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INVESTMENT OPPORTUNITY IN THE SOLID MINERALS SECTOR IN NIGERIA.
For a nation that wants to develop her economy, it must look inwards to identify areas where it has comparative advantage over other nation and efforts should be geared towards the development of the identified areas.
Apart from the hydrocarbon {crude oil} deposit which is Nigeria is well blessed with, the country also have comparative advantage in the solid minerals sector owning to the large deposit of mineral deposit in the different parts of the country and if the Nation is to develop and attain her vision of 2020 target, more efforts should be geared towards the development of the solid mineral sector of the Nigeria economy.
There is no doubt that Nigeria is blessed with so many mineral deposits. As at the last count, the federal ministry of mines and steel development have found over five hundred{500} location of mineral deposit in the country and identify Nine {9} that they would want to concentrate on and promote and these include Iron ore,Coal,Tin Ore,Bitumen,Gold,Columbite-Tantalite, Lead/zinc,Wolframite and industrial minerals .
Apart from these minerals, Nigeria is also blessed with different types of gemstones. Gemstone mining has boomed in various parts of Plateau, Kaduna and Bauchi States for years. Some of these gemstones include Sapphire, Ruby, Aquamarine, Emerald, Tourmaline, Topaz, Garnet, Amethyst; Zircon, and Flourspar which are among the world's best. Good prospects exist in this area for viable investments.
However, the availability and distribution of these minerals is not the subject matter of this article but the seemly lack of information on the investment opportunities available in this sector.
Nigeria lies approximately between latitudes 4°N and 14°N, and between longitudes 3°E and 15°E. Nigeria has an estimated current population of about 140 million, making it the most populous country in Africa and the tenth most populous in the world.
The country as estimated national population growth rate of 5.7% per annum ,an average economic growth rate of 3.5% per annum in the past five {5} years.
Nigeria has a long, but discontinuous history of mining and the country was a prominent exporter of tin, columbite and coal. Mining is administered through the Ministry of Mines and Steel Development, which is promoting private-sector led development and with Nigeria Minerals and Mining Act of 2007.
Mineral Estimated Reserve and Location
Coal :Nigerian Coal is one of the most bituminous in the world owing to its low sulphur and ash content and therefore the most environment friendly. There are nearly 3.00 billion tonnes of indicated reserves in 17 identified coalfields and over 600 million tonnes of proven reserves.
Coal can be found in Enugu and Kogi States.
Kaolin : An estimated reserve of 3 billion tonnes of good kaolinific clays has been identified.
It has been discovered in almost all the state. Nigeria Kaolin Company has it mining site in Bokkos, Plateau State.
Bentonite and Baryte Ore : These are the main constituents of the mud used in the drilling of all types of oil wells. The Nigerian baryte had specific gravity of about 4.3. Over 7.5 million tonnes of baryte have been identified in Taraba and Bauchi States. Large bentonite reserves of 700 million tonnes are available in many states of the Federafion ready for massive development and exploitation.
Lead/Zinc : An estimated 10 million tonnes of lead/zinc veins are spread over eight States of Nigeria. They have been discorved in Plateau,Bauchi,Gombe,Nassarrawa,Ebonyi amongst other states of the federation.
Tantalite : Large deposits of Tantalite are known to occur in Nasarawa, Gombe and Kogi States as well as the Federal Capital Territory. The deposits are both alluvial and primary in the numerous pegmatite bodies that infest these areas. Grades of well over 50% Ta2O5 are found. Private investors are 'invited to stake concessions for the development and loitafion of tantalite in these areas.
Gypsum : Gypsum is an important important for the production of cement. It is also used for the production of Plaster of Paris (P0P) and classroom chalk, etc. A strategy for large-scale mining gypsum used in the cement industries is urgently required to sustain existing plants and meet future expansion. Current cement production is put at 8 million tonnes per annum while the national requirement is 9.6 million tonnes. About one billion tones of gypsum deposits are spread over many sites in Nigeria.
Rock Salt : The national demand for table salt, caustic soda, chlorine, sodium bicarbonate, sodium hypochloric acid and hydrogen peroxide exceeds one million tonnes. A colossal amount of money is expended annually to import these chemicals by various companies including tanneries, food beverages, paper and pulp, bottling and other industries including the oil companies. There are salt springs at Awe (Plateau State) and Uburu (Imo State), while rock salt is available in Benue State. A total reserve of 1.5 billion tonnes has been indicated, and further investigations are now being carried out by government to ascertain the quantum of reserves.
Gold : There are proven reserves of both alluvial and primary deposits of gold with proven reserves in the schist belt covering the western half of Nigeria. At present exploitation of alluvial deposits is being carried out mostly by artisan miners in a few places in the country. A number of primary deposits, which are sufficiently big for large scale mechanized, mining, have been identified in the northwest and southwest parts of the country. Private investors are invited to stake concessions on these primary deposits. It is interesting to note that the primary deposits are of relatively high grade and at shallow depth. Proven deposits have been discorved in Osun, Kwara amongst other states.
