ICSID Tribunal declines jurisdiction due to claimants’ failure to obtain environmental impact assessment in breach of local law

In a recent investment arbitration Award, in Cortec Mining v Kenya, an ICSID tribunal has declined jurisdiction over a claim brought by a trio of mining companies on the basis that the mining licences at issue had not been obtained lawfully due to the Claimants’ failure to obtain the required environmental impact assessments.

In its award of 22 October 2018, the tribunal held that the withdrawal of the Claimants’ mining licence by the Kenyan Government could not be challenged under the 1999 UK-Kenya bilateral investment treaty (“BIT“), as the relevant mining licence had not been obtained lawfully. Despite the fact that the BIT contained no express requirement of compliance with local law, the tribunal nevertheless held that the BIT and the Convention on the Settlement of Investment Disputes between States and Nationals of Other States 1966 (the “ICSID Convention“) protect only lawful investments. The tribunal affirmed that a principle of proportionality should apply when assessing the impact of unlawful conduct on the right to bring a BIT claim, with minor omissions or inadvertent misstatements not precluding the BIT from applying. However, in this case, environmental considerations were of fundamental importance and non-compliance with the protective regulatory framework was a “serious matter” justifying the tribunal in declining jurisdiction.

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The Liberian mining law reform and the impact of the Ebola crisis

Despite its relatively small size (approximately 110,000km with a population of four million people), Liberia, the oldest republic in Africa, is a resource-rich country with significant deposits of iron ore, gold and diamonds.

The West African mining industry is facing significant headwinds from the combined effect of:

  • the Ebola virus outbreak, which has caused the death of 3,439 people, including 2,069 in Liberia, as of 30 September 2014 according to the World Health Organization,
  • the depressed iron ore price, which has decreased by more than 30% over the last year, and 
  • the increased pressure on the financing and refinancing of greenfield projects in developing countries.

This has caused:

  • a reduction of growth projections for the region: the Liberian government and the World Bank have halved growth estimates for the mining sector and the overall economy for this year and medium term prospects are likely to be worse if the crisis is not quickly contained, and
  • various challenges for a number of iron ore and gold companies and contractors operating in the region, which has led a number of them to declare force majeure.

Despite these difficulties, Liberia’s mining potential is considered to be very promising given that:

  • Liberian soil is yet to be fully explored,
  • the country is still recovering from a 14-year long civil war that ended in 2003 (before the civil war, Liberia was the number one iron producer in Africa and the fifth largest exporter of iron ore in the world), and
  • its mining industry is still transitioning from artisanal to industrial mining. 

In line with a number of resource-rich West African countries, Liberia has been planning to revise its 24-section long 2000 Minerals and Mining Law (2000 Mining Law) since 2012 in order to boost the state’s share of resource profits, as well as transparency and accountability.

The 2000 Mining Law was enacted during the presidency of Charles Taylor and replaced the Natural Resources Law of 1956. Although it was amended in 2004 to include a new chapter on the 2003 United Nations’ Kimberley Process Certification Scheme and was supplemented by comprehensive Exploration Regulations in 2010, it has often been described as out-dated, unclear and not very detailed in certain respects (e.g. the differences between class A, B and C mining licenses).

Despite the Ebola crisis, which has hit Liberia the hardest because it has spread to the densely populated zones of Monrovia, this mining reform appears to remain on the Government’s agenda.

The main objectives of this reform are to:

  • harmonise the 2000 Mining Law with a number of laws, including the 2010 Public Procurement and Concession Act Law and the 2000 Revenue Code (as amended in 2011) and the 2009 Liberia Extractive Industries Transparency Initiative (LEITI) Law,
  • switch from a concession-based system to a license-based system and reduce carve outs from the prevailing legislation that are currently available under the 2000 Mining Law on the basis of negotiated mineral development agreements for major projects,
  • increase local content requirements, and
  • improve cooperation between the various governmental departments and agencies involved in the mining sector.

