Gabon's ore deposits remain largely untapped

Natural richesse in Gabon extends well beyond the country’s sizeable oil and gas reserves and fertile soil. Based on forecasts for production and processing of manganese, the mining sector’s primary output, along with gold, iron ore and poly-metallic deposits, the sector’s GDP contribution could grow from its current 6% to as much as 25% within the next 15-20 years, according to Fabrice Nzé-Békalé, CEO of state-owned mining company Société Equatoriale des Mines (SEM).

Resources

Manganese, gold and iron ore are viewed as the country’s three strategic metal resources, and as such these are receiving the most attention from the government as well as from international mining and exploration firms. Gabon is the world’s third-largest producer of highgrade manganese, with output of 3.5m tonnes in 2014 and reserves of at least 250m tonnes as of end-2014. It also has more than 1bn tonnes of iron ore, more than 40 tonnes of proven gold reserves, and 22,400 tonnes of lead and zinc, according to the Ministry of Industry and Mines.

The country is believed to hold significant reserves of a range of other base and rare-earth metals and minerals, including niobium, titanium, copper and diamonds, based on studies carried out in the 1980s by France’s Geological and Mining Research Bureau (Bureau de Recherches Géologiques et Minières, BRGM), as well as more recent exploration activity. Yet the country is under-surveyed and could in fact hold far larger deposits. Up to 75% of the country’s territory has yet to be properly explored, according to Maurice Ndziba, director-general of local mining consultancy Geomining Services Pro.

New Mining Code

The new mining code signed by President Ali Bongo Ondimba in February 2015 has not yet been officially published, pending a review by the government, and as such is not yet in force. The draft law will replace the existing mining code implemented in 2000, setting out new principles governing taxation, environmental and social obligations, and local content requirements. The new framework also elucidates specific participatory and regulatory roles for the state, following a shake-up of the sector’s institutional structure that established SEM in 2011 and later a stand-alone Ministry of Mines, with plans for a new independent regulatory authority.

The principal changes will include a free carry of 10% for the state in all new production projects, and an optional cash participation of 25%; a sliding royalty rate that varies with the type of metal or mineral and the project’s complexity in terms of geology, location and associated infrastructure development; new and more clearly defined obligations in terms of environmental protection, corporate responsibility, investment in social programmes for local communities and local content requirements; simplified procedures for the granting of exploration permits; and greater protection of foreign investors’ rights.

The establishment of SEM and the carve-out of stakes for the state in new production projects underline Gabon’s push to ensure that the local economy benefits from a higher share of sector revenues and a greater role in its future development. “Mining resources are not renewable, so it is only normal that a country maximise its profits from these resources while they last. The new code takes into account the interests of Gabon so that the country benefits to the maximum from its mineral and metal potential,” said Ndziba.

Role of SEM

This vision is highlighted by SEM’s growing role in the sector. SEM has two main missions: managing state shareholdings in the sector, and developing projects either on a standalone basis or in partnerships with private investors.

In 2014 it took control of the state’s 28.45% stake in the country’s major manganese producer, Comilog (a subsidiary of France’s Eramet), and acquired a 15% stake in Gabon Manganese & Ferro Alloys (GMFA), a joint venture formed in June 2014 with India’s Navodaya Trading DMCC (NTDMCC) to explore and develop a manganese deposit at Okondja in the south-eastern province of HautOgooué. This stake will rise to 25% with the state’s 10% free carry once production starts.

The company is involved in downstream and processing activities as well. In 2013 it established a wholly-owned subsidiary, Comptoir Gabonais de Collecte de l’Or, to collect and transform artisanal gold production. With Morocco’s OCP, it is also planning to produce complex fertilisers for sale across sub-Saharan Africa.

SEM is currently looking at long-term prospects in order to achieve growth through new ventures. “Our role is to look at the investment both from the position of a shareholder and with an eye to protecting the interests of the state,” said Nzé- Békalé. “We do not expect rapid inorganic growth as the state will only receive a free carry in mining projects when they reach production, and it should take another five years for the next significant mine to come into production.”

Development

On the development side, SEM’s activities have for now been limited to gold exploration. Development of gold deposits, which involves lower exploration costs and less infrastructure development compared to the state’s other two strategic resources of manganese and iron ore, mean that SEM is willing to risk investing its own money initially before farming out stakes, rather than seeking to bring in a joint venture partner from the outset, according to Nzé- Békalé. “Basically we follow the same model as junior mining companies – keeping control of the project as long as possible because the value of the project increases exponentially over time,” he said. SEM currently holds gold exploration licences for three sites (Camp 6, Lombo Bouenguidi and Kolissen) and has applied for another at Mavenza.

