By Johan Pretorius, MMM Segment Lead, Anglophone Africa at Schneider Electric
8 November 2024,
Today, Africa holds approximately 30% of the world’s total mineral reserves. Indeed, from the copper belts of Zambia and the lithium and cobalt deposits in the Democratic Republic of the Congo (DRC) to the manganese mines in Gabon, the continent holds great promise when come to provision of both valuable metals and minerals for the future.
However, Africa’s contribution not only lies in its deposits of critical minerals (for clean energy technologies) but also its impact on the globe’s mining, minerals metals decarbonisation efforts.
That said, this shift to greener energy sources comes with substantial financial investment. Fortunately, there are also attainable financing models which allow mines, particularly junior miners, to realise their green projects.
Feasible and attainable models
Foremost, are partnerships with independent power producers (IPPs) and energy companies that offer flexible financing and infrastructure development options.
One example is Power Purchase Agreements (PPAs) which sees mines partner with renewable energy companies to secure long-term, stable energy supply contracts. Under a PPA, the renewable energy company finances, builds, and operates the renewable infrastructure (such as solar or wind farms), and the mine agrees to purchase the generated power at a predetermined rate over a fixed period.
This model is particularly advantageous for mines that want to reduce upfront capital expenditure while ensuring a reliable and clean energy source.
Another option is Build-Own-Operate (BOO) models, preferred by larger, financially secure mining groups. These companies have the capital and resources to finance, construct, and manage their renewable energy plants. In turn, it offers greater control over energy production, reducing reliance on external power sources and minimising long-term operational costs.
For junior mining companies that lack the financial capacity of their larger counterparts, opportunities still exist, primarily through partnerships with IPPs and external investors.
Junior miners can enter into PPAs or lease agreements with renewable energy providers, allowing them to access green energy without the need for significant upfront investment. This is crucial as many junior miners want to align with industry trends and comply with increasing regulatory pressures around sustainability and environmental impact.
In addition to partnerships with renewable energy companies, there is growing interest from development finance institutions (DFIs) and international organisations in funding green energy projects in Africa’s mining sector. These institutions recognise the importance of reducing the carbon footprint of the mining industry and are eager to support projects that promote environmental sustainability.
DFIs, such as the African Development Bank (AfDB), are increasingly providing financing packages that cater specifically to renewable energy projects. These packages often come with favourable loan terms, grants, or equity investments, making it easier for mining companies, particularly junior miners, to transition to renewable energy.
Ultimately, as the African mining industry continues to grow, the need for innovative financing solutions for renewable energy projects will only grow. This transition to green energy is no longer a nice-to-have but an industry imperative, driven by regulatory requirements, investor demands, and the need for cost-effective and reliable power.
