Cobre Ltd has kicked off a collaborative airborne gravity gradient (AGG) survey with neighbour Sandfire Resources, covering a large portion of the Kalahari Copper Belt (KCB), including Cobre’s Ngami Copper Project, Kitlanya West and Kitlanya East (KITE) Projects.

Notably, the results are expected to provide valuable information on KCB basin architecture and the location of sub-basins, margins and controlling structures where copper-silver mineralisation may be targeted.

The survey will complement results from the recently completed 5,000-metre diamond drilling, ongoing soil sampling, and aircore and reverse circulation drill programs, providing valuable additional data for area and target prioritisation at Kitlanya West and Ngami Projects.

Furthermore, AGG results may also help in the detection of copper-silver bearing trap sites analogous to Sandfire’s neighbouring T3 and A4 deposits at KITE, providing new targets for drill testing.

Significant insights

Cobre CEO Adam Wooldridge said: “We are pleased to announce that the AGG survey, in collaboration with Sandfire, is finally underway. These results are expected to provide significant insights into our understanding of the regional controls for copper distribution in the KCB.

“They will also provide a new targeting tool to complement our other datasets. The deliverables from this survey are expected to be highly complementary to the results from our ongoing aircore, reverse circulation drilling and soil sampling programs at KITW as well as providing further context for the distribution of copper-silver grades at NCP.

“Additionally, the results over the KITE project will be particularly interesting given its proximity to the T3 deposit and potential for hosting similar styles of deposit.”

Survey background

Gravity data is routinely used for mapping sedimentary basins where it provides a cost-effective method for modelling the basin architecture, often key to understanding the distribution of sedimentary copper deposits.

This is demonstrated in the historical regional ground gravity data over the north-eastern portion of the KCB where correlations are evident between the margins of gravity lows and known copper-silver deposits.

The higher resolution AGG is expected to build on these correlations, identifying further priority sites for copper-silver deposits as well as providing important structural information and potentially identifying trap-site targets where mineralisation may be economically upgraded.

Africa is home to some 30% of the world’s mineral deposits; yet 70% of mined materials are exported to Europe or Asia to be further refined and turned into marketable products.

African countries hold some of the largest deposits of particular minerals on Earth, including Namibia, which is the second-largest producer of uranium in the world. The country is also home to massive deposits of tin and lithium – two materials needed to enable the green transition away from fossil fuels towards more sustainable energy sources.

Voices within Africa argue that those minerals should stay on the continent for greater beneficiation – or the process of improving the economic value of a mined raw substance. Proponents of beneficiation say Africans will benefit from greater income generation, employment opportunities, industrialisation, as well as regional integration.

It is an ambitious goal, but one that may be achieved over the coming decades as African governments coalesce to push for continent-wide development and reform. There is no doubt a long road to travel to get there, and part of that path includes building roads and developing infrastructure. Miners say political risk in some countries is another major hurdle.

While there is a greater impetus for cohesion with endeavours such as the intra-continental African Continental Free Trade Area that recognises the importance of infrastructure development to advance trade, there is still a monumental need for new policies to push development.

“Adequate domestic policies for the development of a beneficial value chain for improved prosperity, and job creation, to support the sustainable development of the continent have not been formulated,” reads a 2021 report from the African Natural Resources Centre.

Beyond policies, foreign direct investment (FDI) is also needed to see these goals realised. Historically, investors have been hesitant to invest in Africa due to its perceived risk.

“Africa gets a pretty bad reputation in terms of being an investment destination,” says Anthony Viljoen, the South African CEO of Andrada Mining, which operates exploration projects across Africa, including in Namibia. “The recent history has been quite volatile, and there are countries where political risk is a life or death situation.”

Over the past decade though, policymakers and government officials on the continent have worked to flip the script on risk. A UN Conference on Trade and Development report found that between 2006 and 2011, Africa boasted the highest rate of return on FDI inflows at 11.4%. In Asia, the rate was 9.1%, and 8.9% in Latin America and the Caribbean. The global figure for that time frame stood at 7.1%.

