Millions to be invested in mining fund

The Board of Directors of the African Development Bank (AfDB) approved, in June 2010, a US$25mn equity investment in the second New Africa Mining Fund.

New Africa Mining Fund II (NAMF II) is an equity fund that invests in mining projects throughout Africa. Like its predecessor New Africa Mining Fund I (NAMF I), NAMF II focuses on the upstream stages of the mining investment cycle where value creation is highest, i.e. primarily exploration and pre-development activities by junior and intermediate companies. The Fund will invest over five years and will have a life of eight years.

The role of mineral resources in Africa’s economic development is undisputed, particularly in the context of the favorable market outlook as a result of strong commodity demand. The African junior mining market remains capital constrained and unable to fully harvest prevailing opportunities. NAMF II therefore intends to mobilize capital for this sector in order to take advantage of the market potential. The Fund is targeting a net return in excess of 20 per cent.

From a development perspective, the Fund is expected to positively influence private sector development, create local permanent and short-term jobs, support balanced revenue sharing, increase government revenues (+US$900 million per year), ensure compliance with environmental standards and promote transparency through the Extractive Industries Transparency Initiative (EITI). The Fund will be guided in its governance strategy by a comprehensive Governance Codex developed in collaboration with the AfDB.

The Bank’s Private Sector Strategy emphasizes provision of equity capital to catalyze the resources necessary to develop assets. The Fund’s investment will facilitate growth and expansion in Greenfield projects across the continent, thus developing African companies in the private sector and promoting growth in a sustainable manner through its Governance Codex and Environmental and Social Management System (ESMS). NAMF II is therefore well aligned with Bank strategy and regional priorities.

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