Solid minerals sector: Goldmine seeking effective exploitation for economic diversification

A mining site in Nigeria

Huge solid mineral deposits lie in various parts of Nigeria. However, this goldmine is yet to be effectively explored – despite the vast opportunities it offers – in order to diversify the nation’s revenue earnings, writes ALEXANDER CHIEJINA

Following global economic recession in the late 1980s and early 1990s, developing countries began to liberalize their external trade to improve balance of payment and increase economic growth through provision of incentives to attract capital in-flow and investment. Interestingly, developing countries, especially in Africa and Latin America, turned to solid minerals exploration as a solution to sustained economic growth.

This economic initiative paid off as mining companies have continued to play key role in the economic development of these countries. Countries like South Africa, Ghana and Tanzania remain critically dependent on earnings of solid minerals. As a result, countries introduced liberal reforms to meet intense competition to attract investment funds.

Ghana, for example, undertook significant reforms in legal and institutional framework as well as the general organization of the sector. This reform has paid off as there has been an increase in mining investment. Tanzania is now a leading destination for exploration funds due to deliberate government attention towards the development of mining. Burkina Faso and Mali have also become strong mining countries.

Coming home, Nigeria has in the past focused on developing the oil and gas sector, thereby neglecting other sectors of the economy. During pre-independence era, the nation was known for the production of coal as an energy source for electricity, railways, and also for export.

Tin, columbite, lead and zinc were exported. Earnings from solid minerals were used to develop roads, education, hospitals, to name but a few. Geological reports show that Nigeria had strong mining potentials. In total, the nation has over 34 known major mineral deposits distributed in locations across the country and offers considerable attraction for investors.

More worrisome is the fact that neglect of the sector led to disorder in the minesfield with strong presence of illegal miners whose activities are characterized by inefficient mining, illegal trading of highly priced minerals, severe ecological degradation, and huge loss of revenue to the government through smuggling.

With President Goodluck Jonathan’s avowed commitment to develop the solid minerals sector, given its huge potentials to boost the nation’s economy, economic experts have decried the slow growth of development in the sector, as they proffer solutions through which the sector can generate wealth if fully explored.

Jude Idika, a mine development specialist, revealed that the gap between exploratory mapping and detailed exploration is a clear manifestation of changes that have occurred in the sector.

The mines specialist pointed out that considering the current situation, this is a great difference with the past when the gap was not obvious as previous government, through the Geological Survey and defunct Nigerian Mining Corporation (NMC), was able to build upon basic geoscience information from the geological surveys to commence detailed resource valuation through exploratory drilling programs, and carry out mine development on economically viable deposits.

“With the liberalization of the sector and subsequent proscription of NMC, limited geophysical data means that private sector interest has not been sufficient enough for high risk and costly detailed exploratory programs to materialize," Idika hinted.

He further stated that the aftermath of this was government’s plans of implementing competitive bidding for mineral titles are undermined as the level of information on mineral resource evaluation is low for a large number of deposits.

Another issue, Idika pointed out, is the prevalence of unsustainable practices in mineral resource exploitation. The mine specialist noted that solid mineral resources are threatened by widespread and uncontrolled artisanal activity thus resulting decline in the growth of the minerals sector.

“No doubt, artisanal and small scale mining (ASM) operations has dominated the mining sector for quite some time now. It is estimated that the ASM sector provides rural livelihood to the informal artisanal miners in Nigeria. Even though the current institutional and legislative framework for the industry recognizes ASM and sets out deliberate strategies to formalize and integrate it with the economy, progress in implementation of institutional provisions has been very slow thereby making uncontrolled and unregulated artisanal activities to still persist.”

In the meantime, the artisanal and small scale mining has become characterised by declining levels of education in mining regions, growing threat of epidemics, and lack of access to fair markets and recourse to smuggling and lack of access to credits. While this has contributed to severe environmental degradation in host areas and though the law made provisions for reclamation, the enforcement of this provision of the law has been weak and ineffective.

