$110m Africa-focused mining fund launched

2nd February 2011 By: Petronel Smit

JOHANNESBURG (miningweekly.com) – African and international institutions have committed up to $110-million in junior venture capital through the second New Africa Mining Fund (NAMF II) at the first closing on January 31.

The Africa-focused capital fund, which was launched on Wednesday, is targeting a total commitment of $300-million by its second closing at the end of January, 2012.

NAMF principal Neil Gardyne said that the NAMF II would provide risk capital for early-stage exploration and development of junior mining companies with projects in Africa, that can demonstrate a minimum 35% return on investment. All mineral types, except diamonds and uranium, would be considered.

“Most of our investors have policies against minerals of a radioactive nature, like uranium, as well as the risk associated with diamonds,” he explained.

Investors that had already committed to the fund, include the Development Bank of Southern Africa, the African Development Bank, the International Finance Corporation, the Swiss Investment Fund for Emerging Markets and the German DEG KFW Bankengruppe.

NAMF II would have a life of eight years with capital commitments made over the first five years and returns concluded by the end of the eighth year. It would invest exclusively in African projects, spending no more than 25% on any one commodity and a maximum of 15% on one company.

Gardyne pointed out that attitudes were changing along with the economic climate and said that NAMF II had received positive feedback from potential investors. However, the matter of sustainability was as important as return on investment.

“Our commitment to World Bank performance standards, aligned to the Equator Principles and to the Extractive Industries Transparency Initiative, means we must see those junior miners in which the NAMF II is invested delivering jobs, infrastructural development and contributions to the treasury and foreign exchange reserves of their host countries,” he added.

The ten African mining projects in which the NAMF I was invested ultimately delivered a 39% internal rate of return. Key investments included JSE- and Aim-listed Petmin, which has developed the 1,1-million-ton a year run-of-mine Somkhele anthracite mine in KwaZulu-Natal, as well as the Zambian copper-miner Kiwara, which Vancouver-based First Quantum subsequently acquired and was now developing its Kalumbila copper deposit in north-west Zambia.

Gardyne said that, while approaches for NAMF II funding had already been received from more than 30 mining juniors with projects in various parts of Africa, the search continues for more. Although private companies were preferable for investment, the NAMF would not turn down listed companies seeking funding.

NAMF aimed to act as a catalyst for job creation, infrastructure development and foreign exchange reserve contribution. The fund’s management pointed out that Africa was well endowed with the mineral resources that would be in growing demand over the next two decades by emerging economies, such as China and India.

“NAMF has proved that it has what it takes to identify and support African mining projects that will produce successfully for such markets, contribute positively to socioeconomic development and deliver attractive returns to our investors,” Gardyne concluded.