HOW TO GET INVOLVED WITH THE MINING INDUSTRY IN NIGERIA Part II

BETTING ON NIGERIA

The Giant Heart of Africa

For long.West Africa has been a destination of choice for mining executives the world over, with countries like Burkina Faso,Ghana,Ivory Coast and Niger being actively explored and mined. Now, Africa’s most populous nation, Nigeria,fortuitously located in this remarkably prospective region, is opening up its mining sector and taking aggressive step to woo foreign mining companies as it seeks to become an alternate mining destination.Gold has been the predominant mineral of choice in the region.But Nigeria, thus far known for its oil and gas deposits (tenth – largest reserves in the world and third – largest after OPEC at 36 billion barrels), is now offering a whole range of 34 solid minerals including precious metals,base metal, rate earths and minerals such as uranium to prospective miners for development.

While Nigeria opens its mining industry it also seeks to battle negative perceptions that have bedeviled it through years of military rule and socio-econmic crisis. The present government’s reform commitment is progressively boosting the confidence of investors. A mining industry always existed in Nigeria and prior to independence in 1960,it was the dominant industry controlled by British firms. But investors were left with a bad taste after the mining sector was completely nationalized in the 1970’s as the country sought to recover from a devastating civil war. All foreign investors left the country and many of them of them have had strong reservation about reengaging with the country until the recent past, when they have seen a steady path of growth and unflinching political support to attract foreign direct investment. Understandably, the years of dormancy meant that the mines deteriorated and production fell sharply, especially since the state owned companies were neglected with neither technological equipment nor conditions for efficient performance. After the discovery of oil in the 1960s, the government’s focus swung to developing its oil resources and that focus has remained to date to the continued detriment of the mining sector. But with the unprecedented boom in commodity prices, especially for solid minerals, the Nigeria government decided to revisit the mining sector and emphasize the opportunity there to global investors.

Since june 2006 and until the end of March 2007, Nigeria has had a dynamic minister appointed to the country’s mining and steel development portfoli, professor Lesiye Obiora.Despite a short tenure, Professor Obiora has credited with helping push through new legislation that has redefined the Nigerian mining sector and opened an unprecedented opportunity for domestic and foreign investors looking for fresh untapped mineral resources. She has since been replaced as the Nigeria Minister of Mines and Steel Development by Bala Borodo.
NIGERIA

An interview with Prof. Leslye Obiora, who has led planning for Nigeria’s mining sector as Minister for Mines and Steel Development for most of the past year.As Nigeria opens up its mining sector and begins to attract foreign mining companies, it faces negative perceptions and a large number of skeptics. How is the Nigeria government going about tackling it? Since you been hard selling Nigeria as a mining destination what has been your assessment of the response?

Unfortunately, Nigeria has a reputational disadvantage as far as foreigners are concerned. But it is impractical for the government to focus on constantly rebuffing these negative perceptions and to keep having to defend ourselves. The best strategy t address the Nigerian mystique is to keep doing what we have been doing for the country. The negative perception is certainly a hamstring, but its significance pales in light of objective evidence that we have what it takes to hold our own as a competitive mining destination in the mining sector, where I have been pushing the opportunity to all those willing to listen during visits to several cities all over the world .Some of those who came to see me at these meetings may well have come to scorn but ultimately stayed to pray, so to say. Various entities that followed up with invitation to visit the country were sufficiently impressed to apply for licenses and have now become third party advocate for our purpose. Even Nigeria expatriates were tentative at first to come back, but now it seems that some of them cannot get enough of the country. Many would agree with my analogy of the country of an acquired taste that becomes an addition. My standard invitation to people outside of Nigeria is to come and see for themselves the changes that have come about. We have invested enormous energy in marketing and promoting the sector within and outside Nigeria.

Our approach has been to systematically survey our resources, embed investor-friendly mechanisms, raise awareness of the mining sector’s potential in Nigeria and that in turn will help dispelling myths.
My message to the global investment and corporate community is that Nigeria is open for business; the processes and structure we are putting in place speak for themselves – come and see that for your self.
What can investors expect in Nigeria today? What are the fiscal and other incentive being offered by the Nigeria government to prospective investors in the country’s mining sectors?

We have gone through great lengths to demonstrate our good faith in facilitating an investor – friendly environment. A cornerstone of our efforts has been the brand new legislation that we have just unveiled.The mere fact that this legislation was signed the very morning that we had our Mining Investment Conference speaks volumes about the extent to which the respective arms of the government would go to create conducive climate for minerals development. As of mid-December 2006 when plans for the conference kicked into place, much about the terrain, especially the election primaries suggested that the law would not see the light of the day on schedule. However, the legislators perceived the urgent need for the law and the implication for the development of agenda. Accordingly, they took great pains and worked very hard to ensure that the law was passed to coincide with the conference. Political factions and congressional staffers closed ranks and some worked round the clock to ensure the promulgation of the bill which had been widely canvassed and celebrated by the mining community as a best practice example. To my mind, the act was proof that Nigeria not only works but sentiment. Highlights of the critically acclaimed legislation include generous incentives, tenure security and sustainable resource development.

How friendly our mining policies are today can be seen from the fact that even the World Bank took issue with the scope of incentives we were willing to concede. They maintained that the fiscal regime articulated in the proposed bill was far too generous and above acceptable norms. While we revisited the proposal, we still erred on the side of a liberal trade-off. The point is that the domino effect of catalyzing a robust mining industry is bound to adjust for much of what could be reoccupied through taxes. For us, the bottom-line is to demonstrate our fierce competitiveness as a choice mining jurisdiction and attract the caliber of operations that would reinforce the laudable efforts of the government to deliver on the social contract.

