Search

 

Cablegate: Nigeria Seeks to Rekindle Its Dilapidated Mining Sector -

VZCZCXRO5420
PP RUEHMA RUEHPA
DE RUEHUJA #2108/01 3270632
ZNR UUUUU ZZH
P 230632Z NOV 09
FM AMEMBASSY ABUJA
TO RUEHC/SECSTATE WASHDC PRIORITY 7542
INFO RUEHOS/AMCONSUL LAGOS 2335
RUEHJO/AMCONSUL JOHANNESBURG 0137
RUEHZK/ECOWAS COLLECTIVE
RHEBAAA/DEPT OF ENERGY WASHDC
RUEATRS/DEPT OF TREASURY WASHDC
RUCPDOC/DEPT OF COMMERCE WASHDC
RUEHC/DEPT OF LABOR WASHDC
RUEHBJ/AMEMBASSY BEIJING 0058
RUEHBY/AMEMBASSY CANBERRA 0035
RUEHPE/AMEMBASSY LIMA 0013
RUEHLO/AMEMBASSY LONDON 0618
RUEHMO/AMEMBASSY MOSCOW 0096
RUEHNE/AMEMBASSY NEW DELHI 0028
RUEHFR/AMEMBASSY PARIS 0475
RUEHOT/AMEMBASSY OTTAWA 0075
RUEHSG/AMEMBASSY SANTIAGO 0019

UNCLAS SECTION 01 OF 06 ABUJA 002108

SIPDIS

STATE PASS USGS FOR MICAEL FOOSE, INTERNATIONAL PROGRAMS
STATE PASS TO USAID AFR/SD FOR CURTIS, ATWOOD AND SCHLAGENHAUF
STATE PASS TO USTDA-PAUL MARIN
STATE PASS TO EXIM-JRICHTER
STATE PASS TO USTR-LAURIE-ANN AGAMA
STATE PASS TO OPIC-BARBARA GIBIAN AND STEVE SMITH
STATE FOR EEB/ESC/IEC/ENR-DAVID HENRY, CBA
STATE PASS TO S/CIEA-DAVID GOLDWYN AND MICHAEL SULLIVAN
JOHANNESBURG FOR USTDA/JASON NAGY
USDOE FOR GEORGE PERSON AND THOMAS SPERL, OPIA
TREASURY FOR IERONIMO AND BARCAN, OAN
DOC FOR 3317/ITA/OA/BURRESS AND 3130/USFC/OIO/ANESA/REED


E.O. 12958: N/A
TAGS: EMIN EPET ENRG EINV ETRD SENV SF NI

SUBJECT: NIGERIA SEEKS TO REKINDLE ITS DILAPIDATED MINING SECTOR -
PLATEAU STATE

ABUJA 00002108 001.2 OF 006


-------
SUMMARY
-------

1. Nigeria is a leading hydrocarbon producer and has allowed its
mineral sector to decline through an overdependence on oil and the
relative neglect of its non-oil sectors. The GON now seeks to
restore its mineral sector and to declare itself "open for
business." It implemented new policy and legislation as of 2007
that sought to create a more attractive minerals investment
environment. The GON still needs to establish implementing
regulations to provide an investor-friendly framework. The Embassy
Minerals Team found enthusiasm for mining in the old tin mining
capital of Jos in Plateau State, but existing mining activity is
small-scale, vestigial and almost artisanal. The World Bank has
promulgated a small-scale mining program that has funded a mining
institute in Jos and may be able to play a useful role. The USGS
may be able to partner some activities with the World Bank. There
is scope for further minerals assessment in other regions in
Nigeria. END SUMMARY.