Echoing the sentiment of Idika, Nnamdi Obiago, CEO, Proper Technologies, a Nigerian mining company hinted that many good quality mines in Nigeria are economic non-starters because they lack basic infrastructure.  Obiago stated that infrastructure development should be the responsibility of government, but the government also lacks funding and ideas on how to deliver.

“Mining companies could fill part of that gap. But this will only be effective if action is properly coordinated with government and by officials who understand the dynamics of our industry. The government tends to take unilateral decisions and therefore waste opportunities for synergies. We have the Miners Association of Nigeria, which would be more than happy to discuss these issues with government, if government were interested,” Obiago stated.

Also speaking, Loretta Aniagolu, chief executive officer, LOC Metals and Minerals Limited told BusinessDay that low institutional and human capacity across all segments of the minerals and metals sector is a challenge the sector is confronted with.

While adequate human and institutional capacity is indispensable to the growth of most industries, the minerals and metal sector inclusive, Aniagolu hinted that effective institutions are required to create the enabling environment for a private sector led mining industry to emerge, deep functional skills, knowledge and experience is required for such an industry to thrive.

“In Nigeria, years of underinvestment in capacity building have led to dearth of quality personnel across all segments of the solid mineral sector-from regulation, administration, research and training to commercial operations. Ultimately, this problem has tended to undermine the effectiveness of reforms in the sector as the capabilities required to implement and manage change is limited in the key implementing institutions,” Aniagolu concluded.

Sector challenges

 Risk evaluation is a reality of life in the mining world. Before investors and banks ploy their finances into any project, a risk assessment of such project is analysed. Since it has to do with the mineral sector, risks attached to the geology of a certain prospect, or the availability of infrastructure in a particular mining area is accessed. However, the condition of the market which the developer intends to sell its commodity is yet another concern.

For Tope Adebanjo, country representative, Tasaree International Limited, one factor that affects investor sentiment in the nation’s mining is ‘Aids’. Adebanjo stated that while the alarming infection statistics are readily available, the impact on the mining industry seems to be a well kept secret apart from generalisations and projections.

“The difficulty of getting estimates particular to the mining industry and the potential effect on operations has resulted in a big debate. You said that the business community has been largely ignorant of the economic potential in this sector. Don’t you think it is because the community has found a ‘comfort zone’ in oil?”

Lending his view, Jude Idika, a mine revealed that one practice that has also threatened the feasibility of exploiting solid mineral resources is the limited revenue flows to mining communities and states from the industry.

While lamenting that despite three decades of mineral exploitation in Nigeria, the nation has not been able to derive much benefit from this sector because of weak linkages between it and other sectors of the economy, Idika revealed that this is nothing but a true reflection of poor policy coordination and a fragmented approach to growth and development.

"The absence of a model for the integrated planning and development of the following sectors of the economy-minerals and metals, agriculture, energy, transport and manufacturing has posed the biggest threat to the development of the minerals and metals sector. As a result, it has become impossible to utilize demand from one sector to boost production of the other. For instance despite the high levels of local demand for steel by the construction sector, it is quite displeasing to realize that the country has been unable to develop its primary and secondary iron and steel industries because of lack of integrated planning and development,” he opined.

Policy on the sector

Dr Mohammed Sada, Minister of Mines and Steel Development

According to economic experts, solid minerals have the capacity to provide the all-important launch pad for development of other sectors of the economy as well as give meaning to the oneness of the Nigerian state as minerals are located in all states of the Federation.

Interestingly, the mineral policy seeks to ensure the exploitation of mineral resources in a manner that minimizes the social, environmental and economic consequences of mining. This is because successful exploration and exploitation of the nation’s mineral resources requires technical expertise and financial strength that can to an extent be provided by foreign investment capital.

The principal legislation that regulates mining activities is the Minerals and Mining Act 1999.  This legislation is administered by the Ministry of Solid Minerals Development. The 1999 Act seeks to provide security of tenure and ensure transparency in licensing procedures.

