It has been an interesting time in African mining since the beginning of the year. It seems like an age since the industry gathered in Cape Town in February for the annual Mining Indaba at which there seemed to be a genuine air of optimism. Issues that seemed important at the time included finding ways for local participants such as labour, communities and states to obtain a greater share of the revenues from an industry that was showing signs of improving.

So optimistic were some governments that, for instance, Gwede Mantashe, Minister of Mineral Resources announced the creation of a new energy provider in South Africa which would compete with Eskom to ensure an energy oversupply in the country so that industry, including mining, could expand without fear of power interruptions.

Even as the Mining Indaba was underway, infections of Covid-19 virus were rising rapidly in Wuhan, and were spreading in other Chinese provinces. Countries around the world were reporting growing numbers of cases and deaths. Within six short weeks, the world was in the grips of a global pandemic, most of Europe, Asia and Oceania was in a hard lock down and international travel had all but come to a standstill.

As manufacturing was shuttered and people stayed at home, demand for commodities fell off dramatically with prices showing sharp declines. The reduction in demand so exacerbated the oversupply of oil started by a price war between Russia and Saudi Arabia that the price briefly went negative. Copper prices fell from $2.60/lb at the time of the Indaba to a low of around $2.15/lb in mid-March. As was the case in the 2008 global financial crisis, even gold prices unexpectedly dropped precipitously in mid-March to six-month lows before recovering equally rapidly.

With the strong reliance of its economies on commodity extraction and the possibility of its fragile health systems being overwhelmed by high rates of infections among populations thought to be at higher risk because of other health issues, the outlook for Africa looked very bleak. In addition to fears that workforces would be disrupted by the virus, operators were nervous about the ability to obtain supplies and ship products in and out of locked down countries.

As it turns out, Africa has suffered far less from the effects of Covid-19 than expected. By 9 July, a total of 522 000 cases have been reported with nearly half of the number being accounted for by South Africa and approximately 250 000 cases had recovered. The 12 233 deaths that have occurred among Africa’s 1.5 billion inhabitants is not much higher than the number for Belgium which has a population of less than 1 per cent of that of Africa. While just about every country on the continent has implemented some form of lockdown and quarantine regulations, the continent has been so successful in managing the epidemic that three out of the fifteen third party countries allowed to travel into the EU without restriction from 1 July are African – Algeria, Morocco and Rwanda.

Despite the apocalyptic predictions made at the beginning of March, mining production in Africa has not suffered as badly as everyone expected. Open pit mines have continued to operate without interruption throughout the period and, with the notable exception of South African operations, production from the continent’s underground mines was not affected negatively by Covid-19. In order to manage the spread of the virus in the difficult environments in the highly labour intensive South African gold and platinum mines, production was initially halted completely but mines have been allowed to resume at 50% capacity from 16 April.

As the lockdown was introduced, there were some initial delays in the movement of essential supplies into mining operations, but these were relatively quickly overcome. The almost complete cessation of international air travel has prevented the movement of expatriate staff in and out of African countries and has had the unexpected consequence of causing severe disruption in the movement of precious metal to refineries and terminal markets due to an unwillingness to entrust large bullion cargoes to a single charter flight rather than spreading them over several commercial flights. However, it seems that even these impediments are being overcome.

Perhaps the most positive development for mining on the continent has been the resurgence of interest in gold mining. Gold stocks were already showing significant gains from the lows of late 2018. For instance, the TSX Gold Index (a measure of over 80 precious metal stocks) had doubled from CAD 0.80 in September 2018 to CAD 1.62 by February 2020. Similar performances were seen on other exchanges and some individual stocks appreciated even more spectacularly. This performance attracted significant amounts of new money to the industry and resulted in some investors crystallizing gains on single stocks and re-investing into several others in order to diversify risk. The increase in the gold price due to investors perception of the likely effects of international stimulus packages from $1400/oz at the beginning of the pandemic to over $1800/oz in the last week has improved the outlook even more.

The availability of equity money has resulted in a global resurgence in gold exploration spending and several precious metal projects that were being developed being hurried into financing. With banks and other financial institutions looking to find revenues to offset those lost to the global recession, it has become much easier to finance the construction of new mines. The highly prospective gold fields of West and, increasingly, East Africa are set to become major beneficiaries of the surging demand for gold exploration and production exposure, with new projects and expanded drilling programmes being announced on an almost daily basis.

It seems that while the outlook for other mining in Africa has not been dimmed appreciably, that for gold mining is shining especially brightly in these troubled times.