This reform is supported by the German International Cooperation agency (GIZ) and the World Bank and is based, inter alia, on the following policies and documents:

  • the 2013 LEITI post award process audit,
  • the 2010 Mineral Policy guidelines,
  • the 2009 African Union’s Africa Mining Vision guidelines, and 
  • various recommendations from the World Bank’s Extractive Industries Technical Advisory Facility.

This reform is driven by an Inter-Ministerial Steering Committee chaired by the Ministry of Lands, Mines and Energy, and largely managed by Deputy Minister Sam Russ, and includes representatives from the Ministries of Justice, Finance, Planning and Economic Affairs, Labour and Internal Affairs and of the Environmental Protection Agency, the Public Procurement and Concession Commission, the National Bureau of Concessions, the Law Reform Commission and the National Investment Commission.

Pre-drafting consultations were conducted in 2013 in order to seek the views of various stakeholders including local authorities, local communities, political parties, the private sector, donors and development partners.

The first draft of the proposed new mining law was produced by two external experts (Philip James Kelly, lawyer, and Patrick William Gorman, mining engineer) together with a team of local experts and was circulated to operators for comments in late 2013.

Further consultations are likely following the production of the second draft.

This extensive consultation process is a positive step in the implementation of the reform.

One of the key issues that the new mining law will need to cover is the transitional and, possibly, grandfathering regime that will apply upon the new law entering into force – companies currently operating in Liberia will be particularly interested in any guarantee that mining rights granted prior to the new law will be maintained, especially if a mineral development agreement was entered into with the state.

The timeframe for the next steps and, possibly, the content of the new law itself, may be impacted by the development of the Ebola crisis. It will be interesting to compare the final version of this new law with the mining laws recently enacted by Liberia’s three neighbouring countries over the past five years (Sierra Leone in 2009, Guinea in 2011 and 2013 and Ivory Coast in 2014).

For further information please contact Yann Alix, Senior Associate, London or your usual Herbert Smith Freehills contact.

Bright future – the key factors driving economic growth in sub-Saharan Africa

The African market will continue to thrive thanks to increased availability of capital and investment in natural resources, power and infrastructure.

Since 2008 the world economy has undergone significant strain, which has had an effect on growth across all regions. However, in the face of these global headwinds, domestic supply shocks and civil conflict, Africa has been resilient. Of the 10 fastest-growing global economies in 2012, seven are in sub-Saharan Africa (SSA).

Natural resources
Persistently high commodity prices elsewhere in the world in recent years have resulted in renewed demand for Africa’s abundant natural resources. This demand is evidenced by the increased foreign investment in the oil and gas sector in several SSA countries such as Kenya, Uganda and Mozambique, with relative success thus far.

Tullow drilling wells onshore in Turkana, Kenya have exhibited good results and declared commerciality with a circa 5,200 barrels-per-day flow rate; Mozambique has been the subject of a natural gas discovery of 100 trillion cubic feet (mainly in the offshore Rovuma Basin); and oil and gas exploration activities in Uganda have had an unprecedented 90% drilling success rate, with 58 of the 64 exploration and appraisal wells drilled in the country to date encountering oil and/or gas.

Accessibility to funding
The increased availability of capital for small and medium-sized enterprises has contributed to economic development in SSA by stimulating sectors that have traditionally been the backbone of growth in countries that do not rely on natural resources. For example, historically SSA’s agricultural sector has struggled to access the financing required to sustain growth, with the cost of extending traditional banking infrastructures in rural areas deterring many banks and financial institutions from providing financing for the sector.
However, this gap has been filled, to a large extent, in recent years through private equity funding. This has become more available in SSA as governments move to relax or suspend laws that restrict repatriation of funds or impose currency controls. According to the Emerging Markets Private Equity Association, total private equity capital raised for SSA in 2012 was $1.4bn (£830.3m), with agribusiness proving one of the primary draws.

Infrastructure and power
Power and infrastructure has also become a key investment sector, and is both an opportunity for foreign investors and an essential ingredient in the continued development of many African countries. Interest in infrastructure investments seems only likely to grow, with recent figures from the Commonwealth Business Council showing an average 15%-20% return on investments in SSA infrastructure projects across all sectors.

