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Potential, risks of Mozambique mining sector outlined

VITAL TO GROWTH Mozambqiue's lack of proper infrastructure results in an inability to meet the demands of the mining sector

Photo by Duane Daws

STRUGGLE TO UNLOCK VALUE Coloured gemstone supplier Gemfields mines rubies at its Montepuez ruby mine in Mozambique, where the unlocking of the true value of the country's natural resources riches has been delayed

3rd June 2016

  

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The extractive sector in Mozambique currently represents less than 4% of economic activity in the country, but has scope to grow considerably, says international metals and minerals researcher Roskill, which has released its Mozambique African Mining Report (AMR) 2016.

Mozambique is viewed by many as a success story, having gained independence in the 1970s, overcome civil war and developed into one of the fastest growing economies in Africa, notes Roskill, explaining that though Mozambique is relatively poor, its economy grew at an average rate of over 7% a year from 2005 to 2015.

The discovery of huge reserves of mineral resources in early 2016, combined with ongoing reforms and the subsequent improvement of the business climate in Mozambique, is providing good opportunities for the transformation of the country into a middle-income nation, Roskill adds. The country is host to gold, copper, nickel, iron-ore, bauxite, graphite, rare earth minerals, lithium, bismuth, antimony and rich coal deposits, as well as onshore and offshore natural gas deposits.

Roskill explains in the Mozambique AMR that, with recent exploitation of vast coal reserves in the country’s Tete province, discoveries in Niassa province, and large natural gas deposits in the Rovuma basin, the mining and natural resources sectors are poised for growth. In the period between 2010 and 2015, over $10-billion was invested in these sectors, with a further $34-billion set to be invested by 2020.

However, there are currently risks to the mining sector in Mozambique, most notably, the lack of proper infrastructure, which results in an inability to meet the demands of the mining sector. Roskill says the falling global commodity prices, coupled with infrastructure bottlenecks associated with connecting the hinterland areas rich in natural resources to the country’s ports, has delayed the unlocking of the true value of the country’s natural resources riches.

Roskill explains that major investment in the country is most likely to come from the development of liquefied natural gas plants needed to process the huge reserves in Mozambique’s Rovuma basin. The delay of both petroleum and natural gas exploration and production company Anadarko and integrated energy company Eni’s projects is cause for concern.

The report points out that another pressing issue is the increasing political instability in Mozambique. In October 2014, Felipe Nyusi of the Frelimo party was elected President of Mozambique. Historically, the country has been governed by the leaders of the liberation struggle and Nyusi is the first President who was not actively involved in the Mozambican War of Independence.

It was hoped that his election would bring increased political stability to Mozambique, Roskill states, adding, however, that the status quo has not changed much.

It is vital that the government of Mozambique works to improve infrastructure and security issues as well as other challenges, such as improving education and healthcare, to continue to attract investment, develop its mining sector and continue on the path of economic growth and poverty reduction, Roskill stresses.

Development Afoot

In May, Mining Weekly reported that the international tender for the construction of a new railway to link Mozambique’s coalfields to the coast closed at the end of April.

The project is being developed by Thai Moçambique Logística, a joint venture between Thailand-based Italian Thai Development Company, which has a 60% share, local State-owned ports and railways company Portos e Caminhos de Ferro de Moçambique (better known as CFM), with a 20% stake, and local private-sector Zambeze Integrated Development Corridor, also with 20%.

Seven companies are known to have submitted bids for the project. Two are from China, two from Turkey and one each from Brazil, Portugal and South Korea. The aim of the project is to provide a third rail link from the coal-rich inland province of Tete, running to the port of Macuse, in Zambézia province. This will allow the future expansion of coal production in Tete.

The new Macuse line will run for 480 km to 500 km, although talks are under way with the Mozambique government to add another 120 km, which would serve coal deposits not yet connected or close to any railway. The project is also expected to help with port congestion by adding a third harbour for the export of the energy mineral. Indeed, being capable of taking ships of up to 80 000 t, Macuse has greater capacity than the Beira port.

Edited by Tracy Hancock
Creamer Media Contributing Editor

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