Epidemics and Mining: How Companies Are Dealing With Crisis

Resource Investing News

Investors may be used to hearing about Tuberculosis in Africa. However, a new danger has emerged in the form of Ebola, which is ravaging Guinea, Liberia, Nigeria and Sierra Leone and forcing mining companies operating in those countries into action.

Investors may be used to hearing about Tuberculosis in Africa. And for good reason — of the 2.3 million cases of TB reported in Africa in 2013, almost a third were connected to mining in Sub-Saharan Africa. According to Aeras, nine out of 10 gold miners in South Africa are latently infected with TB.

However, a new danger has emerged in the form of Ebola, which is ravaging Guinea, Liberia, Nigeria and Sierra Leone and forcing mining companies operating in those countries into action.

According to The New York Times, more than 3,000 people have contracted Ebola since March, and more than half of those people have died. The outbreak is concentrated in West Africa, where many mining projects are located, and is the deadliest spread of the disease since 1976, when the virus was first discovered. The United Nations has since called it “the greatest peacetime challenge that the UN has ever faced” as health organizations try to stem the spread of the disease.

The Center for African Democratic Affairs, or CADA, has been keeping tabs on the economic impact of Ebola on West Africa, and the news it has found is fairly dire. Companies have been forced to stop working on projects and airlines have suspended flights to the disease-hit countries. The World Health Organization has not yet recommended travel or trade bans beyond cautioning people who have been close to Ebola patients to put off travel and submit to exit screenings. CADA is concerned that the spread of the outbreak could lead to general panic and a cessation of economic activity.

While economic activity has not stalled entirely, the resource industry has certainly been hit hard. There have been work stoppages and many workers have been evacuated as companies look to protect employees from the Ebola outbreak. Several CEOs have called for the global community to wade in and help. Many have asked for international aid to ease the financial ramifications of the disease.

Here’s a glance at some companies that have been impacted and how they have managed this threat:

Tawana Resources (ASX:TAW)

Shares in iron ore developer Tawana Resources fell after the company announced plans to cease most of its activity in Liberia due to the Ebola outbreak. Tawana is developing the Mofe Creek project near the coast of Liberia, and said it will halt most of its activities for the duration of the outbreak.

“All non-essential local staff, contractors and expatriate staff will return to their homes in the coming week,” the company said in a statement provided to the Australian Stock Exchange.

Vedanta Resources (LSE:VED)

Vedanta Resources evacuated all its expatriate staff from Liberia in late August, according to Reuters. The country’s government has declared a state of emergency regarding the Ebola outbreak, and Vedanta said it is working with the government to follow its guidance. The company has three iron ore mines in Liberia, and 97 employees in the region.

ArcelorMittal (NYSE:MT)

Looking to be spared from financial backlash, steel and mining company ArcelorMittal announced force majeure on a project in Liberia. Declarations of force majeure are meant to protect companies from being sued when they address circumstances beyond their control and cannot fulfill contracted obligations as a result. The project in question was expected to begin producing by the end of 2015, but in the face of the Ebola epidemic many of its workers are being evacuated, with work being halted. The company hopes to start work again as soon as possible. Its other projects in Liberia will continue as usual.

“While the recent developments are very concerning, at present we believe that the emergency procedures and other measures developed and currently in place at all ArcelorMittal sites in Liberia make it possible to continue our phase 1 operations,” Bill Scotting, chief executive of ArcelorMittal Mining, told Reuters.

The company is one of the five largest producers of iron ore and metallurgical coal in the world.

What investors must know

The Ebola epidemic in Western Africa is clearly disrupting mining operations, but there is no other choice for the many companies that have decided to evacuate workers and halt production. Ebola is fatal in 60 to 90 percent of cases, and there is neither a vaccine nor a reliable cure available for the disease. The risk of such diseases is one that companies assume when they work in certain areas — as the tuberculosis epidemic in South Africa attests — and Ebola is something of a worst-case scenario of this kind of risk.

Those concerned about the operations of resource companies in Africa should determine what response, if any, the companies are making to the Ebola outbreak. Smart investing means understanding risks — and smart investing in companies operating in West Africa now means understanding Ebola. As investors should realize, some epidemics and disasters can’t be avoided no matter how prepared companies may be.

 

Related reading: 

What Does the Ebola Outbreak Mean for Congo Copper Operations?

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