Mozambique Mineral Scan

CASE STUDY

North-South Corridor Roads

Table of abbreviations United States dollars

$

African Development Bank

AfDB

Single trailer articulated trucks

artics

Banded Ironstone Formation

BIF

Billion (thousand million)

bn

Billions of tonnes

bt

Coal Bed Methane

CBM

Companhia Dos Caminhos De Ferro Da Beira, S.A.R.L

CCFB

Carbon (dioxide) Capture and Storage

CCS

Chart datum

CD

Chief Executive Officer

CEO

Ceramic metal composite

cermet

Mozambique Ports and Railways

CFM

Di Methyl Ether (CH3OCH3),

DME

Dry metric ton unit

dmtu

Democratic Republic of the Congo

DRC

Deadweight tonnage (the safe carrying limit of a ship)

DWT

Electricidade de Mozambique

EDM

Environmental impact assessment

EIA

Empresa Nacional de Hidrocarbonetos

ENH

Front for the Liberation of Mozambique

FRELIMO

Gross vehicle mass

GVM

Highland African Mining Company

HAMC

High purity pig iron

HPPI

Heavy rare earth oxides (Eu through Lu +Y).

HREO

High voltage direct current

HVDC

Interested and Affected parties

I&AP's

Kilometres

km

Pound

lb

Life of Mine

LOM

Mineral Engineering Technical Services Pty Ltd

METS

Memorandum of understanding

MoU

Millions of tonnes

Mt

Millions of tonnes per annum

Mtpa

Metric ton unit

mtu

Megawatt

MW

Materials and Structures National Technical Committee

NTC

Odzi-Mutare-Manica Greenstone Belt

OMM

Per annum

pa

Palabora Mining Company

PAM

Pulverised coal injection

PCI

Proton Exchange Membrane

PEM

Platinum group metals

PGM

Parts per million

ppm

Particle size distribution

PSD

Rare earths

RE

Rare Earth Elements

REE

Southern African Development Community

SADC

Southern Africa Power Pool

SAPP

Spatial Development Initiative

SDI

Sedimentary exhalative

SedEx

Specific gravity

SG

Tonnes (1,000 kilograms)

t, ton

Trillion cube feet

tcf

Twenty foot equivalent units (approximate cargo capacity based on 6.1m x 2.4m container loads)

TEU

Tonne kilometre

tkm

TNG Limited

TNG

Terms of reference

TOR

Tonnes per annum

tpa

Tonnes per hour

tph

Total rare earth oxides (La through Lu + Y)

TREO

TABLE OF CONTENTS Executive Summary…………………………………………………………………….…………….i 1.

INTRODUCTION ............................................................................................................. 1 1.1. Spatial Development Initiatives ................................................................................ 4 1.1.1. Beira SDI ................................................................................................. 4 1.1.2. Zambezi SDI ............................................................................................ 4 1.1.3. Nacala SDI............................................................................................... 4 1.2. Geopolitical environment .......................................................................................... 5

2.

METHODOLOGY ............................................................................................................ 7

3.

GEOLOGY ...................................................................................................................... 9 3.1. 3.2. 3.3. 3.4.

4.

MINERAL SCARCITY ................................................................................................... 13 4.1. 4.2. 4.3. 4.4.

5.

Definition of scarcity ............................................................................................... 14 Supercycles ............................................................................................................ 15 Energy .................................................................................................................... 17 Food security .......................................................................................................... 17

WORLD ECONOMIC CLIMATE.................................................................................... 19 5.1. 5.2. 5.3. 5.4. 5.5.

6.

Mozambique ............................................................................................................. 9 Zambia ................................................................................................................... 10 Zimbabwe ............................................................................................................... 10 Malawi .................................................................................................................... 10

Introduction............................................................................................................. 19 Demand .................................................................................................................. 19 Supply .................................................................................................................... 20 Commodity Prices .................................................................................................. 20 Financing ................................................................................................................ 22

MINERAL DEPOSITS ................................................................................................... 25 6.1. Aggregate ............................................................................................................... 26 6.2. Aluminium minerals ................................................................................................ 26 6.2.1. Reserves and resources ........................................................................ 26 6.2.2. Market .................................................................................................... 27 6.2.3. Properties and applications ................................................................... 28 6.2.4. Substitutes ............................................................................................. 28 6.2.5. Deposits ................................................................................................. 28 6.3. Asbestos................................................................................................................. 30 6.4. Carbonatites ........................................................................................................... 30 6.5. Coal ........................................................................................................................ 32 6.5.1. Market .................................................................................................... 32 6.5.2. Reserves and resources ........................................................................ 33 6.5.3. Deposits ................................................................................................. 35 6.5.4. Production .............................................................................................. 36 6.5.5. Logistics ................................................................................................. 37 6.5.6. Downstream opportunities associated with the Tete coal deposits ....... 37

6.5.7. Coal development and the environment ................................................ 42 6.5.8. Conclusion ............................................................................................. 43 6.6. Copper.................................................................................................................... 43 6.6.1. Market .................................................................................................... 43 6.6.2. Deposits ................................................................................................. 43 6.7. Diamonds ............................................................................................................... 45 6.8. Dimension Stone .................................................................................................... 45 6.8.1. Resources .............................................................................................. 45 6.8.2. Deposits ................................................................................................. 46 6.8.3. Conclusion ............................................................................................. 47 6.9. Fluorite (Fluorspar) ................................................................................................. 47 6.9.1. Resources .............................................................................................. 47 6.9.2. Market .................................................................................................... 47 6.9.3. Deposits ................................................................................................. 48 6.9.4. Transport and energy infrastructure ...................................................... 49 6.9.5. Conclusion ............................................................................................. 50 6.10. Gold ................................................................................................................... 50 6.10.1. Introduction ............................................................................................ 50 6.10.2. Market .................................................................................................... 51 6.10.3. Deposits ................................................................................................. 52 6.10.4. Conclusion ............................................................................................. 55 6.11. Graphite ............................................................................................................. 56 6.11.1. Market .................................................................................................... 56 6.11.2. Properties and applications ................................................................... 57 6.11.3. Reserves and resources ........................................................................ 58 6.11.4. Production .............................................................................................. 58 6.11.5. Price ....................................................................................................... 58 6.11.6. Substitutes ............................................................................................. 58 6.11.7. Graphite Deposits .................................................................................. 59 6.11.8. Mozambique .......................................................................................... 59 6.11.9. Zambia ................................................................................................... 61 6.11.10. Malawi.................................................................................................... 62 6.11.11. Strategy ................................................................................................. 63 6.12. Iron and steel ..................................................................................................... 63 6.12.1. Market .................................................................................................... 63 6.12.2. Deposits ................................................................................................. 65 6.13. Downstream opportunities associated with Tete Magnetite .............................. 68 6.13.1. Market and Technology ......................................................................... 68 6.13.2. Opportunities ......................................................................................... 69 6.13.3. Conclusion ............................................................................................. 71 6.14. Kaolin................................................................................................................. 71 6.15. Lithium ............................................................................................................... 72 6.16. Limestone .......................................................................................................... 72 6.17. Monazite ............................................................................................................ 74 6.18. Nepheline syenite .............................................................................................. 74 6.18.1. Overview ................................................................................................ 75 6.18.2. Spatial Impact ........................................................................................ 75

6.18.3. Project Viability ...................................................................................... 75 6.19. Niobium (columbium) and tantalum ................................................................... 76 6.19.1. Deposits ................................................................................................. 78 6.19.2. Mining .................................................................................................... 81 6.19.3. Processing ............................................................................................. 81 6.19.4. Conclusion ............................................................................................. 83 6.20. Pegmatites......................................................................................................... 83 6.20.1. Pegmatite minerals and Market ............................................................. 84 6.20.2. Reserves and resources ........................................................................ 87 6.20.3. Deposits ................................................................................................. 87 6.20.4. Exploration ............................................................................................. 92 6.20.5. Infrastructure .......................................................................................... 92 6.21. Phosphate ......................................................................................................... 93 6.21.1. Market .................................................................................................... 93 6.21.2. Geology ................................................................................................. 95 6.21.3. Properties and Uses .............................................................................. 95 6.21.4. Reserves and resources ........................................................................ 95 6.21.5. Deposits ................................................................................................. 95 6.21.6. Outlook and Conclusion ......................................................................... 98 6.22. Rare Earths ....................................................................................................... 98 6.22.1. Deposits ................................................................................................. 99 6.23. Silver................................................................................................................ 103 6.24. Titanium and Zirconium ................................................................................... 103 6.24.1. Deposits ............................................................................................... 104 6.25. Downstream opportunities from heavy mineral sands mining ......................... 105 6.25.2. Project Viability .................................................................................... 106 6.26. Uranium ........................................................................................................... 106 7.

MINING ....................................................................................................................... 111 7.1. Mozambique ......................................................................................................... 111 7.1.1. Current situation .................................................................................. 111 7.1.2. Artisanal Mining in Mozambique .......................................................... 111 7.2. Alternative mining techniques ‒ Coal ................................................................... 112 7.2.1. Coal bed methane ............................................................................... 112

8.

MINERAL LEGISLATION ............................................................................................ 115 8.1. Mozambique ......................................................................................................... 115 8.1.1. Taxation ............................................................................................... 116 8.2. Zambia ................................................................................................................. 116

9.

MINERAL RESOURCE DEVELOPMENT ................................................................... 117 9.1. Introduction........................................................................................................... 117 9.2. Fatal flaw analysis ................................................................................................ 118 9.3. Assessment of projects & project shortlist............................................................ 118 9.3.1. Risk note .............................................................................................. 120 9.3.2. Other projects for consideration ........................................................... 123

10.

PROJECT PROFILES .......................................................................................... 125

10.1. Benga coal mine .............................................................................................. 125 10.1.1. Location ............................................................................................... 125 10.1.2. Status ................................................................................................... 125 10.1.3. Short project description ...................................................................... 125 10.1.4. Its contribution to the business case.................................................... 125 10.1.5. Project linkages ................................................................................... 125 10.1.6. Interventions required .......................................................................... 125 10.1.7. Project sponsor or principal ................................................................. 126 10.2. Coke plant ....................................................................................................... 126 10.2.1. Location ............................................................................................... 126 10.2.2. Status ................................................................................................... 126 10.2.3. Short project description ...................................................................... 126 10.2.4. Its contribution to the business case.................................................... 126 10.2.5. Project linkages ................................................................................... 126 10.2.6. Interventions required .......................................................................... 127 10.2.7. Project sponsor or principal ................................................................. 127 10.3. Coal fed power plant........................................................................................ 127 10.3.1. Location ............................................................................................... 127 10.3.2. Status ................................................................................................... 127 10.3.3. Short project description ...................................................................... 127 10.3.4. Its contribution to the business case.................................................... 127 10.3.5. Project linkages ................................................................................... 128 10.3.6. Interventions required .......................................................................... 128 10.3.7. Project sponsor or principal ................................................................. 128 10.4. Zambeze coal mine ......................................................................................... 129 10.4.1. Location ............................................................................................... 129 10.4.2. Status ................................................................................................... 129 10.4.3. Short project description ...................................................................... 129 10.4.4. Its contribution to the business case.................................................... 129 10.4.5. Project linkages ................................................................................... 130 10.4.6. Interventions required .......................................................................... 130 10.4.7. Project sponsor or principal ................................................................. 130 10.5. Tete magnetite ‒ ilmenite - phosphate mine.................................................... 130 10.5.1. Location ............................................................................................... 130 10.5.2. Status ................................................................................................... 130 10.5.3. Short project description ...................................................................... 131 10.5.4. Its contribution to the business case.................................................... 131 10.5.5. Project linkages ................................................................................... 131 10.5.6. Interventions required .......................................................................... 131 10.5.7. Project sponsor or principal ................................................................. 131 10.6. Iron and steel production ................................................................................. 131 10.6.1. Location ............................................................................................... 131 10.6.2. Status ................................................................................................... 132 10.6.3. Short project description ...................................................................... 132 10.6.4. Its contribution to the business case.................................................... 132 10.6.5. Project linkages ................................................................................... 132 10.6.6. Interventions required .......................................................................... 132

10.6.7. Project sponsor or principal ................................................................. 133 10.7. Ncondezi coal mine ......................................................................................... 133 10.7.1. Location ............................................................................................... 133 10.7.2. Status ................................................................................................... 133 10.7.3. Short project description ...................................................................... 133 10.7.4. Its contribution to the business case.................................................... 133 10.7.5. Project linkages ................................................................................... 133 10.7.6. Interventions required .......................................................................... 133 10.7.7. Project sponsor or principal ................................................................. 133 10.8. Fertiliser production ......................................................................................... 134 10.8.1. Location ............................................................................................... 134 10.8.2. Status ................................................................................................... 134 10.8.3. Short project description ...................................................................... 134 10.8.4. Its contribution to the business case.................................................... 135 10.8.5. Project linkages ................................................................................... 135 10.8.6. Interventions required .......................................................................... 135 10.8.7. Project sponsor or principal ................................................................. 135 10.9. Mont Muambe fluorspar and plant ................................................................... 136 10.9.1. Location ............................................................................................... 136 10.9.2. Status ................................................................................................... 136 10.9.3. Short project description ...................................................................... 136 10.9.4. Its contribution to the business case.................................................... 136 10.9.5. Project linkages ................................................................................... 136 10.9.6. Interventions required .......................................................................... 136 10.9.7. Project sponsor or principal ................................................................. 137 11.

TRANSPORT INFRASTRUCTURE ..................................................................... 139

11.1. Background ..................................................................................................... 139 11.2. Current Status ................................................................................................. 141 11.2.1. Beira ‒ Zambezi Corridor ..................................................................... 141 11.3. Nacala Corridor ............................................................................................... 145 11.3.1. Planned Regional Developments ........................................................ 148 11.4. Local locomotive manufacture ......................................................................... 149 11.5. Possible barging of coal .................................................................................. 149 12.

ENERGY INFRASTRUCTURE ............................................................................ 151

12.1. Electrical Network ............................................................................................ 151 12.1.1. Expansion in Inhambane ..................................................................... 151 12.2. Electricity Generation ...................................................................................... 151 12.3. Gas .................................................................................................................. 153 12.4. Electricity Transmission ................................................................................... 153 12.4.1. North South AC and DC Transmission ‒ inland backbone .................. 154 12.4.2. Mozambique ‒ Malawi Interconnection................................................ 154 12.4.3. Mozambique ‒ Zimbabwe interconnection .......................................... 154 12.4.4. Revenue Collection .............................................................................. 155 12.4.5. Conclusion ........................................................................................... 155 13.

ENVIRONMENTAL ISSUES ................................................................................ 157

13.1. 14. 14.1. 15. 15.1. 15.2. 15.3. 15.4. 15.5. 15.6. 15.7. 16.

Climate Change ............................................................................................... 157 MINERAL POLICY ............................................................................................... 161 Politics of mineral scarcity ............................................................................... 161 RESULTS OF DISCUSSIONS WITH INTERESTED PARTIES ........................... 165 Transport ......................................................................................................... 165 Pegmatites....................................................................................................... 165 Licensing ......................................................................................................... 165 Corruption ........................................................................................................ 165 New Law .......................................................................................................... 165 Explosives ....................................................................................................... 166 Skills ................................................................................................................ 166 CONCLUSIONS AND RECOMMENDATIONS .................................................... 167

APPENDIX I.

MINERAL PRODUCTION OF MOZAMBIQUE .................................... 180

APPENDIX II.

METHODOLOGY ................................................................................ 181

APPENDIX III.

DIRECT IMPACTS ‒ FLOWSHEETS .................................................. 183

APPENDIX IV.