According to the Act, the ownership of minerals is vested in the Federal Government as custodian on behalf of the citizens of the country.  The government grants titles to allow suitable entities to explore for, mine and market mineral resources. There are fixed-term titles over a fixed area that may be granted to entities committed to approve programs of exploration or mining.

The legislation seeks to create a competitive business environment, limit the role of Government to regulator of the mining sector and licensor of mineral titles in the country. The legislation for the investor is a risk management tool and a critical component of the investment decision.

In an interview with BusinessDay, Olusegun Aganga, Minister of Trade and Investment, revealed that that there is in place a Mining Cadastral office, separate from Minister of Mines and Steel Development. The minister revealed that if anyone wishes to seek licence, the individual goes to the Cadastral office to obtain such

“The Law supporting the acquisition of Mining Rights in Nigeria is the Nigeria Mineral and Mining Act (NMMA) 2007. Section 5 of the Act established the Mining Cadastre Office as an autonomous body to administer mining rights, acquisitions and Investment Opportunities in Mining in Nigeria.  The office has exclusive responsibility for the administration of mineral title and maintenance of cadastral register.”

BusinessDay gathered that other functions of the mining cadastre office are to receive and dispose of applications for the transfer, renewal, modification, relinquishment of mineral titles or extension of areas; maintain a chronological record of all applications for mineral title as well as undertake other activities necessary for the carrying out of duties and responsibilities under the law.

It is noteworthy to state that types of mineral titles Section 6 NMMA 2007 provides for Reconnaissance Permit, Exploration Licence, Small-Scale Mining Lease, Mining Lease, Quarry Lease and Water Use Permit.

Meanwhile, efforts been made towards the development of the sector include New National Policy on Solid Minerals Development, 1998;  development of the Seven Year Strategic Action Plan for solid minerals development in Nigeria, (2002 2009);  establishment of Nigerian Geological Survey Agency.; establishment of Sustainable Management of Mineral Resources Project -a World Bank assisted programme; establishment of the Mines Environment Compliance Department to ensure best International practice; establishment of the Artisanal and Small Scale Mining Department as a focused department for small entrepreneurs and local content, to name but a few.

Previous policy decisions and instruments, although well meaning, have not produced the desired results and the outcomes for which they were developed. As a result, for the sector to develop beyond its low level, it became apparent that a reform of the policy is required. These decisions and instruments, developed in recent times have brought about significant change in perception and interest in the sector.

Investment opportunities

 In a bid to expand the solid mineral sector for sustainable development and growth, the Federal Government embarked on far-reaching reforms in the sector. Nigeria, with the help of South Africa, has been developing a geochemical database of the country intended to facilitate exploration efforts.

In addition, the government, in partnership with the World Bank, pooled US$120 million two years ago to fund the solid minerals sector through the establishment of a project for sustainable management of mineral resources in an attempt to address issues of artisan and small-scale mining as a poverty reduction strategy.

Speaking recently at a workshop on ‘Investment Opportunities in the Nigeria Mining Sector’, Mohammed Sada, Minister of Mines and Steel Development, revealed that discussions with the Swedish government through their embassy in Nigeria are ongoing aimed at developing the sector.

According to the minister, “Swedish companies are some of the leading manufacturers of heavy mining equipment like drilling rigs, which is the one of the most important machinery needed in this country at this time to do further exploration works at the various mines. Currently, we have over 10,000 exploratory licenses out there, and each and every one of these licenses will require one type of rig or exploration machine or the other.”

The Minister noted that emphasis is being placed on enforcing the security of mining titles in order to boost the confidence of investors in the sector. According to him, “Government is doing everything it can to ensure that mining titles are secure, and we consider this as one of the most important aspects of the reform with the economy. We make sure that when we give the miner his title, that title is secure and cannot be overturned unless there is excess breach of our regulations or, where necessary, if we have to enforce our ‘Use it or Lose it’ policy.”

In the meantime, incentives for investors (Section 23-32 of NMMA) include attractive tax policy, deduction of 95 percent of qualifying capital expenditure in the year of investment in: a) all certified exploration and development expenditure (including feasibility study and sample assay costs in the year incurred).

