New legislation aims to attract mining investment in Algeria

In addition to its hydrocarbons wealth, Algeria is rich in a variety of minerals, such as phosphate, gold, iron, zinc, lead and others. These ores are still largely untapped but the diversification drive deployed by the government to reduce the country’s reliance on oil and gas and direct it towards more sustainable growth could lead to greater development of this heretofore marginal industry.

Structure & Oversight

In 2017 the mining sector had approximately 1380 active mines, 450 quarries being mined, and roughly 1350 active companies. The public sector is predominant in mining activities, accounting for 89% of the sector valued added in 2017. Operations are carried out by the Algerian Mines Company (Manadjim Al Djazaïr, Manal), and its subsidiaries. These are Entreprise d’Exploitation des Mines d’Or, which is in charge of gold mining; Entreprise Nationale des Produits Miniers Non Ferreux, responsible for other non-ferrous metals; Somiphos, in charge of iron ore and phosphate; Enamarbre, marble; and Enasel, salt.

The sector was overseen by the Ministry of Energy until 2013, when the Ministry of Industry and Mining (Ministre de l’Industrie et des Mines, MIM), took over. The National Agency for Mining Activities is in charge of issuing mining permits, although permissions for some related activities, such as infrastructure, equipment and housing projects, can be issued by wilayas (provinces) – either by direct award or invitation to tender. Foreign mining companies are permitted to operate with an Algerian partner, following the 51:49 investment policy, in mining research, development and exploration.

Strategic Aims

Mining policy is geared towards expanding this marginal sector, in line with the government’s policy of diversification. Key minerals identified for development are phosphate, salt, marble, gold, diamond and non-metallic ores. Primary aims include modernising production and equipment, and attracting foreign investors, who would supply much-needed technical knowledge, capital and potential for export development. In February 2018 Youcef Yousfi, minister of industry and mining, announced an investment programme of AD9.4bn (€68.2m) between 2018 and 2028 to boost the mining sector, of which AD1.5bn (€11m) would be supplied in 2018.

Contribution to GDP

Notwithstanding sizeable reserves, Algeria’s mining potential is still largely untapped, and the sector has undergone successive periods of negative growth in recent years. Following a contraction of 6.1% in 2017, in the first and second quarters of 2018 mining posted negative growth of 9.2% and 8.4%, respectively, according to the National Statistics Office. Its value added amounted to AD26.3bn (€191m) in 2017. “The sector of mining and quarrying is in freefall since 2015. Oil prices dropped so everything has been put on hold,” Reda Radjradj, business line-manager of mining and rock excavation at Atlas Epiroc, a mining and infrastructure equipment firm, told OBG. “We are aiming more towards quarries than mines.”

In a sign of this slowdown, a total of 30 mining sites valued at AD513m (€3.7m) were awarded in 2017 compared to 58, valued at a total of AD2bn (€14.5m), in 2016. In 2017 exports of phosphate, Algeria’s best developed ore, amounted to 1m tonnes, a modest performance compared to the 40m tonnes exported by Morocco, which is also a large-scale producer of the mineral.

In spite of its considerable mining potential Algeria is a net importer of ores that could be locally procured, such as baryte. The MIM estimates that the total financial value of ore deposits in Algeria is around $2.6trn, while the investment required to unlock this potential is around $200bn. According to geological surveys undertaken to date, Algeria’s untapped mineral resources include approximately 2.2bn tonnes of phosphate, 3bn tonnes of iron, 1bn tonnes of salt, 100 tonnes of gold and 100m tonnes of lead and zinc. The country is also estimated to have considerable reserves of manganese and baryte, as well as rare mineral deposits, although these are largely unexplored. Even now, the quality and quantity of resources in Algeria, rare and otherwise, remains unknown, highlighting the need for additional geological surveys. These are also critical to attracting foreign investment, as a lack of knowledge regarding mineral potential increases the risk surrounding any long-term investment.

Legislation

Algeria adopted a mining law in 2001 that opened the sector to private investment. However, experts considered the legislation more suitable to countries with mature mining activity as opposed to countries where mining is at the embryonic stage, like Algeria. In 2014 the authorities introduced Law No. 14-05 in another bid to revitalise the industry. Yet, many dispositions could not be implemented because of the absence of implementing decrees. In this regard, executive decree No. 18-202 of 2018 marks a step forward as it will allow the implementation of dispositions included in the 2014 law. Notably, the decree establishes the conditions and procedures for allocating mining permits. The National Agency of Investment Development expects that this decree will have a positive effect on mining activity.

Activity

Although mining activity is largely stagnant, projects in various segments are under way. In phosphates, for example, the Djebel Onk mine in the wilaya of Tébessa, where most phosphate mining takes place, is expected to undergo expansion in the near future, while in May 2018 the press reported that construction of phosphate processing facilities at Oued Keberit in the wilaya of Souk Ahras would begin by the end of that year. This is significant because the bulk of phosphate mined in Algeria to date has been exported in raw form.

Iron

Plans for the development of a major iron ore deposit in Gâra Djebilet, in the country’s south-west, also moved forward in 2017, after feasibility and technical studies carried out by China’s Sinosteel Equipment & Engineering Company were announced to be successful. The project, which aims to develop estimated reserves of 1.5bn tonnes and has been in the works for several years, was in doubt due in part to the high level of phosphorus contained in the deposit, which threatened the project’s viability. While the final greenlight for the mine has yet to be given, if it enters into operation it could produce some 20m tonnes per annum (tpa).

Gold

With an estimated 100 tonnes of gold reserves and 1 tpa of output, this precious metal remains largely untapped. The main gold deposits so far identified are located in the wilaya of Tamanrasset in the south-west. The authorities are currently looking for a new foreign partner to relaunch operations at one of the Tamanrasset mines – Amesmessa – following the withdrawal of former operator GMA Resources. There are also gold deposits in Tiririne-Hanine, in Tamanrasset, and Tin Zekri in the wilaya of Illizi, but difficult climatic conditions have so far hindered exploitation. In late 2017 Ferhat Hamioud, director-general of mines at the MIM, told the press that negotiations with foreign partners to develop these deposits had been initiated.

The Way Ahead

Although the mining sector’s potential is substantial, its performance in 2017 and into 2018 suggests that previous efforts to increase mining activity have largely failed to have any meaningful impact. However, while mining activity is currently muted, a number of projects in various segments have the potential to give a fillip to production if development goes ahead as planned.

These projects, coupled with the government’s recent large-scale investment programme and introduction in 2018 of new legislation to attract investment are expected to improve the sector’s economic performance in the coming years.