QUESTIONNAIRE USED .................................................................... 191 LIST OF FIGURES

Figure 1: Mozambique – geographical context ....................................................................... 2 Figure 2: The 10 provinces of Mozambique ............................................................................ 3 Figure 3: Area studied in original Mintek report on the Nacala SDI ........................................ 4 Figure 4: Bue Chart of economic freedom in Mozambique 2004-2006................................... 6 Figure 5: Simplified geological map of Malawi indicating mineral deposits........................... 11 Figure 6: Element availability ................................................................................................ 14 Figure 7: Years of extraction until exhaustion: based on current reserve ............................. 15 Figure 8: Super cycles of six base metal prices .................................................................... 16 Figure 9: Conservative coal forecast by RMG (2005$ terms) ............................................... 21 Figure 10: Conservative Iron ore forecast by RMG (2005$ terms) ....................................... 21 Figure 11: Conservative base metals forecast by RMG (2005$ terms) ................................ 22 Figure 12: Coking Coal Supply routes .................................................................................. 34 Figure 13: Seaborne Hard Coking Coal Market 2025 ........................................................... 35 Figure 14: Ncondezi Project locality map .............................................................................. 36 Figure 15: Spatial dynamics of the coal project .................................................................... 39 Figure 16: Synthesis Energy Systems Gasification Technology ........................................... 40 Figure 17: Quality of Benga Hard Coking Coal ..................................................................... 41 Figure 18: LME copper price, 1980-2011.............................................................................. 43 Figure 19: Schematic geological map showing marble occurrences .................................... 45

Figure 20: White dolomite marble member ........................................................................... 46 Figure 21: The Monte Muambe project location.................................................................... 49 Figure 22: Gold deposits in Mozambique .............................................................................. 51 Figure 23: Gold price (2001-2011) ........................................................................................ 52 Figure 24: Global gold demand and gold price 2004-2010) .................................................. 53 Figure 25: Ancuabe Graphite plant ....................................................................................... 62 Figure 26: World crude steel production 1950-2008 ............................................................. 64 Figure 27: World iron ore prices 2001-2010.......................................................................... 64 Figure 28: Baobab holdings on the Tete Complex ................................................................ 67 Figure 29: Price of iron ore .................................................................................................... 68 Figure 30: Palabora Mining Company 240 Mt Magnetite stockpile ....................................... 69 Figure 31: Spatial dynamics of the magnetite project ........................................................... 71 Figure 32: Lithium demand curve.......................................................................................... 73 Figure 33: Spatial dynamics of the nepheline syenite project ............................................... 76 Figure 34: Price for Tantalite of African Origin over the last 5 years..................................... 77 Figure 35: Mineralised zones at the Kanyika deposit............................................................ 78 Figure 36: Power options for the Kanyika project ................................................................. 79 Figure 37: Noventa’s Tantalum holdings in Mozambique ..................................................... 80 Figure 38: Simplified Marropino flowsheet ............................................................................ 82 Figure 39: Theoretical magnetic separation of concentrate .................................................. 82 Figure 40: Idealised cross section of a complex Alto Ligonha pegmatite ............................. 84 Figure 41: Morrua and Marropino Pegmatite/ Tantalum Deposits ........................................ 90 Figure 42: World Phosphate production ................................................................................ 94 Figure 43: Price for phosphate rock over the last 10 years................................................... 94 Figure 44: Phosphate occurrences in Mozambique .............................................................. 96 Figure 45: Lanthanide contraction ....................................................................................... 100 Figure 46: Global rare earth production .............................................................................. 101 Figure 47: Main anomaly in Northern Machinga ................................................................. 102 Figure 48: Mutanga Uranium project................................................................................... 108 Figure 49: Simplified Geology and location of the Zambezi Valley Project ......................... 109 Figure 50: Simplified Geology and location of the Uranium Projects .................................. 110 Figure 51: Movement of Methane in Coal ........................................................................... 112 Figure 52: Coalbed methane recovery ................................................................................ 113 Figure 53: Land usage for coal bed methane production in Western Colorado .................. 114 Figure 54: Plant efficiency versus CO2 output .................................................................... 128 Figure 55: Beira Port – Position of Planned New Coal Terminal ........................................ 140 Figure 56: Beira Port Showing Position of Planned 50ha Coal Terminal ............................ 141

Figure 57: Zambezi Valley Transport System – Main Features .......................................... 143 Figure 58: Beira Corridor, Sena rail system ........................................................................ 144 Figure 59: Nacala Corridor Railway System – CEAR and CDN ......................................... 146 Figure 60: Nacala Short-term development plan - 2020 ..................................................... 146 Figure 61: Mozambique Electricity transmission network, December 2010........................ 152 Figure 62: High Voltage Direct current Line ........................................................................ 154 Figure 63: Cyclone Early Warning System, Mozambique ................................................... 159 Figure 64 : Areas vulnerable to cyclones ............................................................................ 160 Figure 65 : Simplified flowchart of some of the developmental projects discussed ............ 169 LIST OF TABLES Table 1: Real GDP growth ...................................................................................................... 2 Table 2: Appropriate Long-term (Equilibrium) Commodity Prices (2005$) ........................... 22 Table 3: Envisaged commodity prices – 3 scenarios ............................................................ 23 Table 4: Individual rare earth oxide prices (99% purity) ........................................................ 23 Table 5: Mont Muande Apatite resource ............................................................................... 32 Table 6: Top ten hard coal producers 2009e ......................................................................... 33 Table 7: Top ten hard coal exporters 2009e .......................................................................... 33 Table 8: Top coal importers 2009e ........................................................................................ 34 Table 9: Tete coal resources ................................................................................................. 34 Table 10: Tete production estimates ..................................................................................... 38 Table 11: Expected Coking coal/steam coal production 2020 .............................................. 38 Table 12: Other possible by-products of the Coal Industry ................................................... 42 Table 13: Significant results from trench MATR001 (main anomaly) – N. Machinga............ 50 Table 14: World graphite 2009 production and reserves ...................................................... 58 Table 15: Graphite resources in the study area .................................................................... 59 Table 16: Scenario parameters for scoping – Tete Iron ore project ...................................... 67 Table 17: World tantalum production – Tantalum content .................................................... 77 Table 18: JORC compliant mineral resource estimates for Kanyika ..................................... 79 Table 19: Mineral localisation in Alto Ligonha zoned pegmatites ......................................... 84 Table 20: Gemstones and mineral specimens found in Mozambican pegmatites ................ 87 Table 21: Past production figures for the potassic pegmatites ............................................. 87 Table 22: Estimated reserves of some pegmatite related minerals in Mozambique ............. 88 Table 23: Reserves# of some sodalithic pegmatites ............................................................. 89 Table 24: Mt Muande indicative tonnages and grades ......................................................... 97 Table 25: Significant results from trench MATR001 - main anomaly – N. Machinga .......... 102 Table 26: JORC compliant reserves and resources under licence to Kenmare ................. 104

Table 27: Resources at Moebase ....................................................................................... 106 Table 28: Reported resources from Malawian deposits – Nacala SDI................................ 106 Table 29: Chirundu project resource ................................................................................... 107 Table 30: Kayelekara JORC (2004) resource ..................................................................... 107 Table 31: Numbers of artisanal miners by province ............................................................ 111 Table 32: Technical selection criteria .................................................................................. 119 Table 33: Risk/Impact matrix ............................................................................................... 119 Table 34: Ranking of projects by technical criteria and risk/economic impact .................... 119 Table 35: Approximate port dimensional requirements for various vessel types ................ 141 Table 36: Port of Beira, Mozambique – as at February 2011 ............................................. 142 Table 37: CCFB Rail ........................................................................................................... 144 Table 38: Port of Nacala, Mozambique ............................................................................... 147 Table 39: CEAR/CDN rail to Nacala ................................................................................... 147

EXECUTIVE SUM M ARY The purpose of this report is to update projects carried out previously in the area for the Spatial Development Initiative (SDI) programme by Mintek. Although the project deals with spatial development initiatives that go beyond the borders of Mozambique, the central focus of the work is on Mozambique. Mining only contributed 2% of GDP in Mozambique in the past, however a significant growth is expected from 2010, since Mozambique’s mineral industry is expected to experience substantial expansion across a wide range of commodities in the short to medium term. Work done some years ago on the spatial development initiatives showed that significant potential existed in Mozambique for mineral development. The rich coal resource was seen as an opportunity that could be opened through the rebuilding of the Sena rail. The Mozambican government has been proactive in following through with the proposals put forward in these reports and the first major projects are now paying off. Favourable mining legislation, a committed administration and competitive royalty rates has seen government issuing 1,000 licences for exploration of minerals. 2011 can be seen as a pivotal year. Coal production will rise to 2 Mtpa and tantalum as well as ilmenite production is expected to increase and Minister Esperança Bias has been reported as saying that the contribution of the mining industry to GDP might increase to 12%. Spatial Development Initiatives (SDIs) are inter-regional economic planning zones based on geographic associations and usually related to current, or possible, transport routes and natural geographical features such as river courses. There are three SDIs dealt with in this report: r The Beira SDI, which relates to the main road and rail link between the Port of Beira and Harare in Zimbabwe. r The Zambezi SDI, which is located in central Mozambique and is associated with the course of the Zambezi River. The SDI runs from the coast through the Tete region and into the Zimbabwe/ Zambia border zone. r The Nacala SDI, which includes the provinces of northern Zambézia and northern Nampula in Mozambique and eastern Zambia with a branch extending through Malawi. The Nacala SDI is centred on the rail link from the Nacala port as it extends along an east-west axis, through Nampula and Cuamba in Mozambique, through Blantyre and Lilongwe in Malawi, and into southeastern Zambia via the road through Chipata. Mineral scarcity is a concept, which, in the year 2011, needs close attention from mineral strategists and policy makers. The need to produce enough food for burgeoning populations and to maintain standards of living indicates that mineral scarcity lies at the centre of future social security. Although there is much dissension within the scientific community over the detail of such mineral scarcity studies, there is little choice but to accept the essential premise that non-renewable sources are in serious danger of running out of continuous economic supply – many of them in the foreseeable future (10-20 years). Over the past ten years, global mineral markets have experienced the longest boom in mineral commodity prices since World War II. Concerns in mineral scarcity focus on energy commodities and on certain minor and speciality metals that are key to emerging high-tech applications and ‘green’ technologies. International concern centres both on the scarcity itself as well as on the degree to which countries (notably China) are using the situation for “resource diplomacy”. In the future world, mineral wealth together with human capital and unspoilt agricultural land is likely to denote true wealth. However, power will tend to be in the hands of those who learn the value of minerals early, and control the production of useful products from minerals. Therefore it is critical, at as early a juncture as possible, to ensure that mineral

i

processing is held together with the mineral resource. “Mineral scarcity is no longer a trade-issue but an issue of strategic interest.” (Kooroshy et al, 2009). The current and probable future demand growth pattern means that there is unlikely to be any major abatement in demand in the lifetime of many deposits in the region and entrepreneurs can go ahead with developments where current demand is in place, and where local conditions are favourable. A fundamental change in the world economy, as well as the slow realisation amongst industrialists and governments of the reality of future mineral scarcity has set in motion certain price trends in the metals and minerals industry, which will fundamentally change the perception of mineral development in years to come. There will probably be a period of increasing prices of commodities in real terms during the next 10-20 years. In the aftermath of the recession, banks have reassessed their lending criteria, and become much more cautious about making loans. For the mining sector, this has meant that project finance is much more difficult to come by and many projects have been put on hold. Mid-tier companies should as a result rather look towards investors than towards banks for funding, and reduce the temptation of incurring debt. For the Mozambican mining sector it remains important that the country is perceived as being investor friendly, since this is a time in which the investor rather than the bank is seen as vital for project development. Some lenders are responsive to projects that are seen as state sponsored, or having some state involvement in feasibility and therefore the Mozambican government may want to consider that some form of public support for mining ventures might similarly encourage otherwise jittery investors to invest in the country. Offtake agreements are becoming commonplace in investor funding agreements. These will limit Mozambique’s ability to beneficiate commodities, since the export of raw materials may be a precondition for investing. Although this could lead to rapid early economic development it carries with it the threats of a resource curse and of low-job economic growth. Mozambique has deposits of antimony, apatite, asbestos, bauxite, beryl, bismuth, coal, copper, dimension stone, feldspar, fluorite, gemstones, graphite, gold, quartz (gem), gypsum, halite, ilmenite, iron, limestone, lead, lithium, mica, monazite, nepheline syenite, nickel, niobium, rare earths, rutile, tantalum, uranium, zircon, some of which are economically important. The demand for aggregate required for building projects is expected to grow due to the strong growth in mining activity and may stabilise on a higher level than in the past. Small bauxite (the major source of alumina), deposits occur in the region; one (Serra de Moriangane) is being mined and the bauxite exported for the manufacture of refractories and chemicals. The most promising other deposit in the region is the Mulanje Mountain bauxite deposit, however due to logistical and environmental issues it is unlikely to be mined. Although coal will still be well supplied in the world for some time, several countries have already passed their peak production. World peak production is expected as early as 2030. Certain coal qualities are already very much in demand and one of these is coking coal. The Tete region has currently got a coal reserve of 1,340 Mt and this figure is expected to increase considerably as the level of confidence in more deposits is raised sufficiently through detailed exploration and production drilling. The resource figure currently stands at 17,503 Mt. Vale expects to produce 11 Mtpa of metallurgical and thermal coal from its Moatize mine over the next 35 years and will generate some 900 direct jobs at the production peak. The Benga mine has excellent coking coal and in 2010 there was a 40% life of mine (LOM) offtake agreement with Tata steel, and a 10% LOM offtake agreement ii

pending with WISCO, therefore this material is essentially sterilised to local beneficiation. The Zambeze coal project lies adjacent to the Benga project, which will allow possible production and administration synergies. The Zambeze project will also be developed (together with Chinese steelmaker Wuhan Iron and Steel Corporation), as a primary exporter of coking coal. Drilling has identified a JORC compliant steam coal resource of 1.8 bt. Probable production estimates are shown in the table below (assuming the infrastructure can cope with these levels of export). Tete production estimates Mine/prospect Moatize

Estimated production kt* 2011

2012

2013

2015

2020

2025

2030

1,000

6,000

11,000

11,000

11,000

11,000

11,000

6,000

2,000

8,000

15,000

15,000

15,000

15,000

300

3,000

5,500

10,000

10,000

10,000

10,000

10,000

2,500

10,000

10,000

10,000

10,000

Zambeze Benga Ncondezi Minas Moatize Total

2035

96

1,000

2,000

2,000

2,000

2,000

2,000

2,000

1,396

9,000

20,500

33,500

48,000

48,000

48,000

43,000

Source: Macdonald, 2011 Macdonald, 2011a, Ncondezi, 2011, Club of Mozambique 2010c, Reuters, 2011, and own estimates * Assuming Logistics issues can be dealt with.

