Alatise: We must prioritise minerals needed for industrialisation, infrastructure requirements
Non-availability of finance and technical know-how constitute major challenges in solid mineral development. How can these be overcome?
High risk allocation in early-phase mining projects means that activities such as exploration and ore reserve estimation are the most difficult to obtain funding from standard project finance sources. The risks at the beginning are quite high, but they decline over the course of the project.
Put differently, the more advanced the project is (with feasibility studies conducted, and project plans defined), the greater the chances of an increase in funding source options. Credit quality only increases when a project reaches construction (installations) and production (full operation) stages.
Having identified these finance challenges and considering the risks involved in mineral exploration, government should bear the responsibility and ensure more funds are voted for exploration of solid minerals in the country. The primary information required by an investor are geological, geophysical and geochemical analysis of minerals. Embedded in these data are mineral location, total reserve, total mineable mineral, total valuable ore, impurities, chemical composition, topographical profile etc.
Collaboration between government, industry, academia and technical partners to support geoscience data collection should be encouraged.
Having this catalog of minerals will obviously change the creditor and investors perspective. Moreover, data obtained will always be there and can be accessed by generations to come.
Despite the abundance of solid minerals, the country appears not to be benefitting from its immense endowment. What are the factors that are inhibiting growth in the sector?
Factors that inhibit growth in the sector include, geoscience (inadequate data), struggling industry participants; limited engagement of industry participants; poorly understood and limited enforcement of regulations; security challenges; lack of community, stakeholder and institution partnership; infrastructure deficit (power plant, rail roads, water processing plants and port handling system); slow progress in implementing government reforms in the mining sector; policy conflict; poor financial management by miners; high cost of capital; unwillingness of banks to fund the sector; outdated laws punishing law breakers with little or no consequences; high porous boarders, and general lack of knowledge on community development agreements. These are some of the factors that are stifling growth in the sector.
What steps should the government take to encourage investment in the solid mineral sector?
Government should strive to create an enabling business environment that have the right policies in place. Importantly also, security challenges, civil unrest and corruption must be surmounted.
Asides the discovery of crude oil in 1956, the Nigeria solid mineral sector experienced further setback due to the indigenisation decree introduced by the military, which caused many expatriates to leave the country since they considered the policy unfavorable. A more recent security challenge is the one posed by Boko Haram and alleged herdsmen attacks. The northern part of the country is richly endowed with lots of valuable minerals, but presently the area is not investment friendly due to the growing rate of killings.
The non-existence of a viable commodity exchange is also a factor. The unstable rate of foreign currencies against the Nigeria is not encouraging, while there is the compelling need to meet infrastructure deficit. Ports and roads leading to internal market should be constructed. Capacity building and training for all MDAs involved, especially Nigerian Customs Services to avoid the continued undocumented export of our mineral resources is very important.
Activities of illegal miners are equally robbing the country of a lot of revenue. How do we urgently address this excesses?
The absence of reliable geoscience data leads to Nigerian mining companies finding it extremely difficult to access finance from the formal money market in Nigeria to engage in meaningful commercial mining, leading them to engage in Artisanal mining with its low production volumes, sterilisation of mining sites, land degradation, uncoordinated and inefficient methods and it’s inherent threat to workers’ safety.
Excesses can, however, be curbed by registering, training and developing artisanal and small scale miners, thereby integrating them into the economy. It is also important that the dangers and hazards associated with Illegal mining be made known to the general public on a regular basis through various media. Not only does Illegal mining deplete the environment, its health disadvantages are enormous. So, strict laws should be enforced and anyone found culpable tried accordingly. Community watch groups and mines’ police should be empowered as well.
Do you think solid mineral has got what it takes to break oil’s dominance as the country’s mainstay?
For solid mineral to break the almost 60 years dominance of crude oil, it is important to first of all take a critical look at the solid mineral sector. The history of mining in the country dates as far back as the year 1903 when the mineral survey of the Northern Protectorate was created by the British colonial government. A year later, the mineral survey of the Southern Protectorate was founded. By the 1940s, Nigeria was a major producer of tin, columbite and coal.
The combination of the Nigerian Civil War and the introduction of the indigenisation decree that took place between 1967 and 1970s is also worthy of note. The war and wrong policy led many expatriate mining experts to leave the country. Underdevelopment of the mining industry has led Nigeria to import minerals we could produce domestically such as barite and iron ore.