Successful implementation of the Nigerian power sector privatisation – seen by many as one of the boldest privatisation initiatives in the global power industry over the last decade – may create further investment opportunities in SSA. Other countries may follow the lead of Nigeria and accept that, under certain circumstances, there is no continuing case for retention of infrastructure in public hands and that the constant need for state-owned enterprises to take into account non-commercial and political considerations will ultimately hinder the efficient provision of much-needed power and infrastructure, with consequential long-term detrimental impacts to the interests of consumers and taxpayers.

If continuous efforts to tackle poverty, corruption, inadequate infrastructures and political instability are successful in SSA, the region can expect to see continued economic growth.

This article was written by Gavin Davies, Partner, London and Aleem Tharani, Senior Associate, Kenya.

For further information, please contact Gavin Davies, Aleem Tharani or your usual Herbert Smith Freehills contact.

How to navigate dispute resolution in Africa

As investment continues to flow into the continent, the number of disputes is also rising
Over the last decade investment into Africa from foreign companies, financial institutions and private equity groups has soared, while investment between African countries is also increasing. For those willing and able to seek out its opportunities, Africa represents the world’s largest emerging market, but there are several factors that are particular to doing business in the continent that mean the scope for dispute resolution will inevitably increase.

For instance:

  • Governments may seek to revisit past legislation or renegotiate agreements with a view to obtaining higher revenues
  • As the ‘soft law’ obligations of companies are increasingly on the radar of governments and civil rights organisations, disputes could arise where companies are alleged to have made investments without due care for the rights and concerns of local communities
  • Disputes may also be caused by dealings with governments that are under international censure or sanctions regimes, or with unethical officials in legitimate governments

Commercial issues

Before resorting to litigation or arbitration in Africa, there are several commercial issues that should be considered. First, it is important for companies to assess their framework of operations, as there could be existing or potential projects in the country that militate against getting into a full-blown dispute.

Second, the publicity of litigation may play into the hands of competitors, as there could be plenty of other investors ready to step into disputing parties’ shoes.

Third, the majority of disputes in Africa are resolved through commercial settlement, with companies and states alike preferring negotiation over the uncertainties of litigation or arbitration.

Finally, legal technicalities often carry greater weight in African jurisdictions than in Western proceedings, so the relative strengths of parties’ legal positions need to be factored in with care.

Litigation

It is not always possible for international companies to confine the conduct of litigation to their own shores. African state entities that enter into contracts may require that any disputes are resolved before their local courts applying local law, or by domestic arbitration.

While many jurisdictions have well-developed legal systems with commercially minded and experienced judges, local courts in some countries suffer from delays, protracted appeal and enforcement processes, and judiciaries that are less well-equipped or used to dealing with complex international transactions.

The civil court structures across all African jurisdictions generally have a predictable hierarchy. Local courts typically derive jurisdiction from the sum in dispute, with higher courts being reserved for larger disputes. Almost all jurisdictions have a Court of Appeal and Supreme Court (or equivalent).

Aside from the civil court system, traditional courts often play a major role in rural areas. Village elders or specialist lower courts may determine property disputes under customary law, and in some jurisdictions the application of customary law permeates throughout the entire court system.

Arbitration

Many investors are reluctant to expose themselves to proceedings in local courts with which they are unfamiliar, and hence the neutrality, choice of rules and venue and confidentiality of arbitration are attractive.

There are several jurisdictions where local laws provide the necessary legislative and judicial support for onshore arbitration, but in other jurisdictions less experienced judiciaries and untested legislation point to offshore arbitration being the better choice.

Regardless of whether offshore or onshore arbitration is chosen, its chief advantage is the ability to enforce an award.

This article was written by Stéphane Brabant, Partner, John Ogilvie, Partner and Paula Hodges, Partner, at Herbert Smith Freehills.

Arbitration in Africa: Recent developments

The Court of Appeal of the Lagos Judicial Division recently issued a pro-arbitration decision holding that courts may only intervene in arbitral proceedings where specifically permitted by Nigeria’s arbitration law and set aside an injunction obtained ex parte by Nigeria’s state oil company NNPC restraining arbitration proceedings brought by Chevron and Statoil.