The major hold on development of the coal export industry in Mozambique is inadequate infrastructure for export both in terms of rail and port facilities. Several other options are being looked at to export coal as well as to use steam coal in the production of electricity and / or liquid fuels. This report suggests further projects, which can productively use coal in Tete to produce higher value goods from local mineral commodities. The rail is entirely inadequate to deal with the quantities being planned by the various mining groups and therefore if there is to be a successful roll-out of these project it is most likely that local downstream usage will have to receive serious consideration. Besides coal fired power plants it may be beneficial to produce coke locally both for the lessening of the load to be transported as well as for the ancillary industry that can be built around the by-products of coke ovens. There is a strong likelihood that the Tete magnetites may be mined, and if so, the local production of iron and steel will not only use a considerable amount of coal (low quality coal if pulverised coal injection is used), but will also add considerably to the industrialisation of the region. Although coal liquifaction is an option it is one that will need time to mature since the amount of coal required is high and the carbon capture and storage situation in Mozambique is not clear. There is an opportunity in the upcoming amendment of mining and environmental legislation to remedy this problem. Coal bed methane (CBM) refers to methane adsorbed onto the solid matrix of some coal seams. Production of coal bed methane is an alternative mining technique, which can be used where conventional mining is not feasible because of quality and economic constraints. The procedure is relatively inexpensive, however, it does have some serious environmental impacts. The world copper market is currently strong but the region covered does not have large copper resources. The Chiduè deposit is a small copper deposit situated 55 km north of Tete, which hosts copper, silver, gold and nickel mineralization. The Fingoe (Muenguè) iron skarn deposit, located approximately 35 km southwest of Fingoe in the Tete Province, also hosts copper, whilst the Mundoguara deposit situated approximately 10 km west of Manica is a third small deposit. Although these deposits may prove mineable, at this stage they are not seen as important targets for the region.

iii

Although some 50 kimberlite pipes and dykes occur in the Niassa province, it is unlikely that they will contain economic diamond deposits. Mozambique has many rock types suitable for the dimension stone market. However, transport remains a major issue. As the country is built up and modernised as it will be with the much greater mining revenues that will be available, government should ensure that local dimension stone is used so far as possible in the facing of buildings. Mont Muambe is a medium sized fluorspar resource (1.42 Mt at 75-81% CaF2), which is currently being investigated for both its fluorspar content as well as its rare earth content. Its positive relief will allow low cost open cut mining, with the ore will be crushed, milled and passed through a flotation concentrator to produce acid grade fluorspar, which is likely to be exported. If the deposit is to be developed, it will require power. In Mozambique gold occurs in the northern province of Lichinga close to the Tanzanian border, southwest of Nampula in association with the pegmatite field, in the Zambezi SDI to the NW of Tete towards the Zambian border and in the Beira SDI towards Zimbabwe. During the last 10 years the demand for gold and the price have shown significant increases. Recently the jewellery demand has increased, perhaps showing that the economic downturn experienced in the previous few years is now over. The gold price is showing signs of further strengthening and may reach $1,600 per ounce in 2012. The official gold production (up to 1996) for Manica is 9.8 t, of which 80% was derived from alluvial placer deposits. However, gold sold on the black market and pre-industrial production was probably significant. It is likely that a considerable resource remains and it is estimated at 4 t of lode gold and 19 t of placer gold. The mining of gold by artisanal miners appears to be inadequately controlled. The challenge lies in monitoring gold production and in adding value to the gold within the country. Although the downstream route for gold is not long, it requires less financial support than most other beneficiation projects and little in the way of transport facilities. The beneficiation of Mozambique’s gold production will add considerably to the value of exports and to the provision of jobs for craftsmen. Graphite is such a fundamental contributor to industry and especially to future power applications that Agrawal Graphite Industries of India commented “No Graphite, no industry.” The global recession on the industrial sector had a negative effect on the graphite market, however the Chinese government continues to discourage exports and graphite is currently seen as a growth market. The growth of the lithium-ion battery market is expected to have a significant immediate effect on graphite demand, whilst fuel cells will provide ample future demand. Graphite deposits occur in seven of the provinces in Mozambique, i.e. Cabo Delgado, Manica, Nampula, Niassa, Sofala, Tete and Zambézia. In Mozambique, exploitation of graphite dates back to 1911 when mining commenced in the Angónia district of the Tete Province. Three mines, Metengo-Balame, Mauè and Satèmua, were in operation until 1955. Ancuabe was the most recent graphite mine producing; it was in operation until 1999 at which point it was put on care and maintenance chiefly due to the cost of supplying its own electricity using diesel fuel. However, Electricidade de Mozambique included the Ancuabe mine in its Cabo Delgado province rural electrification project, and this has resparked interest. Since many graphite deposits tend to be small, it is suggested that local concentration take place on these deposits before transportation to a central processing point for final concentration. High value products should then be produced locally.

iv

Recently the world iron and steel market has evolved so that the major importers are in the east. This bodes well for countries on the eastern seaboard of Africa since they are close to the new markets that have developed. Prices too have shown a change and have increased almost two fold in the last ten years. This has a significant impact on the feasibility of iron ore projects. The Honde deposit located along the banks of the Honde River, is a medium-sized sedimentary (banded ironstone formation – BIF) iron deposit. It was investigated in the past and is estimated to contain some 100 Mt of ore at an average grade of 38% iron. Mont Muande, which is situated about 25 km northwest of Tete has a resource of 220 Mt of magnetite and 75 Mt of apatite. Phosphate is considered deleterious in an iron feedstock and has always been seen as a major drawback of this deposit. During 2006-2007 extensions were found to the Mont Muande project, and considered together with the adjacent Tete titanomagnetites it is considered to present an interesting opportunity for future development. These titanomagnetites consist predominantly of intergrown magnetite and ilmenite, which occurs over a strike length of 8 km in the Massamba area. The Chitongue Grande prospect, has a 47.7 Mt JORC inferred resource with a head grade of 25.3% Fe, 0.18% V2O5 and 9.69% TiO2, with a possible resource established by independent interpretation of 400-750 Mt to 250m depth. A mass recovery study has shown that blending the Chitongue Grande feed with other, high recovery feedstocks would enhance production. The study also showed that the ilmenite concentrate might then be further processed to produce a saleable concentrate. The idea of the Maputo Metallurgical Complex was based largely on sourcing magnetite ore resources imported from Palabora mine in South Africa for blending with local ore. The Maputo Metallurgical Complex project may still be a possibility if the Chibuto heavy mineral sands project goes ahead. It would be ideal to treat all of the iron ore locally to produce steel. The spatial/geographical impact of the successful construction and operation of a plant to treat Mont Muande and Massimba-Singore ores would be significant. It would provide a variety of iron and steel products in the heart of the Tete district, the availability of which will stimulate significant industrial growth possibilities, especially since there should be no shortage of power in the region. Export of high value excess steel products will be by rail, and will essentially be replacing lower value coal products used in the process. Kaolin has been produced in the past in the Alto Ligonha pegmatite field but more often regarded as a waste product. It may be worthwhile to consider a plant to upgrade the clay minerals of the area. As the need for and popularity of hybrid and electric cars grows there will be a great need for lithium, which is used in manufacturing the batteries. Lithium occurs in several small deposits and attention needs to be given to the lithium potential of the area. Extensive limestone deposits are developed from Muanza in the south to north of Inhaminga. There may be possible reserves of several hundred million tons. Mozambique’s cement consumption increased to about 1 Mt in 2009 and since demand could not be locally met, cement imports increased. Cement consumption is expected to show strong growth in the future and reach 1.5 Mtpa by 2015. Several new cement factories are in the pipeline, but if the nepheline syenite factory to produce cement, alumina, soda ash and potash goes ahead, Mozambique will easily meet its own cement requirements and will become a net exporter of cement. Cement kilns burn about 5 t of coal for every 10 t of cement produced. Production of cement via the nepheline syenite route would also require a major input of coal, and therefore the production of cement will have the double advantage of direct v

economic and industrial development benefits, as well as offering a significant local offtake of lower quality coal. A successful construction and operation of the nepheline syenite plant near Dona Ana will open up an industrial hub along the Sena rail route and provide long term growth (> 100 years of resource) to the area as well as making productive use of coal and energy. Taken together with the proposed development of a steel mill based on iron from Mont Muande, Singore and Massamba, the cement production will provide the essentials of building a modern economy. Besides the good revenues that could be earned from this project from alumina and especially clinker the aspect that has greatest direct developmental potential relates to the downstream industrial processes that are made possible with the availability of potash and soda ash. This project would also allow Mozambique to provide “complete” NPK fertilisers to the market. Viability of the nepheline syenite project remains to be tested with regard to both ore quality and the availability of sufficient limestone deposits and the availability of the technology. Monazite occurs widely in the study area in heavy mineral sand deposits as well as in rare earth and other deposits. Most commonly it would be seen as a mineral, which may tend to present environmental threats, however, it is the major ore of thorium and rare earth elements. It will almost certainly become a major fuel source in the medium term. Thorium may replace uranium as a nuclear fuel and several countries including China and India are actively researching this technology. Tantalum is an important input into a variety of modern equipment from cell phones to nuclear reactors. Minerals containing tantalum and niobium occur in the Alto Ligonha pegmatites. Marropino is the only pegmatite in Mozambique currently being exploited for tantalite on a commercial scale. The US Frank-Dodd financial reform bill requires US business to “state whether they source ‘conflict minerals’ from both Congo and neighboring countries” and to “report on steps taken to exclude conflict sources from their supply chains, backed by independent audits.” This international crackdown on sourcing tantalite from conflict areas has exacerbated the general scarcity and led to the sharp price rises, since there is no conflict in Mozambique, it can benefit from the current pricing, and in 2009 it was the worlds second largest producer. The reopening of Wodgina mine in Australia in January 2011 will stabilise prices. The Malawian multicommodity (Nb, Ta, U, Zr) Kanyika project may come into production in 2013. The project has a measured resource of 5 Mt niobium (JORC complaint) with an indicated resource of 18 Mt and an inferred resource of 37 Mt. The lack of power at this project may hamper its startup and a study into the power supply options for the mine is underway. This highlights the power distribution challenges experienced in the Spatial Development Initiatives and indicates the need for detailed temperospatial analysis of the mining and mineral based development options, their interaction and interconnectivity. The Marropino mine has sufficient ore for a further three and a half years of operation after which the crushing and wet concentration plant will be relocated to the Morrua pegmatite, which is about 40km NW of the Marropino mine. The stockpiles will be processed first, followed by the hard rock deposit. Pre-concentrate produced at Morrua will be transported to the plant at Marropino for further beneficiation. Once the Morrua deposit is exhausted, it is likely that the Mutala will be mined on the same basis. Project life is estimated at 9.3 years. Phosphates are a primary plant nutrient and are required in increasing quantities for food security. Global reserves are restricted in the longer term; quality of the phosphate rock left to mine is decreasing and production costs are rising. There is no substitute for phosphate and as long as populations grow so will the phosphate industry so that those populations can

vi

be fed. Mozambique has several phosphate deposits (Evate, Cone Negose, Mont Muande Mont Fema as well as several pegmatites that contain phosphate minerals). The large Evate deposit is located about 100 km east of Nampula. Apatite concentrations occur in mineralised zones about 3 km long, 830 m wide and 600 m thick. The project was considered marginal 10 years ago but the significant increase in the price of phosphate rock should lead to serious investigation now. It does have the drawback of having a relatively high chlorine content that will increase production costs – but this has been known for some time and factored into previous costing. The Mont Muande deposit has been intensively studied both to better understand the resource and to test whether the phosphates and iron can be separated. It has been shown that it is feasible to do so and further testing piloting is required. The Tundulu prospect in Malawi contains some 1.9 Mt ore to a depth of 50 m with a P2O5 content of 15-20%. The Dorowa phosphate mine is an opencut mine located in the Buhera District along the tarmac road from Nyazura to Murambinda. The ore is milled and put through a flotation plant to produce phosphate concentrate. Dried concentrates are sent to the railhead at Nyazura some 65 km away by road and then railed to ZimPhos for processing. Phosphates should be further processed locally for the local and export markets, however local usage of phosphate rock directly or with simple modification can already give significantly improved crops. “Rare earths” comprise a group of 17 metals, 15 of which make up the lanthanide series. Various rare earth elements are essential components in many modern technologies including cellphones, LCD televisions and electric car motors. Rare earth minerals occur in the Alto Ligonha pegmatites, where they were mined intermittently until 1974. Situated about 90 km north of Blantyre, the Kangankunde strontium/monazite deposit is an intrusive carbonatite pipe. One of the important features of this project is that the tailings of the strontianite/rare earths plant can be further beneficiated to provide feedstock for agricultural lime (and or hydrated lime) manufacture and phosphate fertilisers. The deposit is situated in an area with good infrastructure but water availability may present a problem. The Machinga rare-earths project in Malawi has been reported to have multi-metal mineralization rare earth-niobium-tantalum at surface. The rare earth mineralization includes elevated heavy rare earths such as dysprosium, thulium and ytterbium Although the silver content is important in some gold mines and will sweeten the deposits. There are at present no significant silver deposits in the study area. Mozambique has amongst the largest heavy mineral sands deposits in the world. Kenmare has brought the first of the possible projects into production but there are others along the coast and in the Nacala SDI in Southern Malawi. Chibuto (outside of the SDIs covered here) is the world’s largest deposit of titanium-bearing sand. The titanium market is currently in a state of oversupply, but it is likely that this will be balanced by 2012 and move into undersupply by 2015. Therefore, although it is unlikely that international markets could absorb output either the Moebase mine or even less so the Corridor Sands mine in the very near future, the prospect within 3-5 years looks much more positive. Rutile, ilmenite and zircon prices are expected to rise significantly before peaking in late 2012-2013. Kenmare Resources’ Moma titanium project is expecting to expand operations, to meet the expected increase in demand. Kenmare has a resource including 150 Mt ilmenite, 10 Mt zircon and 3.3 Mt rutile. Moma plans to develop into the world’s third largest vii

single mine ilmenite producer with a long term output of 1.2 Mtpa ilmenite. It is likely that the Moebase prospect will be the next project to be developed with the Malawian deposits and the Chibuto deposit following once demand has driven the price up. Downstream opportunities from heavy mineral sands mining including zircon beneficiation, the production of titanium slag and high purity pig iron should be followed through in the short to medium term with other more adventurous opportunities such as the production of pigment and of titanium metal being investigated for implementation in the longer term. Uranium radiometric anomalies that are associated with vanadium bearing graphite schist occur in the Balama licence area. The largest of the anomalies is about 4 km long and up to 500 m wide. The Mavusi and Castro deposits, which did produce previously, are being reassessed. The Chirundu, Mutanga and Kariba valley projects are also prospective for uranium, as are the Dibwe, Kanyemba deposits, all in Zambia. The Kayelekera uranium deposit is a Karoo sandstone hosted roll-front type deposit, which has a JORC compliant (300 ppm cut off) resource of more than 26 Mt with a U3O8 content of more than 19 kt. Mozambique is committed to encouraging foreign investment in mining, and the current mining laws support this position. Mining titles and permits are granted on a first-come firstserved basis, taking into account the date of receipt of the respective applications. The available types of permits and concessions are: reconnaissance licences, exploration licences, mining concessions, mining certificates and mining passes. Mozambique has introduced an electronic mining cadastre system that has regularised the process of applying for mining licences, significantly improving access by foreign investors to its mining industry. The corporate income tax rate in Mozambique is 35%, with a 50% reduction allowed for mines for the first ten years of production. Further to this, there are various incentives in place. Mozambique has set royalties at 3% on all minerals except precious metals (5%), gemstones (6%) and diamonds (10%). Due to the long history of mining on the Zambian copperbelt, Zambia has a well-established legal and service infrastructure for the mining sector. The current mining law was passed in 1995. Although a great deal of development in the transport sector has been achieved since the previous reporting 8 years ago there is still a lot to be done. The 575 km rail from Tete to Beira has been refurbished, but is not yet up to the required standard, whilst the rail link from Tete to Nacala still needs to be established. The strategic link to the Malawi rail system through Vila Frontiera, whilst essentially intact besides a 300m section, remains closed. There is no rail connection to the coalfields south of the Zambezi in the Tete region, and this will be a development constraint. The freight throughput in both Beira and Nacala has expanded considerably in the past few years, with total volumes handled being high enough to attract direct vessel calls. If the coal development programme proceeds as planned, both ports will see the throughput increase to more than 10 Mtpa within 3 to 5 years, dominated by coal exports, but including substantial increases in the importation of mining equipment and consumables. Dredging at Beira Port is critical and the vessel size that can be accommodated decreases when maintenance dredging is not carried out. A new coal terminal is to be build upstream of the current terminal. viii

