A decrease in the grades of iron-ore produced in China and reduced Indian exports as a result of high taxes and mining bans were providing an opportunity for new iron-ore supply to come on line to fuel China’s urbanisation, minerals industry consultancy Kai Batla geologist Anika Solanki said at the Geological Society of South Africa’s Geoforum, held in Johannesburg earlier this month.

China had a significant demand for iron-ore and would need one-billion tons of the metal by the end of this year, most of which would be sourced from mining majors BHP Billiton, Vale and Rio Tinto, she said.

“However, China would like to own 50% of its iron-ore supply through China-owned foreign assets by 2015 and, therefore, it is increasingly looking to Africa,” said Solanki.

Potentially, there are 35-billion tons of direct-shipping iron-ore available in Africa, which amounts to a production potential of between 400-million tons and 600-million tons a year in the region.

However, while there were about 30 projects being under- taken in countries such as Sierra Leone, Guinea, Liberia, Cameroon, the Democratic Republic of Congo and Mauri-tania, there were only about six producing mines operating at low volumes, Solanki pointed out.

She added that there were challenges that had to be considered when planning the exploration of iron-ore on the continent.

“The challenges that have to be considered can essentially be divided into five categories. The first three – locality, geopolitical factors and quality – relate directly to exploration, whereas the fourth and fifth categories, which are infrastructure and market conditions, impact on your exploration spend – in effect, whether continuous exploration will be done in the area,” she explained.

Locality pertains to finding a potential explored area for which good geological information was available, she said.

“Many African countries have had military conflict and political regime changes, which led to geological information being lost, outdated or inaccessible.

“Sierra Leone is an exception, with geophysical surveys having been done in the north-east of the country, leading to the establishment of two major producing mines – London-listed African Minerals’ Tonkolili mine and resources firm Cape Lambert’s Marampa mine,” she said.

Another concern in terms of location was site accessibility and sustainability, Solanki said, adding that this was the main reason why the region’s iron-ore potential was still untapped.

Climate was also an important factor. Many of the iron-ore-rich areas were located in the subtropical or tropical monsoon belt, where wetness and moisture would definitely affect mining operations in those areas, as wet ore could not be shipped, she explained.

Further, geopolitical factors, such as political, social and regulatory risks, also had to be considered.

“The perceived risk associated with a specific country or region will affect investor confidence and make it difficult to secure funding for development.”

In addition, many countries in Africa had porous borders, which meant that conflict in countries such as Libya and Mauritania could spread to other African countries and, therefore, negatively affect their stability.

“Many African countries also have problems regarding legislation and regulation, security of tenure and resource nationalisation,” she added.

However, in some instances, these problems were being addressed by publishing mining contracts online and by becom- ing Extractive Industries Trans-parency Initiative compliant.

With regard to the third factor, quality, Solanki believed that Africa’s iron-ore was of a grade that was high enough to justify significant investment.

Solanki stated that infrastructure was the largest factor currently impacting on iron-ore exploration in Africa.

“Most projects in Central or West Africa are less than 1 000 km away from their ports of entry, similar to the Sishen and Khumani mines, in the Northern Cape; therefore, getting the goods to port should not be such a problem. However, the West and Central African regions lack integrated transport, rail and road networks, as well as power and water supply.”

There was a low degree of actual and planned infrastructure development in the region and many of the roads and railways were in a poor condition.

“Rio Tinto’s Simandou mine, in south-east Guinea, is facing such problems. It is located 640 km from the Port of Conakry and the mining company has to carry the cost of building a trans-Guinean railway. The estimated cost of the mine’s infrastructure, building the railway and expanding the port to a deep-water port, has recently increased to more than $20-billion,” she said.

About 50% of the capital expenditure of many African projects went towards infrastructure, she pointed out.

“For this reason, many mines are using a phased approach, bringing production on line in stages, and they are refurbishing existing rail and port infrastructure, as the cost of this is much less than building a new railway or port. To deal with the infrastructure challenges, mining companies can also cluster their projects together, which would allow them to share infrastructure,” Solanki explained.

In terms of market conditions, she said: “New age geologists will have to add value to their geological offering – you have to take into account what the market is looking for and whether this can be found.”

Profitability also had to be considered. “The key factors that impact on profitability are the quality of the ore, factors of access and infrastructure and the global market,” Solanki concluded.