PERTH (miningweekly.com) – Western Australian miners operating in Africa have been hard hit in 2014, advisory firm Deloitte reported on Monday, with operations affected not only by declining commodity prices, but also by industrial action, geopolitical tensions and the Ebola crisis.

In a special edition of its Deloitte WA Index, released to coincide with the African Mining Indaba conference in Cape Town, South Africa, Deloitte clients and markets partner for Western Australia Tim Richards said the combined market capitalisation of the companies took a significant fall over the period.

“The combined market capitalisation of Western Australian-listed companies with operations in Africa that comprise the Deloitte Western Australian (Africa) Index fell A$3.59-billion, a huge 47.3% over the 12-month period, to close at A$4-billion,” Richards said.

“Of this movement, A$2-billion is attributable to merger and acquisition activity that saw nine companies with African operations delisting from the ASX during the year.”

Richards noted that by comparison, the market capitalisation of all Western Australian-listed companies which comprise the Deloitte Western Australia Index, not just those operating in Africa, declined just 16.9% over the same period, closing the year out at A$129.3-billion – the lowest point since June 2013.

He added that the declining commodity prices had a severe impact, with some companies losing almost half of their market value over 2014.

The index hit a two-year high mid-year at A$156.9-billion, before the resource-dependent market was weighed down by falls in commodity prices in the second half, influenced by weaker demand from the Chinese manufacturing sector, a strengthening US dollar and oversupply of some of the major commodities.

“Coupled with the Ebola outbreak in West Africa, as well as challenges relating to industrial relations and geopolitical tensions, 2014 was a challenging year for many companies and has highlighted the changing nature of investment into Africa,” he said.
 
However, Richards said that the African resources sector still had potential as an emerging market opportunity, a fact clearly demonstrated by the acquisition during the year of a number of companies with significant African operations.

Australia's investment into Africa in recent years has been dominated by the mining and mining services sectors and, at its height, more than 230 ASX-listed companies were active in projects across 42 African countries. However, over the past 18 months, this investment has contracted given the challenging economic environment.

Deloitte’s Australia-Africa Services Group Leader Jacques van Rhyn said that in contrast, Australian oil and gas investment in Africa has increased steadily over the last few years.

“This has ranged from Woodside reappearing with interests in a number of countries, through to an increase among micro-cap junior exploration companies exploring frontier provinces,” Van Rhyn said. 

“It is a positive sign that Australian participation in the African oil and gas sector is clearly increasing. This investment is still in its infancy, but we believe that, in time, it could reach or exceed the levels of capital invested by the sector’s mining cousins.”