Australia/Republic of Congo – In Deloitte’s Australian investment into Africa analysis report, released in February, it reviews the changing face of Australian investment into Africa and speaks to ASX-listed Equatorial Resources CEO John Welborn and how his company is approaching the current climate.
“Commodity and country are the main factors when considering where to invest. We have focused on two large-scale iron ore projects in the Republic of Congo where there have been huge changes recently, particularly regarding Chinese investment. When selecting a country to invest in, a number of factors are important, including political and fiscal stability. There are stable countries in pockets in Africa. It’s also important to look at what external investment exists and whether there is a dominant driving and sustainable industry in the country which other industries can then build off.
“Chinese investment is obvious across Africa, but investment from other countries is less so. On-going Chinese infrastructure investment and the increasing appetite across Africa to diversify economies has driven these changes. The Republic of Congo is mainly focussed on oil, so mining represents an obvious diversification opportunity,” says Welborn.
When questioned on commodity price volatility and whether it has impacted Equatorial Resources’ access to funding over the past 12 months, Welborn says, ““Definitely, Equatorial is ready to fund and build, but the appetite for funding iron ore is zero at present. But it’s not impossible; we are looking at other opportunities such as government funding.”
“We are well-funded to maintain the project but we need to be patient,” he adds. “We need to continue to look for partners and refine the project, pursuing the staged plan particularly at Myoko which has a railway that can handle a small scale iron ore project. Starting small and building over time is a good approach in Africa given the current fiscal and political risks.”
Looking forward to the next 12 months Welborn says the company will continue to pursue government funding options. “Infrastructure sharing is not in the mining culture, but it makes so much sense. It is the right long term answer for Africa.”
Global iron ore supply remains the company’s largest threat at present – its rules the pricing structure Welborn states. “If significant supply comes on elsewhere, African iron ore could be left behind in the future.”
“The Congo has on-going enthusiasm for foreign investment but does recognise the need to provide a stable platform for investment. You can’t generalise, in Africa there are 54 countries operating at different stages of maturity, with different political risks and differing views on foreign investment,” Welborn concludes.