Bitumen : The occurrence of Bitumen deposits in Nigeria is indicated at about 42 billion tonnes almost as twice the amount of existing reserves of crude petroleum. When fully developed, the industry will no doubt meet local requirements for road construction and also become a foreign exchange earner for the country.
Iron Ore : There are over 3 billion tonnes of iron ore found in Kogi, Enugu, Niger, Zamfara and Kaduna States. Iron is currently being mined at Itakpe (Kogi State), which is more or less at the center of the region of crystalline iron deposits. The large deposit of oolific iron ores of Kogi and Enugu States are yet to be fully explored. Itakpe iron ore is being beneficiated to 67% Fe.
Talc : An estimated reserve of over 100 million tones of talc has been obtained in Niger, Osun, Kogi, Kwara, Ogun, Taraba and Kaduna States. There are only two medium size talc processing plants currently operating in Nigeria and both are located in Niger State. The colour of the Nigerian talc varies from white through milky-white to grey The talc industry represents one of the most versatile sectors of the industrial minerals of the world. The exploitation of the vast talc deposits in Nigeria would therefore satisfy not only local demands but also that of the international market as well.
Limestone : An estimated reserve of 2.3 trillion tones has been discovered. The product can be found in the following states Kogi, Ogun, Cross River, and Sokoto amongst other location.
Granite : The granite deposit in Nigeria is estimated to be in billions of metric tons. They found in Ogun, Oyo, Osun, Ondo, Plateau, Cross River and most other states of the federation.
Diatomite : Over 200,000 tones deposit of the product has been found in Borno state.
Lignite : Lignite deposits of 72 million tons have been discorved in Delta state.
The above gives the profiles of solid minerals deposits in Nigeria.
The solid minerals sector contributes less than 1% to the Gross Domestic Product {GDP} of the country, due to the influence of its vast oil resources. The domestic mining industry is underdeveloped, leading to Nigeria having to import minerals that it could produce domestically, such as salt.
Organized mining began in 1903 in Nigeria when the Mineral Survey of the Northern Protectorates was created by the British colonial government. A year later, the Mineral Survey of the Southern Protectorates was founded. By the 1940s, Nigeria was a major producer of tin, columbite, and coal.
In the past in the solid mineral sector was dominated by Government and at such the discovery of oil in 1956 hurt the mineral extraction industries, as government and industry both began to focus on this new resource. The Nigerian Civil War in the late 1960s led many expatriate mining experts to leave the country.
Before the advent of the current democratic dispensation in Nigeria, some of the problems which the industry faced after the crash are stated below
? Lack of Information:
This is by far the single largest factor why investment in the solid mineral sector in Nigeria was low because like it has been noted, the industry was controlled by state-owned corporation and at such not much information was let out to investors. Interested investors do not have enough geological data confirming the availability and distribution of minerals up until the recent enactment of the Nigeria minerals and mining act of 2007 which created the mining cadastre system in mineral title administration.
Illiteracy on the part of local miners have cost the industry a lot has the miners do not appreciate the benefits of conducting survey on the mining site in order to determine the deposit of the ore before investing, hence when it turns out the ore can not be extracted at an economic sense, the miner are already far deep into mining thereby leading to lots of loss.
? Lack of Technical Know-How:
Closely related to the problem of lack of information is lack of technical know-how. Though mining in Nigeria started long before the independence of the country in 1960, The Nigerian Civil War in the late 1960s led many expatriate mining experts to leave the country thus affecting the availability of manpower with the right technical know-how.
However, over the years the country has been able to build a large community of young skilled geoscientists and engineers that can handle large scale mining operations easily.
? Lack of Mining and Processing Facilities:
Mineral processing, otherwise known as mineral dressing, is the practice of beneficiating valuable minerals from their ores. Industrial mineral treatment processes usually combine a number of unit operations in order to liberate and separate minerals by exploiting the differences in physical properties of the different minerals that make up an ore.
Mineral processing involves four general types of operations which include comminution or particle size reduction, sizing or separation of particle sizes by screening or classification, concentration by taking advantage of physical and surface chemical properties, and dewatering or solid/liquid separation.
The supply of industrial mining and processing facility in Nigeria is in short supply, except in quarry site where modern industrial mining and processing facilities are used, most of the mines in Nigeria are operated with the use of crude implement which leads to low output and eventual selling to the product at give away price because of the lack of processing facility to add vale to the product.
? Lack of Access to Fund:
Because of the unstable nature of the macro-economy of the country in the past , illiteracy of most miners amongst other reasons ,financial institutions do not advance funds to miners even when they have a proven deposit of mineral from the geological survey of the site.
The attitude of miners in the past and the disorganized nature of there business has not helped matters either thereby leading to lack of funds to mechanize the operations of the mines in Nigeria.
