JUST A ROCK AWAY

Tanzania 2015 | INDUSTRY & MINING | REVIEW: MINING

Tanzania has come a long way toward developing a viable mining sector, but increased investment from abroad will be decisive if further gains are to be made.

Just over 50 kilometers south of Lake Victoria, the miners at Bulyanhulu are hard at work extracting one of Tanzania's key exports and a major contributor to its GDP. Gold mining in the East African country, focused around the region of Mwanza and the central and northern parts of the country, has been practiced since the late 19th century. However, recent discoveries have piqued investor interest in recent years and encouraged policy-makers to refine government regulations and allow the sector to flourish. Similarly, the undeveloped state of other extractive industries suggests a bright future for any companies planning to get involved commercially. Mining represents the second most important foreign exchange source in the Tanzanian economy, with around 40% of export income stemming from the production of minerals. Its growth levels in 2013 were 6.9%, lower than the 7.8% of 2012 due to changes in the global gold market. However, newly discovered resources promise higher levels of energy sufficiency and commodity exports in the near future.

The fourth largest gold producer in Africa, Tanzania has a current capacity of around 40 tons a year. As a result of the global economic crisis, demand for the resource skyrocketed, creating the right conditions for the expansion of the sector in producer countries. Despite the gradual recovery of the global market since 2010, which has seen a decrease in international prices, demand for gold has grown in China and a rehabilitated India, keeping Tanzanian mines busy producing this sought-after commodity. In 2012, the country sold $1.84 billion worth of gold, a figure that represented 33.06% of total exports, and over 90% of mineral exports. This figure declined in 2013 to $1.73 billion as a result of price fluctuations. Bulyanhulu itself, operated by African Barrick Gold (ABG), raised 959 tons of ore in 2012, followed by 872 tons in 2013. However, increased investment in the site over the same period will transform it from being a narrow vein mine to one focused around drift, fill, and long-hole techniques. The site is expected to continue producing for another 20 years. Other prominent mines include Buzwagi and North Mara, also run by ABG, Sekenke, which shares rights between ABG and Currie Rose Resources, the long-established Golden Pride mine, operated by Resolute Mining Ltd., and the relatively young New Luika mine, managed by Shanta Gold. The State Mining Corporation (STAMICO), set up in 1972 to foster growth of the sector, has a number of ongoing investments under joint ventures. These include the Itetemia gold project, which has a potential reserve of more than 500,000 ounces, and the Buckreef and Buhemba gold projects, about which feasibility studies are underway. The Geita Gold Mine (GGM) was the most prolific in 2013, with a total of 37% of all gold produced originating there. Small- and medium-sized mines represented around 2.8% of the country's gold producers in the same year, a significant increase in involvement in comparison with a decade prior.

But Tanzania is not only known for its gold deposits. Extensive groupings of silver, copper, platinum, tin, nickel, and iron ore are also available, and also minerals used for industry such as salt, gypsum, bentonite, gravel, sand, and phosphates are drawing in investment. Attractive gems like the unique tanzanite, as well as emerald, sapphire, ruby, and diamond have been extracted, along with crucial minerals for the production of electricity such as uranium, peat, and coal. For many years, however, these reserves remained unexploited. Despite the setting up of STAMICO and attempts to encourage investment, the sector did not begin to come into its own until the 1980s, when reforms led the government to relinquish its control over the mines and to play a more regulatory role. The formation of new policies regarding investment limitations and environmental and social considerations culminated in the Mineral Policy of 1997 and the subsequent Mining Act in 1998, both of which paved the way for streamlined private investment from abroad to efficiently establish extractive facilities. Over the past 10 years, FDI in the sector has exceeded $3 billion, while the country has generated over $6 billion worth of taxes and services from multinational mining firms as a result of the 1997 policy.

One decade after the 1998 Mining Act was promulgated, a reassessment of government strategy led to the drafting and passage of the 2009 Mineral Policy. This served to improve the investment environment and attract more international interest, while simultaneously consolidating the legal and regulatory environments and supporting small-scale producers. It further integrated the sector with its National Strategy for Growth and Reduction of Poverty (NSGRP), part of the National Development Vision 2025. This latter vision envisages the expansion of the sector to represent 25% of GDP, as opposed to the present 2.3%. A perpetuation of the government's responsibility for the regulation and encouragement of the sector was asserted, which has led to an increase in state participation in selected projects, in addition to a more refined procedural outline for applications for prospecting and retention licenses for metallic minerals, energy minerals, gemstones, kimberlitic diamonds, industrial minerals, and building materials.

Some of the fastest-growing segments of the industry can be found in the prospecting of energy minerals. Recent discoveries of quantities of coal, estimated at over 5 billion tons, have been made across the south, while Tancoal, a joint venture between Intra Energy Corporation of Australia and the Tanzanian state, has been busy advancing the Ngaka deposits near Lake Nyasa. It sold 134,063 tons of coal in 2013. Other interesting prospects include the project being developed in Mchuchuma-Katawake by Sichuan Hongda Company Ltd (SHCL). SHCL signed $1.7 billion and $1.3 billion contracts for the construction of a coal and iron ore mine, hoped to lead ultimately to a coal electricity generation facility by 2019. If these initiatives come to fruition, they could potentially create an additional 400 MW of generating capacity and $100 million in exports.

Mid-2013 brought some notable developments in the uranium segment. The state offered the tender for the construction of the Mkuju River uranium mine to the Mantra Resources subsidiary of Russian mining firm ARMZ. The project will take two years, but will likely yield more than 36,000 tons of refined ore, potentially placing Tanzania at the highest levels of global production along with Canada and Kazakhstan. It would, however, necessarily remain an export commodity given certain deficiencies in the state's infrastructure and a complete lack of nuclear facilities and expertise.

Gemstones remain a promising source of income for the sector. There are hundreds of varieties of kimberlitic minerals in Tanzania, but the country has emerged as a world-famous producer of diamonds over the past half century, playing host to some of the oldest such mines on the planet. The Williamson Diamonds Ltd produced an overall figure of 158,562 carats, a 17% increase on 2012. A wide range of other stones are mined across the country, including amethyst, quartz, topaz, and rubies. However, it is the completely inimitable tanzanite, mined in cooperation with STAMICO at the TanzaniteOne mine in Kilimanjaro, that is the country's most iconic rock. Around 3.24 million carats were produced in 2013, an over 25% increase that was unfortunately undermined by lowered revenue due to unsatisfactory quality as well as illegal operations and unlicensed sales.

Despite wavering levels of output as a result of international price changes, the mining sector in Tanzania is of enormous importance to the country. Continued investment from outside will increase as valuable minerals are unearthed, prompting the advancement of the sector through the creation of infrastructure and skilled manpower. The sector employs over 15,000 people, and supports domestic commercial enterprises through locally sourced supply contracts. But this will not be enough if the strategy outlined by the government is not strictly adhered to, companies do not respect legal and regulatory norms, and the transport infrastructure needed for exports is not developed.