-----------------------------------
OVERVIEW OF THE MINERALS TEAM VISIT
-----------------------------------

2. The Minerals Team, comprised by Embassy Abuja Economic Counselor
and Deputy Chief, Embassy Pretoria Minerals/Energy Officer and
Specialist, and USGS Africa Coordinator, recently conducted meetings
in Abuja and in and around the Plateau State capital of Jos to
assess the status and potential of minerals production in Nigeria.
The Minerals Team worked closely with former Commissioner of Mines
Markus Pwajok and Engineer Francis Ahmadu to generate a full program
of a working dinner with government representatives, three active
mine visits, a tour of the Nesco Power Plant, and a Mining
Roundtable at the Nigerian Institute of Mining. The team also
visited the Nigerian Extractive Industries Transparency Initiative
(NEITI), the Ministry of Mines and Steel Development's Sustainable
Management of Mineral Resources Project in Abuja (funded by the
World Bank), and the Nigerian Geological Survey Agency in Abuja.

3. Plateau State has been associated with mining as far back as
1902. The British developed a robust exploitation of tin,
columbite, and associated minerals during colonial times, but these
suffered from tin price busts, under-investment, and nationalization
over time. The state government claims that there are very large
reserves of tin-related columbite, cassiterite, and zircon minerals,
which have specialized uses as tantalum, niobium, and alloy products
Qwhich have specialized uses as tantalum, niobium, and alloy products
used in aircraft engines and nuclear reactors. In addition, there
is significant potential for gemstones, lead, zinc, kaolin (for
pharmaceuticals and detergents), tantalite (for computers, aircraft,
and nuclear systems), gypsum, dimension stone, and titanium.

--------------------------------------------- ----
MINING ROUND-TABLE - CHALLENGES AND OPPORTUNITIES
--------------------------------------------- ----

4. The flagship event for the Minerals Team was head-lining the
Mining Roundtable at the Nigerian Institute of Mining on September
29, which was televised and covered by the local press. Economic
Counselor noted the positive attributes for Jos in attracting mining

ABUJA 00002108 002.2 OF 006


investment: proven reserves, a reliable source of power, the
plateau's relatively pleasant and healthy climate, and a good
international school. The key challenges he identified were:
obtaining domestic or foreign financing, volatile commodity prices,
and assuring a stable investment environment. The Miner's
Association and a number of other mining representatives asserted
that there were adequate and economic mineral deposits and proven
reserves in the region, although a few noted that the information
was out-dated. Consolidated Tin Mines (CTM) Managing Director Frank
Kwueme said they had 80,000 tons of proven reserves of cassiterite
and 14,000 tons of columbite under the 600 leases previously owned
by Amalgamated Tin Mines. He asserted that this was based on
reliable (albeit old) work done by the British. Kwueme applauded
the decision of the Government of Nigeria to eventually privatize
the 60 percent stake it held in CTM as a result of nationalization
in 1972. He and others noted that nationalization was an abject
failure that created a legacy of under-investment in the sector.
(He cited the image of the large, defunct Bucyrus Erie drag line
that has rusted in place next to a flooded strip mine on the edge of
Jos.) Kwueme obserVPQCQQzthe
sector. An Environmental NGO and other participants noted the
environmental and community safety contingent liability from years
of mining and then neglect, resulting in around 4,000 flooded and,
according to some, toxic, open-pits in the area. The new law
requires adequate rehabilitation, but it is unclear how effectively
it will be implemented. The new Nigerian Institute of Mining (NIM)
was recognized as a useful establishment to develop human resources.
Pennsylvania State has been involved in curriculum development and
will participate in a training of trainers program early in 2011.
The World Bank-funded institute could be a partner for the USGS in
Nigeria. The team toured the facility which includes multiple
classrooms and a minerals processing area, available for both
research and practical use by miners. The NIM Director declared the
Qresearch and practical use by miners. The NIM Director declared the
roundtable such a success that he recommended continuing it on a
quarterly basis and inviting other Embassies to participate,
probably starting with Australia.

