April 9, 2014 10:00 pm

Mauritania looks to rail and water to boost mining sector

DEGPDB Rig operator pulling out core tube and making a new connection on RC diamond drill exploration rig, surface gold mine Mauritania©Alamy

Expansion plans: an exploration rig at a surface gold mine

Stretching 704km into the remote desert and guarded in places by the army, Mauritania’s iron ore railway is the backbone of the country’s economy. It is also the key to unlocking its vastly under-developed mining potential.

The railway is owned by the state-controlled mining company, Société Nationale Industrielle et Minière (Snim), which some who know it well describe as a jealously defended “state within a state”. The line and the port of Nouadhibou at the end of the track are critical to opening up Mauritania’s vast iron ore deposits.

Mohamed Ould Khouna, Mauritania’s mines minister, says: “We have maybe at least 2bn-3bn tonnes of good iron ore, [known as] magnetite, so now we are looking for how to transform this discovery into production. To produce, we have to secure two things: the railway and water, which will require investment. If we sort out the infrastructure, I’m sure we will make a huge jump in mining output.”

It has not been plain sailing. It took Glencore two years to negotiate access to Snim’s 100 per cent owned and operated railway.

But now the agreement is, according to Snim’s chief executive Abdellahi Ould Mohamed Oudaâ, “definitive” as of last month, it could open up several deposits to foreign investors.

“It’s been difficult because it’s the first [agreement], but we have now agreed the model with Glencore [and] that will form the basis for our discussions with other companies from Saudi Arabia and China that are also looking to export iron ore from Mauritania using our infrastructure,” he says, citing several other huge planned projects that could double annual iron ore output.

Snim, which first exported iron ore in 1963, plans to boost its own production from last year’s 13m tonne record to 40m tonnes by 2025 as part of a $6bn expansion, putting Mauritania in the top five producers in the world, up from second in Africa.

“There’s a gap [in global supply and demand] today, but it will close after 2020. That means we have a window to boost output before it’s too late and other producers come online,” says Mr Oudaâ, who points out that more than 75 per cent of its iron ore now goes to China, compared with only 20 per cent before the global financial crisis. Although several foreign mining companies plan to develop iron ore projects, Mr Oudaâ says Snim intends to maintain its 100 per cent ownership of the port and railway, which has top carrying capacity of 80m tonnes a year.

Plans to privatise Snim were abandoned in 2008 after President Mohamed Ould Abdel Aziz, praised for his “patriotic historical position”, put his foot down. As it is the crown jewel in the nation’s otherwise feeble economy, Mr Khouna says the country will “never” privatise Snim.

Elsewhere, the country has issued more than 300 permits to more than 70 companies for mining exploration, for everything from diamonds and quartz to rare earth metals and uranium.

Although the country depends heavily on mining and reformed the mining code to attract foreign investment, so far only two enterprises, both Canadian, have set up production operations: Kinross, with its 220,000oz a year gold mine at Tasiast, and First Quantum Minerals’ copper and gold operation at Akjoujt.

Kinross will next year decide whether to go ahead with a mill expansion plan, after having to scale back earlier production plans to accommodate the falling gold price. Some of the 300 workers it laid off last year as a result are continuing their protests.

“It’s a very good asset, but the mine is losing money,” says James Crossland, executive vice-president at Kinross.

Although the company says it is owed tens of millions of dollars in value added tax rebates, relations with government remain largely good.

“Kinross has a problem with itself, not with the government,” says Mr Khouna, a reference to shifts in internal company strategy in part to accommodate what turned out to be the high fee paid for the mine, given the subsequent drop in gold prices.

First Quantum also made hundreds redundant last year, but has found ways to cut production costs. Since 2012, it has sold gold in concentrate rather than as the more expensively processed ingots.

The mine, which started production in 2006, is due to run out of its copper and gold resource in 2022, but the company plans to process tailings for magnetite, thanks to a new iron ore plant scheduled to start up this year.

“We hope it gives us an additional revenue stream and longevity,” says Bill Wakabayashi, the mine’s general manager.

If not, residents in Akjoujt, the mining town that is also home to the president, may face the limits of the mining economy all too soon.

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