken countries, writes LAURA CORNISH.
“According to World Bank reports, it is estimated that over US$100 billion every year is required to bridge the infrastructural gap across Africa, which suffers for a start from a dilapidated power sector and ‘less-than-ideal’ transport infrastructure, from both an intermodal and interregional connectivity perspective,” says Osam Iyahen, director & head of natural resources at the AFC.
“The combination of these difficulties leads to a number of adverse social economic impacts across Africa which are reflected in the GDP and other economic indices,” he continues. The lack of infrastructure also impacts heavily on mining developments whose viability is often determined to a large extent by logistics and power availability.
“AFC was founded in 2007 to address this specific issue. We are an infrastructural investment bank at the core with a mandate to provide funding for projects that have a developmental impact.” Iyahen highlights the investment grade rated organisation’s “unique” attributes noting that the business is capitalised by Africans to solve African problems. It has been rapidly gaining an international reputation as a sound investor in this sector based on its deep knowledge of the African infrastructure landscape.
“That gives us a significant edge and advantage because we are able to take on and absorb risks that other financiers can’t. We are a public/private partnership between government and private entities, meaning we have a commercial imperative to seek out financially viable projects which importantly need to have developmental impact,” Iyahen reiterates. Having raised a significant amount of funds from external parties and lenders over the years, the AFC’s balance sheet currently sits north of $3 billion. “As such we believe we are on track to become the premier international investment banks focusing on infrastructure development across Africa.”
To demonstrate AFC’s investment journey to date, Iyahen says the organisation has invested in a number of infrastructure projects in Africa which include toll roads in South Africa. “Our investments also include the 25.5 MW Cabeolica wind farm in Cape Verde which provides 20% of the total power usage on the island as well as the Henri Konan Bedie bridge – a $365 million public private partnership project in Abidjan, Côte d’Ivoire.” This bridge consists of a 6.4 km highway and 1.9 km bridge with three lanes in each direction across the Ebrié lagoon, connecting Abidjan’s residential Riviera district directly with the commercial district of Marcory.
Further to this the company was a pioneer investor in an international undersea high speed telecom company called MainOne – which has supplied high speed internet from Spain to a number of West African countries including Nigeria, Ghana, Burkina Fasa, Côte d’Ivoire, Togo and Benin.
“At present we are investing (with the highest equity stake) in a 350 MW gas-fi red power plant in Ghana,” Iyahen adds. Discussing the mining sector, the head of natural resources notes its increasing attraction for AFC. “We have entered into our third transaction and are looking to deploy additional capital into the mining space this year. We believe we have a unique role to play in bridging the gap between the lack of infrastructure and unlocking resources in remote locates.”
A record investment of $205 million by an international consortium, including AFC, to develop the high-grade Bel Air bauxite mine in Guinea (only 15 km from the Atlantic coast) is generating new hope in this West African country.
AFC’s high calibre consortium partners include Orion Mine Finance, a specialist mining investor, with over $2.5 billion of assets under management, and Resource Capital Funds, a mining focused private equity firm with over $2.5 billion under management, as well as existing shareholders.
Guinea was one of three states in the sub-region that were stricken by the Ebola crisis in 2014. The economy of this nation of 10.5 million people was virtually destroyed by both the effects of the disease and the international isolation engendered by the illness. This is believed to be one of the largest foreign investments in the country post Ebola. Alufer Mining Company holds the ratified mining convention for the mine and is planning to produce in Phase 1 about 5 Mtpa of bauxite by the third quarter of 2018. Production on this scale would increase Guinea’s total output, currently at around 18 Mt, by more than a quarter. Phase 2 is set to increase production to 10 Mtpa.
The bauxite at Bel Air has been described as very high quality and capable of fetching premium prices in global markets, particularly in China which is currently remodelling its industrial output towards domestic consumer production. The current demand for aluminium is outpacing supply. Guinea currently has around 33% of the world’s reserves of bauxite. Alufer also holds licences linked to the Labe project in central Guinea. Together with Bel Air it is believed to hold over 3 Bt of resources. “Financing projects such as Bel Air in this short time frame is rare in the mining sector. We only completed our definitive feasibility study in May 2016 and to secure funding within seven months is an incredible achievement. I am convinced that this demonstrates the quality of the project and our team,” says Bernie Pryor, CEO of Alufer.
Not only does the Bel Air mine adhere to best practice environmental principles: it has also been working with the local community to develop sustainable projects which assist in the provision of drinking water, as well as development of local infrastructure and job creation. “This project holds three main attractive features for us,” Iyahen states. “Guinea is one of the Ebola-affected countries and therefore a priority country for us to invest in. The project is sizeable and will have a significant impact on the country; and we also have like-minded partner investors with the same objectives as ourselves.” AFC had been in discussion with Alufer for almost the last three years, which demonstrates the difficulty in developing the right infrastructure projects in Africa. “Thanks to our long-term investment view, we remained constant in our discussions and proceeded with the project which undeniably fi ts our investment appetite.”
Iyahen says the AFC’s current focus will spread across proven mining jurisdictions, and like Guinea includes the post-Ebola stricken Sierra Leone and Liberia. “These areas need growth and economic stimulation and unfortunately are areas which few investors will consider.” He also identifi es gold opportunities in Mali and Mozambique as two priority regions which the institution is evaluating.
“We are looking to deploy around $150 million across the continent this year.” It is close to closing a new transaction for a gold project in West Africa, although at this stage Iyahen will not reveal more. “This is the right time to invest when the market is relatively low – the bottom of the commodity cycle has passed. But regardless of market conditions, we can withstand volatility because our business has a long-term view and approach.” MRA
In 2015, despite a difficult commodity price environment, AFC provided a $110 million preexport finance syndicated loan facility to the DRC’s Shalina Resources in collaboration with First Bank of Nigeria (UK) - FBN UK - and Trafigura Beheer BV, a Dutch multinational commodity trading company. The loan facility was used to fund the construction of a leach solvent extraction and electrowinning (SX/EW) plant at Shalina’s Etoile mine.
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