--------------------------------
SMALL-SCALE AND ARTISANAL MINING
--------------------------------

6. The three active mines visited around Jos were small-scale,
vestigial, and almost artisanal in scope. Rayfield Mine
owner/operator Joshua Egbagbe hosted the Minerals Team at his
open-pit, "junior-miner" columbite mine on September 28. He told
the team that there was a potential production of 50-100 tons of
columbite per month ($500,000 per month at current prices), but
noted that the mine was substantially shut down because of the price
drop. He said he had partnered with a Russian interest and had
entertained unrequited interest from Chinese and South African
investors. Egbagbe was critical of the Chinese as murky buyers and
alleged that Chinese interests had unsuccessfully sought to steal
rights to the ground beneath his mine. He lets some 500 artisanal

ABUJA 00002108 003.2 OF 006


workers operate freely on the open-pit mine site. It appeared to
the Minerals Team that any serious investor would want to carefully
remove the informal miners by job offers or by compartmentalizing
their activities. It was also apparent that any attempt to drive
them off could easily result in the sabotage of his unfenced and
unguarded equipment.

7. The Rim Mine is a small-scale operation, reached by fording a
small river. (The Minerals Team shared boots and/or were ferried
across on the backs of workers.) This mine relies on a dilapidated
pump to provide water for sluicing to provide primary separation of
tin, ilmenite, and cassiterite-bearing ores, mined under a 60-foot
over-burden. The economics of the mine looked challenging,
exacerbated by the antiquated pump. The Minerals Team will look at
potential sourcing of a jig that might be used by the NIM to help
this and other mines increase the recovery of tin, ilmenite and
cassiterite, for which much of the finer material is currently being
washed down the river. This mine is an old lease of Consolidated
Tin Mines. The Team also visited the small-scale Sho mine, which is
exploiting kaolin and gypsum. This mine employs a crusher to
generate 90 tons per month of Kaolin worth $50 per ton. The kaolin
is used as a filler for detergent, paint, and fertilizer produced in
Nigeria.

--------------------------------------------- -----
VINTAGE HYDRO-PLANT PROVIDES RELIABLE POWER SOURCE
--------------------------------------------- -----

8. One strong point of Plateau State is that there is adequate
power supply - albeit a British colonial vestige - which is unusual
in Nigeria. The team visited the 1929 British colonial vintage
Nesco Power Plant which produces 25 megawatts out of an installed
capacity of 33 megawatts. The plant houses three turbines turned by
gravity-fed water pipelines below the Kura dam. The management is
successfully maintaining the old equipment, selling power, and
serving as a stand-by for the Nigerian grid in Plateau State. Nesco
provisions regular power to residential neighborhoods in Jos. The
Nesco Plant sits in a spectacular canyon off the Plateau escarpment.
The area looks like it has significant unrealized tourism
potential.

9. Jos maintains a few vestiges of its British Colonial past,
beyond fairly reliable power, although our working dinner on mining
with government officials was plunged into embarrassing, momentary
darkness when the power supply was cut off. Former mining
Qdarkness when the power supply was cut off. Former mining
management and workers housing is still visible. There is a
still-functioning golf course. There are British tomb-stones in the
churchyard surrounding the Anglican Church. Jos is also blessed
with a renowned international school that educates the local elite
(such as our hosts) and the American missionaries based in Jos.

----------------------
WORLD BANK INVOLVEMENT
----------------------


10. The World Bank has been supporting Nigeria's mineral
development through at least two activities. Nigeria began working
with the World Bank in 2004 to develop the Nigeria Extractive
Industries Transparency Initiative (NEITI). Its purpose is to

ABUJA 00002108 004.2 OF 006


promote transparency and accountability in the management of
Nigeria's oil, gas and mining revenues. A visit to the NEITI office
in Abuja revealed that Nigeria is viewed as an EITI "good pupil",
implementing the initiative in its hydrocarbon sector as a way of
building domestic trust and confidence. NEITI Director Stan Rerri
participated in an EITI workshop in South Africa, aimed at prodding
South Africa to become an implementer and leader on the continent
for EITI. However, the NEITI management admitted to the Minerals
Team that they had focused on energy and now needed to pay more
attention to the NEITI needs of the mineral sector. As part of this
process, they announced plans to hire a mineral specialist as a
technical consultant.


