Morocco seeks to extract and process a wider variety of mineral resources

With the world’s largest known reserves of phosphates, mineral resources have traditionally played an important role in the Moroccan economy. The authorities have established the country as a major exporter of the resource, and are now looking to diversify the sector towards other minerals. The government has implemented a series of initiatives aimed at attracting domestic and foreign investment into the exploration of less-developed segments of mining activity. A recent revamp of the regulatory framework – coupled with a more diligent promotion of its potential – is helping Morocco gain a foothold in new segments. While some regulatory and operational improvements are yet to be made, the industry has a solid base from which to grow. Mining is one of the top source of exports, accounting for 20.9% of the total, and there were more than 40,000 people employed in the sector in 2018, according to government figures.

The Ministry of Energy, Mines and the Environment (Ministère de l’Energie, des Mines et de l’ Environnement, MEME), is in charge of implementing and coordinating overall policy, and the National Office of Hydrocarbons and Mines (Office Nationale des Hydrocarbures et des Mines, ONHYM) also provides oversight for the industry. As Morocco works to diversify its economy, the extraction and processing of a wider variety of its mineral resources has been identified by government officials to be a strategic imperative for economic development.

Leading Segment

Mining accounts for 10% of GDP, but roughly 90% of extraction is phosphates. Morocco is the largest exporter of phosphates and holds 75% of the world’s reserves. In 2018 phosphates and its derivatives were the third-largest export after automotive and agro-industrial goods, bringing in Dh52bn ($5.4bn). For the second consecutive year, the export value of phosphates grew, expanding by 11.6% in 2017 and 17.6% in 2018, according to the Office des Changes. The higher export levels were driven by an 18.4% increase in the sales of natural fertilisers and chemicals. Total phosphate production reached around 34.3m tonnes in 2018, according to the most recent figures from MEME.

Major Players

The processing and export of phosphates is handled by the OCP Group, which is 95% owned by the government. The group exports phosphate rock, fertilisers and phosphoric acid. Benefitting from higher international prices, OCP Group had a 19% increase in net profits in 2018, reaching Dh5.4bn ($562.6m). Revenue for the year also rose, by 15% to approximately Dh55.9bn ($5.8bn), while the earnings before interest, tax, depreciation and amortisation margin was 30.5%, up from 26.2% in 2017. The company has a 65% market share in the phosphate-based fertiliser market in Africa, and has been investing heavily in production to further increase its foothold across the continent.

Another key player is Managem, part of the Al Mada holding company and the industry’s largest private operator. The firm produces fluorine, copper, cobalt, silver and copper in Morocco, and is developing mining operations in Sudan, Guinea, the Democratic Republic of Congo and Gabon. At home Managem operates seven mines, extracting zinc, copper and lead reserves at Draâ Sfar; silver from Imiter; copper from Akka; fluorine deposits at El Hammam; copper from Bleida; copper from Oumejrane; and cobalt reserves from the Bou-Azzer mine near Ouarzazate. Managem is also developing two mining projects at Tizert and Bouskour. The Tizert facility, in the Souss-Massa Draâ region, is expected to produce around 3.3m tonnes of copper ore annually, while the Bouskour mine has an estimated 9m tonnes of copper reserves.

In 2014 Managem stopped operations at its Akka gold mine after its reserves fell below commercially viable levels. This led the group to focus on adjacent copper reserves first discovered in 2007. A number of small-scale finds of gold reserves have been discovered across the kingdom, but as of early 2020 no large-scale gold prospects had been found.

Diversified Potential

In addition to phosphates, Morocco has sizeable reserves of iron, zinc, lead, copper, fluorine, silver, manganese, salt, cobalt and gold. Excluding valorisation, Morocco produced 126,000 tonnes of copper, 102,000 tonnes of zinc, 100,000 tonnes of iron and 99,000 tonnes of manganese in 2017, according to ONHYM. In 2018 the main processed mining products were solid fertilisers (8.6m tonnes), arsenic (6.9m tonnes), phosphoric acid (5.7m tonnes) and cobalt cathodes (1924 tonnes).

Foreign mining companies are present in the country, and efforts to attract new investors to intensify exploration efforts are paying off. In mid-2018 UK-based firm Altus Strategies was granted six exploration permits to search for copper, zinc, tungsten and tin across several locations. In January 2019 Canadian firm Maya Gold and Silver began commercial production of silver out of its Zgounder mine. The firm has an 85% stake in Zgounder, while the remaining 15% is controlled by ONHYM. Australian firm Kasbah Resources holds a 75% stake in the Achmmach Tin project, which is scheduled to start production before the end of 2020. The underground mine is expected to have an initial lifespan of 10 years, with an annual production of 750,000 tonnes of ore.

Regulations

Investors have been encouraged by an mining code adopted in May 2016 that made critical changes to the previous law dating to 1951. The updated regulation differentiated between three mining titles: research permits, which are granted for a period of three years and can be renewed for an additional four years; exploration licences, which are assigned for two years and can be renewed for one year; and operational licences, the duration of which was extended from four to 10 years. The law also increased the size of exploration concessions, which can range from 100 sq km to 600 sq km.

Under the previous code, any firm could buy a mining title as long as it fulfilled minimum criteria. However, many concessions were acquired and left idle, with investors opting to speculate and sell the land later. When the law changed and more stringent requirements were put in place, around 30% of the existing 7600 mining permits were annulled. Under the updated regulation, firms with a mining permit and wish to move from the exploration to the exploitation of mineral resources need to produce an environmental assessment study and a 10-year investment plan.

Benefits

The government introduced several incentives to attract investors. Mining companies that export their output or sell it to processing companies for subsequent export can benefit from a reduced corporate tax rate of 17.5%.

Equally important is the state’s contribution to mining development. Projects involving an investment of over Dh200m ($20.8m) are able to benefit from government contributions to the cost of basic infrastructure such as roads or water access. However, the state’s contribution cannot exceed 5% of the total investment for the project. The kingdom’s skilled workforce and notable mining expertise is also attractive to investors, and a number of large operators have had an impact on the sector by providing specialised knowledge and training.

Financing

One of the major challenges facing the sector in the coming years will be to adapt financing structures that meet the requirements of mining operations and project development timelines. Channelling such funds will allow domestic mining ventures to advance to commercially viable stages of production. While engineers and geologists have found a number of areas with significant potential, they have been unable to acquire the bank financing needed for testing and studies. If Morocco is able to overcome its financing challenges and leverage its skilled human resources, mining is likely to sustain accelerated growth in the short to medium term. However, it will be imperative to focus on exploration efforts outside of the well-established phosphate segment to ensure sustainability in the long run.