* Ecobank and Banque Atlantique move into mining finance
* Junior miners viewed as high-risk
* Branch networks provide alternative perspective
* Avocet, London Mining and IMIC have signed loan deals
By Stephen Eisenhammer
LONDON, Dec 12 African banks are playing an
increasingly significant role in the continent's new generation
of mines, providing cash for projects considered too risky or
expensive for rattled markets and cautious international
Central and West Africa is home to some of the world's
largest untapped deposits of gold, iron ore and other minerals,
but the promising mine projects often require billions of
dollars to be spent on bridges, roads, railways and ports.
That level of investment, combined with the perceived risks
of corruption and political uncertainty in Africa, is proving
too much for under-pressure equity and debt markets and twitchy
overseas banks undergoing enforced belt-tightening since the
A solution, however, appears to be on the mining companies'
own doorsteps, with recent deals suggesting that local banks
could provide a lifeline for the region's junior miners.
In West Africa, banks such as Togo-based Ecobank
and Ivory Coast's Banque Atlantique are moving in on
mining projects, emboldened by the expert local knowledge gained
from their extensive branch networks.
Ecobank agreed a $63 million loan with Burkina Faso-focused
gold miner Avocet, which has a market value of $44
million. It also increased its share of a $200 million loan with
Sierra Leone iron ore miner London Mining, equivalent
to four fifths of the company's market value.
IMIC, an investment company that is buying
Cameroon-focused miner Afferro , signed a loan
facility with Banque Atlantique worth $27 million. Afferro has a
market value of $150 million.
Ecobank, listed in Nigeria and Ghana, has expanded rapidly
and operates in 35 African countries. Banque Atlantique operates
in eight countries, with a focus on French-speaking Africa, once
dominated by the likes of BNP Paribas, SocGen
and Credit Agricole, who have cut back
overseas lending to boost their capital strength.
Chinese investment, though present in companies such as iron
ore miner African Minerals, has also failed to live up
Yet Africa's burgeoning banks are ready to pick up some of
the slack, says the head of corporate and investment banking at
Standard Bank, the continent's largest lender.
"There is an emerging group of more local African banks who
are sophisticated, have strong balance sheets and are looking to
build their investment banking and structured project financing
capability," Standard Bank's David Munro said, adding that the
trend is also extending to other capital-intensive areas such as
oil, gas and general infrastructure.
For international banks, including the big South African
ones with a significant African presence, such as Standard Bank
and Nedbank, local lenders can be important partners to
share the risk attached to mines in remote and often volatile
parts of the world.
Nedbank has an alliance with Ecobank and is also affiliated
through bonds that could convert to a 20 percent holding in its
smaller rival. Nedbank Chief Executive Mike Brown recently said
he expects the bank to take up the stake.
"They're a good partner, they don't tend to have the same
view of political risk as we do," Mark Tyler, managing director
of mining investment banking at Nedbank Capital, told Reuters.
But while the Ecobank tie-up gives access to a branch
network stretching into places where Nedbank has no presence -
such as Burkina Faso, Ivory Coast and Liberia - it is starting
to encounter an increasingly competitive edge.
"We've lost a couple of deals because Ecobank has put some
serious money down," Tyler said.
Charles Kie, head of corporate banking at Ecobank, told
Reuters that having operations on the ground across Africa
enables it to see the risks differently.
"I can easily imagine that the perception of risk of African
countries is still far from the reality," Kie said.
"It's not simply because the international banks are
stepping out of the continent," he said of the rising
involvement of local banks, "... 20 years of growth means we are
now in a position to play a much stronger role."
Ecobank in March announced a record annual profit of $348
million for 2012, though it has also faced its share of
troubles, with its chairman resigning in October over
allegations of mismanagement.
Regardless of any hitches along the way, Standard Bank's
Munro believes the role of Africa's local banks in mining will
only increase: "You can't play against a theme like this, you
have to play with it."