Meanwhile, the Democratic Republic of Congo (“DRC“) has become the 150th state to accede to the New York Convention, making a notable reservation that excludes enforcement of arbitral awards that relate to mining interests in the DRC.

Whilst these developments continue the encouraging trend towards international norms in arbitration judicial practice and legislation in parts of Africa, careful planning and an awareness of the continent’s legal diversity remain as important as ever for businesses operating in the region.

Nigerian courts may not injunct arbitration proceedings

Foreign parties involved in arbitrations either seated inside or outside of Africa face the risk of interventionist practices by local courts which may be less familiar with international arbitration.

The Court of Appeal of the Lagos Judicial Division issued a decision on 12 July 2013 which evinced a more pro-arbitration approach. In October 2012, the Nigerian National Petroleum Corporation (“NNPC“) successfully obtained an ex parte injunction from the lower courts in Lagos restraining arbitration proceedings in relation to NNPC’s tax dispute with Chevron and Statoil on the basis that tax matters are non-arbitrable. Chevron and Statoil appealed the injunction.

The injunction was overturned on a number of grounds: in particular, NNPC had failed to comply with the requirements for an ex parte injunction, including its duty to fully and frankly disclose material facts to the lower courts. One such example was the arbitral tribunal’s offer to hear submissions as to arbitrability in a bifurcated proceeding, which NNPC had rejected. NNPC had also failed to prove the urgency that might warrant an ex parte application.

Arguably the most important part of the decision was the Court’s strict interpretation of Section 34 of Nigeria’s Arbitration and Conciliation Act which provides that “A court shall not intervene in any matter governed by this Act except where so provided in this Act.” The Court held that the word “shall” was mandatory and that the Act did not provide any exception to the prohibition on intervention that would permit the court to issue an ex parte interim injunction.

Whilst this decision is good news for parties conducting arbitrations seated in Nigeria, it remains to be seen whether the same approach will be followed by the Court in the appeals pending against NNPC’s injunctions restraining other arbitrations brought by international oil majors.

The DRC’s cautious embrace of the New York Convention

In July 2012, the DRC became a Member State of OHADA (Organisation pour l’Harmonisation en Afrique du Droit des Affaires – Organisation for the Harmonisation of Business Law in Africa) which permitted the enforcement of foreign arbitration awards seated in other OHADA states. About a year later, on 26 June 2013, President Joseph Kabila, signed Law No. 13/023 authorising the DRC’s accession to the New York Convention. As the treaty’s 150th signatory, the DRC has expanded the scope of foreign arbitral awards that may be enforced by its courts, but with four reservations.

The first two reservations are fairly common amongst Convention signatories, being provided for by Article I(3) of the Convention – namely (1) the reservation on the basis of reciprocity whereby the DRC will apply the Convention only to the recognition and enforcement of awards made in the territory of another Contracting State, and (2) only to differences arising out of legal relationships, whether contractual or not, which are considered as commercial under the national law of the DRC. What constitutes “commercial” activities in the DRC are broadly defined by various OHADA Uniform Acts.

The third and fourth reservations appear to signal a protectionist approach by the DRC government as regards its mining industry and to address concerns that accession to the Convention would result in local enforcement proceedings of arbitration awards owned by FG Hemisphere against DRC’s state mining company Gécamines (click here to view our earlier post on this case). The third reservation specifies that enforcement of awards under the Convention will only be possible in relation to awards which post-date the DRC’s accession. The fourth and most notable reservation is that the DRC will not apply the Convention to awards related to immovable property situated in the DRC, thereby excluding real estate, and in particular, mining rights (defined as immovable property by Article 3 of the DRC’s Mining Code).

In 2012, the DRC’s growth rate was 7% and yet the country came in the bottom five in the World Bank’s “ease of doing business” survey. Whilst the extractive industries remain DRC’s largest source of export income, its reservation to the scope of the New York Convention in relation to mining rights will not of itself accelerate in-flows of foreign direct investment into the sector. This will be seen by some as a missed opportunity.