Furthermore, unclaimed capital cost can be increased by 5 percent annually until fully recovered. In addition, tax relief period is for three years but may be extended for another two years if government is convinced of the expansion, efficiency and development of mining operations and the capacity building programme.

Besides this, government has approved an expatriate quota and resident permits in respect of approved expatriate personnel and personal remittance quota for expatriate personnel free from any tax imposed by any enactment for transfer of external currency out of the country as permission has also been given for remittance of foreign capital in the event of sale or liquidation of mining plant.

The Minister urged investors from across the globe to explore all the viable investment opportunities that abound in the Nigerian mining and steel sector, especially against the backdrop of the economic mechanisms and reform being put in place in the industry to encourage the development of a robust 
private-sector led economy.

He added, “The government is committed to supporting any company or organization that is seriously engaged in the utilization of the abundant mineral resources in the country for economic production activities. Massive investment in the mining sector through private sector participation is key to rapid development of the sector; and the resultant effect is the much needed diversification of the economy which this administration is driving.”

MINERAL DEPOSITS

Abia: Glass Sand, limestone, Salt, Shale, Ball Clay, Granite, Galena, marble, laterite, bentonite, phosphate, kaolin, pyrite, feldspar, petroleum, lignite, gypsum, sphalerite, clay.

Adamawa: Granite, clay, gypsum, limestone, uranium, kaolin, coal, trona, barite salt, marble, magnesite, laterite.

Akwa Ibom: clay, glass sand, salt, silica sand, granite, coal, petroleum, Natural Gas, Kaolin, limestone, lignite.

Anambra: clay, iron Stone, Natural Gas, petroleum, sand stone, Kaolin, pyrite, lignite.

Bauchi: kaolin, Trona, gypsum, cassiterite, mica, clay, tantalite, galena, iron ore, gemstone, sphalerite, silica sand, Barite, columbite, Zinc, Lead, Muscovite, Quartz, Tin, glass sand, monazite, Feldspar, Graphite, Wolfram, Coal, Agate, Tentalum, Rutile, Tungsten, Copper, Talc, Limenite, Ziron.

Bayelsa: salt, petroleum, Natural gas, Silica Sand, Bentonite, crude Salt, petroleum, limestone, glass sand.

Benue: Gemstone, Barites, Feldspar, Marble, Mica, silica Sand, quartz, Galena, lead, zinc ore, silica sand, clay, crushed and dimension stone, fluorspar, wolframite, bauxite, shale, magnetie, Limenite, Brenite

Borno: Silica Sand, Natural Salt, sapphire, topaz, mica, quartz, gypsum, uranium, iron ore, megnesite, fedspar, Granite Aquamarine, Nepheline, Limestone, Kaolin, bentonite, laterite, Refractory Clay, Trona, Gold, Tin, Potash.

Cross River: Salt Limestone, Coal, Maganese, Mica, Limenite, Gold, Quartz, Glass sand, tourmaline, petroleum, Natural Gas, Kaolin, Tin ore, Sharp Sand, spring water, salt deposit, Talc, Granite, Galena, Lead, Zinc, Tin Ore, Muscovite, Uranium, Barite.

Delta: Kaolin,Lateritic Clay,Gravel,Silica Sand,Natural Gas,Petroleum, Ball Clay, Bauxite, Granite, River Sand,Clay,Spring Water.

Ebonyi: Lead, Zinc ore, Salt, Limestone, Ball Clay, Refractory Clay, Gypsum, Granite.

Edo : Chamockite, Copper, Gold, Marble, Granite, Gypsium, Petroleum, Dorite, Lignite, Limestone, Ceramic Clay.

Ekiti: Clay, Chamokite, Quartz, Lignite, Limestone, Granite, Gemstone, Bauxite, Cassiterite, Clumbite, Tantalite, Feldspar, Kaolin.

Enugu: Laterite Clay, Crude oil, kaolinitic clay, iron ore, glass sand, petroleum, gypsum, coal, silica sand ceramics.

