The African Development Bank (www.afdb.org) joined investors into the New Africa Mining Fund II (NAMF II) equity fund investing in mining projects throughout Africa, especially Southern Africa. The bank announced on 19 July a $25 million equity stake. NAMF II aims to raise $100 million to $300 million.
According to the International Finance Corporation website (www.ifc.org), the IFC has approved a proposal for a $30 million investment in May.
According to the AfDB press release: “Like the first New Africa Mining Fund (NAMF I), this fund will focus on the upstream stages of the mining investment cycle where value creation is highest, i.e. primarily exploration and pre-development activities by junior and intermediate companies. The Fund will invest over 5 years and will have a life of 8 years.
“The role of mineral resources in Africa’s economic development is undisputed, particularly in the context of the favourable market outlook as a result of strong commodity demand. The African junior mining market remains capital constrained and unable to fully harvest prevailing opportunities. NAMF II therefore intends to mobilize capital for this sector in order to take advantage of the market potential. The Fund is targeting a net return in excess of 20%.
“From a development perspective, the Fund is expected to positively influence private sector development, create local permanent and short-term jobs, support balanced revenue sharing, increase government revenues (+$900 million per year), ensure compliance with environmental standards and promote transparency through the Extractive Industries Transparency Initiative (EITI). The Fund will be guided in its governance strategy by a comprehensive Governance Codex developed in collaboration with the AfDB.
“The Fund’s investment will facilitate growth and expansion in greenfield projects across the continent, thus developing African companies in the private sector and promoting growth in a sustainable manner through its Governance Codex and Environmental and Social Management System (ESMS).”
According to its website (www.newafricaminingfund.co.za), NAMF I raised about ZAR564 million ($77.8 milllion) of committed capital and invested in early- to later-stage junior exploration, mining and beneficiation activities (“junior miners”) in Africa, in resources such as base metals, platinum group metals, gold, coal and other bulk minerals such as iron, manganese and chromite. Its target companies offer high-quality management and have the potential to become substantial mining operations or to be acquired by larger mining operators.
NAMF I capital funded exploration, feasibility studies or development and expansion. Investors included ABSA bank, the Development Bank of Southern Africa, BHP Billiton, Goldfields, Industrial Development Corporation, IFC, Exxaro, Sanlam and Harmony.
According to the IFC, NAMF II is to be run by a joint venture of Decorum Capital Partners (Pty.) Ltd. and a black economic empowerment investor. “Through the involvement of a BEE partner, DCP aims to introduce Historically-Disadvantaged South Africans (HDSAs) into the management team, to broaden the team, develop a succession plan and potentially achieve compliance with South Africa’s BEE Code, as it applies to private equity funds”.
The target commodity focus will include base metals, gold, platinum group metals, coal and potentially other bulk minerals, where the medium-to-long-term industry fundamentals are attractive.
DCP claims its investment professionals “have proven private equity investment track records and are ready to respond quickly to new investment opportunities. The team skills mix has a bias to experienced exploration, mining, processing and beneficiation professionals and also includes investment banking skills.”