New mining frontier opens in Madagascar

After nearly four decades of self-imposed isolation, in the past couple of years theisland Republic of Madagascar has been reopening itself to the outside world and to foreign investment.

And international mining com-panies, spearheaded by juniors, are already active in the country.

A World Bank project report (No PID10746) states that “Madagascar is very rich in minerals and precious stones”.

Writing in the US Geological Survey Minerals Yearbook 2003 (which was published during 2004), US geologist Thomas R Yager noted that Madagscar’s “miningindustry has been chiefly noted for the production and export of chemical- and metallurgical-gradechromite ore, high-quality crystalline flake graphite and mica”.

“In addition to these minerals,small quantities of beryllium, gold, rare-earth minerals and such industrial-mineral commodities ascement, feldspar, ornamental stones, precious and semiprecious gemstones, quartz, and salt have been produced.

“Madagascar is also known to have resources of bauxite, coal, cobalt,copper, lead, manganese, nickel,platinum, tin, titanium, zinc, and zirconium.” According to the World Bank, in 2002 there were 2 300 operatorsactive in the mining and minerals sector in Madagascar, providing “direct and stable” employment for some 100 000 people, plus as many as another 500 000 seasonal jobs.

Even so, the global agency adds that “Madagascar’s geologicalpotential is little known”.

(The most recent geological map of the whole island, for example, appears to have been compiled by a French geologist 41 years ago, in 1964.) Official mining exports increased form $16-million in 1996 to $37-million in 2000, mainly due to trading in precious stones.

Yager reports that the Madagascan government had issued 26 mininglicences in 2001, rising to 36 in 2003, although the number ofexploration licences issued declined from 158 in 2001 to 146 in 2003 – hardly a dramatic fall.

The number of small-scalemining licences rose from 429 in 2001 to 640 in 2003.

“Mining licences were renew-able and had a duration of 40 years. Exploration licences had a duration of ten years and were renewable for a single five-year period,” he noted.

Madagascar, located some 420 km east of Mozambique, is the world’s fourth-largest island and has a total area of 587 040 km2 and a coastline of 4 828 km.

Its topography can be divided broadly into four main regions: the east coast, marked by lowlands leading to steep bluffs and central highlands; in the north the Tsaratanana Massif, with volcanic mountains; the west coast region features broad plains and many protected harbours; and finally the south-west plateau and desert region.

Madagascar’s highest point is Maromokotro, at 2 876 m. The capital is Antananarivo, and the country is divided into six provinces.

Madagascar has six internation-al and 12 local ports, the fourmain ports being Antsiranana, Mahajanga, Toamasina (which is the most important) and Toliara.

There are some 33 000 km of roads and 800 km of railway (metre-gauge), but both networks deteriorated during the 1990s and rehabilitation is planned (and may now be taking place).

The country has an estimated population of 18 040 341 (figure for July 2005), of which 44,8% are 14 years old or younger, with an average life expectancy of 56,95 years.

The literacy rate among people aged 15 and over is 68,9%.

Ethnically, the people are predominantly Malayo-Indonesian and Cotiers (who have mixed African, Malayo-Indonesian and Arab ancestry); 52% of the population follows indigenous religious beliefs, 41% Christianity and 7% Islam.

The country has a gross domestic product (GDP) in purchasing-power parity (PPP) terms of $14,56-billion (2004 estimate) and a percapita GDP (PPP) of $800 (also a 2004 estimate).

The GDP is composed of agriculture (29,3%), industry (which includes mining – 16,7%) andservices (54%).

Government revenues last year totalled $783,7-million, but expenditures were $1,079-billion, including captal expenditures of $331-million.

Electricity production in 2002 was 840,2-million kWh, with consumption of 781,4-million kWh; some 66% of electricity is gener-ated by hydropower.

In 2003, the country had 59 600 main telephone lines in use, as well as 279 500 cellphones; it had 773 Internet hosts and an estimated 70 500 Internet users.

International telecommunications links are provided by a submarine cable to Bahrain and with satellite earth stations for Intelsat (Indian Ocean) and Intersputnik (Atlantic Ocean).

The US Central Intelligence Agency’s The World Factbook 2005, from which most of these statistics are taken, rates Madagascar’s telephone system as being “aboveaverage for the region”.

The country was annexed by France in 1894 and regained its independence in 1960.

With regard to the mining and minerals sector, “poor governance and corruption in the sector have discouraged many formal investors and have led to a smuggling of precious stones out of Madagascar, with very little value addition being created in the country,” highlights the World Bank.

“Severe governance problems have characterised Madagascar’s mining sector for years,” it points out.

“Illegal exports are a multiple of official exports and estimates put the value of trafficking in precious stones ranging from a minimum of $200-million to the maximum of $500-million (or 10% of GDP) per year.” (The reference to GDP is to the country’s dollar-exhange-rate GDP, not to the PPP GDP.) The Madagascar government, with international assistance, has been seeking to eliminate these problems.

“The measures to improve gover-ance in the management of mineral resources constitute the core of the short-term policy programme of the government,” says the World Bank.

A major step was taken with the launch of the Madagascar Mineral Resources Governance Project in May 2003.

This is a joint project funded predominantly by the World Bank, with this global institution providing $32-million, the government of Madagascar $5-million, the government of France $1,2-million, while the US government is contributing $0,5-million.

