INTERVIEW: Africa Finance Corp. says mineral extracting, processing crucial for economy

Supporting the development of Africa's extensive energy and mineral resources is critical for accelerating industrialization, infrastructure development, and economic growth across the continent, Africa Finance Corporation President and CEO Samaila Zubairu told S&P Global Commodity Insights in a recent interview.

Speaking on the sidelines of the Investing in African Mining Indaba conference in Cape Town, South Africa, Zubairu said that AFC remains focused on diversifying its funding portfolio while channeling investment in its core infrastructure sectors of power, natural resources, heavy industry, transport, and telecommunications.

With abundant resources critical to the global energy transition effort, Africa's mining potential continues to garner attention from foreign investors and government agencies. In light of surging demand for the critical minerals required for said effort, the continent has emerged as a prime target for mining investors.

Since 2007, AFC has invested more than $15 billion in projects in 36 African countries, including several mining projects.

Zubairu said that AFC sees investment in Africa's minerals as crucial to supporting the build-out of the large-scale transport and power infrastructure needed to support local and regional economic development.

"The primary means of accelerating Africa's industrialization and integration centers upon the value capture and retention of our minerals," he said, adding that mineral ores currently account for the majority of the continent's exports.

An emphasis on value-added mineral processing

To promote economic development and value-creation, Zubairu said that the AFC wants African countries to capitalize on their resource wealth by moving further up the value chain through investment in a domestic mineral processing capacity.

Known as "beneficiation," this desire has led to the implementation of mineral export bans in African countries such as Ghana and Zimbabwe.

Although some within the industry suggest that such a strategy could ultimately deter foreign investment, Zubairu affirmed that African countries should be allowed to capture part of this value given their fundamental role in battery metals supply chains.

"The manner in which we currently export is not efficient because we're exporting raw materials as opposed to value-added products," he said. "We believe that capturing this value and keeping more of these products in Africa would help accelerate industrialization and urbanization within the continent."

Zubairu said that Saudi Arabia and the Gulf states have expressed interest in supporting this approach because of the significant project capex savings.

"We have shown them that they can make their project capex more efficient by extending their mineral value-chains into Africa with the establishment of processing facilities," he said, adding that conversations around specific investments are ongoing.

Zubairu pointed to the findings of a 2021 Bloomberg study examining the cost of producing lithium-ion battery precursors in the Democratic Republic of Congo and benchmarking the cost to that of the US, China and Poland. Commissioned by AFC and several other African financial and development institutions, the study concluded that a 10,000 mt/year precursor facility could be built in the DRC at a cost of $39 million, three times cheaper than the US and well below China ($112 million) and Poland ($65 million).

Building on this effort, Zubairu added that AFC recently commissioned a study exploring the viability of establishing a bauxite plant in Nigeria utilizing the country's abundant natural gas reserves. He added that the study will use Australia and Guinea as benchmarks, and the findings will be announced in the coming months.

"We have clients that have huge gas reserves, and I have been encouraging them to consider how they can use it to enable value-added industry that has a global price," he said.

In addition to bauxite, Zubairu noted that Nigeria also has significant critical mineral deposits that could be extracted and processed at a competitive cost utilizing the country's natural gas reserves.

He said that these integrated mining and processing projects, which have the advantage of a readily available energy supply, offer significant capex savings relative to other jurisdictions.

"We believe they represent a huge opportunity for accelerating Africa's industrialization," Zubairu said.

Lobito Corridor development

Zubairu added that AFC remains closely involved in the development of the Lobito Corridor, a 1,300 km railway linking the mineral-rich regions of northern Zambia and southern Democratic Republic of Congo to the Port of Lobito in Angola. AFC is the lead developer for the project, in partnership with the US, the EU, Angola, DRC, Zambia and the African Development Bank.

He said that the expansion of the Lobito Corridor holds enormous promise for regional and international trade, fostering economic development and improved connectivity, adding that AFC is focused on helping mining companies increase their shipments via the railway.

Platts, part of S&P Global Commodity Insights, assessed CIF China clean copper concentrate treatment and refining charges at minus $12.50/mt and minus 1.25 cent/lb, respectively, Feb. 14, down 40 cents/mt and 0.04 cent/lb, respectively, from Feb. 13.