Oman: Adding value to mining

The government is moving to boost Oman’s mining industry, announcing plans to review additional licence applications in 2014. However, any new concessions are likely to be tied to amended investment conditions that will require raw materials to be processed before export. Such stipulations create local employment and add value to the exports.

In mid-June, the Directorate-General of Minerals said mining licence applications could be submitted starting as early as January 2014. The authorities had previously stopped issuing licences pending the completion of a sector review, which is expected to upgrade and modernise regulations in line with best practice.

This is likely to result in tighter environmental controls, as well as restrictions on the export of raw materials, a policy that was first revealed in February. At that time, Ahmed bin Hassan Al Dheeb, the undersecretary at the Ministry of Commerce and Industry, told the local media that companies would be required to implement value-added processing to any material mined in Oman, adding that existing licensees would be given a grace period within which to adjust to the new rules.

Some mining firms have moved to expand their activities to include processing, but these types of operations can be expensive - the domestic market could be limited, and buyers may prefer to acquire raw materials direct from the supplier rather than pay extra for processed minerals.

While any new rule requiring local processing could deter potential investors, both domestic and foreign, such concerns may be allayed by the launch of a new project that is in line with the ministry’s policy of maximising mining’s benefits through processing. On June 20 the Takamul Investment Company, a subsidiary of government-owned Oman Oil Company, and Canadian mining firm Medallion Resources announced they were joining forces to investigate the viability of establishing a monazite-based, rare-earth extraction facility at the industrial port city of Duqm.

According to a statement issued by Medallion, an engineering firm will be tasked with conducting a financial and technical study of the viability of the project, with a report set to be issued early in 2014. Medallion’s chairman and CEO Bill Bird was positive about the prospects for the development.

“We look forward to bringing rare-earth production and value-added industries to Oman, while providing industrial consumers worldwide with a significant alternative source of rare-earth products,” he said.

Monazite is one source of the chemical element cerium, which has a wide range of commercial applications, including in ceramics production and as an additive in fuels. If Oman were able to join the limited ranks of monazite producers – such as India, Brazil and the US – it could serve as an aid to its own industrial sector and potentially to its export trade.

The Takamul-Medallion venture could also lead to a greater interest in the mining sector, especially among specialist operators like the Canadian firm, if it can be shown the Sultanate has commercially viable rare-earth deposits.

China is the world’s leading source of rare-earths, accounting for more than 85% of global production in 2012 and 70% of consumption, according to a report from US-based IHS Chemical, a global market research firm. However, there have been complaints over Beijing’s policy of limiting exports, including a 2012 investigation by the World Trade Organisation. Oman could be well-positioned to benefit from a search for alternatives, with estimates putting the annual growth in demand for rare-earths at 7.6% over the next four years.

The mining industry is still developing in Oman, but its contribution to GDP has shown a steady rise over the past few years, reaching $263m in 2012, according to the central bank. While this growth has come on the back of more traditional resources such as copper, marble, gypsum, salt, chromite, iron, clay, sand and quartz, the addition of rare-earths could spur activity and provide additional investment opportunities.