SADC MINING SECTOR OVERVIEW The following presents the context of mining sector activity in the Southern African Development Community (SADC) region in 2006. The views expressed herein are those of the authors and are not those of the SADC authorities or of the European Commission. Introduction As MINES 2006 approaches in November 2006, regulatory and fiscal reforms within the Southern African Development Community (SADC), initiated prior to and after the last EU-SADC sectoral meeting in Lusaka in 2000 (Mines 2000), have increased the attractiveness for mining investment across the region. Continued improvement in world prosperity will strengthen the demand for mineral products in the medium to longer term. The mineral prospectivity of the region remains high and with a sustained level of exploration, investors and governments will be rewarded with the likely discovery of major, profitable mines across a range of commodities. Foreign Direct Investment Foreign Direct Investment, provided in part by the mining sector, is a driving force for economic growth in the SADC region. Mineral exploration is essential for the augmentation and replacement of depleting mineral resources which are central to the world’s economic wellbeing. In 2005, Africa attracted 17% of the estimated US$50 billion world mineral exploration expenditure, after Australia at 23% and Canada at 19%. Much of the African portion of these expenditures would have been in the SADC region and are a measure of the region’s mineral endowment. Such exploration and development levels are, also, an affirmation of the degree of investment security and workable tax and regulatory environments. Black empowerment, poverty alleviation, dealing with the HIV/AIDS pandemic and debt relief for some SADC members, are laudable objectives that may best be achieved by the wealth generated by expanding economies. To that end investment, especially domestic and external mining investment with its foreign exchange currency earnings, is of special benefit to SADC governments, operators and investors. Consequently, it is essential that all stakeholders work in harmony. Mineral Heritage The SADC region is mineral rich, but geologically, mineral deposits are naturally unevenly distributed within different national territories, and in many cases within any given country. The preponderance of metallic mineral resources occurs in a few areas. Nearly half the world’s gold is from the Witwatersrand in South Africa, and the bulk of the all known platinum group metal resources occur in association with the Bushveld Complex and the Great Dyke of Zimbabwe. Similarly, the Copperbelt of Zambia and DR Congo forms a world-class repository of copper-cobalt deposits. Across the SADC region, under published mining codes, these minerals are essentially the property of the people and are administered by each State. Historically, in the case of mineral rich areas with a prevalence of profitable deposits, many governments throughout the world were inclined to explore and mine on their own behalf. However, due to the high investment risk and the large amounts of scarce capital investment required (for which there is more pressing need), the SADC States and others by 2006 generally adopt a facilitatory and regulatory role of private sector mining development. The States have much to gain from the development of their mining economies through employment (often in rural areas), taxation and other benefits, with the primary risk undertaken by private investment. The discovery of new deposits in known, highly prospective areas is difficult , while the discovery of new mineral fields is yet more difficult and higher risk. Added to these natural factors, political risk varies across the region. Hence, investors’ returns in the few successful cases must be comparatively large in order to compensate for the cost of failure by many. The SADC mining sector has greatly benefited from rising commodity prices and the cessation of civil strife, previously in Mozambique and more recently in Angola and DR Congo. These factors have resulted in much increased investor interest and a more lively exploration scene across the region. Mineral Discovery and New Mines In the long established mining areas, the mining industry has matured, but there is yet great scope for future development. In South Africa, improvement in the gold price has allowed the development of the two North West mines on the Witwatersrand, while improved copper prices have assisted the Palabora mine to make a successful transition from open pit to underground mining. A feasibility study may be completed by the end of this year for development of the Western Bushveld platinum project. In Zimbabwe two new PGM mines are planned near existing mines at Ngezi, on the Great Dyke. Located in northwest Zambia , Lumwana is one of the world’s largest undeveloped copper deposits (270Mt grading at 0.8%Cu) and is scheduled for commissioning in late 2007. Turning to zinc mining, the Skorpion mine and refinery produced its first metal in May 2003. Elsewhere, in Botswana and Angola , there are very active investigations for diamonds, while development of offshore, diamondiferous gravels continues in South Africa and Namibia. In Northern Malawi, Kayerekera, the Karoo sandstone-hosted uranium deposit, is of current interest. In Mozambique, by late 2004, work began on the Moma mineral sands mine. When complete, the mine is planned to produce 612,000t of ilmenite annually. The Corridor Sands Project at the mouth of the Limpopo River also may have production potential. In Madagascar, a feasibility study in 2005 showed the Ambatovy nickel project has proven and probable reserves of 125 Mt at 1.04% Ni and 0.099% Co. In Tanzania, reform of the 1997 Investment and the 1998 Mining Acts encouraged exploration of old gold properties and artisinal mines in the Archean Greenstone Belts. This resulted in the Golden Pride, Geita and Bulyanhulu mines going into production and more latterly the North Mara Mine, and the Tulawaka mine in 2005. Regulatory Regime and Policy Harmonisation The forthcoming MINES 2006 Country Profiles will provide an overview of the regulatory information for each individual SADC country. Because of the inherent complexity of the regulatory regimes, prudent investors may find it beneficial to independently review the mining and tax laws and other regulatory policies of the SADC country in which they are interested. It may be advisable to avail of the advice of relevant experts in the country of interest. Studies were undertaken in 2004, under the auspices of the United Nations Economic Commission for Africa, with a view to harmonising mineral sector regulations across the SADC bloc. There would be obvious benefits in having similar regulations across the area trade blocs and the potential Customs Union. Such harmonisation would encourage mineral exploration, provided it is recognised that the mineral wealth is unevenly spread across the SADC region. The less mineral advantaged countries may wish to have more attractive incentives in order to gain mining investment. Conclusions It is apparent that the SADC area hosts a huge range of minerals, in some cases, as in gold, platinum, vanadium and chrome, a very high total of the world’s total resources. The sector, where mining has been of long standing, is becoming mature as for example in the more than century old industry within the Witwatersrand Basin. It is likely that as many or more deposits remain to be discovered over the coming years. However, most of these deposits will not be found by surface inspection, many of which are covered by surfical deposits or younger sedimentary rocks than those hosting the sought after orebodies. Future exploration will increasingly focus on discoveries yet to be made beneath the Post Karoo cover rocks. The potential remains for the discovery of gold or uranium deposits comparable to the Witwatersrand or, indeed, an analogue of the Zambian Copperbelt. It is becoming apparent that with current world economic expansion the increasing demand for metals augurs well for the future of mining within the SADC region. MINES 2006 is a timely event within the metal cycle and will offer significant opportunity for investors and promoters alike. Download as PDF