11. The World Bank also has been supporting Nigeria through the
"Sustainable Management of Mineral Resources" project. This project
also began in 2004 and has provided Nigeria with approximately $120
million in support. The project's principal objectives are to
increase Nigeria's capacity to manage Nigeria's mineral resources
and to promote income generating opportunities through small-scale
and artisanal mining. It is scheduled to end in 2010, although
there are plans for it to be extended. (NOTE: It was this project
that provided the support for the NIM. END NOTE.) The World Bank
has implemented similar "Sustainable Management of Mineral
Resources" projects in Mauritania, Madagascar, Mozambique, and
Uganda and will probably start one in Tanzania in 2010.

12. The Minerals Team met with project coordinator Linus Adie in
his Abuja office. Nigeria is completing large geophysical and
geochemical surveys as part of this project. The geophysical
company, Fugro, is currently finishing an airborne geophysical
survey that will cover 54 percent of the country with 1.2 million
line kilometers of data from flight lines spaced 500 meters apart.
At the same time, Nigeria is working with the British Geological
Survey on a $4 million regional geochemical sampling campaign. Both
these efforts will produce important new data which should be very
helpful in identifying new targets for mineral exploration.

13. The Nigerian Geological Survey Agency (NGSA) is one of the
principal recipients of support from the "Sustainable Management of
Mineral Resources" project. The USGS visited the agency and met
with its director, Dr. Syian Malomo. The agency was started in 1903
with a focus on the columbite and tin resources of the Jos plateau.
Qwith a focus on the columbite and tin resources of the Jos plateau.
It currently has a staff of about 800. Its main office is in Abuja,
but it has regional offices for geochemistry in Kaduna, geohazards
in Awka, and marine and coastal geosciences in Yenagoa. They are
strongly focused on work that will attract private sector investment
in Nigeria's resources. The NGSA reported that they were visited by
65 potential investors in 2008, of whom 22 percent were Chinese, 18
percent were South African, 12 percent were US, 8 percent were
Australian, and 40 percent were others. During the visit, the NGSA
announced their intention to support a visit next year by the USGS,
during which time the USGS would present a course on methods for
estimating undiscovered mineral resources.

--------------------------------------------- -------
POSITIVE MINING LEGISLATION, BUT REGULATIONS DELAYED
--------------------------------------------- -------

14. The Nigerian government has made a decision to promote

ABUJA 00002108 005.2 OF 006


exploration and development investment in its solid minerals sector
following almost 50 years of neglect. Nigeria was one of the
world's biggest producers of tin, but a combination of Dutch
Disease, caused by the discovery of oil, and nationalization of
mines following independence in 1960 has reduced the mining industry
to a few small mines and hundreds of informal (subsistent) workings.
The government produced a new minerals policy document and a
minerals and mining act in 2007 in an attempt to encourage
investment. The accompanying regulations have not yet been
published and are still being negotiated, although industry has been
minimally consulted.

15. The National Minerals and Metals Policy of January 2008 makes
clear that minerals are owned by the state and are to be exploited
for the benefit of Nigerians. It makes clear government's intention
that industry must be driven by private investment, management, and
operation. It also appears to be an "apple pie" expression of all
the things a potential investor wants to hear. In this respect, it
is little different from mining policies the world over. Its main
tenet is the privatization of the industry, security of tenure, and
minimum government interference in the running of mines and
marketing of product. Indigenization and adding value to raw
materials is an expressed goal of the government.

16. The Nigerian Minerals and Mining Act of 2007 addresses most
aspects of the governance of the mineral industry, the various types
of permits, leases and licenses available, their qualifying
requirements and durations, and time limits in which government
officials must reply to the respective applications, usually within
30 to 45 days. These include:

-- reconnaissance permit for one year and renewable,
-- exploration license for three years and renewable,
-- small-scale mining lease for a time dependent on the particular
circumstances,
-- mining lease for 25 years and renewable,
-- quarry lease for five years and renewable, and
-- water use permit, presumably for the period of the specific right
granted.