Manganese

Gabon’s mining sector for now is limited almost exclusively to the production of manganese ore by Comilog, a subsidiary of France’s Eramet, and China’s Compagnie Industrielle et Commerciale des Mines de Huazhou ( CICMHZ). Comilog saw its production decline by 6% in 2014 to 3.48m tonnes, in part due to a traffic-disrupting accident in March on the Transgabonais rail line that carries ore for export to the port of Owendo near Libreville. Broader exogenous pressures also hurt revenues, as turnover declined 9% in 2014 to €1.43bn as a result of lower production and the fall in manganese ore prices.

The price fall itself was partly a result of slowing growth in China, which accounts for half of global manganese demand. CRU CIF China spot prices for high-grade manganese ore decreased by 16% year-on-year on average in 2014. Conversely, global carbon steel production rose by 1.1% in 2014, which bodes well, given that 90% of Gabon’s manganese is used in steel production.

In the second half of 2014 Comilog began production at the Moanda metallurgical complex, the country’s first facility to process ore. The CFA155bn (€232.5m) manganese processing facility consists of a silico-manganese plant with a capacity of 65,000 tonnes per year, and a manganese metal plant with a capacity of 20,000 tonnes per year. The complex is supplied with 150,000 tonnes of ore a year from its nearby mining operations, with electricity supplied by the Grand Poubara hydropower plant commissioned in 2013.

Expansion Plans

Comilog has set a goal of increasing manganese ore production to 4m tonnes a year in the coming years. Reaching this will depend on its ability to extract the ore.

At present, the Transgabonais, a 648 km-long single-track rail line – run by Société d’Exploitation du Transgabonais (SETRAG), which is majority-owned by Comilog – has a maximum transport capacity of 4m tonnes. Comilog and the state are planning to raise financing from development finance institutions to revamp and expand the line’s transport capacity so that it can handle more than 7m tonnes of mining products per year.

This will allow for the transport of new production not only by Comilog but also by CICMHZ and from two planned manganese production projects by Singapore-owned Nouvelle Gabon (NOGA) Mining and GMFA.

In 2013 CICMHZ, a 51%-owned subsidiary of China’s CITIC Dameng Holdings, disclosed plans to boost output at its Bembélé mine, near Ndjole in the central province of Moyen-Ogooué, to around 400,000 tonnes per annum by 2014. Though it fell short of its target, producing 349,000 tonnes of manganese ore that year, down from 388,000 tonnes in 2013, exports to China remained stable, and in December CICMHZ completed its first-ever shipment to India. CITIC reported the mine had manganese ore reserves of 16.4m tonnes with an average manganese grade of 32%.

New Licence

NOGA Mining acquired in June 2013 rights from the state to exploit an 800-sqkm lease near Franceville, formerly held by BHP Billiton. It expects to produce 2m tonnes per year of medium-grade manganese ore within three years. In 2014 it began production, testing operations with output of 50,000-100,000 tonnes, though it is not yet exporting. The group is building a second ore beneficiation plant with capacity of 324,000 tonnes a year to complement an existing one of 75,000 tonnes a year. This will involve building a new rail loading facility for the ore.

Smelting & Processing

In line with the government’s goal of industrialising the economy and adding value to its metals industry, NOGA Mining plans to follow in the footsteps of Comilog and build a new smelter plant to produce up to 39,000 tonnes of ferro-manganese and 94,000 tonnes of silico manganese, with production to be ramped up to full output over three years.

GMFA also plans to construct a processing plant in an investment estimated at CFA75bn (€113m), allowing it potentially to produce 0.5-1m tonnes of manganese ore per year, according to Nzé- Békalé, with 35% of output to be processed locally. According to a 2005 report by the Brazilian mining group Vale, the deposit offers reserves of 27m tonnes of manganese with a grade of 35-40%.

Gold

Gold is the only other metal currently being mined in Gabon. Total annual production averages around 2 tonnes – an estimated 1 tonne from artisanal gold miners and 1 tonne from Morocco’s Managem, through a local entity called Ressources Golden Gram (REG) in which it holds a 75% stake. Managem’s production in 2014 totalled 1012 kg, down 11% year-on-year.

