New Mining Frontiers: Nigeria

More solid investment than oil

“If Thor’s Segilola mine was located anywhere else in the world, it would have been developed 10 or 15 years ago, but the current postcode prevented the asset from being developed,” said Osam Iyahen, senior director of natural resources at the Africa Finance Corporation.

Developed by TSX-listed Thor Explorations, Segiola is Nigeria’s most advanced gold project and Nigeria’s attesting proof that the country could be the next mining destination.

Africa’s largest oil producer, Nigeria has been at the whim of changes in the oil prices, which, combined with the pandemic, pushed the economy into recession in 2020. Half of the workforce in Africa’s biggest economy are unemployed, and more people live in extreme poverty compared to anywhere else in the world. Before the discovery of oil in 1958, however, the mining of coal, tin and columbite represented up to 20% of Nigeria’s GDP. Today, mining contributes 0.6% to the national GDP, but the country is looking to increase this figure to 5% by 2025.

“The growth of the mining industry is a 30 years process, and I think Nigeria is 10 years into it, so the next decade will be pivotal in its ability to fast-track investment.”

David Turvey, Managing Director, Kogi Iron Limited

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This year, Nigeria celebrated its 60th anniversary since gaining independence from British imperial rule. This milestone coincided with the pandemic, whose devastating economic effects reinstate the country’s need to create a more diversified economy. The diversification project started back in 2007, but only in recent months belated reforms began to materialize. The government decided to increase VAT from 5 to 7.5%, it fast-tracked the Petroleum Industries Bill and it has opened the economy to gold mining.

After publishing its mining act in 2007, the next step for the government was to prove Nigeria’s mineral endowment. The current administration set aside US$80 million for exploration studies and current survey data has identified 44 minerals in the country. To attract investors to these minerals, Nigeria is offering generous incentives, such as a three-years tax holiday for explorers, 100% allowance on foreign capital, and duty-free shipments on mining equipment. On the other hand, it has also enshrined a Community Development Agreement (CDA) in its regulation, while driving forward a downstream policy to reduce imports.

In the downstream sector, the industry is already showing great resourcefulness. Kogi Iron, an Australian listed company, made a successful iron ore discovery at Agbaja, but has decided since to integrate the ore deposit into a steel producing facility, the first of its kind in the country: “It is surprising to find out that Africa’s biggest economy is a large importer of scrap steel, re-melting and fabricating steel products on a needs-based level (…) The country needs to develop indigenous steel production instead of paying high prices for imports,” said David Turvey, managing director of Kogi Iron. This pioneering project has driven new policy, as the company seeks to negotiate a gas-supply contract, as well as a market-entry policy.

The oil industry has nurtured the development of a robust infrastructure, as well as a competitive services sector, which are important assets for the mining industry. Reversely, service providers should also benefit from an alternative client base. PW Nigeria Mining, a contractor with 45 years of experience in the country, created a mining division in 2015 after seeing a decline in infrastructure developments, the main part of their business. Partnered with Meridian Drilling and MS Analytical, PW Nigeria Mining expanded its capabilities to drilling and sample analysis to offer a complete service to mining clients.

“We have seen many investors moving in and out of Nigeria, showing initial interest but usually either the timing is not right, or the projects are not advanced enough. Larger players in the sector are starting to listen when it comes to Nigeria, but we have more work to do to entice them.”

Chris McQuillan, Director, PW Nigeria Mining Limited (PWN Mining)

Other countries

Cameroon has been popularised by Oriole’s discoveries at Bibemi and Wapouze: “While other West African countries are becoming more difficult to work in, Cameroon is becoming more stable and friendly for investors,” said Tim Livesey, CEO of Oriole Resources.

Oriole is among a handful of groups operating in the country, but there is a high expectancy from other parties regarding the results of the maiden drilling campaign due to commence later this year. Cameroon is located in an area of geological compression between the Congo Craton and the West Africa Craton, but investors will require convincing evidence from drilling results. This is why Oriole Resources’ project is very important and could prompt the opening of the country to more exploration. Meanwhile, the Cameroonian government has already been working with the World Bank to develop the country’s attractiveness, as well as reviewing its licensing structure, rebuilding the cadastre system and inviting BRGM and GTK to provide a country-wide geological mapping.

"Cameroon is geologically correct, with large scale, deep-tapping structures, but it has been overlooked due to historic issues around corruption and security concerns. Investors should understand that Cameroon has gone through a big political change in the last decade.”

Tim Livesey, CEO, Oriole Resources

In Guinea, Australian junior Predictive Discovery announced a discovery at the Bankan gold project, on track to obtain a maiden resource calculation by mid-2021 and a PEA by the end of next year. While also having a portfolio of assets in other countries, including a JV with Resolute Mining in Ivory Coast, Predictive Discovery is focused on Guinea, having bought more land to increase its exploration permits area in length to 357 km2, and the company is looking to pick up more ground in the future: “Guinea’s negative reputation goes back to the former government of Lansana Conté but the current government under President Alpha Conde is pro-mining. While we had some initial reservations, we have found that there are great opportunities to pick up highly prospective ground, and we enjoy great working relationships with the government at all levels,” said Paul Roberts, managing director of Predictive Discovery.

“We have been very pleasantly surprised by Guinea, which has a welcoming Mines Ministry, a transparent mining registry online system, and great prospectivity. While we had some initial reservations, we have found that there are great opportunities to pick up highly prospective ground, and we enjoy great working relationships with the government at all levels.”

Paul Roberts, Managing Director, Predictive Discovery

Other countries outside the main focus of this report are also under the radar of investors and explorers. Liberia, Sierra Leone, and Mauritania are other mining destinations to watch, especially if the gold price maintains its strength.

Image courtesy of PW Nigeria