Nigeria has around 49 proven mineral resources. These minerals belong to several categories. They include industrial minerals (eg kaolin, feldspar, limestone); energy minerals (eg coal, bitumen, uranium); metallic ore minerals (eg gold, copper, iron ore); construction minerals (eg granite, laterite, sand) and precious stones (eg sapphire, tourmaline, emerald).
The Bitumen reserve in Nigeria is twice the volume of existing crude oil. However, it is sad to admit that most of the bitumen used for our road construction and maintenance are imported.
Considering that our vast mineral wealth cannot be exploited all at once, there should be strategic choice for focus, and few minerals could be prioritised for development.
According to the recommendations of the Mining Implementation and Strategy team, Nigeria’s priority minerals will be those for which data exists around commercial viability; eg proven reserves. Based on these criteria, seven strategic mineral resources have been identified as priorities. These are iron ore, coal, bitumen, limestone, lead/zinc, gold and barite. These resources are priorities for Nigeria’s domestic industrialisation and infrastructure requirements. Barite for instance, is imported from Morocco in huge quantities with foreign exchange by oil producing companies for the drilling of crude oil and Nigeria has it in commercial quantities in Nasarawa, Cross River to name a few.
Ghana for example, prioritised gold and it contributes more than 14 per cent to the country’s GDP as at 2014. Gold also accounts for 25 per cent or more of the country’s export value. The Democratic Republic of Congo has prioritised coltan (columbite – tantalite), which is used in the electronic industry for capacitors and high power resistors. The current price of tantalite ore is $158. 90 per kilogram compared to a barrel of crude oil at $80. Nigeria is blessed with both minerals in commercial quantities.
With these testimonies, it is evident that Nigeria’s solid mineral sector has the ability to replace oil and gas as the main source of revenue generation very easily.
Is the country’s solid mineral policy framework good enough to attract investment into the sector?
Yes, it is, provided the policies are implemented. The solid mineral policy framework is grouped into six categories thus priority minerals; develop an industrial mineral strategy; develop an energy mineral strategy; develop the steel sector; institution and government; build organisation and functional capabilities of the Ministry of Mines and Steel Development; build stronger regulatory frame work and ensure stronger economic and political coordination of minerals and mining policy.
On the part of the stakeholders, there should be improved engagement of states with mineral and mining sector, improve engagements with communities, while operators must make efforts towards attracting majors in the industry, promoting exploration by junior miners and formally integrate artisanal and small scale miners into the sector, among others.
Some are of the opinion that states should be allowed to develop the resources in their domain, is that the way to go?
Global best practice suggests that the state cannot be both a regulator and an operator simultaneously. Historically, data has proven that government owned businesses, whether state or federal, in one way or the other would collapse. States can, however, create a special purpose vehicle via a public private partnership with mining companies to develop the resources in their respective areas, and some states are already doing this.
Taking Botswana as a case study, government control of mine ownership led to development of her mining sector. To avoid inequalities across areas, states and tribal authorities transferred mineral rights to the Federal Government. This initiative helped contribute approximately 40 per cent to the country’s GDP.
Botswana has the third largest diamond reserve in the world, and an estimated coal reserve of approximately 212 billion tonnes (Nigeria at approximately 2.7 billion tonnes).
The Botswanan government divested itself by collaborating with industries. This ensured government’s minority stake in all new mining projects. This initiative made policy perception index of Botswana highest jurisdiction in Africa in 2014, and investors attractive index second in Africa.
The major reason that the Nigerian government nationalised the solid mineral sector is to get a higher share of mining revenue. However, to avoid inequality across states, the Federal Government might allow states to develop resources in their respective areas outright. They can improve their engagements particularly around financial participation and revenue sharing and coordinating oversight with the federal ministry.
In essence, what does roadmap into the country’s solid mineral entail?
The road map for Nigeria’s solid mineral development is clear on the immediate, medium and long-term goals and explicit with objectives clearly stated. The solid mineral sector has been critically analysed and the challenges identified. There are case studies in it of Zambia and a few other African countries. Zambia embarked on privatisation and others like DR Congo, Guinea and Cameroon sought partnership with foreign countries. Ghana on the other hand, having recognised the challenges and threat to artisanal mining posed on her economy, integrated it into the mining economy. They implemented laws directed towards helping artisanal miners and the economy. Together with the IMF, they developed a national economic recovery plan to revitalise a stagnating economy. The plan succeeded in regularising small-scale mining operations. Technical assistance was provided for prospective and registered small-scale miners, and purchase of mercury from authorised dealers for gold extraction was legalised.
These case studies highlighted are intended to serve as blueprints for Nigeria’s mineral sector.
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