Both the Beira and the Nacala Corridor transport systems are constrained in respect of the maximum future volumes of coal export that can be accommodated – Beira in respect of vessel size and Nacala in respect of the much longer land distance and consequent higher operational costs. Although one long-term solution may be to construct a new dedicated railway and specialised terminal to handle Cape sized vessels, it would be far more beneficial for Mozambique and the region as a whole for more of the coal to be used locally in developing an industrialised nation. Main roads in the Beira corridor are in relatively good condition but need to be maintained since there is now rapid deterioration, which would be exacerbated by greater traffic volumes. In Chapter 9, projects are rated based on an assessment of capital requirements, life of operation, marketing ease, numbers employed, logistics, electrical power provision, availability of water and environmental impact. A very basic risk versus impact classification is also done to classify all projects into one of five risk-impact categories. The resultant matrix of ranked projects listed the top ten in the following order (best first): 1. Benga Coal Mine 2. Coke plant 3. Coal fed power plant 4. Zambeze coal mine 5. Tete Magnetite – ilmenite – phosphate mining 6. Iron and steel production 7. Ncondezi coal mine 8. Jewellery factory 9. Fertiliser production 10. Zircon beneficiation plant. It is important to note that the interdependency of these and other projects may be critical and it would be useful to have an in depth study of such interdependencies together with possible timing of projects especially in relation to electricity take off and current planning in mines already producing. There are further projects ranked in the matrix as well as a series of other possible projects that need further attention. Detailed assessment of the spatial development initiatives, bringing this all together with other factors of development should be seen as crucial to the ordered development of the area in the near to medium term. Chapter 12 contains a discussion of the electrical energy generation and transmission infrastructure in Mozambique and summarises both the current state of affairs as well as indicating possible future developments. Interconnections with surrounding states are briefly discussed. Mozambique’s electricity demand is projected to grow by 11% per annum to 2015. An expected 5.9% decline in natural gas production and a 4.8% planned reduction in electricity output will lead to pressure on the electricity supply. Although electrical output is likely to be constrained in the short term, the developments in coal fired power stations; further hydroelectric development and possible solar energy will mean that in the medium term electricity will be well supplied in the region. Climate change may play an important part in mining in the foreseeable future since risk of extreme weather events may cause the shutdown of production as it did recently due to floods in Australia. Industrialists will look in future at distributing mineral purchases across various climatic zones to ensure the best possibility of sustained supply. In general the environmental issues facing mining in Mozambique are not dissimilar to those experienced in all mining situations. However, there is concern over the effects of mining on the water security of some areas especially if methods such as coal bed methane extraction ix

are considered. In this respect it is important that the environmental law in Mozambique is reviewed specifically with such mining methods in mind to ensure that there is no major unseen impact on farming and rural communities. Mineral scarcity may influence world policy makers to rethink country policies around mineral resources, resource development and resource control. It is equally advisable that policy makers in Mozambique consider carefully the way forward, since the non-renewable nature of mineral resources means that a country has only one opportunity to take the best route in mineral development. Although it may be unpopular with mining companies it is likely that the state should take a degree of direct control over the mineral resource development of the country as do the US, China and Japan. One of the most important aspects of this should be a moderated level of mining with a well planned developmental approach to the extraction and local refining of minerals as well as a strong growth strategy to ensure industrialisation built out of the mineral resource strength. It is particularly important that Mozambique ensures that it supplies the maximum degree of knowledge as well as infrastructural support to the minerals industry in order to allow for a vibrant exploration and mining sector. Where foreign countries make agreements for mineral access there should be a system in place that will allow Mozambique to fully replace the lost mineral capital with other forms of capital. Careful calculation should be done to ensure that in developing its mineral potential the Mozambican people do not lose their overall capital position in being too keen to pursue a quick but unsustainable growth path which is not soundly based on an overall national development. It is to be expected that in the future, certain scarce minerals may no longer be available on the open market with equal access to all bidders, but may increasingly be available only to preferred bidders via long term contracts. For a country like Mozambique, and for mineral producers in Mozambique, global politics will inevitably enter into the supply relationships that are established. At this stage, China, India, Brazil and Australia are particularly present on the regional mining landscape through exploration, ownership or take-off agreements. Strategic minerals, and the access to them, will continue to be an issue for many countries, and their decisions to invest in a particular country will be made based on careful consideration of what they consider strategic. Mineral commodities in Mozambique that could be considered strategic include steam coal, coking coal, rare earth minerals, flake graphite, uranium, thorium and lithium. .

x

1. INTRODUCTION The purpose of this report is to update projects carried out previously in the area for the Spatial Development Initiative (SDI) programme by Mintek. The quality of the work done in those projects was excellent, whilst the use made in Mozambique of SDI planning is laudable and the results may be seen in the rapid growth that has occurred within the infrastructure and mining sectors in Mozambique over the last 10 years. The project deals with spatial development initiatives that go beyond the borders of Mozambique, however the central focus of the work will be on deposits within Mozambique. Mozambique is a moderately sized country (~0,8 million km2) situated on the eastern side of southern Africa bordered by the Republic of South Africa and Swaziland to the south and southwest, Zimbabwe to the west, Zambia and Malawi to the northwest and by Tanzania to the north. To the east it borders the Mozambique Channel of the Indian Ocean with a 2,456 km long coastline and it possesses several good natural harbours. It provides a sea route to a number of landlocked countries in Central Africa and as such is a critical trade route for the development of the continent (Figure 1). It has an estimated population of about 22 million and therefore has a relatively low population density of 27,5 people per km2. Mozambique’s capital city is Maputo (pop. ~1.1 M), with the other major towns being Beira and Nampula. It has ports at Maputo, Beira, Quelimane and Nacala. Mozambique has three lakes (Nyassa, Chiuta and Shirwa), and several large rivers (Zambezi, Limpopo, Rovuma, Lugenda, Pungwe, Komati and the Save (Sabi)). During colonial times the Portuguese built a dam to deepen the Limpopo, control its flow, and provide water for irrigation. Hydroelectric projects were built in the Manica highlands, and in 1974 the Cahora Bassa Dam on the Zambezi was completed. Mozambique has a diverse, multicultural population with ethnic groups including Makhuwa, Tsonga, Makonde, Shangaan, Shona, Sena, Ndau, as well as whites, Asians and people of mixed blood. Religious convictions include: Christian ~40%, Muslim ~20%, traditional African beliefs ~40%. The official language is Portuguese and various African languages are spoken. Education levels are low and the adult literacy rate is less than 50%. Mozambique’s first inhabitants were San hunters and gatherers. Around 100 AD, Bantuspeaking peoples with farming and ironworking skills migrated from the north. Arab traders arrived centuries before the Portuguese who reached Mozambique in 1498. Mozambique became independent from Portugal on 25th June, 1975. Mozambique is a constitutional democracy. The Front for the Liberation of Mozambique (FRELIMO) has been the ruling political party since independence in 1975. At independence Mozambique was one of the world’s poorest nations. Mismanagement and civil war from 1977-92 did not help the situation. In 1994 the country held its first multiparty democratic elections. Joaquim Chissano was elected President. On October 28, 2009 Mozambique held simultaneous presidential, legislative, and provincial assembly elections. FRELIMO candidate Armando Guebuza won 75% of the presidential vote. The region as a whole has a sub-tropical to tropical climate, it is cooler inland and experiences higher rainfall. The period from October to March is hot and rainy, with most of the rain falling rain between January and March. The coastal areas experience warm dry weather from April to September. Soils are generally infertile except along river valleys and in parts of the Angonia Plateau in Tete Province. 1

Figure 1: Mozambique – geographical context

Mozambique has an estimated GDP per capita of $933 based on purchasing-power-parity (PPP) per capita GDP (indexmundi 2010). It had a rising trend in GDP growth from 2003 until affected by the world economic crisis in 2007 as can be seen in Table 1. The country is divided into 10 provinces (Figure 2). Table 1: Real GDP growth GDP growth % Mozambique

1997-2002

2003

2004

2005

2006

2007

2008

9.0

6.5

7.9

8.4

8.7

7.0

6.8

2009#

2010#

4.3

5.2

Source: IMF 2009 # estimated

Mozambique has a diverse economy with services making up 39.7% of GDP with an annual growth 4.7%, industry producing 31% of GDP; (annual growth 10%) and agriculture contributing 21% of GDP (annual growth 7.9%). Mining only contributes 2% of GDP, however these figures will show a significant change in 2010 and 2011, since Mozambique’s mineral industry is expected to experience substantial growth across a wide range of commodities (Yager, 2008). Its natural resources include hydroelectric power, water, coal, natural gas, heavy mineral sands, nepheline syenite, tantalite, graphite, iron ore, limestone, phosphates, semi-precious stones and arable land. Fiscal reforms, including the introduction of a value-added tax and reform of the customs service, have improved the government’s ability to attract foreign investment whilst improving revenue-collection. In spite of these gains, Mozambique remains dependent upon foreign assistance for much of its annual budget, and the majority of the population remains below the poverty line.

2

Work done some years ago on the spatial development initiatives showed significant potential in Mozambique for mineral development. That work showed that one of the first areas that should be tackled was the rich coal resource. The Mozambican government has been proactive in following through with the proposals put forward in these reports and the first major projects are about to start paying off. The government expects the mining sector to significantly increase its share of GDP during the next few years with the ramp-up in coal production as well as a planned increase production of heavy minerals and tantalum. Mining Review (undated) quoted mining Minister Esperança Bias as indicating that the contribution of the mining industry to GDP might increase from 5% to 12% during the next year (2011). Coal production will rise to 2 Mtpa and is expected to peak at more than 40 Mtpa. The Minister said that Kenmare Resources expects a significant (15-20%) increase in production of ilmenite. The government has issued 1,000 licences for exploration of minerals. Royalty rates are competitive at 3% for coal to 5% (ex refinery) for gold. Significantly the minister also indicated that the government was committed to improving infrastructure to support the export plans of mining companies. She added that two thermal coal plants and a 200 MW hydropower plant would be constructed to power mines in Tete province. Media reports in August 2010 indicated that the Government was considering making alterations to the mining laws to speed up the process and simplify licensing procedures. There will be a substantial period of consultation before changes are made. Figure 2: The 10 provinces of Mozambique

3

1.1. Spatial Development Initiatives Spatial Development Initiatives are inter-regional economic planning zones based on geographic associations and usually related to current, or possible, transport routes and natural geographical features such as river courses. 1.1.1. Beira SDI The Beira corridor spatial development initiative (SDI) relates to the main road and rail link between the Port of Beira and Harare in Zimbabwe. The area studied in the previous report connected the Beira corridor SDI to the Zambezi River SDI along the Beira-Sena railway, and was limited to the area within Mozambique. 1.1.2. Zambezi SDI The Zambezi River SDI is located in central Mozambique and includes the provinces of Tete, southwestern Zambézia, northern Manica and northern Sofala. It is associated with the course of the Zambezi River, which represents a possible transport route. The SDI runs from the coast through the Tete region and into the Zimbabwe/ Zambia border zone. This area is rich in natural resources. 1.1.3. Nacala SDI The Nacala SDI includes the provinces of northern Zambézia and northern Nampula in Mozambique and eastern Zambia with a branch extending through Malawi. However the report previously written (Callaghan, 2002b) included only the southern part of Malawi and was unfinished due to a lack of client funding. The area over which the planned research took place is shown in Figure 3. The Nacala SDI is centred on the rail link from the Nacala port as it extends along an east-west axis, through Nampula and Cuamba in Mozambique, through Blantyre and Lilongwe in Malawi, and into southeastern Zambia via the road through Chipata. Figure 3: Area studied in original Mintek report on the Nacala SDI

Source: Callaghan 2002b

4

1.2. Geopolitical environment Mining is a highly capital intensive and long-term business and as a result mining companies are very sensitive to risk and especially geopolitical risk. Matimba Khoza is quoted by Feytis (2010) as saying “The challenge here in Africa is political stability as there is no reasonable company that can invest into a country with political and economical future uncertainty.” A sense of stability is not built overnight. It takes years for international companies working within a country to develop a feeling of certainty. Since Mozambique’s mineral riches have only recently received the centred attention from the multinationals, one can expect it to be a few years before they are entirely comfortable to invest without being overly conscious of the investment being into a third world country. However, interviews of various stakeholders by Letlapa have shown that, in general, the companies interviewed are satisfied with progress and with the environment in which they are working. The government can continue to play a major role by making the country attractive to players in mineral resources business. The regulatory and political climates have great importance in assessing the attractiveness for investment in a given country. Long term political stability is a prerequisite for investment with security of tenure being uppermost in the minds of potential investors. Consistency of the fiscal regime seems to be more important than the actual levels of taxation. The Fraser Institute of Canada produces what is termed indices of economic freedom. Five categories are assessed, that for Mozambique 2004-2006 is shown in Figure 4 as adjusted by whythawk.com against the benchmark countries selected as amongst the most popular emerging market investment destinations (Whythawk.com). The countries making up the benchmark are: Brazil, Chile, China, India, Indonesia, Poland, Russia and Turkey. The definitions for the data segmentation are as follows: r Size of Government: Expenditures, Taxes and Enterprises: a measure of the levels of government spending as a share of the total, the extent of the government enterprise sector, and the marginal tax rates; r Legal Structure and Security of Property Rights: the extent to which a country protects the individual rights of persons and their rightfully acquired property; r Access to Sound Money: the extent to which a country follows policies and adopts institutions that lead to low (and stable) rates of inflation and avoids regulations that limit the ability to use alternative currencies; r Freedom to Trade Internationally: a measure of the restraints that affect international exchange: tariffs, quotas, hidden administrative restraints, exchange rate and capital controls; r Regulation of Credit, Labour, and Business: the extent to which government allows markets to determine prices and refrains from regulatory activities that retard entry into business and increase the cost of producing products. (Whythawk.com). Reading the graph: r The benchmark score derives from the basket of benchmark countries and is set as equal to 1; r A country's scores are presented from 0 to 10; r Any score below 1 is below the benchmark - the closer to 0, the worse it is; Any score above 1 is above the benchmark - the higher the score, the better. (Whythawk.com). Although these international reports are often a misrepresentation of reality, and are taken from a particular viewpoint, they nevertheless represent the perception of the international investor. In the latest Fraser Institute document (2010) Mozambique still ranks amongst the least economically free countries in the world, coming in 121st place out of 141. In the breakdown the following rankings are given (all out of 141): 5

r r r r r

The size of government involvement: 128, Legal systems and property rights: 119, Sound money: 85, Freedom to trade internationally: 93, Regulation: 115. In the further breakdown of regulation it is clear that it is labour market regulation that requires most attention. (Gwartney et al, 2010). Figure 4: Bue Chart of economic freedom in Mozambique 2004-2006

Source: Whythawk.com

6

2. METHODOLOGY This project set out to update the information provided in previous reports and to identify fatal flaws in possible projects as well as to find what the steps are that may advance projects that are not fundamentally flawed and will probably come to fruition if the environment is conducive to their development. In order to be able to derive answers to these questions a desktop study was carried out in order to find the necessary data. This was put together to form an excel database and a body of knowledge from which to write this report. The work was done in three phases leading to three reports – an inception document indicating the level of knowledge at the beginning of the study, an interim report based on major changes in the world environment since the previous reports were written and incorporating knowledge derived from interviews with some interested parties, and this final report. Such work must of its very nature be somewhat speculative and the suggestions made in the document are based on the considered opinion of a group of experts in various fields related to mining.

7

This page is intentionally blank.

8

3. GEOLOGY Metamorphosed rocks of the polycyclic Mozambique belt underlie much of the area under consideration, whilst the Zambezi metamorphic belt intersects it and lies in an east-west zone between Zimbabwe and Zambia. Important also are intrusions of various ages; the Mesozoic Karoo sediments; and Quaternary sediments carrying heavy mineral deposits.

3.1. Mozambique Mozambique has a diverse geology, with rocks of Achaean, Proterozoic, Karoo, Mesozoic, and Cainozoic age (Schlüter, 2006). The older crystalline rocks occur mainly in the north and comprise gneiss, schist, quartzite and limestone whilst the younger, Tertiary and Quaternary sediments and volcanic rocks occur in the south. In the northern part of Mozambique in the Nacala Corridor, mylonitic gneiss, with migmatitic augen gneiss, leucocratic granite gneiss and leptite occur in the upper part of the Nampula Supergroup, whilst tonalitic to trondjemitic migmatites with concordant sheets of leucocratic granite gneisses occur in the lower part. The Lurio Supergroup occurs in the Mugeba Klippe and Monapo areas and consists of alkaline to calc-alkaline granulites, nepheline syenite, alkali granite and anorthositic gabbro. The metamorphosed and sheared Cuamba unit (tonalite and diorite) of the Unango Group occurs in the Nacala corridor in Zambia and into Malawi and western Mozambique. Intrusions of Precambrian granite occur mainly in Tete Province and western Zambézia (BGS, 2002). Mafic dykes crosscut the crystalline rocks in places, especially near Tete and along the Zimbabwean border (Dias and Wilson, 2000). Mineralised veins and associated alluvial gold deposits occur in the crystalline basin in the valleys of the Cocone, Metuisse and Namirroe Rivers (Dias and Wilson, 2000). The Mesozoic, (245-65 My) Chilwa and Kangankunde complexes consist of carbonatites, syenites, nepheline syenites, pyroxenites, alkaline dyke swarms and agglomerate vents. Altogether, about seven volcanic necks or ring structures and ten dyke-like bodies have been located in the Lake Chilwa area. Sediments and volcanic rocks of Karoo age (180–300 My) crop out in a narrow band along the western margin of the coastal plain and along the Zambezi. These Karoo age rocks have tended to fill grabens formed due to east African rifting. The Moatize coal basin comprises a graben structure approximately 35 km long with an average width of 1 km that was formed in early to middle Proterozoic times and filled with lower-Karoo aged rocks. Minor occurrences of Jurassic (135–180 My) sandstones, conglomerates and limestones occur in Lupata, Nampula and Cabo Delgado Provinces, whilst Cretaceous (70–135 My) sandstones, calcareous sandstones, clays and carbonates with occasional conglomerate occur southeast of Tete, as well as along the southwestern border and in a narrow strip along the northeast coast (BGS, 2002). Very young (Cainozoic - 1.6–70 My) marine carbonates and sandstones occur in the coastal region of Cabo Delgado and in large parts of southern Mozambique showing that there has been a considerable regression of the sea in relatively recent times. Quaternary sediments consist mainly of unconsolidated sand, clay and limestones as coastal dunes, river alluvium and lacustrine deposits (BGS, 2002). In Mozambique these host important heavy mineral deposits.

