The last ten years have seen an unprecedented rise in the price of mineral commodities worldwide. This “super cycle” has created a new set of challenges and opportunities for mining firms engaged in a race to secure higher output of the minerals needed by expanding emerging economies. One of the consequences of this “race to riches” has been to improve the financial viability of mineral deposits which, until then, where thought to be either too distant to market and/or located in countries too risky to be developed.
From the mid 2000s through the early 2010s, the world’s largest mining companies embarked in the planning of numerous and often very large mining projects to satisfy what was seen as an ever growing double digit demand for minerals (iron ore, coal, bauxite, copper, etc). The advent of the 2008/2009 crisis and the subsequent economic slowdown, including that of China, has exposed serious flaws in the commercial viability of many of the planned mining projects and new supply is now thought to significantly exceed short and medium-term demand (e.g. Africa’s known iron ore projects alone would represent an expansion of nearly 60% of iron exports). It now seems inevitable that the development of these projects will be stretched over many years, and that only the most profitable ones will be implemented in the short term.
A number of these mining projects are located in frontier countries1 (e.g. Mongolia, Guinea, Afghanistan, Sierra Leone and Mozambique). These “first movers” projects present mining firms with specific and often unfamiliar obstacles, including the need to build Greenfield multi-billion dollar logistics transport solutions using private capital due to the lack of existing adequate transport infrastructure. Frontier markets are often also characterized by sub-investment grade environments, a weak rule of law and regulatory systems, a limited Public-Private Partnership (PPP) track record, strong tendencies towards resource nationalism and constrained pools of skilled labor. This report explores the challenges and solutions associated with the development of Greenfield mining-related transport infrastructure through project financing in frontier countries, including as shared-use assets.