The piece “Standard Bank beckons mining investors” featured below was initially published in Malawi’s Mining Review Issue Number 26 2015 that is circulating this June 2015.
The full edition is available for download here. This monthly publication is edited by Marcel Chimwala.
Standard Bank beckons mining investors
…Bank has financial muscle to finance large-scale mining ventures – CEO
Standard Bank has a rich pedigree in the mining industry. It is also the only bank in Malawi with a fully fledged investment banking section that takes care of the needs of investors in mining and other sectors. Mining Review Publishing Editor, Marcel Chimwala, had this online interview with Standard Bank Malawi Chief Executive Officer Andrew Mashanda. Excerpts:
Q. The Government is in the process of reviewing the 1981 Mines and Minerals Act to come up with a new law that suites mining development while incorporating international best practices. As a Bank well versed in serving the mining sector in Africa, what is your advice to the Government in framing the new legislation? How do you think the law should be framed to ensure that the country has more bankable projects that can take the country to new economic heights.
A. Fairness and transparency are key to any piece of regulation. To achieve this, those drafting laws must consult all relevant stakeholders extensively. Naturally, it becomes a very delicate balancing act to draft a law that satisfies all parties. Another key consideration must be regulation in other jurisdictions. We live in a competitive world and Malawi needs to be a mining destination that’s attractive to investors.
Q. How ready is Standard Bank to finance large-scale mining projects understanding that the projects require big chunks of financing?
A. Our strength and passion is for Africa as a region. And so when clients speak with Standard Bank Malawi, they are actually having a conversation with an entire regional backbone. And with MWK32.7 trillion Kwacha in gross loans and advances at the end of 2014, Standard Bank Group definitely has the financial muscle to finance large-scale mining ventures in Malawi.
Q. Exploration is the most significant but financially risky step in the development of a mining project. Is Standard Bank ready to finance exploration projects?
A. We are always ready to finance business ventures with an established business plan and viable outlook. Exploration projects however have a very unique business structure in that income streams tend to be highly speculative and dependent on what’s in the ground and the interested extraction counterparty. For this reason, most exploration projects are funded by owner equity or by sizeable minerals extraction firms.
Q. Mining is a risky business which is influenced by several factors including uncertainties in commodity prices on the world markets. Is it not risky for Standard Bank to embrace such a sector?
A. 2015 has so far been challenging for the global mining industry. In terms of the outlook, commodity prices are not anticipated to exhibit material improvement, impacting on sector valuations and the ability to raise financing. But Standard Bank Group research shows that African mining remains underexplored. In 2013, African exploration accounted for 17% of the worldwide exploration budget despite the fact that the continent holds more than 30% of the world’s mineral resources. So amid a more sober outlook, the prospects for mining in Africa remain essentially intact over the medium term. And although cautious, our appetite for mining projects, especially in an untapped market such as Malawi, is quite strong.
Q. What financing products is Standard Bank offering to medium and large scale exploration and mining firms?
A. We offer solutions in Advisory, Capital Markets, Debt and Transactional Services. All these capabilities bring together complementary skills from corporate finance and balance sheet banking to geology and mining engineering. And with our global footprint, our transactional banking network is able to provide our clients with a more seamless solution for their day-to-day operations.
Q. How do you convince a local miner to access project financing from your Bank other than foreign financial institutions understanding that it is always cheaper to borrow from Banks in foreign countries where interest rates are relatively lower?
A. This question symbolizes our strength as a regional bank. We are able to finance miners on both Kwacha and foreign exchange expenditure needs within our integrated Group structure.
Q. As a Bank, how do you look at the future of the minerals sector in Malawi, which is traditionally an agricultural country?
A. Given the surge in investment in mining all across Africa and the fact that Malawi is fairly late in the game, we have a positive outlook for Malawi’s mining sector.
Q. As one of the stakeholders in the minerals sector, how will Standard Bank contribute to the growth of the mining sector in Malawi? Do you have any specific projects/services to support mining development other than offering ordinary banking services?
A. Because of our history as a mining bank and our enduring expertise in this sector, we work to understand our client’s individual requirements. We coordinate and execute our clients’ financing and banking requirements across Africa and emerging global markets. Our highly regarded commodity and currency trading desks offer 24-hour trading capabilities to support price-risk management and hedging strategies. In addition, we carry out in-depth analyses of commodity trends and stay on top of the latest developments in the mining and metals industry. We continue to play a leading role in arranging facilities for many of the most significant mining projects in Africa and other key emerging markets.
Our comprehensive suite of financing and advisory solutions for the mining and metals sector include:
- Project finance
- Corporate finance advisory solutions
- Working capital facilities
- Bridging finance
- Acquisition finance
- Inventory financing
- Structured trade and commodity finance
- Commodity price risk management solutions
- Foreign exchange and interest rate hedging
- Global transactional banking services
Q. I understand Standard Bank in countries such as South Africa finances mining conferences that bring together mining executives and facilitate mining development deals. Are there any plans to hold such conferences in Malawi?
A. We continue to explore such options and ultimately it’s a matter of timing. In the meantime we continue to participate in dialogues that promote sustainable growth and business in the mining sector. For example, we recently participated in consultative workshop, where we submitted substantive feedback on the Mines and Minerals Draft Bill.