MIIF, Ghana Stock Exchange Advocate for Mining Sector Investment

The Ghana Stock Exchange (GSE) and the Minerals Income Investment Fund (MIIF) have called on Ghanaian Pension Funds and other Fund Managers to consider investing in the mining value chain to increase and retain profits that accrue to local companies from mining activity.

At a workshop for Fund Managers in Accra in a bid to demystify mining as an asset class for long-term investments or patient capital, the Managing Director of the Ghana Stock Exchange, Ms Abena Amoah noted that there is an urgent need for managers to be aware of the endless opportunity space in the mining industry and factor it in their investment analysis.

“There is the need to build the knowledge capital to be able to pursue these opportunities. There is no mystery to mining and the mining value chain. We just have to network properly, raise awareness about the opportunity, and design the vehicles that can be used to invest in the space” she said.

Fund Managers were introduced to the architecture of mining from exploration to development by the Chief Technical Officer (CTO) of MIIF, Kwabena Barning, a miner with more than 20 years of experience in different aspects of mining-related activity.

Mr Barning provided insight into a gamut of work including mining operations, and mining support services all the while highlighting distinct areas for investment opportunities including the beneficiation axis of minerals like Bauxite, Manganese, Iron and Lithium.

“Mining is a heavy-activity industry. It requires patient capital and a lot of it. What drives mining is the technical knowledge and the financial wherewithal. If Ghanaians want to benefit from the different minerals in our soil, the key is to participate in asset ownership. That way you become the primary beneficiary of the mining activity happening.”

Enormous Potential of Mining

While the Fund Managers seemed aware of the enormous potential of mining, entering the sub-sector have always proved daunting. The Chief Investment Officer of MIIF, Bubune Sorkpor, anchored the pursuit of value investing from MIIF as a model they could adopt.

“The opportunities are incredible. For instance, we have invested US$ 40 million in Asante Gold Corporation, and Atlantic Lithium where we are significant stakeholders. We are participating at the asset level and have board seats in these listed entities; meaning Ghana has a seat at the decision table for these global companies.

“We are on the cusp of investing some US$ 30 million in the Ada Songhor Salt project, and that will support its goal of becoming the biggest Salt-producing facility in Africa. MIIF will be working with this project to list it on the GSE. We hope to de-risk projects like this and present co-investment opportunities to retail investors, pension funds, and other institutional investors in Ghana” Bubune Sorkpor noted.

The workshop also discussed major opportunities for Fund Managers to invest along the mining value chain, specifically, mine support services companies and exploration. “In 2022, Goldfields Ghana alone spent 896 million US dollars to procure goods and services for the mines,” Sorkpor said.

Mr Sorkpor disclosed that over 90% of this amount went to in-country suppliers, who make up 70% of the 1,600 active suppliers. He noted that this demonstrates the huge investment opportunity in the entire mining value chain.

“There is almost US$4 billion worth of business in the local content area reserved for only Ghanaians. These are businesses that provide various services for mining companies and are in dire need of investment to take advantage of our local content laws and provisions.

“You need to understand the mining industry, and its needs, perform stringent due diligence, and structure the right financing for these mine support services providers. This is a ready business waiting to happen and that is where the opportunity for investments exists.”

Using Atlantic Lithium as a case study for an exploration project that is transitioning into production in 18 months, the MIIF CIO talked up the risks of early-stage investment and the potential upside of the project based on: the importance of lithium, the geology and resources of the tenement, the extractability of the ore through a conventional dense media and the location of the asset.

Over the 12.5-year mine life, the operation is expected to generate US$ 6.6 billion in revenue and a free cash flow of US$2.4 billion with an average life of mine EBITDA of US$316 million per annum.