These developments continue the encouraging trend towards international norms in arbitration judicial practice and legislation in parts of Africa. However, it is clear that careful planning and an awareness of the continent’s legal diversity remain as important as ever for businesses operating in the region.

For further information, please contact Craig Tevendale, Partner, Robert Rothkopf, Associate, or your usual Herbert Smith Freehills contact.

This article was originally published here.

A strange thing happened at Africa Downunder

A strange thing happened at the annual Africa Downunder conference in Perth last week, and it had nothing to do with the record attendance of more than 2,500 delegates from Australian and overseas mining companies, service providers, financiers and governments.

It was the vastly different, almost conflicting, messages coming out of senior Australian government ministers who spoke at the conference.In one corner, was Australia’s current Foreign Affairs minister Bob Carr. In the other, was former Prime Minister and subsequent Foreign Minister, Kevin Rudd. Both seasoned political campaigners well equipped to speak of the importance of Africa to the hundreds of delegates that crammed into the Riverside Ballroom.

Carr had clearly studied his briefing notes as he lauded the role that Africa has and will play in Australia’s economic and social development, challenging the conventional wisdom that we were all living witnesses to the ‘Asian century’. In Carr’s words, “what we’ve seen since 2000, could well be an African century”. Heads nodded in agreement, media bulletins were issued. Job done.

Rudd, however, appeared far less interested in talking about Africa, focusing almost his entire speech on the continued rise of China whilst launching the release of the “Fuelling the Dragon” report by the ASPI and the Brenthurst Foundation.

In contrast to Carr, Rudd began his speech declaring that “the core question confronting treasuries and finance ministries around the world at present is what is the near, medium and long term prospects for the Chinese economy.” There was less head nodding, more head scratching. Little mention was made of Africa. In fact, in the entire 20 minute speech Rudd mentioned Africa on fewer than four occasions.

One might readily conclude that Rudd’s last minute call-up in place of the ill Resources minister, Martin Ferguson, meant that a ‘revert to type’ presentation was inevitable for the former Prime Minister. Whatever the reasons, the contrast in the political messages from two of Australia’s most senior government ministers at Australia’s largest mining conference, was striking. But were they conflicting?

One conclusion that is easily drawn from the presentations and discussions with participants during the three day conference, is that they are not conflicting messages – that Africa probably needs China more than it needs Australia, but that China needs Australian expertise, resources and know-how to unlock its growing need for natural resources.

During a conference breakfast, hosted by BDO, Herbert Smith Partner, Michael Walter, joined other panellists to discuss and field questions from the audience on the impact that China’s growing need for “rocks and crops” is having on Australian mining companies’ business plans for Africa, and how we can work effectively with China in our collaborative African mining pursuits.

According to Michael, the huge amount of interest in Africa, and relationships with China, was much in evidence in a great turnout for the breakfast briefing and some thoughtful and searching questioning.
 
Austrade also hosted a luncheon which saw Senior Trade Commissioner for Sub-Saharan Africa, John Madew, speak about the importance of our government’s role in assisting Africa with the three “A”s – access, advice and advocacy. In his speech, CEO of Fortescue Metals, Andrew Forrest, urged Australian mining companies to replicate the high environment standards that they display in their Australian operations across their African operations. He also highlighted the importance of Australian mining companies investing in corporate social responsibility programs that make a sustainable difference to the lives of the African communities in which they operate.

With the impending merger of Freehills with international law firm Herbert Smith due to launch on 1 October, the conference was a great networking opportunity for the respective Freehills and Herbert Smith mining teams and a tremendous success generally.

Herbert Smith Freehills will provide clients with an impressive global mining practice boasting over 30 years of experience advising across the entire continent of Africa in both French and English. With offices strategically placed in Perth, Singapore, Shanghai, Beijing, Paris, New York and London, and an office to be opened on the ground in Guinea, Herbert Smith Freehills’ mining clients will benefit from seamless service all the way from the office in Australia, China or Europe, to the minesite in Africa.