Gombe: Graphite, Kaolin, Limestone, Silica sand, Uranium, Coal, Halites, Clay, Gypsum, Diatomite, Granite.

Imo: Crude oil, Shale, Natural Gas, Kaolin, Laterite Sand, Limestone, Salt,Marble.

Jigawa: Glass Sand, Granite, Laterite, Clay, Silica, Kaolin, Iron Ore, Qurtz, Potash, Talc, Limenite, Gemstone, Columbite.

Kaduna: Muscovite, Granite, Gold, Manganese, Clay, Graphite, Sand, Zircon,Kyanite, Tin Ore, Limenite, Gemstone, Columbite.

Kano: Clay, Laterite, Cassiterite, Columbite, llmenite, Galena,Phyrochlorite,Kaoline,Gemstone,Silica, Tin Ore, Monazite, Wolframite, Thorium, Granite, Hyalite, Kaolin, Beryl, Amethyst, Gold.

Kastina: Gold, Manganese, Lateritic Clay, Feldspar, BlackTourmaline, Amethyst, Quartz, Kaolin, Mica, Gypsum, Silimanite, Clay, Granite, Sand, Uranium Asbestos, Tourmalin, Serpentine (Chresolite Asbestos),Chromites, Limenite, diamond, graphite, Iron Ore, Potash, Silica Sand.

Kebbi: Salt, Iron Ore, Gold, Feldspar, Limestone, Quartz, Bauxitic Clay, Manganese, Kaolin, Mica.

Kogi: Clay, Iron Ore, Gemstone, Marble, Limestone, Feldspar, Dolomite, Phosphate, Mica, Cassiterite, Granite, Ornamental Stone, Coal, Kaolin.

Kwara: Clay, Kaolin, SilicaSand, Quartz, Dolomite, Marble, Feldspar, Gold, Tantalite, Cassiterite, Granite, Limestone.

Lagos: Silica Sand, Bitumen, Sharp Sand, Gravel, Petroleum, Laterite.

Nassarawa: cassiterite, Gemstone, Amethyst,Beryl, Cherysolite, Emerald, Gamet, Sapphire, Topaz, Barites, Galena, Monazite, Zicron, Glass sand, Coal .

Niger: Bell Clay, kaolin, limestone, Granite, Glass Sand, iron ore, red clay, feldspar, silica sand, Quartz, Asbestos, marble, Talc, Gemstone.

Ogun: kaolin, Feldspar, Silica sand, Mica, Granite, Clay, phosphate, gypsum, limestone, quartz, Tar sand.

Ondo: Marble, Gold, Gemstone, Diorite, lignite,

Osun: Clay, Granite, Talc, Dolomite, Feldspar, Quartz, Limestone, Mica,

Oyo: Clay, Feldspar, Granite, Limonite, iron ore, Kaolin, Quartz, Talc, Marble, Dolomite, Tourmaline, Aquamarine, Amethyst,

Plateau: Monazite, columbite, Feldspar, Clay, Cassiterite, Gemstone, Kaolin, Dolomite, Mica, Zicron, Marble, Limonite, Barite, Quartz, Talc, Galena.

Rivers: Petroleum, Natural gas, Silica sand, Glass sand, clay

Sokoto: Silica sand, Clay, salt, limestone, Phosphate, gypsum, kaolin, laterite, potash, granite,

Taraba: Flurspar, Gamet, Tourmaline, Sapphire, Zicron, Tantalite, Columbite, Cassiterite, barite, Gelena, Limestone, Laterite, calcite, Bentonitic clay

Yobe: salt, Trona, diatomite, clay, gypsum, kaolin silica sand, limestone, Epsomite, iron ore, shale, uranium, granite, bentonic Clay.

Zamfara: Gold, Alluvia Gold, Granite, Chromites, chamorckite, clay, Feldspar, spring water.

Federal Capital Territory (FCT): Limestone, Kaolin, granite, marble, feldspar, mica, dolomite, clay, sand, talc.

Source: www.nipc.gov.ng