9

3.2. Zambia The rocks of Zambia include the Basement Complex and the Muva, Katanga and Karoo Supergroups. The Karoo strata are overlain by Mesozoic, Tertiary and Quaternary sediments. Zambia’s most important mineral export is cobalt, which is produced as a by-product of copper in the lower Roan Group, Copperbelt Province (outside of the ambit of the SDIs being considered in this report). Other metal commodities include lead, tin and zinc. A variety of other commodities occur including mica, talc and gemstones including emeralds, aquamarines and garnets. Economic coal deposits may be found in the Lower Karoo, and uranium in the Upper Karoo (Schlüter, 2006).

3.3. Zimbabwe Zimbabwean geology is dominated by the Zimbabwe Craton, which is intruded by the Great Dyke (an ultramafic/mafic dyke complex). To the south of the craton lies the Limpopo Mobile Belt, to the northwest is the Magondi Supergroup, to the north the Zambezi Mobile Belt and to the east is the Mozambique Mobile Belt. The craton is overlain by sedimentary basins of Proterozoic and Phanerozoic age. Zimbabwe’s main economic mineral products are PGMs, chromite, gold, nickel and recently diamonds. Asbestos is also economically significant, but the associated health risks threaten its production. The most important product in the country’s mining industry is gold. Platinum group metals are also of high importance due to their occurrence in the Great Dyke. Nickel is the third most important commodity (after gold and PGMs) in terms of gross value. Zimbabwe also has significant coal reserves. Other minerals occurring in Zimbabwe include asbestos, vermiculite, graphite, mica, limestone, and black granite (Schlüter, 2006).

3.4. Malawi Malawi’s geology is dominated by igneous and metamorphic rocks of the Basement Complex of Precambrian age; covered in places by younger Cainozoic sediments (Dill, 2007), see Figure 5. The southern limit of the East African Rift Valley extends down through Malawi (BGS, 2002). The Pre-Mafingi Group consisting of regional metamorphic gneisses and granulites occurs around Zomba, to the northeast of Blantyre and in the Dedza area east of Lilongwe. Malawi’s carbonatite complexes have economic significance, containing rare earth elements, as well as apatite, barite, strontianite and pyrochlore. Significant commodities occurring in various parts of the country include uranium, pyrite, pyrrhotite and vermiculite. Coal deposits occur in the northern part of the country. Other commodities include bauxite, china clay, corundum, dimension stone, graphite and silicon sand. Exploration for several other products has also been conducted in recent years, including chromite, copper, gold, gypsum, nickel, petroleum, rutile and salt (Schlüter, 2006). The British Geological Survey recently digitised and reproduced the geological map of Malawi. (BGS, 2010) Karoo strata and Cretaceous igneous and sedimentary rocks cover parts whilst Quaternary and Tertiary alluvial and colluvial deposits along Lake Malawi may host important heavy mineral deposits.

10

Figure 5: Simplified geological map of Malawi indicating mineral deposits

Source: Dill, 2007

11

This page is intentionally blank.

12

4. MINERAL SCARCITY The concept of energy and mineral scarcity is not new, but the imminence of mineral scarcity in 2011 is such that it can no longer be ignored. Mineral scarcity is related directly to the entire value chain, to self-sufficiency (Kooroshy et al 2009) and importantly to the ability of the world to continue to produce enough food for burgeoning populations. For these reasons mineral scarcity lies at the centre of future social security and as such needs to become an area for careful discernment when developing policy. It was as early as 1956 when M. King Hubbert, a Shell Oil geologist, predicted, with remarkable accuracy, that oil from the lower 48 states of the USA would peak in around 1969. Hubbert’s accuracy in predicting the peak in American oil production has led many other theorists to follow in his footsteps, and look at oil, all energy and mineral production peaks as a way in which to plan for future scenarios and shortfalls. Although there is much dissension within the scientific community over the detail of such studies, there is little choice but to accept the essential premise that non-renewable sources are in serious danger of running out of continuous economic supply – many of them in the foreseeable future (1020 years). The chief arguments against the urgency of mineral scarcity are: r Technology will save us r Resources are only estimates r Markets will self correct. All of these arguments have validity. However, technology, even if it can resolve the issues, will tend to rely on other non-renewable resources that may well be as scarce. Furthermore, with regard to the mining industry in particular, Heap (2005) argues that technological innovations have been a long standing feature, with the implication that the moderating effect that they will have on future cycles will be no more significant than they have been in the past when high grade resources were far more available. Resource figures are estimates, this is true, however experts carry out these estimates and the estimate may be lower or higher than the amounts actually in existence. One of the arguments often used to indicate that there is no end to mineral availability is that only around 0.01-0.001% of the total mineral resource in the earth’s crust is mined (Kooroshy et al 2009). Whilst true, this presents a confusing picture to the non-geologist. The reason why such a small amount of the resource is tapped is twofold. Firstly, only a very small proportion of the resource exists in concentrations great enough and shallow enough to be economically mined – furthermore due to the way in which the term “resource” is defined we may not (and may never) know if much of the resource is actually present at all. Secondly and perhaps more importantly, dependent on what is being considered “the total resource” the term may include the resource of an element widely dispersed in minerals in which the element is practically inaccessible. This situation, where an element is present in trace amounts as an impurity in a mineral from which it cannot be readily extracted by an industrial process, is referred to as the “mineralogical barrier” (Figure 6). Thus the mineral reserve rather than “resource” or “reserve base” should be the number taken into consideration. However, the term “reserve”, which relates to minerals currently technically and economically producible has the problem of changing continually because it is directly related to such imponderables as the current (or expected future) price of the commodity, mining conditions, wages, taxation etc. The energy costs of producing metals that are geologically or geographically less accessible (more remote, deeper, lower grade, less amenable to processing) may be so great that in a world of restricted energy availability, that they also become economically inaccessible.

13

Figure 6: Element availability

Source: Kooroshy et al 2009 after Skinner 1976

It is true that markets will self correct, but that means that the resource in question will at some point be entirely out of reach of the “ordinary” citizen and become a luxury good that cannot support industry. The Raw Materials Group has the opinion that in fact there is no foreseeable shortage and surprisingly they attempt to include all economists and geologists as supporting their view! They state that “today most economists and geologist agree there are enough reserves of metals to cover future demand.” (RMG 2006). Over the past ten years global mineral markets have experienced the longest boom in mineral commodity prices since World War II. Demand has shown unprecedented growth and supply has struggled to keep pace. Although at first seen as a transitory situation by world governments, mineral scarcity issues have recently become recognised by government policy makers and strategists. Concerns in mineral scarcity debates have tended to focus on energy and on certain minor and speciality metals that are key to emerging high-tech applications and ‘green’ technologies (Rademaker and Kooroshy 2010). International concern centres not only on the scarcity itself but equally on the degree to which countries (notably China) are using the situation for what Rademaker and Kooroshy (2010) call “resource diplomacy”.

4.1. Definition of scarcity The difficulty in dealing with the concept of mineral scarcity is that we encounter a situation where the ultimate recoverable amount is uncertain and the future demand is uncertain. Thus the actual number of years of continued supply is a figure that is not only uncertain but changes continually. However there are many estimates (Figure 7) of expected trends, and rather than trying to avoid the problem because it is not clear, the mineral strategist should pay increased attention to it, so as to ensure that the best solutions to the problems that scarcity will bring with it can be found. It is important to realise that the projections in Figure 7 do not take into account new discoveries or changes in consumption (e.g. consumption reduction, re-use, recycling, substitution). Furthermore, these projections are based on current reserve figures and since reserves by definition are “currently economically recoverable” the actual amount of reserve will change both with changes in geological

14

knowledge as well as with market and technological changes. This latter fact has often been used as a reason to ignore the scarcity debate, but that too misses the point. There is no doubt that mineral scarcity will have a direct impact on the world in the very near future, and it is the ability to cope with the changes that it implies that will separate out nations with foresight. Ideally mineral scarcity should be seen in the context of overall scarcity and abundance of all goods and services and with insight into the relationship of mineral scarcity to other factors of production. Figure 7: Years of extraction until exhaustion: based on current reserve

Source: Kooroshy et al 2009

4.2. Supercycles A supercycle has been defined as a prolonged period in which commodity prices rise due to demand driven by major periods of development. Heap (2005) defines a supercycle as “a prolonged trend (decade or more) rise in real commodity prices, driven by urbanization and industrialization of a major economy.” Three supercycles have been identified since the late 19th century. The first related to the industrialisation of the USA and stretching from the late

15

1800s to the early 1900s. The second one started during WWII and continued up to 1975 driven by the post war reconstruction in Europe and the industrialisation of Japan. Although the fundamental price trend of commodities during a supercycle is upwards, markets tend to be volatile as demand and supply mismatches develop due to the rapid demand changes. The latest cycle started in 1999. Since then we have seen commodity prices rising steadily and following the pattern of the beginning of a long-term upward super cycle. The world economic crisis which developed around a property bubble, greed and bad banking practice did cause a dip in the longer term trend, but the trend has clearly re-established. This latest cycle has been driven so far by China, the world's largest country and fastest growing economy, which is undergoing a period of industrialization and urbanization. There has been some degree of argument as to whether in fact supercycles occur at all, and, more pertinently, whether the phase that the world finds itself in currently can be seen as a supercycle. Cuddington   and   Jerrett   (2008)   taking   an   “agnostic”   view   have   applied   econometric   techniques   to   6   LME   metals   based   on   150   years   of   prices.   The   techniques   that   they   have   used   clearly   show   the   existence   of   supercycles   in   support   of   previous   authors   who   have   considered   these   trends   to   be   evident   (see   Figure 8).   It   is   interesting   to   note   that   the   Raw   Materials   Group,   although   admitting   that   there   is   merit   in   the   argument   of   supercycles   does   not   see  an  upward  sloping  base  price  for  metals  in  the  future  up  to  2025  (RMG,  2006) Figure 8: Super cycles of six base metal prices

Source: Rademaker and Kooroshy 2010

Whether   it   is   demand   or   supply   that   controls   the   supercycle   remains   an   issue   for   conjecture   according   to   Cuddington   and   Jerrett   (2008),   who   quote   Tilton   as   preferring   the   idea   that   the   supercycles   are   likely   to   be   supply   driven   (due   perhaps   to   technological   breakthroughs   dropping   commodity   prices),   although   most   commentators   indicate   that   demand   is   the   likely   driver.   An   interesting   point   is   made   in   that   technological   breakthroughs   may   affect   only   individual  metals  if  the  technology  only  eases  processing  for  that  metal.  However  since  there  is   a   high   correlation   between   metals   in   the   supercycles   seen   in   the   past,   the   idea   that   they   are   supply  driven  due  to  technological  change  becomes  less  likely  and  this  gives  more  credence  to   the  hypothesis  that  supercycles  are  demand  driven.     16

Martin  Creamer  (2011)  reports  on  an  interview  with  Rio  Tinto’s  Harry  Kenyon  Stanley  in  which   he   indicates   that   global   demand   will   require   the   mining   industry   to   produce   more   mineral   commodities  in  the  next  20  years  than  it  has  in  the  last  10,000  years.  

4.3. Energy The realisation throughout the world that oil and other conventional energy mineral commodities such as coal and uranium are being depleted is beginning to change perceptions of mineral commodities altogether and is emphasising the non-renewable nature of minerals. One of the fundamental issues is the very close relationship between mineral commodities of all types and energy. Fundamentally, the issue is that, the production of mineral commodities is highly energy dependent and that many of the alternative methods of harnessing energy are mineral dependent. The interdependence of minerals and energy presents a set of unique problems when considering the future industry. It is important that strategists and government planners start now to see the significance of uranium, thorium, rare earths, platinum etc as “energy elements” and see the special nature of mineral commodities that can in future be used in the production of energy.

4.4. Food security The 1996 World Food Summit defined food security as “when all people at all times have access to sufficient, safe, nutritious food to maintain a healthy and active life”. The concept includes both the ideas of physical and economic access to food and considers dietary preference. This concept may be well considered but it is already far from being met in the world and especially not in Africa. With rapid population growth around the world there are more than 200 million more people to feed each year. Agriculture remains the main economic sector in Mozambique at present providing livelihoods for most Mozambican families. However, only 12% of Mozambique’s 36 M hectares of arable land is currently being cultivated (USAID, 2011) whilst considerable poverty, food insecurity, and malnutrition are still prevalent. Food security is dependent on good agricultural and environmental practice and on adequate addition of soil nutrients to ensure a healthy nutrient rich soil. Besides energy, carbon, oxygen and hydrogen which plants extract from the sun, the air and water, plants also require macro and micronutrients especially if high yields are expected in order to feed burgeoning populations. The macronutrients are nitrogen, phosphorous, potassium, magnesium, calcium and sulphur whilst the micronutrients are iron, zinc, copper, manganese, boron and molybdenum. Pertinent to the discussion here is especially nitrogen, phosphorous and potassium, very important macronutrients which are mineral based. Potassium can be obtained relatively easily as a slow release fertiliser from rock dust. Nitrogenous fertilisers are produced chemically from ammonia which is produced downstream of coal or other hydrocarbons and phosphates are produced primarily from phosphate rock. Due to the shortages of phosphates already being experienced and the major shortages facing humankind in the medium to long term Mórrígan (2010) calls for policy responses to prepare society for the decline of phosphorous supplies, to promote the efficient use of phosphorous and to develop phosphorous recycling programmes. Due to the looming shortage in hydrocarbons, nitrate fertilisers are set to become very expensive in the future and shortages in phosphates are already on the horizon. However Mozambique is in an excellent position in that it has good hydrocarbon sources as well as phosphate deposits. The challenge is to ensure local beneficiation and sale within southern Africa to ensure food security for the region.

17

This page is intentionally blank.

18

5. WORLD ECONOMIC CLIMATE 5.1. Introduction In the future world, mineral wealth together with human capital and unspoilt agricultural land is likely to denote true wealth. However, power will tend to be in the hands of those who learn early the value of minerals and control the production of useful products from minerals. Therefore it is critical at as early a juncture as possible to ensure that mineral processing is held together with the mineral resource. It is important to note that this view will NOT be popular with developed countries that currently hold the bulk of refining and manufacturing ability, and therefore will not assist in obtaining financing from those countries to develop the refining and processing ability at source. Kooroshy and others (2009) state: “The control of the supply of scarce minerals is in the hands of a few countries and companies. Faced with the prospect of increasing demand and tightening supply of minerals used in critical applications, access to scarce minerals and stockpiles are increasingly framed as issues of vital interest or national security. Some countries are pursuing mineral policies aimed at preventing or mitigating mineral scarcity. The US, China and Japan pursue mineral policies that secure supplies, assuming growing scarcity and economic disruption when supplies dwindle. These policies may create their own dynamic, distorting free market dynamics and tightening supply. Mineral scarcity is no longer a trade-issue but an issue of strategic interest.” (my emphasis). The problems of mineral scarcity are not the only ones facing the industry. Tony Ottaviano, BHP Billiton’s vice president for planning is reported to have stressed a series of difficulties which are placing pressure on the delivery of iron ore projects around the world. Mozambique may escape some of these but certainly not all. Capital costs have escalated since the global financial crisis, as business tries to build in a financial safety factor. There are global shortages of skilled labour and this will inevitably lead to higher costs. Ottaviano is reported to have specifically mentioned the level of political risk in Africa, which he said would be supplying more than 25% of the world’s iron ore by 2025 (Swanepoel, 2011).

