Mozambique & Mining: A Rising Star on the Global Map
On Africa’s east coast, Mozambique boasts a treasure chest of resources – everything from significant coal reserves to metals such as iron, nickel and copper, minerals like fluorite, and graphite, as well as of gold, silver, precious and semi-precious gemstones. As investors from across the world eye the opportunities, government is stepping up to make it attractive destination
Mozambique has the mineral resources to be a major global player and is drawing world attention as commodity prices rise. A lengthy coastline and deep-water ports, a favourable climate and premier geographic location make it the gateway to landlocked countries in southern Africa, and make it an attractive investment target. Indeed, last year all these factors helped the country come first in sub-Saharan Africa for foreign direct investment (FDI).
GDP has been recovering after several difficult years, the pandemic being only one of Mozambique’s challenges that the government is working to overcome. By the end of 2022, GDP was advancing at an annual rate of over 4%, with a very positive last quarter contribution from mining of over 14%, and international economics data publishers Trading Economics is quoting GDP forecasts of 5% for 2023.
The government sees mining as a leading pathway for the country’s development, as the Canadian Mining Journal describes: “The government’s goal in welcoming miners is straightforward: to generate revenues (for both the government and the private sector), which can support infrastructure development, local economic development, and maybe even community empowerment”.
Progress is being made in modernising infrastructure and regulation, with support for the latter coming from the EU and World Bank. “ The improved management of mineral titles, plus improved geodata, are becoming crucial to efforts which aim to move new developments into production. The goal is to attract a new wave of exploration investment, which the national government considers to be critical to ensuring continued sector growth and replenishment of stock of available deposits, “ states the Canadian Mining Journal, which notes the significant interest from Canadian miners.
There is no shortage of international mining companies seeking Mozambique’s resources, particularly for coal, with Asia supplying the latest arrivals. Vulcan Minerals, part of India’s Jindal Group, bought last year the coal assets of Brazilian giant Vale to add to its interests at the Chirodzi coal mine. Also, India’s ICVL has been expanding its Zambeze coal project. Mozambique holds some of the world’s largest untapped coal deposits, and given rising costs and other problems in neighbouring South Africa could gain regional competitive advantage.
Coal and aluminium have grabbed the headlines, although energy is the major revenue source, but the resource list published by OECD is a reminder of just how many minerals Mozambique’s soils hold: “…. significant reserves of coal (estimated at 20 billion tonnes), heavy sands, metals such as iron, nickel, copper, titanium, manganese tantalum, tin, niobium, bauxite, chrome, other minerals such as fluorite, graphite, ornamental rocks (such as marble and granite), precious metals such as gold, silver and precious and semi‐precious gems and stones, and building materials, among others.”
While the international quest for green economies had been expected to reduce interest in coal, the shortage of natural gas due to Russia’s invasion of Ukraine has changed that, with coal demand with for use for electricity production soaring. According to the IEA’s Coal 2022 report, demand has hit an all-time high. Even if Europe is able to reduce its reliance on coal by 2025, it states, demand for the energy source in Asia looks set to grow for years to come.
China, with which Mozambique has strong bilateral relations, has become an active acquirer and a major source of mining industry and infrastructure funds in recent years. Several badly needed major roads, bridges, ports, and railway facilities constructed by Chinese investors have been completed and put into operation. Triton Minerals is reported to be going ahead to buy the Ancuabe, Cabo Delgado graphite mine with Chinese funds. (Graphite is an extremely promising growth area due to demand for the international battery market.) In precious metals, Shandong Yulong Gold committed to invest US$ 3.4m.
But there is also interest from elsewhere in the world, with Australia’s MRG expanding its heavy mineral sands interest, buying lithium developer Savanah’s concessions. Another Australian, South 32, has been growing its interest in Mozambique-based Mozal Aluminium, increasing its stake to over 70%.
Mozal is important, as it has put in place programmes, working with the IMF’s financial wing, the IFC, to help develop private-public initiatives including business linkages and development of capabilities with SMEs. Although not a mining project, this was seen as a flagship project. The country has begun to prioritise local content policies expansion to capitalise on skills transfer and training initiatives to increase countrywide living standards and boost local participation in expanding sectors
Among other large investment projects focused on mining that are progressing is that on the Moma heavy sand deposits, which is one of the world’s largest titanium deposits. It has attracted well-known Irish miner, Kenmare Resources. Moma, is currently the world’s fourth largest producer of TiO2 feedstocks and a significant contributor to Mozambique’s economy, accounting for around 5% of the country’s exports in 2018.
Indicative of the rewards to be had in the precious minerals among Mozambique’s resources, Gemfields Group, whose precious stone interests include Mozambique’s Montepuez ruby mine, has announced that total auction revenue for 2022 rose 32% to $316 million.
Gold deposits have attracted domestic and international investor interest and increased gold mining regulation is leading to larger-scale production, as the government requires miners to formalise their legal status in a quest to reduce illegal artisan mining. Gold production in Mozambique reached a record high in 2021, rising to 800 kilos from 545 kilos in the previous year.
The World Bank’s economic outlook for Mozambique is quietly encouraging, international online data network Investment Monitor observes. The country is anticipated to grow at an average annual rate of 5.7% between 2022 and 2024, though largely because of its energy industry. But, Investment Monitor adds: “With interest from major global players and delayed mega-investments due to recommence,(as commodity prices reflect economic recovery) Mozambique’s impressive FDI showing could get stronger still.”
Business works better face to face
Key local, regional and global stakeholders are anticipated to convene in Maputo for the 9th Edition of Mozambique’s Mining & Energy conference, holding between 26th-27th April at Joaquim Chissano International Conference Centre.
To learn more please visit www.mmec-moz.com