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Gold/Mining/Energy : Gold Price Monitor -- Ignore unavailable to you. Want to Upgrade?

To: Alex who wrote (23632)	12/1/1998 7:57:00 PM
From: goldsnow	Respond to of 116756

Africa an 'increasingly bad investment choice' LONDON - Canadian exploration group Nevsun Resources estimates it will need to raise $75m to develop its Tabakoto gold project in Mali. With expected annual production of about 140 000oz at a cost of $175/oz, Tabakoto would probably have attracted strong interest from the investment community in Canada last year. Nevsun, though, is keenly aware that few investors these days are willing to take risks on junior mining ventures. Canada's juniors have had difficulty tapping capital markets ever since the Bre-X Minerals fraud seared investors last year. The hangover from the scandal was still painfully fresh when "Asian flu" sent commodities prices into a tailspin and the mining industry into a crisis. The sombre mood among investors has affected many Canadian junior mining groups attempting to develop projects in Africa, a region in which Canada's exploration companies play a prominent role. The health of the Vancouver stock exchange is a key indicator of the state of the junior mining industry in Canada. Home to more than 800 mining groups, almost 80 of which are active in Africa, the exchange's key index has fallen from 1466 points in 1996 to about 400. The industry slump has affected exploration worldwide and Africa has not been exempt. Metals Economics Group (MEG) in Canada suggests that non-ferrous metals exploration expenditure by Canadian junior mining groups in Africa will fall from about $220m last year to an estimated $150m. African exploration budgets for Canada's leading mining groups are expected to drop to $14m this year from $20m last year. David Cox of MEG says with funds in tight supply, many small groups are being squeezed by the minimum exploration expenditure requirements placed on the property rights they hold. John Clarke, CE of Nevsun, which has four other properties on the continent, says: "It is a delicate balance between providing the best value to our shareholders and maintaining ownership of good quality grassroots properties." In Africa more advanced projects also face a financing crunch, particularly given the corruption and turmoil that plague many of the continent's nations. Political unrest in the Democratic Republic of Congo has forced Canadian mining group Tenke to postpone development of its $450m Tenke Fungurume copper-cobalt project. And events such as the early November rebel raid on the Diamond Works mine in Angola, which left a number of mine workers dead, will only contribute to the perception that the continent is unsafe. "Africa is becoming an increasingly undesirable place to invest," says Art Ettlinger, of Yorkton Securities. Senior producers have largely overcome that situation by funding existing capital projects through debt financing, but juniors do not have that luxury. Given the pessimism of the market, it is surprising the industry has not seen more consolidation, with seniors taking over junior groups that have quality properties but few resources. - Financial Times. bday.co.za