5.2. Demand Demand for mineral resources in the past has been closely related to industrial development and the urbanisation of populations in Europe, the USA, Japan, South Korea and Taiwan. The chief reason appears to be the demand for metals in building the infrastructure of a modern economy. After the industrialisation of the economy is achieved metal demand per capita decreases rapidly, but still remains higher than that seen in undeveloped rural economies. China is clearly undergoing the same fundamental change of rapid industrialisation and urbanisation at present and there are indications that India may also be beginning its slow move to a highly urbanised and industrialised country. Chinese metal demand grew at 10% per annum from 1990-2006 (RMG, 2006) and has accelerated to 17% per annum since 2004 (Kooroshy et al 2009). In the 2005-2006 year China became the single most important user of most metals and accounted for over 70% of the global metals growth (RMG, 2006, Kooroshy et al 2009). After the recent earthquake and tsunami devastation in Japan there will be extra demands on the market that are not fully clarified yet but certainly the demand for certain metals and notably vanadium, copper and possibly niobium and molybdenum are expected to increase worldwide. It is important to understand that besides the demand growth from the infrastructural development required during urbanisation and industrialisation, the individual demand of citizens increases as they become more affluent (white goods, vehicles, etc). Once basic necessities are met at a family income of some $5,000 per annum, the demand levels for metal rich goods rapidly increases. In Asia demographic projections indicate that some 250750 million families will pass this threshold between 2000 and 2020. Although China is still 19

struggling with poor infrastructure and highly congested roads, it passed America as the largest consumer of new motorcars in 2010 with sales of an estimated 17.5-18 million vehicles (Waldmeir, 2011) and this figure is broadly expected to pass 20 million in 2011. The growth phase in China is likely to continue for at least another 10 years whilst that of India is close behind. Africa too has a billion poor people who will want to move out of their current state of poverty and equally have a right to a better standard of living. In essence barring major tragedy (and here the aftermath of the Japan earthquakes and tsunami should not be discounted), the current phase of intense growth is expected to continue (with modification by normal business cycles) for thirty years or more. For the Mozambican minerals industry this means that there is unlikely to be any major abatement in demand in the lifetime of many deposits and entrepreneurs can go ahead with developments where current demand is in place, and where local conditions are favourable.

5.3. Supply Commodity supply is largely dependent on known reserves and the ability to optimise the mining, beneficiation and movement of the metals from source to point of demand. In times of expanding demand, lead times become critical and can result in wild price fluctuations, as supply is temporarily unable to meet demand. Poor lead times can also result in substitution where this is feasible. In the past the easy-to-mine deposits have been exploited. As demand increases, supply will have to rely more and more on lower grade, deeper and more geographically inaccessible deposits. All of these will increase the energy cost of mining and extraction of the useful metals from the ores. As the cost of energy increases geometrically the cost of mining will therefore increase at an even greater rate.

5.4. Commodity Prices A fundamental change in the world economy, as well as the slow realisation amongst industrialists and governments of the reality of future mineral scarcity has set in motion certain price trends in the metals and minerals industry that will fundamentally change the perception of mineral development in years to come. Real commodity prices tend to show long-term downtrends. However, the emerging supercycle combined with the imminent peak production for some commodities being reached is likely to mean that there will be a period of increasing prices of commodities in real terms during the next 10-20 years. Heap (2005) suggested that project evaluators should use higher equilibrium prices than had been used in the recent past. He indicates that whilst average margins are likely to remain constant, increasing demand growth will be met by higher cost of production and longer lead times, which will result in higher prices and extended periods of market tightness which is likely to lead to a high level of volatility in pricing. Heap’s (2005) equilibrium pricing list is shown in Table 2. His methodology in determining these proposed equilibrium prices is counter-tradition in that he attempts to foresee the influence of existing production capacity, where costs are already largely depreciated as well as taking consideration of the fact that mining operations rarely return their cost of capital. Whenever considering the future pricing of mineral commodities it is important to realize that these prices are highly variable and may be affected greatly by such issues as flooding (as recently experienced in Australia), transport breakdowns, workers strikes, and even simply political comment that can lead to market uncertainty. However, making broad estimates is a requirement for the development of mining business and essential for the understanding of the scenario in which further research into the development of spatial initiatives in Mozambique is set. RMG (2006) gives a set of forecasts (Figure 9, Figure 10, Figure 11) that can be used in comparison with others such as those by Heap 2005 (Table 2). A summary of the RMG forecasts is shown in Table 3.

20

Figure 9: Conservative coal forecast by RMG (2005$ terms)

Source: RMG 2006

Figure 10: Conservative Iron ore forecast by RMG (2005$ terms)

Source: RMG 2006

Certain rare earth oxides are very much in demand because of their use in modern technology such as computers, mobile phones and television sets and especially in green technologies such as hybrid vehicles. Globe (2010) listed a set of prices based on the late 2009-early 2010 market and these are reproduced in Table 4. 21

Figure 11: Conservative base metals forecast by RMG (2005$ terms)

Source: RMG 2006

Table 2: Appropriate Long-term (Equilibrium) Commodity Prices (2005$) Commodity

Value unit

Equilibrium Value

Value unit

Equilibrium Value

Aluminium

$/lb

0.70

$/t

1543

Coal, Coking

$/t

62

$/t

62

Coal, Thermal

$/t

33

$/t

33

Copper

$/lb

0.95

$/t

2094

$/mtu

0.45

$/mtu

0.45

Lead

$/lb

0.27

$/t

595

Nickel

$/lb

3.50

$/t

7716

Oil

$/bbl

28

$/bbl

28

$/lb

0.50

$/t

1102

Iron ore (lump)

Zinc Source : Heap 2005

Both Heap (2005) and RMG (2006) have projected values that do not show a fundamental change due to the expected levels of mineral scarcity in the future. In the case of the Raw Materials Group prediction, this is to be expected since they do not see any fundamental scarcity of minerals in years to come.

5.5. Financing The recent economic recession was a banking crisis, which came into being as a result of excessive numbers of loans being granted on over-optimistic terms to the lower-income sectors in the US. As interest rates rose, housing prices fell, repayments became difficult, and foreclosures became commonplace. The high-risk loans that had been granted and 22

could not be repaid resulted in large financial institutions being distressed and many suffered from the possibility of collapse without the support of governments (Wikipedia 2010). Table 3: Envisaged commodity prices – 3 scenarios Pessimistic

Conservative

Commodity

Units

2006

2010

2020

2025

Coal, Coking

US$/t

111

57

55

Coal, Thermal

US$/t

51

34

Copper

US$/t

7379

Iron ore fines

US$/mtu

Iron ore lump

Optimistic

2010

2010

2025

2010

56

77

73

2020

2025

73

96

91

33

33

45

90

43

43

56

53

2027

1875

1885

53

2703

2500

2490

4793

4549

0.71

0.45

0.43

4490

0.44

0.54

0.52

0.52

0.63

0.60

US$/mtu

0.91

0.57

0.59

0.55

0.56

0.69

0.66

0.66

0.80

0.76

0.75

Iron ore pellets

US$/mtu

1.13

Lead

US$/t

1383

0.94

0.91

0.89

1.04

0.92

88

1.19

1.06

1.03

507

485

488

676

647

644

898

853

Zinc

US$/t

3261

842

1014

970

975

1351

1293

1289

2118

2011

1984

Source: Raw Material Group 2006. Prices at 2005 terms assuming 2-3% inflation

Table 4: Individual rare earth oxide prices (99% purity) Rare Earth Oxide

Grouping

¹Lanthanum Oxide – La2O3 ³Cerium Oxide – CeO2 ¹Praseodymium Oxide – Pr2O3 ¹Neodymium Oxide – Nd2O3 ¹Samarium Oxide – Sm2O3 ³Europium Oxide – Eu2O3 ²Gadolinium Oxide – Gd2O3 ¹Terbium Oxide – Tb2O3 ³Dysprosium Oxide - Dy2O3 ²Holmium Oxide – Ho2O3 ²Erbium Oxide – Er2O3 ²Thulium Oxide - Tm2O3 ²Ytterbium Oxide – Yb2O3 ²Lutetium Oxide – Lu2O3 ²Yttrium Oxide – Y2O3

Light Light Light Light Light Heavy Heavy Heavy Heavy Heavy Heavy Heavy Heavy Heavy Heavy

$/kg 6.30 5.85 28.60 26.70 3.40 524.00 7.86 490.00 197.50 25.38 25.50 790.00 155.30 238.00 10.01

Source: Global 2010:

¹Sourced from Lynas Corporation, February 2010; ²Sourced from Stans Energy Corporation, December 2009; ³Sourced from www.asianmetal.com – spot prices, April 2010

In the aftermath of the recession, banks have reassessed their lending criteria, and become much more cautious about making loans. For the mining sector, this has meant that project finance is much more difficult to come by and many projects have been put on hold (Smit, 2009). Mining companies had been too eager to accumulate debt before the recession and were unaccustomed to the fiscal discipline that was required in the recession period and that continues to be required. The banking crisis and its aftermath may present difficulties for Mozambican projects since considerable amounts of money will be required to bring mega-projects into being (Smit 2009, Candy 2011). Where companies have not accumulated significant quantities of debt they will be in demand by investors who are now particularly wary of debt-laden companies, and these investors may be a good source of a level of development funding that banks are unwilling (or unable) to provide. Ives (George Media Network 2011) notes that mid-tier companies should rather look towards investors than towards banks for funding, and reduce the temptation of incurring debt. While this may lead to a dilution of equity, it will result in mining companies remaining in existence in the long term. For the Mozambican mining 23

sector it remains important that the country is perceived as being investor friendly, since this is a time in which the investor rather than the bank is seen as vital for project development. What is interesting is that some regions have shown that lenders remain responsive to projects that are seen as state sponsored, or having some state involvement in feasibility studies (Plastemart 2011). The Mozambican government might want to consider that some form of public support for mining ventures might similarly encourage otherwise jittery investors to invest in the country. Otherwise, the credit crisis may actually assist in developing Mozambican greenfields projects. This is because, during the pre-recession period, easy access to funding had made it easy to acquire assets rather than grow organically. This resulted in “a churn of existing projects” rather than the development of new projects (Nedbank Capital mining and resources co-head Mark Tyler, quoted in Candy 2011). Since many of Mozambique’s projects are in the very early stages of development, this emphasis on exploration and greenfields projects may assist Mozambique to attract investors. However, it is often noted that offtake agreements are becoming commonplace in investor funding agreements. These offtake agreements will limit Mozambique’s ability to beneficiate commodities, since the export of raw materials may be a precondition for investing. Although this could lead to rapid early economic development it carries with it the threats of a resource curse and of low-job economic growth similar to that seen in South Africa. In addition, since investor funds are more readily available in the East at present, with Europe and the US still attempting to recover to their pre-recession growth levels, Mozambique may find that many of the mining companies who express an interest in projects will be from Asia. This suggests that an active engagement and an attempt to understand these culturally-different firms’ expectations of mining within Mozambique may be required. This also suggests that any government-sponsored roadshows that attempt to attract investment should probably focus primarily on this region and on listed companies that are perhaps listed on the Australian, Singapore, Bombay or Hong Kong stock exchanges.

24

6. MINERAL DEPOSITS The Manica Belt in Mozambique contains gold, copper, asbestos, lead, iron, nickel and bauxite. The Gairezi and Umkondo Groups contain iron, copper and limestone. Pegmatites in the Zambézia and Nampula Provinces boast minor metals, gemstones, beryl, mica, feldspar and radioactive minerals, notably niobium and tantalum. Alluvial gold deposits are also found in this region. In northeastern Mozambique, pegmatites contain tantalum, along with columbium, antimony, bismuth, lithium minerals, quartz and beryl. Coal deposits may be found in the lower Karoo Supergroup. Ilmenite, rutile, monazite and zircon are found in dunes and beach sands as heavy mineral deposits (Schlüter, 2006). Mozambique plays a significant role in world aluminium (production not mining), and ilmenite, tantalum and zircon mining (Yager, 2008). Other mineral commodities found in Mozambique include asbestos, coal, graphite, fluorite, bauxite, limestone, nepheline syenite, halite and gypsum (Schlüter, 2006). A World Bank study identified four main constraints on the mining sector of Mozambique: 1. Insufficient geological information; 2. Inadequate legal and regulatory frameworks (especially regarding land tenure); 3. Lack of capacity of government institutions in the sector; and 4. Poor infrastructure. In 2004 the Nordic Development Fund, together with the World Bank and the African Development Bank (AfDB), agreed to finance the geological mapping of Mozambique. Contracts were awarded and the work started, unfortunately the information resulting from this is not easily available. Overall regulatory responsibility for mining rests with the Ministry of Mineral Resources and Energy. The Direccao Nacional de Minas (National Directorate of Mines) carries out administration and licensing. The mining taxation regime dates from 1994. In 2002 new legislation was introduced providing guarantees to owners of mining concessions, granting rights to artisanal miners, and consolidating ad hoc incentive schemes into a new fiscal regime for foreign investments. The previous reports done by Mintek considered the following projects to be of particular interest: r Moatize Coal Ø Thermal power station (for take-off of steam coal) Ø Chemical industry r Chibuto titanium Ø Production of titanium slag Ø Production of pig iron r Cheringoma plateau limestones (e.g.Muerédzi or Muanza) Ø Cement factory r Moma Ø Production of titanium slag r Mont Muande iron (prefeasibility) Ø Production of steel billet r Nepheline syenite Ø Clinker Ø Alumina Ø Glass and ceramics industry r Hard rock and alluvial gold mining (esp. Revué River) r Mont Muambe fluorspar r Evate Apatite (Monapo Structure) 25

r Heavy mineral sands near Moma-Congolone (Kenmare Resources): r Mulanje Mountain bauxite Whilst the following were considered to be potential opportunities: r Morianga bauxite deposit which is already in production for refractory grade bauxite r High grade graphite deposits especially in the Satèmua area r Chidue copper r Apatite especially at Mont Muande r Dimension stone throughout the area but especially in the Tete province r Estima dumortierite deposit r Morrua and Marropino niobium and tantalum r The Alto Lingonha pegmatite belt r Gold in alluvial deposits and quartz veins r Kaolin and graphite r Rare earths from the Chilwa alkaline complex, Kangankunde Hill complex and Monkey Bay r Titanium (Heavy mineral sands) at Salima, Monkey Bay, Unga Lake Chilwa and Tengani r Various gemstone deposits from the Zomba plateau and Likudzi

6.1. Aggregate Aggregate in general is widely available inland in Mozambique, especially from the felsic volcanic rocks (rhyolites) since these are generally more stable than the more basic lava varieties such as andesites and basalts. Sand and gravel is available mainly along rivers and at the coast. Consumption is expected to increase significantly due to the increase in mining activity and consequent rail and road construction and improvement. This consumption pattern should remain high if Mozambique is able to ensure that the advantages of the mining (inputs, sidestream and downstream industries) are fully utilised. The majority of active stone quarries are located around Maputo (outside of the study area) where requirements are the highest and mostly comprise rhyolite deposits. In the Beira SDI aggregate is quarried in several places between Chimoio and Manica. Ballast and aggregates for the rehabilitation of railway lines and roads are quarried at Xiluvo with the aggregate being loaded directly onto railway wagons in the village of Xiluvo. In 2006 aggregate production amounted to 1,178,997 m3 (Lehto and Gonçalves, 2008). Conclusion This industry provides aggregate as required to building projects. It is expected to grow due to the strong growth in mining activity and may stabilise on a higher level than in the past. Aggregate is a low cost material and is quarried as close to the usage site as possible, however the industry in Mozambique is constrained by the high transport costs due to insufficient availability of rail and road networks as well as poor maintenance of those that do exist.

6.2. Aluminium minerals 6.2.1. Reserves and resources Occurrences of lateritic bauxite occur in a variety of areas covered in this study and especially in association with high altitude areas (over 1600 m above sea level) and due chiefly to alteration of alkaline rocks. In Mozambique bauxite occurs in the mountain in the Sierra de Snut Moriangane, Sierra Vumba in the area of Chimanimani-Rotanda, Sierra Suir (Zuira) and around Catandica in Manica Province (Lächelt, 2004), whilst a significant deposit occurs at Mont Mulanje in Malawi. In the Zambezi Corridor, bauxite occurs at Mont Salambidua in

26

the Tete Province, and Mont Mauzo, Mont Derre (associated with nepheline syenite) and others in the Zambézia Province. Four bauxite ore types are to be found in Mozambique. They are: white saprolitic bauxite, light brown saprolitic bauxite, brown ferruginous, saprolitic bauxite and white kaolinitic clay with concretionary white bauxite. A resource estimate for bauxite in Mozambique as a whole is 6.13 Mt (Callaghan, 2002a). Currently only the Morianga deposit is being exploited. Besides this and Mont Mulanje, deposits are generally of adequate grade, they are small and are unlikely to be viable at a meaningful scale to make a significant contribution to the region. The nepheline syenite intrusions in Zambezia province, such as Mount Mauzer, Cargo, Sierra Tundo, Derre and others may be capped with bauxite and of these Mount Mauzer represents the best known deposit (Lächelt, 2004). 6.2.2. Market Bauxite (>45% Al2O3) is the major source of alumina (Al2O3) with about 85% of bauxite mined going into the production of aluminium metal. Nepheline syenites present a secondary source used by the Russian company RUSAL with their minimal waste technology. Bauxite is also used for refractories (5%), abrasives (4%), cement production (3%), chemicals & steelmaking (2% each), and welding.

