West Africa's mining sector has seen a flurry of financing activity since October, driven by higher metal prices and growing global demand for metals needed for electric cars and renewable energy.
For Capital, a mining services provider that has been expanding in west Africa for the past two years, the lack of exploration spending, the stagnation of drilling activity and record levels of financing create the best conditions for expansion in the region.
As the world's second-largest Gold producer after China, Barrick, Iamgold and the recent acquisition of Teranga Gold, Endeavour Mining, are attracting a growing number of investors.
Capital believes activity in West Africa is just starting to take off, as companies look to replace mine production and discover new sources of key metals amid talk of a new "commodity supercycle".
"With a rapid increase in drilling activity, the mismatch between supply and demand for exploration and production RIGS has the potential to place significant pressure on the mining and exploration sectors in the region," Capital said in a white paper released on Tuesday.
New mining regulations designed to attract and secure foreign investment are helping the West African gold rush, which is now spreading to other parts of the continent, including Egypt.
West Africa ranked third in exploration spending globally in 2020, behind Australia and Canada, with more than $470 million invested, according to Capital.
Capital said activity in the region was being driven by relatively little modern exploration activity used in developed markets such as Australia and North America.
However, the region has benefited from being a world leader in exploration success, discovering more than 50 million ounces of gold between 2009 and 2019, dwarfing its nearest rivals Canada (36 million ounces) and Ecuador (24 million ounces).
Capital expects investment needs to increase in the discovery of new ore bodies and expansion of existing resources.
This time, Capital believes, companies will be forced to accelerate exploration and expand production assets compared with the previous three supercycles of the last century.
Capital notes that the average life of the gold industry has halved in the past 10 years, making demand for new gold discoveries greater than ever.
According to Capital, the challenge for West African miners is to be able to implement their ambitious exploration plans within the constraints imposed by COVID-19, as well as access to sufficient mining services resources to meet this demand.
Capital has drilling, mining, maintenance, and geochemical laboratory projects in Burkina Faso, Cameroon, Egypt, Guinea, Mali, Mauritania, Nigeria, Saudi Arabia, Tanzania, and Cote d 'Ivoire, generating $135 million in revenue and $24.8 million in net profit in 2020.