This is a five-year project and will run until December 31, 2008.

It was preceded by the World Bank’s Mining Sector Reform Project (MSRP) for Madagascar.

“The MSRP assisted the Mada-gascan government in setting up a legal and regulatory framework conducive to private investment in the area of mineral resources, in line with its overall policy . . . whose key objectives are shifting the role of the State from operator to regulator and promoter of sustainable minerals development, and opening up the sector to private investment, including foreign.” The MSRP supported three major reforms, in particular.

First, the country’s new mining code and its regulations, which provide an adequate legal and regulatory framework to attract private investment into mining.

Second, the passing of a speciallaw for large-scale mining investments, creating an ‘attractive’ special regime for foreign direct investment in mining, “and providing for a fair share of revenues between the government and the privatesector, and an adequate cut for the provincial governments”, in the words of the World Bank.

Third, improved governance through the creation of the Mining Cadastre, which is a transparent,nondiscriminatory system to issue, manage and cancel mining permits.

The main challenge now facing the Madagascan government with regard to mining-sector governance comes from the small-scale andartisanal mining sector.

In recent years, the country has suffered a series of artisanal mining‘rushes’ triggered by discoveries of precious and semiprecious stones.

“Because of a lack of institutional capacity of the mining administration, the new mining code is not being enforced consistently and, as a result, most of the small-scale and artisanal mining is being conducted outside the formal channels, with insufficient linkages to the rest of the economy, damage to the environment, social conflicts and substantial loss of fiscal revenues,” states the World Bank.

The Madagascar government is seeking to fight smuggling and corruption in this sector and create an environment that will promote the legitimate production, trade and cutting-and-polishing of gemstones.

Thus, the current Mineral Resources Governance Project has a special focus on the small-scale mining operators.

In the words of the World Bank, “the overall objective of the project is to assist the government of Mada-gascar in implementing its strategy to accelerate sustainable development and reduce poverty . . . through the strengthening of governance and transparency in the management of mineral resources, with special emphasis on small-scale andartisanal mining”.

From the point of view of the South African mining industry, the first major fruit of this mining-sector reform in Madagascar has been Impala Platinum’s decision, earlier this year, to take a 37,5% share in the $2,25-billion Ambatovy nickel project, originally pursued by Canadian company Dynatec (which now also has a 37,5% share); Japan’s Sumitomo is the third partner, with a 25% share (see Mining Weekly September 23, 2005).

Ambatovy is expected to produce 60 000 t of nickel and 5 600 t ofcobalt a year at full production, which is expected by 2009.

Meanwhile, Diamond Fields International, of Canada, has been undertaking reconnaissance samp-ling of the Valorozo nickel laterite deposit, which is located in south-central Madagascar and reportedly has a resource of 3,7-million tons at a grade of 1,75% nickel.

Samples collected have been pro-cessed at Anglo American Research Laboratory, in Johannesburg.

Diamond Fields International has also been exploring for diamonds in the country, has discovered kimber-litic ilmenites and hopes to beproducing diamonds this year.

Chromium is mined by the State-owned mining company Kraomita Malagasy (Kraoma).

Gold has been produced fromnumerous deposits by artisanal miners; in his report for the US Geological Survey, Yager states that in “recent years small mining companies and individual miners have produced from about 1 000 kg to2 000 kg a year of gold from small high-grade deposits”.

He also reports that “Madagascar has primary occurrences of platinum-group metals in the Andranomiely region and secondary occurrencesin Antanambo, Antampombato and Antara”.

Regarding titanium and zir-conium, there are plans to develop a mineral-sands project in the south-east of the country, at Tolagnaro; this will be done by QIT Madagascar Minerals, which is a joint venture between the Madagascan government (20%) and QIT Fer et Titane, of Quebec, Canada (80%) – QIT Fer et Titane is itself a subsidiary of Rio Tinto Plc.

In addition, Ticor, of Australia, signed an agreement in 2003 with Madagascar Resources, despite its name a Mauritian company, toexplore for titanium and zirconium in the Tulear region of Madagascar’s west coast.

Regarding gemstones, the country produces sapphires, emeralds and rubies.

Semiprecious stones includeamethyst, beryl, citrine, garnet, topaz, and tourmaline.

Madagascar has also produced a wide range of ornamental stones, including agate, aragonite, jasper, labradorite and rose quartz.

Graphite is mined in the eastern coastal region.

Exploration for coal and offshore oil resources is taking place.

“Over the medium term, the Madagascan government’s strate-gy for the sector is based on therecognition that the sustainable development of mining cannot be achieved without a decentralised administration and a deep involvement of the affected communities,” reports the World Bank.

“The government is convinced that its central objective of redu-cing poverty through accelerated growth can only be accomplished through institutional and administrative reforms that refocus the role of the State, remove inefficient and discretionary regulations and build a strong partnership between the State, the private sector and civil society at large.”

E-mail the article:
Published: 2005/10/07 Printer friendly:

Author: Keith Campbell
Portfolio: Engineering News/Mining WeeklyContributing Editor
E-mail: newsdesk@engineeringnews.co.za

Comments

Popular posts from this blog

IMF Executive Board Discusses the First Assessment of Eligible Countries under the Multilateral Debt Relief Initiative

Oil’s chaotic collapse deepens; stocks drop worldwide

Mapping Extreme Poverty Around the World A new report from the