Mining legislation: Open letter to President Magufuli

Tuesday December 18 2018

 

By Benson Tnecniv

Your Excellency, Dr John Magufuli, President of the United Republic of Tanzania.

I write this letter with a heavy heart, concerning the stagnation of Tanzania’s mining industry. I appreciate your intention in introducing new legislation in mid-2017. Tanzania’s mining industry truly needed a shakeup and re-alignment to deliver to all Tanzanians.

But, some 18 months later, we’re yet to see mining vibrant again. Rather than taking the most advanced projects through to production, the Minerals ministry and Mining Commission are mired in over 100 concurrent evaluations.

To name graphite as an example of a resource with multi-million revenue and employment potentials – but which is at risk due to persisting delays…

Graphite is vital to industry. It has in recent times taken centre-stage as a critical mineral as the world rapidly shifts from fossil fuels to cleaner energy sources. Graphite is a key component of batteries – and batteries are the ‘engines’ to electric mobility and storage systems.

Nearly all graphite has historically come from China. That’s why most Lithium ion batteries are made in China.

With dozens of battery ‘gigafactories’ being built worldwide – and with each requiring graphite as a key ingredient – quality graphite sources outside China are being sought to feed this huge demand.

Tanzania is one such potential source. If and when Tanzania (and other ‘graphite countries’) come on-board as graphite suppliers, this would render it unnecessary for manufacturing companies and countries to continue relying on far-off China for supplies of this critical mineral.

It has been confirmed that Tanzania has significant reserves of quality graphite. Years ago, astute miners – both Tanzanian and multinationals – started exploring and developing the mineral in Tanzania.

But, doing so was no easy thing. Mineral exploration is extremely costly.

Exploration and early mine development mean years spent in locating resources deep-down; securing tenements; drilling, drilling – and more drilling – to map out resource size, depth and quality.

Once all that’s done, extensive independent assessments (called ‘bankable feasibility studies’ in the business) must be made to establish if it is commercially-viable to build the requisite mining infrastructure, extract and refine the resource, transport it from on-site to customers...

All this takes years and millions upon millions of early-stage investor money. And – more often than believed – explorers fail to deliver feasible projects.

Also, there is the relocation of people, villages, roads and crops already on proposed mine sites...

Once all that has been achieved, it helps bankers to know you already have customers for your product... They’re known as ‘Offtake Agreements.’ Phew; it’s a wonder that miners ever get off the ground!

Tanzania has everything in the graphite space, ranging from developed graphite mines to pre-funded mines and lots of explorers. But they’re adversely affected by the 2017 mining legislation.

They’re not bad guys; and they have agreed to comply with the new legislation in spirit in letter and intent. Yet, they’re in limbo nearly 18 months on.

Kibaran Resources is just one such potential graphite miner. The project was ready to commence 18 months ago.

But, like so many other mining projects, it remains in limbo as negotiations to enable it to complete funding arrangements drag on.

Now, citing Kibaran’s Epanko project as an example doesn’t mean it’s worthier than the others. Rather, my intention was to stress that ‘build-ready’ projects have been delayed for 18 months while negotiating finer points – and projects funders don’t know what happens next.

One can understand the 2017 changes in mining legislation, being efforts to create a win-win situation for investors and the host country alike.

Also, perhaps – but only just perhaps, in my humble view – the responsible ministries’ overzealous desire to bring about nirvana in mining legislation is doing more harm than good.

A one-size-fits-all legislative framework may sound nice; but further delays in working toward this goal risk killing the goose that lays golden eggs to ‘feed’ Tanzania’s growth.

Perhaps a more pragmatic business approach that enables projects like this to commence in good time will show prospective investors in particular – and the world at large – that Tanzania’s mining industry is back in healthy business.

Fast-tracking compliant mining projects that are ‘shovel-ready’ will result in revenues and jobs for Tanzania.

Thank you, Your Excellency, for reading this my humble plea.

Benson Tnecniv is a Tanzanian mining investor