Africa Finance Corporation is seeking international partners to help develop junior mining projects amid accelerating demand for critical materials such as lithium, cobalt, nickel and copper fueled by the global energy transition, senior director - head of natural resources told S&P Global Commodity Insights in a recent interview.
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According to Osam Iyahen, AFC's mission is to foster industrial development, unlock value from natural resources, and catalyze significant long-term growth and diversification opportunities.
Since 2014, AFC has invested more than $900 million in African mining projects covering a host of minerals including those critical to the global energy transition including copper and manganese.
According to Iyahen, there were a growing number of global players seeking to build relationships or secure offtake agreements with African suppliers. As a result, the group was seeing growing demand for financing and technical expertise regarding a host of junior mining projects.
"The world needs African Resources to fully transition to clean-energy in the long term, and more investment is required to sustainably mine and develop in-continent processing capacity for commodities that are critical to the energy transition," Iyahen said.
"This will require global expertise that facilitates access to these minerals, and traders are increasingly deploying capital for project construction."
On Feb. 8, the company said it was partnering with the Solid Minerals Development Fund to provide funding and technical support to mining projects in Nigeria.
Under the Memorandum of Understanding, AFC and SMDF will co-develop mining projects to mitigate risks that would have otherwise prevented financing.
The partnership was expected to create a pipeline of high-quality projects with considerable economic impact for the country and local communities.
The announcement followed on from AFC's investment in the 715,000 mt/year Segilola Gold Mine in Osun State which achieved commercial production in July 2021
According to Iyahen, the perception of risk was one of AFC's most significant challenges when it came to the financing and development of early-stage mining projects.
"Africa holds 30% of the world's minerals, yet the continent attracts less than 5% of global funding for African mining projects. This makes the case for an African-led solution for derisking projects and why the mining sector is a focus for AFC," he said
AFC works to offset this by combining their own funds through a series of project development products to reduce risks around exploration, drilling, confirmation of deposits, and third-party development costs, including technical and environmental studies, project structuring, and project contract negotiations.
Only projects that have completed phases of pre-feasibility studies and secured all relevant government and regulatory permits are eligible for consideration.
The AFC also provides technical support to international sponsors throughout the development phase of the project.
"AFC has a mining-focused project development facility for sponsors to leverage in order to advance key workstreams which derisk projects for principal investments, and forges partnerships with funds such as SMDF, to crowd in additional capital and expertise that advances early-stage mine development," Iyahen said.
Other notable projects include the Bon Ami bauxite project in northwestern Guinea where AFC provided $10 million to start construction of the project. Once completed, the project will consist of a surface mine, 50 km haul road, a river export terminal, and a barging and transshipment operation to load Capesize vessels.
The initial production rate will be 6 million mt/year increasing to 10 million mt/year from year 3 of operations with production expected to commence in the third quarter of 2023.
AFC is also considering investing in a series of new copper-cobalt projects in the DRC where the countries significant cobalt deposits and hydroelectric electricity could make it a low-cost and low-emissions manufacturer of cathode precursor materials for lithium-ion batteries.
Ultimately, the AFC would like to see African countries capitalize on their resource wealth by moving further up the value chain through greater investment in processing capacity.
The EV market represents a US$7 trillion market opportunity between 2021 and 2030. Studies have shown that setting up downstream processing capabilities in Africa are fundamentally more cost effective, Iyahen said.
"AFC actively seeks partnerships with project sponsors and co-investors across the globe, to deliver strategic projects that harness this potential."
Platts, part of S&P Global Commodity Insights, assessed seaborne lithium carbonate and lithium hydroxide at $57,500/mt CIF North Asia and $66,000/mt CIF North Asia March 27, down 23% and 18%, respectively, since the start of 2023.