17. Important elements are the requirements for environmental
management, access to a deposit with compensation to land-owners for
damages incurred, freedom to market mineral products, freedom to
maintain off-shore revenues for purchases of capital equipment and
supplies, together with other concessions, conditions, stipulations,
and requirements. One concerning aspect is the mining company's
Qand requirements. One concerning aspect is the mining company's
need to negotiate a consensus social plan and "approval-to-mine"
from all affected communities, which introduces uncertainty and has
the potential to delay or even prevent the start of proposed mining
operations. Specific implementation details must await the
publishing of the Regulations. South African Mining Expert Peter
Leon recently publicly characterized Nigeria's mining regime and
cadastre as effective and a potential model for South Africa.

-------
COMMENT
-------

18. Nigeria still has a long way to go to demonstrate large,
commercial reserves that can draw domestic and foreign investors.

ABUJA 00002108 006.2 OF 006


Large-scale investment will require proven reserves, a stable
investment environment, and some assurance on environment and other
liabilities. Nigeria seems to have lost its culture for mining as a
result of nationalism, neglect, and under-investment. There are
opportunities for the USGS and other agencies to provide some
assistance to contribute to the GON's new-found objective to develop
its solid minerals sector. Jos and the Plateau State appear to be a
likely target, given their history of tin-mining and the remains of
a once-thriving mining culture. Jos and the Plateau State have many
qualities that could lure investment, but the area has experienced
some recent political conflict over political franchise and
perceived disenfranchisement between ethnic/religious groups.

19. Embassy Abuja, Embassy Pretoria and the U.S. Geological Service
cooperated in the production of this telegram.

Sanders

© Scoop Media

 
 
 
World Headlines

 


Save The Children: World Leaders Urged To Halt Escalating Hunger Crisis

A group of 120 non-governmental organisations has joined forces in an open letter calling on world leaders to do more to halt a devastating global hunger crisis as new analysis shows the number of people likely to be in need of humanitarian aid in 2022 could rise by 17%...More>>

WMO: Another La Niña Impacts Temperatures And Precipitation – But Not Climate Change
La Niña has developed for the second consecutive year and is expected to last into early 2022, influencing temperatures and precipitation. Despite the cooling influence of this naturally occurring climate phenomenon, temperatures in many parts of the world are expected to be above average because of the accumulated heat trapped in the atmosphere...
More>>


UN: Violations Of Palestinian Rights Puts Two-State Solution At Risk, Chief Warns
The situation in the Occupied Palestinian Territory, including East Jerusalem, continues to pose a significant challenge to international peace and security, United Nations Secretary-General, António Guterres, said on Monday... More>>


World Food Programme: Millions More In Need Of Food Assistance As A Direct Result Of Conflict In Northern Ethiopia

The number of people in need of humanitarian food assistance across northern Ethiopia has grown to an estimated 9.4 million as a direct result of ongoing conflict, the United Nations World Food Programme (WFP) announced today... More>>


Food: Three Billion People Cannot Afford A Healthy Diet

Approximately three billion people, almost 40 per cent of the world’s population, cannot afford a healthy diet and another one billion people would join their ranks should further unpredictable events reduce incomes by one-third, the UN food agency said, launching a new report on Tuesday... More>>

COP26: Enough Of ‘Treating Nature Like A Toilet’ – Guterres Brings Stark Call For Climate Action To Glasgow
As the World Leaders Summit opened on day two of COP26, UN chief António Guterres sent a stark message to the international community. “We are digging our own graves”, he said, referring to the addiction to fossil fuels which threatens to push humanity and the planet, to the brink, through unsustainable global heating... More>>

 
 
 
 
 
 
 
  • Pacific.Scoop
  • Cafe Pacific
  • PMC