The federal Government of Nigeria declared 2007 as the minerals and mines year to augment the visibility of the mining sector in the country, lay the ground work for constructive community engagement and participation in minerals development, reaffirm the strategic implications of the sector and redouble efforts to develop the sector.
Could you elaborate on few of the legislative changes that have been enacted?

A major thrust of the new mineral policy is the emphasis on private sector participation in the exploitation of solid minerals and in the sustainable development of the local communities. Some of the highlight of the legislative changes would be permitting capital allowance of 95 percent on all certified exploration, development and processing expenditures. Second, there is an exemption from paying customs and other import duties on plant and machinery.
Third, grant of expatriate quote. Fourth, we’re permitting an annul capital cost indexation. And last, we are deferring the royalty payable to the government for a specific period.

While we are offering significant concessions to mining companies, at the same time we are also insisting on the requirement of beneficiation with downstream facilities. In other words, we want to encourage the creation of downstream industries and not just permit the export of minerals or raw materials. We want to be exporters of value added items too.

Any reform measure required a fair amount of commitment to build the institutions needed to carry out those reforms and maintain it in the future? Is Nigeria building those institutions?

Yes, the management of this process is very critical and our government is taking it seriously. Our first task is bureaucratic reform. We have utilized a UNDP grant and hired global consulting firm KPMG that has deputized a 15-member team to work on an institutional review and make recommendations for its transformation. In a sense, we are outsourcing the management building process to them. McKinsey & Co.has been engaged for an 18 week program that is designed to bring in best practices from the private sector to the government.

We will also bring in transparency in the process through which minor companies can obtain licenses. The licensing process will be based on objectives can obtain licenses. The licensing process will be based bring in tandem with our global consultants. In addition to this, the and UNDP.  DIFID in particular has been very supportive. The UNDP and that a lot of what we are doing will facilitate good governance and that the mining ministry is the premier reform mining in Nigeria. It is clear that we have the goodwill of the agencies.

We are also putting in place dispute resolution mechanisms. There have been recurring conflicts between the federal and local governments on the jurisdiction.

Over mineral deposits. There have also been conflicts with the host communities where the mines are located. The mechanism is in place to handle these conflicts and contain them expeditiously.
We also have to provide for trained manpower to drive the evolution in the mining industry in Nigeria. We have launched the Nigerian institute for Mining and Geosciences, which will evolve over time as a premier earth science institute.

This is a successor institute to the Nigeria School of Mines and will be a world- class center of excellence. The government has been generous in providing the necessary funding for this effort. We are also in providing the necessary funding for this effort. We are also in conversation with elite mining institutions globally to partner with us in developing the manpower needed to power the Nigeria mining industry.

Our effort at creating these institutions is part of our attempt to create an irresistible mining destination for global capital

You have made a number of trips to mining conferences over the past six to eight months in an attempt to woo mining companies and sell Nigeria as an emerging mining destination. What has been the response to overtures so far?

We are beginning to see the rising tide of enthusiasm from mining companies. They are responding to the passion that we have brought to bear. Mining is a buyer’s market today. Companies have been to mining conferences in South-Africa, Canada, China and Australia and have gone and met with mining executives in these places. We are now preparing to go to Europeans Capitals. People who can make it happen. And we have been successful in germinating the idea of a mining venture in Nigeria.
We cannot do this alone and we need creative solutions to accelerate the developmsent of the mining sector. Companies have to realize for themselves that we have come a long way to making ourselves attractive as an investment destination.

Why did Nigeria choose this moment of all others to reform its mining industry and actively woo investors? Why was the initiative dormant all this time despite the immense mining potential and the decade-old knowledge of its favourable geology?

As you know, the Nigerian economy is dominated by the oil industry. Globally, Nigeria is known for its oil and is one of the key players in the energy industry. As a result of this, the government emphasized the development of the oil fields at the cost of other sectors. The mining sector was dominant for a long time. And we felt that it was about time we regroup. With the prices of commodities rapidly rising in the world, we feel it is the right time to reorganize the sector and build it up. But irrespective of what is happening in the world now and irrespective of what the market is doing, the government has a responsibility to develop the mining sector. Our unique geology is a natural endowment and we have to make the most of it. Also, Nigeria did not experience the rush of mining companies that came looking for gold in the neighbouring countries and that may be fortuitous since companies will now be coming in when prices are at very high levels.

Having decided to open the mining sector to private investment, the government’s approach is a testimony to how the various arms of the government work. Who said that things don’t work in Nigeria? The legislative assembly worked until 2:00 AM to clean up the act. The ministry bureaucrats had worked tirelessly to table the legislation. The legislation is an accumulation of good will that exists in the administration. The lower house of parliament passed the legislation in June 2006 and the senate got it only in January 2007, which was subsequently passed on February 2, 2007. The seamless efficiency with which the various arms of the government worked demonstrated our seriousness.

What are the next steps for the government to develop the mining sector?
The next stage is generating the geosciences data and mapping of the country. The government has already completed airborne geophysical mapping of 44 percent of the country. The program to complete mapping the remaining
56 percent will be launched soon. Even the funding for this is available through a $25 million portion of a UN facility.

There are also plans to build up the country’s physical infrastructure. The African development Bank is partnering with the government in these plans for the infrastructure. Right now we are constrained in infrastructure, whether it is road, railways and energy. A total of US$8 billion alone is planned to be invested in railroads. And the power sector needs a boost in investment since the country is extremely deficient in power. While the mining sector is the corner-stone of economic development in Nigeria, there is a need for us to aggressively market our coal properties.

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.

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,llmeniteGalena,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,A,ethyst,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,

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.

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: Limestone, Kaolin, granite, marble, feldspar, mica, dolomite, clay, sand, talc.