From policymakers and businesspeople on the continent, the message to investors is a resounding: “Africa is open for business.”

The link between investment and beneficiation

Intrinsically linked to the investment question is the question of beneficiation.

Greater beneficiation can only be achieved through higher investment that will enable the development of road and transport networks, a steadier electricity supply, and water infrastructure – in some cases, this requires desalination plants. Raw minerals can’t undergo beneficiation if they cannot be moved to a processing plant, and they can’t be processed without steady electricity and water.

Then there is the argument that because many minerals are manufactured into goods that support a certain process – such as lithium-ion batteries – they should be manufactured closer to where they will be used, and that is almost always outside Africa, which lacks manufacturing capacity. As supply chains have been thrown into disarray by the Covid-19 pandemic and global geopolitical events, manufacturers increasingly want parts to be made near their end destination.

“Being an African myself, there is a lot more benefit that can be gained from having beneficiation in-country,” Viljoen says. “Investors need to see to what level beneficiation is practically possible, and it should be pushed to the level that host governments can realistically provide.”

However, the question of value addition to African countries’ economies through expanded continent-level value chains remains central for African governments, despite arguments against it.

Government officials across Africa look at these challenges with a determined optimism that they can be surmounted.

Opportunities abound in Namibia

“In terms of Agenda 2063, African leaders have realised that as Africa, we have natural resources, but they are all being exported to other countries,” says Nangula Uaandja, CEO and chairperson of the Namibia Investment Promotion & Development Board (NIPDB).

“There are significant opportunities for refineries in Africa, because if we can refine even a small percentage of the minerals that are mined on the continent, then there is definitely significant advantages for people who take up the first-mover advantages in that space.”

From exploration to extraction and refining, Uaandja says there are many opportunities for companies. Namibia is also investing in vocational training in recognition that skilled labour is essential to develop the country’s nascent manufacturing sector. By 2050, according to the UN, Africa is projected to have the largest working age population in the world, with birth rates falling in other regions globally.

“Namibia is the best destination in Africa to invest in,” Andrada’s Viljoen says. “It is not perfect, but it is as close as you can get.”

Viljoen adds that within Namibia, and especially within the NIPDB, there is a recognition that the country’s officials and economic development board must work with miners and other investors to find policies, incentives and tax regimes that are suitable for all parties.

“There is a pragmatic, rational way of thinking,” Viljoen says.

Zambia has started rationing electricity supply to mining firms following reduced power generation after a big drop in water levels in lake Kariba, the chairman of state-owned power utility Zesco said on Tuesday.

“We requested them to give away 180 MW but after negotiations we went down to 110 MW,” the utility’s chairman Vickson Ncube told Reuters, referring to mining companies in Africa’s No. 2 copper producer.

Water levels in the lake were down at 1.66% of usable storage on Monday for the Kariba North Bank Power Station in Zambia and the Kariba South Bank Power Station on the Zimbabwean side of the lake, said the Zambezi River Authority, which manages the dam.

Water levels in the lake have fallen due to reduced inflows from the Zambezi river and its tributaries and heavy use by power generation companies in Zimbabwe and Zambia.

The north bank power station at the Kariba Dam has an installed capacity of 1,080 megawatts (MW), while the south bank power station in Zimbabwe has a capacity of 1,050 MW.

Hydropower contributes to more than 75% of Zambia’s electricity generation.

Ncube said power rationing was expected to be reduced by the middle of next month as water levels increased and full generation was to likely resume in March.

Last week, Zesco doubled the number of hours it cut supply to domestic customers to 12 hours from six hours daily as the low water levels in the lake threatened power generation.

The above-inflation electricity tariff increases granted to Eskom, and the negative consequences for the economy and employment, has raised alarm bells in the mining industry.

