* Ecobank and Banque Atlantique move into mining finance
* Junior miners viewed as high-risk
* Branch networks provide alternative perspective
* Avocet, London Mining and IMIC have signed loan deals
By Stephen Eisenhammer
LONDON, Dec 12 (Reuters) - African banks are playing anincreasingly significant role in the continent's new generationof mines, providing cash for projects considered too risky orexpensive for rattled markets and cautious internationallenders.
Central and West Africa is home to some of the world'slargest untapped deposits of gold, iron ore and other minerals,but the promising mine projects often require billions ofdollars to be spent on bridges, roads, railways and ports.
That level of investment, combined with the perceived risksof corruption and political uncertainty in Africa, is provingtoo much for under-pressure equity and debt markets and twitchyoverseas banks undergoing enforced belt-tightening since thefinancial crisis.
A solution, however, appears to be on the mining companies'own doorsteps, with recent deals suggesting that local bankscould provide a lifeline for the region's junior miners.
In West Africa, banks such as Togo-based Ecobank and Ivory Coast's Banque Atlantique are moving in onmining projects, emboldened by the expert local knowledge gainedfrom their extensive branch networks.
Ecobank agreed a $63 million loan with Burkina Faso-focusedgold miner Avocet, which has a market value of $44million. It also increased its share of a $200 million loan withSierra Leone iron ore miner London Mining, equivalentto four fifths of the company's market value.
IMIC, an investment company that is buyingCameroon-focused miner Afferro , signed a loanfacility with Banque Atlantique worth $27 million. Afferro has amarket value of $150 million.
RAPID EXPANSION
Ecobank, listed in Nigeria and Ghana, has expanded rapidlyand operates in 35 African countries. Banque Atlantique operatesin eight countries, with a focus on French-speaking Africa, oncedominated by the likes of BNP Paribas, SocGen and Credit Agricole, who have cut backoverseas lending to boost their capital strength.
Chinese investment, though present in companies such as ironore miner African Minerals, has also failed to live upto expectations.
Yet Africa's burgeoning banks are ready to pick up some ofthe slack, says the head of corporate and investment banking atStandard Bank, the continent's largest lender.
"There is an emerging group of more local African banks whoare sophisticated, have strong balance sheets and are looking tobuild their investment banking and structured project financingcapability," Standard Bank's David Munro said, adding that thetrend is also extending to other capital-intensive areas such asoil, gas and general infrastructure.
For international banks, including the big South Africanones with a significant African presence, such as Standard Bankand Nedbank, local lenders can be important partners toshare the risk attached to mines in remote and often volatileparts of the world.
Nedbank has an alliance with Ecobank and is also affiliatedthrough bonds that could convert to a 20 percent holding in itssmaller rival. Nedbank Chief Executive Mike Brown recently saidhe expects the bank to take up the stake.
GOOD PARTNERS
"They're a good partner, they don't tend to have the sameview of political risk as we do," Mark Tyler, managing directorof mining investment banking at Nedbank Capital, told Reuters.
But while the Ecobank tie-up gives access to a branchnetwork stretching into places where Nedbank has no presence -such as Burkina Faso, Ivory Coast and Liberia - it is startingto encounter an increasingly competitive edge.
"We've lost a couple of deals because Ecobank has put someserious money down," Tyler said.
Charles Kie, head of corporate banking at Ecobank, toldReuters that having operations on the ground across Africaenables it to see the risks differently.
"I can easily imagine that the perception of risk of Africancountries is still far from the reality," Kie said.
"It's not simply because the international banks arestepping out of the continent," he said of the risinginvolvement of local banks, "... 20 years of growth means we arenow in a position to play a much stronger role."
Ecobank in March announced a record annual profit of $348million for 2012, though it has also faced its share oftroubles, with its chairman resigning in October overallegations of mismanagement.
Regardless of any hitches along the way, Standard Bank'sMunro believes the role of Africa's local banks in mining willonly increase: "You can't play against a theme like this, youhave to play with it."