REG has been mining gold at the Bakoudou mine close to Franceville in the eastern province of Haut-Ogooué since 2012 under a production licence signed in May 2010. Production has been stable, averaging 1 tonne (30,000 oz) per annum, according to Bama Barro, managing director of Managem. Based on current estimated reserves, the entity expects to continue mining at the site until 2020. An initial assessment estimated reserves at 5 tonnes (150,000 oz), representing five years of exploitation at current production rates, but since then another 3 tonnes (90,000 oz) of reserves have been confirmed.

As an open-pit mine, REG’s operational costs are 30% lower than other sub-surface mining projects, said Barro, but its production costs have increased significantly since 2014, when the state withdrew subsidies on diesel, pushing prices up by 50%. Regular shortages in diesel supply have hindered the site’s productivity, he noted.

The company holds two research permits near to the Bakoudou mine (Magnima Bakoudou and Substance Lebombi) as well as an exploration licence through a fully-owned subsidiary Managem Gabon for the Eteke deposit near Mouila in central Gabon. Reserves at Eteke are estimated at up to 23.3 tonnes (700,000 oz). At present the company plans to start production in 2017 or 2018.

The government is keen to promote artisanal gold mining as a means of providing both employment and revenues to poor communities in the country’s hinterland, as well as to control its sale. To achieve this, SEM’s subsidiary Comptoir Gabonais de Collecte de l’Or was set up to collect and process artisanal gold output. It has opened branches in the country’s main gold mining regions to buy the metal, which is then smelted into gold doré bars in Libreville before being sold to the Caisse des Depots et des Consignations (CDC) as part of the state’s aim to build up a strategic gold reserve. Any output in excess of what CDC is willing or able to buy can be sold on the market.

SEM also holds gold exploration licences for three sites, and has applied for a fourth. Its most advanced project is Camp 6, in the north-east near the Bélinga iron ore deposit. SEM began exploration activity at the site at the beginning of 2014 and expects to start small-scale production within the next 12 months. Exploration work undertaken by SEM has indicated two types of gold mineralisation: banded iron formations hosting gold mineralisation, and alluvial gold placer in a 2.5-km-long, 300-metre-wide stream hosting about 110 kg of alluvial gold with an average grade of 2.4 grams per tonne.

SEM is currently in talks with potential partners to expand exploration work at the Lombo Bouenguidi site in the central province of Ogooué-Lolo and Kolissen, near Libreville. It also confirmed that it expects to receive an exploration licence in the near future for the Mavenza site, also in the province of Moyen-Ogooué.

Maboumine

One of the larger upstream explorations under way is at a polymetallic ore deposit at Mabounié in central Gabon, being developed by Maboumine, in which Comilog holds 80% and the state 15%. Discovered in 1986 by the French geological survey, BRGM, it contains reserves of niobium, tantalum, rare earths and uranium. In 2014 the certification process of the deposit’s resources was completed to international standards.

The project’s geological complexity has required the development of a special hydrometallurgical process, designed by Eramet Research, to extract the metals at a pilot plant, in various laboratories in Europe. The cost of the process is high, however, and work is now under way to improve its commercial feasibility.

Iron Ore

Gabon holds promising potential for iron ore production. The north-eastern region of Bélinga is believed to host one of the world’s largest untapped deposits. However, development of much of these reserves to date has been held back largely by their remoteness in the heart of the tropical forest, which necessitates large investments in transport and power lines.

In April 2014 the government contracted UK-based mining consultancy SRK Consulting to conduct a two-year study of Bélinga’s reserves, which were last estimated (in the 1970s) at some 1bn tonnes of 64%-pure iron ore. Once the study is finished, a tender process will select strategic partners to develop the deposit. “We are still considering whether we will select one partner or a few. It will depend on the geology,” said Nzé- Békalé. “Bélinga consists of 12 hills and the quality of the ore is not consistent over the whole area. This would favour selecting a single operator who could mix the different qualities of ore for customers. The problem is there is also a lot of gold potential, which could not be developed before as it was part of the concession given to China Machinery Engineering Corporation (CMEC). We must not fall into the same trap, where one mineral is frozen because a single licence encompasses all minerals, including iron ore.”

Belinga

An exploitation permit for Bélinga was awarded in 2007 to Compagnie Minière de l’Ogooué, a 75:25 joint venture between CMEC and the government, but a dispute over the development of the deposit led to the licence being finally withdrawn in late 2013.