Production of aluminium metal from bauxite is a two stage process with alumina being extracted from bauxite in a refining process. The alumina is often then exported to a locality with cheaper electricity (since breaking the Al-O bond is an energy intensive step) before being smelted to produce aluminium metal. Because the industry is so capital intensive, and due to a series of buy-outs and consolidations, it is dominated today by a few large, vertically-integrated companies. Alcoa, Chalco, Alcan, RUSAL and BHP Billiton made up about 60% of the 68 Mt alumina production in 2006 (GAC, 2011). Actual alumina sales are usually priced at a percentage of more liquid and transparent aluminium price quoted on the London Metal Exchange (LME) (GAC, 2011). Typical contract would be in the order of 12,5% (give or take a percent) of the LME aluminium price, whilst spot prices, as can be expected would be much more volatile. More recently prices have increased and pricing today is at the high end of historical prices (GAC, 2011). Historically, alumina supply and demand has been balanced. Some 1.95 t of alumina is required to produce a tonne of aluminium. The annual production capacity of aluminium is 38 Mt and that of metallurgical grade alumina 75 Mt. However, recently, due to Chinese demand alumina has been in short supply (GAC, 2011). At the beginning of 2008 there was a market shortfall, but that was corrected with the economic crisis, which resulted in a significantly reduced demand and concomitant fall in aluminium price. Although some alumina refineries have reduced production or closed down, production has temporarily outstripped demand resulting in the current oversupply of aluminium. With the excess production capacity waiting in the wings for demand to pick up, there is no direct indication that new production in the short term will be particularly beneficial. China already consumes more than a quarter of the worlds aluminium production and by 2020 demand should be well ahead of current supply capacity, therefore any planned new capacity should be looking to coming on line in the medium rather than the short term. LME stocks of aluminium have continued to rise and by mid February 2011 they were reported to be almost 4.6 Mt, nevertheless prices have been strong and ended January at 27

$2,520 per tonne. (Reuters, 2011). This price is more than double that in Callaghan 2002b where a price of $1 337/t was given. Production The production of bauxite in Mozambique over the period 1996-2006 is given in Appendix I. In 2006 the production was 11,07 kt. 6.2.3. Properties and applications Bauxite is used chiefly (>85%) for the production of alumina of which the majority (>85%) goes into aluminium metal. Bauxite is also used in the manufacture of chemical, abrasives, refractories and cement, whilst alumina is also used for abrasives, refractories, pigments, etc. Aluminium sulphate produced from bauxite is very important for water treatment, whilst aluminium hydrate has a variety of uses in the plastics, glass and ceramics industries, as well as for the waterproofing of concrete (Mintek, 1986). 6.2.4. Substitutes Aluminium is common in the earth’s crust and therefore many materials may be a substitute for bauxite as the prime source of alumina including such diverse options as nepheline syenite, clay, alunite, mica, anorthosite and even some coal wastes. Bray (2010) points out that although it would require the use of different technology, alumina from alternative sources could satisfy demand for aluminium metal, refractories, aluminium chemicals, and abrasives. Furthermore he indicates that kyanite and sillimanite, used to produce synthetic mullite can substitute for bauxite-based refractories. Bauxite-based abrasives can be substituted if required with silicon carbide and alumina-zirconia although these will be more costly to produce (Bray, 2010). 6.2.5. Deposits 6.2.5.1. Serra de Moriangane (Beira SDI) The only deposit that is in production in Mozambique is the Serra de Moriangane deposit in Manica province on the Zimbabwean border. The bauxite overlies a hornblende syenite intrusion and is made up by a number of lenticular bodies with limited lateral extent that are up to 20m thick (Callaghan 2002a) The deposit was first mined in 1938 but operations ceased in about 1975 and were resumed in 1985. Production at the mine has been small, from 2 to 12 ktpa. Two grades (high and low iron content) are produced and the product is used for refractories and for the production of aluminium sulphate. Quality is good with an Al2O3 content of >55%. The deposit has a resource of about 1.8 Mt. Mining The mine is operational and since it is not envisaged that there will be much change from the current operation any further assessment of the mine would be of academic interest only. Transport Logistics The mine has restricted access only across the border into Zimbabwe. It is currently adequate for the needs of the operation. 6.2.5.2. Mulanje Mountain Bauxite deposit (Nacala SDI) Peneplanation and fluvial incision accompanied by intense tropical chemical weathering (Dill, 2007) of the syeno-granitic rocks of the Mulanje massif has lead to the formation of the 28

residual Mulanje Mountain bauxite deposit. The deposit is situated on the southwestern part of the Mulanje Mountain, which lies close to the eastern African Rift Valley. It consists of six lenses on a plateau at an elevation between 1,800 – 2,000 m, with the most prospective deposit on the Lichenya plateau. The bauxite occurs as disseminated lenses on crests or between river valleys over an area of 2,150 ha, and comprises mainly trihydrate gibbsite with quartz and goethite being the main contaminants (Callaghan, 2002b). The existence of a bauxite resource at Mont Mulanje has been known since around 1924 and has been explored by the Anglo American Corporation (1934), the British Aluminium Company (1951 - 1958) and Lonrho (1969 – 1972) and Met-Chem (1993). Lonrho estimated resources of 28 Mt grading 43.9% Al2O3. Met-Chem estimated 25.5 Mt at 43.3% Al2O3 as probable reserves and indicated resources (Callaghan, 2002b). Project The mining of the Mulanje bauxite was presented as a possible project in the Nacala SDI study (Callaghan, 2002b). Back-hoe hydraulic excavators and articulated trucks were suggested to deliver ore to an aerial tramway system which would in turn transport it to an alumina refinery on the plain. All men and equipment were planned to be transported to the mine site by a parallel aerial tramway, as the construction of a roadway (other than a service road for the tramway) was considered impracticable and undesirable from an environmental viewpoint (Callaghan, 2002b). The operation would start with topsoil removal and stockpiling for later replacement; breaking and stacking the ore using a dozer, loading and hauling, and rehabilitating. The orebody was given in Callaghan (2002b) as 4 – 5 m thick. Mining was envisaged to begin close to the aerial tramway loading point and progress away to other areas. A bauxite production rate of 580 ktpa (dry basis) to produce 200 ktpa of alumina was used. The cost components of the mine were estimated at $4,58 per ore tonne operating cost and $22 M in capital. A revision in mining costs in Callaghan (2002b) suggests that the previously calculated costs were conservative. Energy, the major cost in the production of Al2O3, accounting for nearly half of the operating cost (Callaghan, 2002b). Mintek reassessed the economics of the mine based on 2002 $ prices and substituting the bulk of the imported fuel oil with locally produced coal. The MET-Chem study looked at mining and an integrated alumina / aluminium plant showed an internal rate of return (IRR) of 6%. This was judged inadequate at the time. The Mintek re-evaluation was even more negative. The Mintek re-evaluation (Callaghan, 2002b) indicated that the IRR for the base case varied from negative to 0.1, whilst in the lower cost case using coal it varied from 1.7-1.9. If the then price was doubled the project (using the low cost scenario) would achieve an IRR of 7%. Even in the current low interest rate world, this is still too low. The Mintek study showed that for the project to show an internal rate of return of 15% the price of alumina would need to be $345/t in the low cost coal usage scenario and $370/t in the low cost base case (Callaghan, 2002b). In the market section (Section 6.2.2) the relationship of the alumina price to the price of aluminium metal was given as about 12.5%. This then would require an aluminium price of $2,760 or $2,960 per tonne of aluminium respectively. The price of aluminium is currently in the order of $2,520, which is still below the cut-off, and it must be remembered that in the interim 9 years many of the costs would have increased. The high silica content of this ore remains a detrimental factor, as does the lack of availability of low cost fossil fuels and electricity. Furthermore, competition with other bettersituated deposits in the world counters the early development of the Mulanje bauxite deposit. Problems of accessibility, ore dispersal and export logistics (distance from coast) also 29

remain as factors against development of the deposit. Hecht (2006) did a study design for evaluation of the mountains natural resources. The final report has not been seen. Hecht points out that the construction of an aerial cableway as suggested in the original METCHEM study does have possible positive as well as negative effects. However, it is clear that the mountain provides a variety of other natural resources to the community and there may be considerable opposition to mining the bauxite.

6.3. Asbestos The Mozambican Government banned the use, import and export of asbestos in August of 2010. This ban is in line with other southern African countries and is for the protection of the environment (Katerere,   2010). For this reason only scant attention is paid to the asbestos deposits in the study area. The main deposits of asbestos are in the Mavita Group, in the region of Mulevala in Zambézia and at Mulatala in Nampula (Afonso & Marques, 1998).

6.4. Carbonatites The carbonatites in the study area contain a variety of minerals; these minerals may be discussed in detail elsewhere in the report. The main purpose of the section is to group the carbonatites so that the reader may more easily find the reference to this type of deposit. 6.4.1.1. Chuara (Nacala SDI) This sill-like intrusion forms a low hill about 3 km in length and probably 150-190m thick on Karoo shale. The sill consists of an orthoclase, nepheline and aegerine-bearing foyaite. Dykes in the granite gneisses north of the hill contain minute laths of nepheline, aegerine and orthoclase (Woolley, 2001). 6.4.1.2. Cone Negose (Zambezi valley SDI) The Cone Negose carbonatite is a 2 km diameter intrusion about 20 km from the north shore of Cahora Bassa. It has phosphate-rich rocks at its core, bearing pyrochlore, monazite, barite and fluorapatite (Pekkala et al, 2008). Several different phosphatic minerals occur at Cone Negose leading to an average grade of 1-2% P2O5. Some layers of unknown continuity and about 1m thick contain 60% apatite (Cílek, 1989). The fluorapatite mineralization occurred in the late stages of the carbonatite formation. It is considered by Pekkala and others (2008) to only have a marginal potential, mainly as a phosphate source for agricultural fertiliser. The 2002 Mintek report indicated that the deposit had a low priority and that any further work on it should concentrate on rare earth potential. 6.4.1.3. Kanyika (Nacala SDI) Globe Metals and Mining are planning to bring the Malawian multicommodity Kanyika niobium project into production in 2013. It is expecting to initially produce 3 ktpa niobium metal (Swanepoel, 2010). For more on this deposit please see section 6.19.1.1. 6.4.1.4. Lucuisse (North of the Nacala SDI à -12.3834o : 36.1834o) The Lucuisse carbonatite deposit lies near the town of Mavago. It contains rare-earth elements, uranium and phosphate. Residual deposits of 7-8 m thick (up to 30m) occurs over an area of 0,66 km2 giving an estimated tonnage of more than 11 Mt. Minerals include apatite, columbite, pyrochlore, zircon, monazite and magnetite. P205 concentrations range from 2.34-6.77% (Cilek, 1989 in Woolley, 2001).

30

6.4.1.5. Lupata (Zambezi Valley SDI) The Lupata volcanogenic deposits overlie Karoo aged Stormberg lavas and a good exposure can be seen in the Lupata Gorge some 70 km downstream from Tete. The alkaline Lupata lavas consist of 300 m of trachyte and analcime rich phonolite; they are overlain by rudaceous Sena arenites. Small intrusions of nepheline syenite cut through the lavas – the largest is at Mont Nhamauro, which has a diameter of about 1 km. 6.4.1.6. Machinga (Nacala SDI) The information for this deposit is presented in section 6.22.1.2. 6.4.1.7. Mauzo (Nacala SDI à -15.7000o : 35.8167o) Mauzo comprises an 8 km long hill that is situated in the border between Mozambique and Malawi. The intrusion consists mainly of nepheline syenite, which has been weathered to produce a bauxite deposit (Cilek, 1989, Woolley, 2001). 6.4.1.8. Meponda (North of the Nacala SDI à -13.4300o : 34.9000o) The Meponda occurrence in the Lichinga district consists of syenites and nepheline syenites that are mineralised with rare earth minerals, uranium, tantalum, thorium and niobium (Woolley, 2001). 6.4.1.9. Monte Tundo (Nacala SDI à -15.90361o : 35.89722o) An intrusion consisting of granite, syenite and nepheline syenite makes up this deposit (Woolley, 2001). 6.4.1.10. Salambidwe (Nacala SDI à -15.9167o : 34.2500o) The Salambidwe project is located on the border with Mozambique, with about 85% of the project falling inside Malawi. The intrusion is of cretaceous age (Pekkala et al, 2008). The project is about 6 km in diameter, and dominated by syenite and nepheline syenite. Airborne radiometrics have indicated elevated thorium and uranium levels, which may indicate rareearth mineralization. Australian listed Globe Metals & Mining acquired the Salambidwe rareearths project in May 2010 (Swanepoel, 2010). The Salambidwe hill has been the site of a microwave repeater, which is particularly important in the communications interconnectivity between Mozambique, Malawi and Zimbabwe, since 1989. 6.4.1.11. Tumbine (Nacala SDI) Monte Tumbine consists of a core of nepheline syenite with surrounding syenite. It forms a mountain rising to 1,542 m above the peneplain. Quartz occurs in syenites near the margins but the nepheline syenite is rich in nepheline with 2 samples containing normative values of 7 and 14% nepheline (Coelho, 1959 in Woolley, 2001). 6.4.1.12. Monte Buzimuana (Nacala SDI à -16.1975o : 34.1008o) Minor alkaline intrusions occur at Chuare located between the carbonatite ring structure of Muambe in the south and Salambidua in the north (Cilek, 1989). 6.4.1.13. Mont Muambe (Zambezi valley SDI à -16.3167o : 34.0833o) The Mont Muambe (Figure 21) ring-shaped carbonatite body is about 50 km southeast of Tete. It is intruded into Karoo sandstone, and is some 780 m high and 6 km in external diameter; the carbonatite rocks cover an area of 8.7 km2 (Woolley, 2001). Mont Muambe is a fluorite deposit. The carbonatite contains up to 2.73% phosphate in apatite (Callaghan, 31

2002a) Globe Metals and Minerals has recently (2 December, 2010) announced initial success with a drilling programme on the deposit (Stephens, 2010). Further details on this deposit are in section 6.9. 6.4.1.14. Mont Muande (Zambezi valley SDI à -15.997o : 33.579o) About 30 km to the northwest of Tete lies the Mont Muande deposit on the north bank of the Zambezi River. Mont Fema, seen as an extension of the deposit, is found on the south bank. The deposit can be seen as primarily a magnetite deposit with marble, which contains apatite. The magnetite occurs as sills or is disseminated in marble while the apatite is more homogenous and is difficult to separate from the host carbonate rock (Cílek, 1989; Callaghan 2002a). Separation of the apatite is likely only to be feasible if the deposit is mined for the magnetite. The apatite resource is shown in Table 5. Table 5: Mont Muande Apatite resource

Eluvial Primary

HUNTING GEOLOGY(1987) (kt P2O5) 374 5,800*

CILEK(1989) (kt P2O5) 295 3,855

Recent exploration has shown this deposit to have significant potential, see section 6.13 for further information on the deposit.