However with enactment of the Nigeria Minerals and Mining Act of 2007 which is based on international best practices and modeled after successful mining jurisdiction to secure tenure of title, create competition on mining tile on a first come,first serve basis and with the advances made in the banking sector on the Nigeria has lead a lot of Nigeria bank to be looking in the direction of the sector again. Investors with good business plan can now seek for funds.
Also the government has provided funds for small and medium scale miners/mining Company to access.
? Government Policy Direction:
Chief amongst all the problems militating against the development of the solid minerals industry in Nigeria in the past was the lack of good policy for the industry .The 1999 minerals and mining act created cumbersome mining license application processes, opaque and inefficient licensing procedures leading to speculative title holding and jurisdictional conflicts between federal and state government.
This scenario has therefore created lots of investment opportunities for savvy investors to make huge profits from the sector.
Some of the areas where investors can invest and make good returns on investment are listed below
? Mineral Prospecting and Mining:
The business of mineral prospecting is still at the infant level and needs lots of investments.
There are two options available to a company or an individual to enter into the mining industry in Nigeria. Through the acquisition of an existing mining property from the original owner. Approval must be obtained from the Ministry of Solid Minerals Development for such a purchase and by obtaining on application.
With the mineral deposit potential of Nigeria, the solid mineral sector has the potential to be the next frontier of large foreign direct investment in the next couple of years going by present happenings.
The establishment is large mechanized mines in the country would surely be profitable.
? Processing:
Great investment opportunities exist in the processing of minerals in Nigeria. Through one way or the other, all mineral can be processed in order to get value addition. Few processing plant, exist in the country.
The lack of processing facilities in Nigeria has lead to a situation whereby products are being sold at give away price.
?Equipment Sales and Rental:
Some mining equipment manufacturers are now opening offices in Nigeria after realizing the market potential and the mineral deposit in Nigeria. A lot of opportunities exist in this sector because the growing middle class in Nigeria who has realized the potentials in the sector tends to prefer using modern mining equipment and the sales/rental of this equipment is good business in Nigeria.
? Mineral Ore Sales:
The market for mineral is both local and international. The international market which is mostly controlled by China is large, expanding and sustainable because of the numerous uses of the ores.
An investor that is able to secure a contract at the right price would have an uphill task meeting the demands of the buyer because output from the mines in the country is low due to the use of crude implement.
The detailed analysis for the trading of lead ore can be obtained from www.farriconsultingng.blogspot.com
? Consultancy:
Opportunities exist for professionals who has acquired one skilled or the other that is relevant in the solid minerals industry to make good money by rendering such service. Services like geological survey, preparation of feasibility study, securing mining site and license, equipment procurement and securing export contract amongst others can be rendered in the industry.
To take advantage of these great investment opportunities in Nigeria, intending investors would have to obtain a mining lease in Nigeria. Like it has already been said, there are two options available to a company or an individual to enter into the mining industry in Nigeria. At this stage, it is assumed that the investor has a registered company .Registration is done at Corporate Affairs Commission of Nigeria.
Mines can be acquired through the acquisition of an existing mining property from the original owner. Approval must be obtained from the Ministry of Solid Minerals Development for such a purchase.
By obtaining on application, an investor would have to apply for an Entry permit into the mining sector .The license is for life and the documents required for these is stated below
Statement of financial capability
Statement of technical capability
Proof of statutory existence of company
Payment of prescribed fee
To obtain a prospecting right/license which is renewable every year, the documents required is stated below
Certificate of entry into mining
Payment of prescribed fee
To obtain exclusive prospecting right/license (for area up to, but not exceeding 20.27 km2) that requires renewal depending on remaining reserves, the investor would have to present the following documents
Certificate of entry into mining
Extant of Prospecting Right
Payment of prescribed fee
Special Exclusive Prospecting License (SEPL) is usually granted for areas greater than 20.72 27 km2 and difficult terrain) with the documents required.
Mining Lease (gives right to mine specified land area 80 hectares)
Possessions of a Prospecting Right, Exclusive Prospecting License or Special Exclusive License are some of the documents required to obtain a mining lease.
Submission of a plan of the prospecting done, a schedule of the mineral value found and a statement of ore reserves. Submission of an environmental impact assessment and protection plan. The license is usually renewable every 21 years depending on remaining reserves.
Special mining Lease for an area larger than 80 hectares also require same documents.
Incentives of investing in this sector include
3-5 years Tax Holiday
Deferred royalty payments
Possible capitalization of expenditure on exploration and surveys
Extension of infrastructure such as roads and electricity to mining sites, and provision of 100% foreign ownership of mining concerns
Though there are challenges in the solid minerals sector in Nigeria, great return on investment awaits any investor that is ready, willing and able to invest in these sector.
To continue reading this article and other investment opportunities in Nigeria, please do click on the link below
INVESTMENT OPPORTUNITY IN THE SOLID MINERALS SECTOR IN NIGERIA.
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