Mauritius paves the way for Australian route into Africa

We have previously blogged about Africa’s importance to Australian mining , and the vast amount of resources work going on in the region – but how can you get your foot in the door?

On Monday night we attempted to answer this when our Perth office hosted 50 guests from the mining, legal and accountancy sectors to talk about African investment and why Mauritius could be your gateway into Africa. The seminar included informative and thought-provoking presentations from the Mauritian Board of Investment, Intercontinental Trust Ltd, Stock Exchange of Mauritius, and HSBC Bank (Mauritius) Ltd, each highlighting the opportunities in this region.

Freehills partner, Justin Little, set the scene with an overview of Australian mining companies’ increasing investment in resource-rich African projects and the legal and commercial challenges that these companies face, including: a lack of infrastructure, skills shortage, reporting and compliance issues, political and social instability, the threat of the nationalisation of the mining industry, changes in fiscal regimes and obtaining financing.  Justin’s overall message was “opportunity knocks for those investors who are prepared to tackle and surmount the challenges that mining in Africa poses” but “the potential for elephant-sized discoveries comes with elephant-sized risks”.

Against the backdrop of these challenges, Managing Director of the Mauritian Board of Investment, Ken Poonoosamy, spoke about the attractive business environment that Mauritius – “the star and key of the Indian Ocean” – has to offer and how its economic, political, legal and fiscal regimes create a competitive platform for Australian companies wishing to invest in Africa.

White sandy beaches and pristine azure blue waters aside, why use Mauritius as an international hub for investing into Africa as opposed to another country or investing directly into Africa?  Why would you not, was the resounding answer from CEO of Intercontinental Trust, Ben Lim, who gave insight into the many perceived benefits of using Mauritius, such as its bilateral investment treaties and fourteen double taxation agreements with Africa, its membership of the African Union and regional economic blocs (such as COMESA and SADC), low income and corporation taxes, lack of capital gains tax and relative ease and efficiency of establishing corporate vehicles.  Ben contrasted this with the arguably less attractive option of investing directly into Africa which comes with the burden of high withholding taxes, capital gains tax, high investment risks and no preferential access.

If that was not enough for the audience to start booking their flights, Chief Executive of the Stock Exchange of Mauritius, Sunil Benimadhu, threw into the bargain the possibility for Australian investors to list their companies on Mauritius’s very own Stock Exchange – one which, according to Sunil, offers a cost competitive and stream-lined listing process, while accommodating dual-listing, and trading in various currencies including USD, GBP and the Euro.

Despite the building momentum behind Australian mining companies investing into Africa, the start-up costs of their projects are significant and, so, financing is often the end game for investors.  Participants were therefore pleased to hear from Managing Director of HSBC Mauritius, James Boucher, that the Mauritian banking system has grown over the years to become part of a sophisticated international banking system – one which is becoming increasingly tailored to its foreign mining clients and which covers the full box and dice of business solutions and services, ranging from acquisition, project, export and trade finance, foreign exchange and treasury services to cash management.

We would like to thank our presenters Ken, Ben, Sunil and James for sharing their knowledge and insight into what Mauritius has to offer as a gateway into Africa.

CEO Michelmore on dancing with the Dragon

Andrew Michelmore, CEO of Minmetals Resources Limited (MMR), treated those who attended Tuesday night’s AMPLA Twilight Seminar at Freehills to a thought-provoking presentation.

MMR is not your everyday company. Its management team is based in Melbourne, it is listed on the Hong Kong Stock Exchange and its major shareholder is the state-owned China Minmetals Corporation. MMR is a rare example of China investing in Australia’s human capital and it has strived to achieve a strong ‘east-west’ partnership that can stand the test of time.

Throughout his presentation, Michelmore spoke in detail about MMR’s explorations and operations, its journey since acquiring Minerals and Metals Group (MMG) at the end of 2010 and its ambitious strategies moving forward into 2012. However, it was Michelmore’s thoughts about Australia’s future relationship with China that really captivated his audience.

