14 Aug

Local mineral producer Base Titanium is headed for a good run as ilmenite and rutile witness an upsurge in prices oversees

Titanium

Local mineral producer Base Titanium is headed for a good run as ilmenite and rutile witness an upsurge in prices oversees.

The price of ilmenite has soared due to a dip in supply against an upswing in demand on the international market, while demand for zircon has strengthened owing to lower than anticipated global production of the ore. This has led to an increasingly tight market and solid price improvements this year.

“The prices of ilmenite have gone up significantly and we expect them to stabilise in the foreseeable future,” said Base Titanium general manager for external affairs and development, Mr Joe Schwarz.

“We’ve gone through a pretty low period in markets over the past couple of years. But there has been a significant improvement over the past six months.”

“The global pigment industry, where demand for most of our products is, has firmed up over the past year,” he added.

“Zircon has strengthened much quicker than we expected because the stocks around the world are gone and we are now seeing an increasingly tight market and solid price increases this year,” said Mr Schwarz. He was giving an update of the business to the economic and macro committee of the Vision 2030 delivery board in Nairobi last week.

Base Titanium and Vision 2030 had assembled to sign a memorandum of understanding to have the miner as a flagship project.

Similarly, the price of rutile, a high-value product which had remained static because of a supply overhang, is improving.

“Despite strong demand, the overhang of high grade TiO2 feedstock inventory has resulted in moderate price improvement for rutile. But that stock is now disappearing and the market is tightening. There are increasing signs of an emerging supply deficit in this high-grade sector, indicating upward price pressure in the second half of 2017,” he projected.

According to Mr Schwarz, retail prices of rutile represented 60 per cent of the combined revenue stream for the miner because of its higher value.

“This is all good news, not just for us but for exports, taxes and royalties,” he said.

Ilmenite is the primary ingredient in the manufacture of pigment for paints and crayons. Rutile is used in titanium metal manufacture, while zircon, an unrelated product, is mainly used in ceramics, tiling and glazing as an opacifier.

The Kwale-based company is one of the most significant mineral exploitation firms in Kenya, representing 57 per cent of the total value of the country’s mineral production.

It had a production valued of Sh13.3 billion in 2016, according to the national bureau of statistics. More than half of the combined total of the mineral is sold outside the country. All the other minerals combined: soda ash, fluorspar, salt, Co2, diatomite, gold and gemstones, totalled Sh10 billion.

This follows the closure of fluorspar mining with the collapse of the Eldoret-based Kenya Fluorspar Company.

It is the largest export in minerals with US$160 million annually in export revenues; and an expected US$1 billion (Sh100 billion) in GDP contribution from 2015 to 2025.

This year, the firm, which last year mined 11 million tonnes of ore (about 1 million tonnes every month) produced 467,000 tonnes of ilmenite, 91,000 tonnes of rutile, and 34,000 tonnes of zircon, whose estimated export value stood at US$160 million (Sh16.632 billion). The figures are expected to go up because of improvements in the market.

In 2017, with rises in ilmenite and zircon prices and closure of fluorspar mining, the estimated contribution from Kwale will rise to 65 per cent.

Base titanium company is on an expansion drive of its exploration programme.

It has discovered additional potential resources at the southern part of the mine, with exploration going on in Ramisi and Vanga towards the border with Tanzania.

A study by Ernst & Young last year to measure the economic impact of mining on the local economy showed building public funds of US$230 million (Sh23.828 billion) in taxes and royalties. According to current assessments, the existing reserves could last seven more years.

Beyond the direct revenue component to the government, there are other benefits including job creation.

article from allAfrica

09 Aug

Nigeria Moves Closer to Single Naira Rate

naira

Nigeria took a step to unify its multiple exchange rates by allowing banks to use a currency window for investors when quoting the naira rather than the official rate. The naira weakened on the interbank market.

FMDQ OTC Securities Exchange, the Lagos-based platform that oversees interbank trading, asked lenders this week to publish quotes reflecting trades in the Investors’ & Exporters’ FX Window, according to Ecobank Transnational Inc. and Access Bank Plc. The window was opened in late April in a bid to attract inflows to the dollar-starved nation.

The interbank rate weakened 14 percent to 366.04 per dollar as of 5:42 p.m. in Lagos, close to 367.08 for the so-called Nafex rate, the daily fixing published by FMDQ for the Investors’ & Exporters’ FX window. Naira three-month forward contracts based on the official rate rose as much as 1.3 percent to 342 against the greenback, the highest level on a closing basis since June 6.

“FMDQ and traders reached agreement to try to move toward a single exchange rate,” Kunle Ezun, an analyst at Ecobank in Lagos, said by phone. The idea is “to show the true reflection of the naira in the market. The I&E window in terms of transparency and price discovery seems to reflect where the naira should trade. All banks are now putting quotes at that rate.”

Nigeria has faced dollar shortages since the price of oil, its main export, crashed in 2014 and the central bank responded by tightening capital controls. As the squeeze worsened, Nigeria opted for a system of multiple exchange rates rather than floating its currency like other crude producers such as Russia and Kazakhstan.

The change this week was made because banks have been trading with each other mainly via the Nafex market since its introduction, according to Bola Onadele, FMDQ’s chief executive.

Banks “should quote where naira is trading with integrity and transparency,” he said in a text message.

While the move will be welcomed by investors, who have long criticized the existence of several exchange rates, a full unification may still be some way off, according to Standard Chartered Plc. The central bank maintains an official rate as strong as 305 per dollar, which is uses to ensure fuel importers get cheap dollars.

“It is probably a positive step toward greater transparency in the FX market,” said Samir Gadio, head of Africa strategy at Standard Chartered in London. But “exchange rate unification across the board could imply higher fuel prices, or larger implicit subsidies, which will require national consensus. So it is not a straightforward step.

 

Article from Bloomberg

10 Jul

African consumer products industry rides out uncertainty

According to Deloitte’s inaugural  African Powers of Consumer Products report, despite a much-discussed slowdown in the African economic growth story, the continent’s consumer products industry is demonstrating a resilient and positive growth path when viewed in local reporting currencies.

The analysis by Deloitte shows that the top 50 African listed consumer product companies are concentrated in 15 countries, with South Africa, Egypt, Nigeria and Morocco accounting for 64% of the companies with just above 80% of their total revenues. This concentration reflects the size of their respective economies, their level of development and economic diversification, but also the low degree of capital market development in other African countries.

While the overall African growth story might have ‘stuttered’ recently (mostly due to the commodities decline), the prospects and opportunities for consumer goods companies still reflect a generally positive growth opportunity. For instance, sub-Saharan Africa’s GDP per capita in purchasing power doubled to US$3,831 between 2000 and 2016. While several oil-producing countries have seen faltering investment, East African economies that are less exposed to commodity markets, are growing at rates of 6% per annum or more.

On average, the year-on-year revenues of the top 50 declined by 7.5% in USD and grew by 4.7% in local reporting currencies. When measured over a five-year period from 2011 to 2015, the average of the top 50 compound annual growth rate (CAGR) in USD was 3.5% and 12.5% in local currencies.

“Although African economies have seen their currencies depreciate sharply against the USD, making imported goods more expensive, companies which produce goods locally and are able to ramp up facilities have an opportunity to grow their market share,” said Andre Dennis, Deloitte Africa consumer products leader.

The report considers the performance of Africa’s Top 50 listed consumer product companies in FY15 (year ending up to and including May 2016), as calculated according to revenue in US dollar terms. It focuses on African domiciled companies which are listed on African stock exchanges, with manufacturing as a core business.

Read More: How we made it in Africa