“We need to take advantage of the slump in iron ore prices to advance as much as possible now, so that when prices recover we are ready to go and find strategic partners,” said SEM’s Nzé-Békalé. “We have to keep working as it is not the only iron ore deposit of this size and quality in Africa. Our biggest competitor is Simandou [in the Republic of Guinea], and while they are affected by lower iron prices too, it will not last forever. If they are taking the opportunity to keep working on their project, then we have to do the same.” BEYOND BÉLINGA: Gabon’s rich iron ore resources are not limited to Bélinga. The Milingui iron ore deposit, which is located in the north-eastern province of Ogooué-Lolo, is estimated to hold reserves of 150m tonnes, while those in Monts de Cristal, north of Libreville, hold estimated reserves of 100m-125m tonnes. Gabon Iron Ore has held an exploration licence for Monts de Cristal since late 2013, while the government is in talks with potential strategic partners to develop the Milingui iron ore deposit.

Elsewhere, Australia-based IronRidge Resources, which has partnered with South Africa’s Assore and Japan’s Sumitomo Corporation, holds exploration licences for the Tchibanga and Tchibanga Nord projects in the south-eastern provinces of Nyanga and Bélinga Sud. According to the company, conservative desktop studies foresee an exploration target at Tchibanga of around 1bn tonnes – 200m tonnes at 62% Fe and 800m tonnes at 50% Fe. This scenario could accommodate annual output of 35m tonnes over a 29-year mine life, with operating costs of $44.40 per tonne. On this basis, with iron ore prices of $75 per tonne, Tchibanga’s present net value was estimated at around $4.8bn. The company expects to conduct its first resource evaluation within 12-18 months.

Two other Australia-based explorers also hold licences to explore for iron ore: Waratah Resources for the Mekambo-Est field on the Ivindo Massif in the north-east (adjacent to its Youkou licence in the Republic of the Congo); and Ferrex for the 309-sq-metre Mebago tenement in central-northern Gabon, which has an exploration target of 90m-150m tonnes at 35-65% Fe and 550m-900m tonnes at 20-40% Fe.

Transport Issues

One of the key obstacles to the development of resources in Bélinga and other remote deposits is the lack of requisite infrastructure and the high cost of developing it. “Iron ore in general is an infrastructure project with a mine at the end of it,” Vincent Mascolo, the CEO of IronRidge, recently told the press.

Well aware of this, the government has ramped up capital spending in recent years, in part to help improve connectivity in the country’s interior. For the iron ore projects in the north-east, such as Bélinga, a rail line to Booué will be required to link up with the Transgabonais, which is itself undergoing its own upgrades (see Transport chapter).

In the case of Megaba, ore could initially be trucked to a trans-shipment facility at Kango on the Libreville estuary and – in the longer term, when production ramps up – be transported to Booué either by aerial ropeway or by truck for onward railing to the port of Owendo.

Ferrex has estimated the operating costs for the 338-km rail haulage from Booué to Libreville at $0.052 per tonne per km, based on SETRAG’s track access rates and costs of leasing locomotives and wagons.

A deepwater port in Mayumba is also planned at a cost of roughly $350m to help cater to mining exports. While the project is very much in early stages, it should not only help reduce shipping times but also be particularly beneficial for the Tchibanga and Tchibanga Nord operators, located just 70 km away and connected by a recently completed seven-span rail and road bridge.

Exploration

A total of around 75 exploration and exploitation licences and 20 prospecting permits have been awarded to international companies as of mid-2015. While the number of licences awarded or applied for in Gabon has tailed off since mid-2014 as a result of the slump in metal prices and the resulting difficulty in raising funding, Gabon’s potential resources continue to attract much investor interest.

Australia’s Waratah Resources announced in March 2015 it had been awarded three new licences: for Tchibanga; for Waka, near Lastourville in the province of Ogooué-Lolo; and for Makokou, in the province of Ogooué-Ivindo. All three are considered highly prospective for base metals.

Canada-based Armada Exploration, owned by US private equity firm Denham Capital and South Africa’s Pangea Exploration, has applied for a third licence to explore for copper and other base metals in the Nyanga Basin.

Areva has, meanwhile, returned to explore for uranium and other minerals in its concession in the Franceville basin, having stopped uranium mining in the 1990s. Since 2014, Rio Tinto has also resumed exploration activities in various areas of Gabon for titanium and industrial elements.

Outlook

The discovery and exploitation of Gabon’s unquestionably significant mineral and metal resources will depend on the development of the requisite transport and power supply infrastructure. It will also require the future legislative and regulatory framework to be set out clearly in the final version of the new mining code, along with vital supporting legislation. The timeframe for wider production, in turn, will hinge largely on two things – a potential up-turn in global commodity prices and demand growth outside China.