According to Michelmore, the centre of economic gravity is shifting from the West back to the East. Interestingly, he noted that apart from the 19th and 20th centuries, the Asian region has led the global economy since the beginning of the Common Era. Michelmore stated that he believes China is going to achieve huge economic growth in the coming years, but went on to emphasise that Australia has what China needs to help them grow. For that reason, a strong partnership with China is mutually beneficial and could be lucrative for Australia.

Michelmore’s message is simple. We can’t fight China. We need to work with Chinese companies, on equal terms, in what must be a win-win scenario for both parties. This is what MMR has tried to achieve and it appears to have reaped the benefits.

Significantly, Michelmore believes that it is important to fight the incorrect perception that Chinese companies collude with each other. He affirmed that, in reality, the exact opposite is true. Chinese companies fiercely compete with each other, in contrast to the collusion believed to be characteristic of Japanese companies back in the 1960s and 1970s.

Ultimately, Australia needs foreign investment and China is a crucial strategic partner moving forward. MMR is one of the leaders in fostering this relationship and tries to use it to create a competitive advantage over its competitors.

Michelmore’s presentation was not limited to China. He explained some of the obstacles that confront his company in Laos, where unexploded bombs from the Vietnam War need to be cleared. He also stressed the importance of building trust and keeping one’s promises in Africa, a region where many companies fall into the trap of painting all countries with the same brush.

Michelmore is an industry leader. His insights on how to avoid cultural clashes are alarmingly simple. All that is required, he suggests, is the ability to “step into the other person’s shoes,” to understand that others see the world through different eyes and to embrace diversity genuinely and wholeheartedly. One couldn’t help but leave Michelmore’s presentation feeling that this mantra could equally apply to many other areas of life outside the corporate world.

Freehills would like to thank Andrew Michelmore for his insightful presentation.

How important is Africa to Australian mining?

Australian mining companies now have more projects in Africa than in any other region outside of Australia. While our mining companies have been part of Africa’s mining industry for years, the last several years have seen a dramatic increase in the level of direct investment into the broader African resources sector.

The Chinese are no less ambitious in their interest in African projects, being engaged in almost all of Africa’s 54 countries – either as miner, trader, offtaker, engineer or lender. More recently, a trend has emerged of Chinese entities seeking control of ASX listed vehicles with African assets.

At this time of increased focus on mining investment into Africa, highlighted at the recent Commonwealth Business Leaders Forum held in Perth as part of the build-up to CHOGM – Freehills’ partners Justin Little, John Tivey and Gemey Visscher, as well as representatives from our alliance firm in Beijing (TransAsia), are gearing up to speak on the importance of fostering greater ties between Chinese and Australian companies looking at investments in African mining projects at the 3rd annual China Overseas Investment Fair in Beijing next month.  The Investment Fair will be attended by all of the major Chinese SOEs and government agencies, including those such as the China-Africa Development Fund, which have a mandate to support investments into Africa.

Australia’s bullish approach to investing in regions once considered to be on the wrong end of the sovereign risk spectrum is certainly supported by recent statistics, comments recently made by the Foreign Minister, Kevin Rudd, and by a recent Australian Trade Commission Survey:

  • there are now approximately 230 Australian mining and oil & gas companies operating about 650 projects in approximately 43 countries within Africa.  In total, these projects account for around $24 billion worth of investment 
  • 143 new projects were added in 2010 alone and approximately 100 new projects (sponsored by roughly 20 companies) have been added since the beginning of 2011
  • of the 700 or so mining companies listed on the ASX, 127 (or 18%) have their primary asset in Africa, spread across 400 projects
  • Recent examples of Chinese entities bidding for companies with African-focussed mining projects include:
    • Minmetals $6 billion bid for dual Australian and Canadian listed copper miner Equinox
    • Minmetals friendly $A1.3 billion takeover of Congo-focused copper miner Anvil Mining; and
    • Hanlong Mining’s recent takeover bid for Sundance Resources which has an iron ore project in Africa

Freehills’ has acted in both of the recent Minmetals’ transactions referred to above and for other Chinese entities seeking cornerstone or strategic investments in ASX-listed mining companies with exposure to African projects.

The China Overseas Investment Fair is scheduled to run for two days from 8 – 9 November 2011.