Tanzania’s mining industry is currently facing several key challenges, including the need to attract investment for exploration in a difficult financial climate, compounded by regulatory uncertainty discouraging additional investment, states law firm Norton Rose Fulbright Tanzania director Adam Lovett.
He attributes these challenges to the risk associated with investment that cannot be properly defined and quantified.
“Last year, the Tanzanian government proposed legislation that would require a mandatory listing of certain mining licence holders on the Dar es Salaam Stock Exchange, which has caused widespread concern within the industry,” says Lovett.
He notes that, this year, the Tanzanian government has cancelled almost 200 mining licences owing to noncompliance with these terms, which has also created alarm among industry stakeholders, as government’s approach to cancellation has been inconsistent and lacked transparency.
Lovett says government is also considering the introduction of stricter measures for procuring local goods and services and stresses that Tanzania’s mining industry requires greater regulatory certainty and transparency for the mining industry.
Meanwhile, despite increased investment in the mining industry, he maintains that there is still great potential for the country’s mining industry, as he believes that the possibility of significantly higher investment remains.
However, to unlock that potential and to link the mining sector to the country’s wider economy, more investment in infrastructure and power generation is required.
“Further, the current mining regulatory framework needs to be bedded down by open, clear and consistent application of the requirements,” Lovett says.
Oil and Gas Potential
Lovett adds that, if a decision to commercialise Tanzania’s deep-water gas reserves is taken by the international exploration companies that have signed production sharing agreements, the country’s oil and gas industry will surpass the gold mining industry significantly in terms of revenue.
“Before that can be achieved, the full legal and fiscal framework must be put in place. Exploitation of the reserves will also require massive infrastructure development, in addition to the infrastructure that will be required for the gas extraction, processing and storage,” Lovett says.
However, the current lack of reliable power and infrastructure limit the processing of the minerals that can take place in Tanzania, he adds.
The International Monetary Fund estimates Tanzania’s natural gas discovery to be about 51-trillion cubic feet and, based on current estimates, the country has the potential to rake in between $5-billion and $6-billion in revenues each year between 2029 and 2044.
The country has also signed at least 25 production-sharing agreements with about 17 international energy companies, including Royal Dutch Shell, Exxon Mobil, Mubadala Petroleum, Statoil, BG Group and Petrobras.
Nevertheless, initiatives focusing on enhancing the country’s resource mobilisation, as well as unlocking further water, transportation, energy, education and agriculture potential, which include the Big Results Now initiative, were launched in April, last year. Tanzania signed a $565-million deal with the World Bank and other development partners last month to expand its main port of Dar es Salaam.
Online publication News24 reported in September that the country wants to lift capacity from the 14.6-million tonnes it handled in the 2013/14 financial year to about 28-million tonnes a year by 2020.
Uranium and Nickel Deposits
While Lovett notes that Tanzania has significant uranium and nickel deposits, he points out that these minerals are, however, located in areas with little or no existing power and transport infrastructure.
These issues, therefore, have to be tackled for the mineral resources to be unlocked, he adds.
Low commodity prices also remain a key challenge, as is reflected in Aim-listed exploration and development company Uranium Resources’ decision to delay further drilling at its flagship Mtonya uranium project, in Tanzania, until uranium market fundamentals improve and the true potential of the project is acknowledged by the wider market.
Nevertheless, investment in Tanzania continues, as is reflected by exploration company IMX Resources’ aim to increase the current nickel sulphide deposit and establish a world-class nickel project at its Ntaka Hill project, in south-east Tanzania, through the ongoing Nachingwea exploration project. The Nachingwea property is prospective for nickel, copper, gold and other minerals, such as graphite.
Lovett adds that the use of coal at Rukwa, which is seemingly usable for thermal power, is “very encouraging news”.
The first stage of the mining definitive feasibility study (DFS) for Tanzania-focused mineral exploration and development company Kibo Mining’s Rukwa coal-to-power project is expected to be completed by the end of November. It will cover the conventional prefeasibility elements that are associated with a coal mine feasibility study.
This is in addition to assessing certain key mining parameters required for the planning of a DFS on the proposed Rukwa power plant.
Moreover, African coal explorer Edenville Energy’s Tanzanian entity, Edenville International Tanzania, has been awarded an environmental-impact assessment certificate, which signals approval for coal mining at the Namwele and Mkomolo coal deposits, near Lake Rukwa, to start.
Edenville International Tanzania’s future mining objectives include the completion of a feasibility study and the subsequent conversion of current prospecting licences and primary mining licences into a full mining licence, with further environmental studies and approvals required as part of the development process for a power plant.
“Tanzania has significant coal reserves, so if a successful project can be developed, this should catalyse further investment in coal,” Lovett concludes.(Source: Miningweekly)