Despite a recognised slowdown in exploration spending owing to credit challenges, Tanzania’s Ministry of Energy and Minerals believes the country’s mining industry remains vibrant as it diversifies its commodity base from gold to base metals, including iron-ore, copper and nickel, and to energy minerals, such as uranium and coal.

However, the Ministry highlights coal, in particular, as having more potential than uranium and nickel under current commodity price trends. It mentions that mineral exploration and development company Kibo Mining’s Rukwa coal-to-power project will add to the growth of the coal industry and to the country’s power pool.

Development Obstacles
Despite these developments, however, the Ministry notes that, owing to the current economic situation, only midtier gold mines are being developed in Tanzania. “Competitiveness is high in the financial markets, and only modest sector growth can be sustained beyond the present credit challenges.

“While two gold mines have closed after reaching the end of their life-of-mine, the boom period of Tanzania’s mining appears to have slowed down,” the Ministry notes. However, expected development of large-scale mines for iron-ore and coal at Liganga and Mchuchuma is likely to close the gap left by the two closed mines.

The mining industry still faces local issues, such as low local-content procurement and land-use conflicts with local communities, while other issues include financial challenges and investors’ overall risk perception.

The Ministry further notes that, in the past five years, mining foreign direct investment (FDI) increased from $57.3-million in 2007 to $406.5-million. However, year to year, FDI decreased from 909.9% in 2010 to 406.5% in 2011, a trend that reflects decreasing investment in the industry, largely because of unfavourable financial and mineral markets.

With increasing new discoveries of gold, energy and base metal deposits, the outlook for Tanzania’s mining industry remains positive.

“There are potential new medium- to large-scale mines on the horizon, despite market conditions,” the Ministry says, pointing out that junior exploration companies have always been the main prospectors and discoverers of deposits that are often later developed by major mining companies.

“These companies’ capacity to attract financing under the current credit crunch will affect the development of new mining projects,” the Ministry adds.

Infrastructure Potential
Ongoing power and infrastructure projects are expected to unlock the marginal mining projects located upcountry, the Ministry notes.

Currently, Tanzania’s existing railway lines are being rehabilitated and upgraded to standard gauge, while additional plans include the construction of more berths to handle more containers, as well as developing the Mbegani port, in the Bagamoyo district north of Dar es Salaam, which will serve as a relief port to Dar es Salaam, says the Ministry.

“Meanwhile, our plans are to increase power generation from the current 1 375.74 MW to more than 3 000 MW by 2015. Several new railway lines are being developed that could benefit the mining projects,” the Ministry says.

These include the Mtwara–Songea to Mbamba Bay line, with spurs to the Liganga and Mchuchuma sites, where new iron-ore and coal mines are being developed.

In addition, upgrading of the 690 km Dar es Salaam Isaka-Keza/Kigali-Gitega-Musongati line to a standard gauge could unlock the Kabanga nickel project, in the Ngara district of Tanzania’s Kagera region.

Further, the Ministry highlights that spurs from Arusha to Minjingu could support Tanzania’s phosphate industry and the soda ash project at Lake Natron.

The Ministry expects this $565-million deal to “reduce lag time and associated costs arising from port inefficiency, especially for bulk importers and exporters”. Tanzania signed this deal with the World Bank and other development partners last month to upgrade the main Port of Dar es Salaam to improve port efficiency.