The Minerals Council South Africa notes this increase with dismay, says Henk Langenhoven, chief economist at Minerals Council.

“The latest 18.65% and 12.74% tariff increases mean the mining industry’s electricity costs will increase by R13.5 billion, or 33.7%, to R53.5 billion by the end of 2024.

“Over the 4 years between 2021 and 2024 electricity tariffs would have increased by 46%. Since 2008, the price of electricity for the mining industry has increased eightfold while consumer prices, as measured using the consumer price index (CPI), have only doubled,” says Langenhoven.

Electricity will make up about 12.5% of South African mining costs by the end of 2024 from about 9% at present.

“These increases the National Energy Regulator of South Africa (Nersa) granted Eskom fundamentally shift the intermediary cost structures in mining. Due to the different electricity consumption densities of various mining commodities, the impact is not the same across the sector, but this is deeply concerning,” says Langenhoven.

The higher cost of electricity means the share of energy in intermediary inputs will increase from 24% to 38% in gold mining, from 22% to 37% in iron ore mining, and from 13% to 19% in the platinum group metals sector.

Langenhoven says the increasing difficulties Eskom has in keeping the economy supplied with electricity coupled with the tariff increases adds to the negative economic sentiment in South Africa.

“This at a time when unemployment is at a record high, and the country desperately needs urgent fundamental structural and regulatory reforms to stimulate the economy.”

The government’s reforms in the electricity arena announced in 2022 have probably been the most fundamental of all.

The Minerals Council welcomed the removal of the cap on the size of private sector electricity generation projects. “This must be emulated in other state-controlled areas of the economy like water and transport logistics where meaningful private sector participation and partnerships should be encouraged and facilitated,” Langenhoven adds.

The mining sector will feel the deepening electricity crisis at processing, smelting and refining plants, while mines need absolute energy certainty when sending employees underground to ensure they can safely return to the surface.

Smelters require sufficient time to ramp down as sudden loss of power will result in catastrophic damages.

With the current levels (Stage 3 and 4, before the recent Stage 6 announcement) of loadshedding, smelters were already experiencing uncharacteristic trips as they were not designed to operate under these conditions.

“The cost to the economy of ‘unserved energy’ or loadshedding is about R87 per kWh while the cost of diesel generation is about R7.50 per kWh, according to the CSIR. It makes sense, therefore, to allow diesel purchases due to the damaging opportunity cost of loadshedding, “ says Langenhoven.

He says the consequences of the latest tariff increase must be seen in the wider mining sector context. Average input costs were running at above 15% at the end of 2022. These new tariffs could add 4 percentage points to costs, materially squeezing profit margins.

The Minerals Council estimates mining production declined by 6% during 2022.

“The adverse operating environment of unreliable and expensive electricity, and a crisis in transport logistics for bulk mineral exports erode the mining sector’s global competitiveness and may very well culminate in job losses in mining,” says Langenhoven.

Over the medium to longer term, these uncertainties bode ill for starting new mines and extending the lives of older, marginal assets. For mining companies building mines that have lives of decades, the ability to accurately estimate long-term electricity prices and supply as well as confidence in securing reliable and cost-efficient transport and export channels are critical factors in deciding whether to start new projects.

The private sector in South Africa has a total pipeline of 9 GW (gigawatts) of energy projects in solar, wind and gas, and in battery storage. By expediting these projects and reducing industry’s reliance on Eskom, the power utility will secure the time and space it needs to undertake critical maintenance and refurbishment of its power plants. The mining industry alone accounts for about 7.5 GW of these projects at a cost of more than R150 billion.

The Minerals Council estimates 3 GW of the 9 GW of private sector electricity generation will be completed by the end of 2024.

The mining sector consumes about 14% of Eskom’s electricity. Adding smelters and refineries, the mineral sector consumes about 30% of Eskom’s output. Eskom will remain a source of baseload electricity supply for the mining industry because solar and wind energy are intermittent.