6.5. Coal 6.5.1. Market Although pumpable oil reserves in the world are now limited, coal will still be well supplied for some time to come. Several countries (e.g. Germany, U.K., Japan) have already passed their peak production. Major reserves in the world are found within only a few countries with the USA, China, India, the former soviet Union, Australia and South Africa holding some 85% of the reserve in 2005 (Höök et al 2008). Although no one of the major producers has yet reached peak production it is expected that the global peak will be reached around 2030 (Höök et al 2008). Certain coal qualities are already very much in demand and one of these is coking coal. Coal currently provides some 27% of the world’s primary energy requirement and generates 41% of the electricity, with hard coal production estimated at 5,990 Mt and brown coal and lignite at 913 Mt (World Coal Association, 2011). Coal reserves are present in about 70 countries and at current production levels proven reserves are expected to last for 119 years (World Coal Association, 2011). The top ten hard coal producers are shown in Table 6 whilst the major exporters and importers of coal are shown in Table 7 and Table 8. It can be seen from Table 7 that at the production levels that mines would like to produce for export, Mozambique will quickly become a major world player especially on the coking coal market. Major importers of coking coal in 2010 are Japan (26%), India (17%), Europe (15%), China (14%), South Korea (11%), Brazil (6%) and Taiwan (2%). Demand is expected to grow at a rate of 7% per annum (or more than 10 Mt growth per annum), and new supply is expected to come chiefly from Australia and Mozambique. Chopra and others (2011) reported in January that most steel producers had an approximate 40-60 day coking coal inventory. Due to the general tightness in the market but especially to the Australian floods, coking coal moved from about $225 per tonne at the end of December to $260/t by mid January (Chopra et al. 2011). This can be compared to the benchmark price of $115-125 agreed to between BHP Billiton and Nippon Steel in March of 2009. Mallyon (2010) shows that key markets are 32

well within reach and his diagram is reproduced in Figure 12. He sees Mozambique as being the world’s second largest coking coal exporter by 2025, with an expected export of 55 Mtpa (Figure 13). Mining-technology (2010) reports that Nippon Steel Corporation, with partners, the Talbot Group (58.9% stake), and POSCO (8% stake) will start the development of a $600 m hardcoking coal mine in Mozambique in 2012. The coal mine is envisaged to produce 5 Mtpa with initial production in 2014. Railway Gazette (2009) reports that Vale expects to produce 11 Mtpa of metallurgical and thermal coal over the next 35 years’. The Moatize project is expected to generate some 900 direct jobs at the production peak. Table 6: Top ten hard coal producers 2009e Country

Production (Mt) 2009 e

Peoples Republic of China

2,971

USA

919

India

526

Australia

335

Indonesia

263

Republic of South Africa

247

Russia

229

Kazakhstan

96

Poland

78

Columbia

73

Source: http://www.worldcoal.org/resources/coal-statistics/ e - estimated

It appears that Japanese coal-fired power stations have extra capacity and therefore in the short term there should be a significant increase in demand from Japan to allow them to make up for lost generation capacity due to the earthquakes and tsunami that they experienced in March 2011. 6.5.2. Reserves and resources The Tete region has currently got a coal reserve of 1,340 Mt and this figure is expected to increase considerably as the level of confidence in more deposits is raised sufficiently through detailed exploration and production drilling. The resource figure currently stands at 17,503 Mt (see Table 9). Table 7: Top ten hard coal exporters 2009e Steam coal Mt

Coking coal Mt

Australia

134

125

259

Indonesia

200

30

230

Russia

105

11

116

Columbia

69

-

69

South Africa

66

1

67

USA

20

33

53

Canada

7

21

28

Source: http://www.worldcoal.org/resources/coal-statistics/ e - estimated

33

Total My

Table 8: Top coal importers 2009e Steam coal Mt

Coking coal Mt

Total My

Japan

113

52

165

Peoples Republic of China

102

35

137

South Korea

82

21

103

India

44

23

67

Chinese Tapei

57

3

60

Germany

32

6

38

UK

33

5

38

Source: http://www.worldcoal.org/resources/coal-statistics/ e – estimated

Figure 12: Coking Coal Supply routes

Source: Mallyon, 2010

Table 9: Tete coal resources Mine/prospect Moatize Zambeze# Benga@ Ncondezi Minas Moatize Cambulatsitsi Total

Reserve Mt 838 502

1,340

Estimated resource Mt 2,500 9,045J 4,032 J 1,809 79 35 17,503

Source: Various sources J – Jorc compliant @ - Mallyon 2010 gives JORC compliant reserves as Proven: 346 Mt, Probable: 156 Mt, and resources as Measured: 710 Mt, Indicated: 362 Mt, Inferred 2,960 Mt # - Mallyon 2010 gives JORC compliant resources as Indicated: 2,365 Mt, Inferred: 6,680 Mt

34

Figure 13: Seaborne Hard Coking Coal Market 2025 Seaborne HCC market (Mtpa)

Mozambique 18%

Others 15% 46 Mt

55 Mt

27Mt 154 Mt

Canada 9%

25 Mt USA 8%

Australia 50%

Source: Mallyon, 2010

6.5.3. Deposits 6.5.3.1. Benga Riversdale has been operating in Mozambique since 2006. It has a 25 year mining lease and has already had environmental approval (mining and power) and in April 2010 Benga mine (owned by Riversdale - 65% and Tata Steel - 35%) was officially opened. Mallyon (2010) has compared the quality of the coking coal at Benga to that at Bowen Basin in Australia, which is considered amongst the best in the world. The resource is given in Table 9. Riversdale had a 40% life of mine (LOM) offtake agreement with Tata steel, and a 10% LOM offtake agreement pending with WISCO in 2010 (Mallyon, 2010) and therefore this material is essentially sterilised to local beneficiation. Leon Fanoe, Riversdale’s Benga general manager has indicated that the company aims to export its first coking coal as soon as its processing plant is completed and plans its first shipment from Beira in September 2011 (MacDonald, 2011). 6.5.3.2. Cambulatsitsi An Essar affiliated company, Essar Recursos de Minerais de Mozambique Ltd, holds a coal licence in the Cambulatsitsi area near Tete. Initial exploration of the area led to an independent estimate of an approximate resource of 35 Mt. The Essar Group has entered into a MOU with CCFB (consortium of CFM-RITESIRCON) for transporting the coal to Beira port (Essar, 2010). 6.5.3.3. Moatize Moatize has not been described here since it is operational and therefore does not fall within the ambit of this report. 6.5.3.4. Zambeze Riversdale’s Zambeze coal project lies adjacent to the Benga project, which will allow possible production and administration synergies. Riversdale had a 40% life of mine (LOM) offtake agreement pending with WISCO in 2010 (Mallyon, 2010). The resource is given in Table 9. Like Benga it plans to produce export quality coking and thermal coal. The principal geologist is reported to have indicated that there are currently 26 geologists and a total exploration staff of 60 together with 10 drilling rigs on the property at the moment (March, 2011) and that the feasibility study is expected to be completed in 2012 (MacDonald, 2011). The deposit occurs in a Precambrian aged downfaulted basin, and includes a total of 22 coal 35

seams. It is envisaged that the Zambese project will be developed together with Chinese steelmaker Wuhan Iron and Steel Corporation (WISCO), which has a non-binding memorandum of understanding with Riversdale Mining to obtain 40% of the project for an investment of $800M (Mining-Technology, 2011a). 6.5.3.5. Ncondezi Coal Project The Ncondezi Coal Company has a large prospect to the northeast of Tete. The Ncondezi Coal Project covers an area of 38,700 ha in the coal bearing Zambezi Basin. The Ncondezi Project comprises licences 804L and 805L (See Figure 14). A total 122 boreholes (16,737 m) have been drilled in prospecting the area and a JORC compliant resource of 1.8 bt has been identified. Figure 14: Ncondezi Project locality map

Source: www.ncondezicoal.com

SRK have undertaken a scoping study in which they confirmed that the prospect has the economic potential to produce 10 Mtpa of thermal from an open pit operation. At this stage the company has not got a coking coal resource, but are undertaking further work, from which they hope to be able to confirm a coking coal resource. The company is currently busy with a bankable feasibility study, which is scheduled to be completed in the second half of 2012 (www.ncondezicoal.com). 6.5.4. Production Assuming that the infrastructure can cope, the Benga coal mine is expected to produce coal in 2011 of which it will export 300 kt of coking coal and 90 kt of thermal coal between September and the end of the year (MacDonald, 2011). The Benga project is being developed in phases. The first phase will produce 5.3 Mtpa ROM including 1.7 Mtpa of hard coking coal and 300 ktpa of thermal coal, for use in power stations (see Table 10). Table 10 is in broad agreement with estimates of the government of Mozambique. The Mozambican Mining Resources Minister, Esperança Bias, said on the 14th March 2011 that Mozambique expected to reach a coal production of 30 Mt by 2015, however it must be

36

emphasised that this production will only be possible if the export routes and other means of take off are in place, and that presents a huge challenge. In the longer term Benga plans to produce 20 Mtpa including 6 Mtpa of hard coking coal and 4 Mtpa of export thermal coal from the Benga project (Mallyon, 2010). Riversdale is investigating the possibility of the production of 90 Mtpa ROM from the Zambeze project in the long term (Mallyon, 2010). 6.5.5. Logistics Riversdale plans to export its phase 1 products through Beira, and will plan its growth path to coincide with rail and port development; it is also investigating the possibility of barging coal down the Zambezi River. (Mallyon, 2010). 6.5.6. Downstream opportunities associated with the Tete coal deposits 6.5.6.1. Project Overview & Scope Resources in the Tete coalfields are now estimated at more than 17 bt (see Table 9). The Moatize deposit was reported in Walker (2004) to be a shallow basin (maximum depth 100m) with gentle variations in dip. The coal, which can be easily upgraded by washing, is a low phosphorous bituminous coal with good swell characteristics, which allows for the production of a good quality coking coal. When the coal produced is washed to produce good coking coal there is expected to be a considerable proportion of subgrade material that will not stand the costs of export but could be used for local projects. This coal could act as feedstock for various downstream projects and once several of the mines are running at full capacity they will be able to supply a considerable amount of coal. The specific qualities of this material as well as the amount projected to be available will determine exactly what opportunities are available. Power stations can be designed specifically to burn high ash coals. Vale’s Moatize project will be an open cast strip mining operation. As reported in Walker (2004) the process after mining is expected include the raw coal being crushed and washed in a double-stage heavy media washing plant. The coking coal comprising the low density vitrinite rich portion has a lower SG than that of the dense media material and will be floated off. The remaining material will be passed through another separation stage using a higher density media to separate out the remaining coal, which will be for local usage in a power station or for other possible projects. The sinks from the second separation will be disposed as tailings. Although more detail on the separation process has not been established at this point, the Kentz group announced last year that it had won a $69 M contract to do the structural (steel), mechanical, electrical, instrumentation and piping erection for the Moatize coal processing plant. The aim is to have a plant that can process 26 Mtpa. The current estimations of coal production (see Table 10 and Table 11) at the various mines in the area are far greater that those envisaged in the 2004 report, in which a total production of 6 Mtpa of steam coal and 3 Mtpa of high quality coking coal was envisaged. The rail is entirely inadequate to deal with the quantities being planned by the various mining groups and therefore if there is to be a successful roll-out of these project it is most likely that local downstream usage will have to receive serious consideration. 6.5.6.2. Spatial Impact The spatial/geographical impact of the successful construction and operation of coal mines in the Tete area is shown in Figure 15 (reproduced from Walker, 2004). The current capacity of the Sena rail is 6 Mtpa. It is expected to carry 5 Mtpa of coal from the Tete coalfields and 1 Mtpa of general cargo, and as a result alternative methods of transport will have to be found for more export to take place (such as through Nacala), and ideally a considerable amount of the coal will be used in local resource-based projects. 37

Table 10: Tete production estimates Mine/prospect Moatize

Estimated production kt* 2011

2012

2013

2015

2020

2025

2030

1,000

6,000

11,000

11,000

11,000

11,000

11,000

6,000

2,000

8,000

15,000

15,000

15,000

15,000

5,500

10,000

10,000

10,000

10,000

10,000

2,500

10,000

10,000

10,000

10,000

Zambeze Benga

300

3,000

Ncondezi Minas Moatize Total

2035

96

1,000

2,000

2,000

2,000

2,000

2,000

2,000

1,396

9,000

20,500

33,500

48,000

48,000

48,000

43,000

Source: Macdonald, 2011 Macdonald, 2011a, Ncondezi, 2011, Club of Mozambique 2010c, Reuters, 2011, and own estimates * Assuming Logistics issues can be dealt with.

The direct impacts flowsheet from Walker 2004 is still pertinent today and is reproduced in Figure 1 of Appendix III. Table 11: Expected Coking coal/steam coal production 2020 Mine/prospect

Mined kt* Total

Estimated production kt* Steam Coal

Coking coal

Total product

Moatize

26,000

2,500

8,500

11,000

Zambeze

45,000

5,000

10,000

15,000

Benga

20,000

4,000

6,000

10,000

Ncondezi

30,000

5,000

5,000

10,000

4,000

1,100

900

2,000

125,000

17,600

30,400

48,000

Minas Moatize Total

Source: Macdonald, 2011, Macdonald, 2011a; www.ncondezicoal.com/mineral-resource-statement.aspx and own estimates • Assuming Logistics issues can be dealt with.

6.5.6.3. Project Viability The cost of rebuilding the Sena rail was at least $230 M of which the World Bank has funded $158 M. Meantime the development of the Moatize mine by Vale has already cost more than one billion US dollars and is expected to cost a total of $1.6 bn. Another $200 M will be spent to increase the railway's capacity to 12 Mtpa by 2014, whilst it is expected that $400 M may be used to improve the throughput capacity at Beira to more than 15 Mtpa by 2014 (Steelguru, 2011). 6.5.6.4. Export Mozambican coal is of a high quality. The coking coal is a hard coal with a high vitrinite content, moderate to high rank and low aluminium content. Importers around the world are likely to be prepared to take as much as they can get as long as the supply is reliable and the price right. With regard to the supply, the Mozambican government needs to ensure not only that the rail link to Nacala is in place to assist in the transport of ore from the Tete area but also ensure that various rail routes are as far as possible “flood safe” so that there can be continued export during adverse climatic conditions which will occur. On the issue of price, it should be ensured that the price obtained is a good market price for the quality of the product being exported. Mozambican coal is one of the premier coking coals of the world, and will be used to blend with other coal to moderate the levels of impurity in those coals. As such, it should fetch a price that is in line with the quality of the product.

38

Figure 15: Spatial dynamics of the coal project

Source: Walker (2004)

6.5.6.5. Power Station Vale and Riversdale/Tata Steel are in the process of opening up the Moatize and Benga coalfields respectively. Coal fired power plants have been proposed for both Moatize and Benga. It is understood that the proposed power station for Moatize will be built in two phases each to produce 300 MW. Once complete the project is expected to consume 3 Mtpa of low grade coal transported directly from the mine via conveyer. Although there appears to be some doubt over whether there will be a take-off for the electricity once available, it is more likely just an issue of timing (and economics) since there are many possible projects that can be considered. The detailed investigation of these issues demands an in-depth multidimensional development study of the SDI. The power station should take 3 years to complete the first phase and cost about $2 billion. Riversdale has a similar plan for the Benga Mine with a first phase 500 MW using existing transmission infrastructure followed by phase 2 which will include a total of 1500 MW and will use a new transmission system. These power stations have a great importance in the overall planning of the coal exploitation. Power stations can be structured to run on rather poor quality coal that has limited usage – in some cases the alternative would be to discard the coal and then have to deal with the possible serious environmental side effects of this. Furthermore the power stations will provide electricity, jobs and a lot of manufacturing openings that would not be available without ready power, whilst sending this material to waste achieves no purpose. Another option that could be considered for the considerable amount of lower grade materials that are associated with prime HCC in Mozambique is the production of syngas.

6.5.6.6. Coal Bed Methane (CBM)

39

Since the production of coal bed methane is strictly a mining technique it has been dealt with in section 7.2.1, and will not be covered here. 6.5.6.7. Syngas and liquid fuel production The possible production of syngas from the Tete coals is an area of some controversy and this should be carefully considered in an in-depth study. The production of syngas has many advantages for the area, and the only real questions in this regard should be: “Is the coal suitable?” and “Can the process be profitable?” Liquid fuels can be produced directly from coal in a single process or the coal can first be used to produce gas that can then be converted to liquid fuel. The production of syngas uses up some of the lower value feedstocks (Figure 16) and turns them into a variety of possible products, which may well be of far greater value than any other usage of coal, especially since it can generate a broad variety of downstream industrial processes. One of the downstream products is mentioned in the section addressing food security – that is, ammonia. Ammonia is further processed into a variety of products, some of which are particularly expensive in Africa. Sanchez (2001) points to the huge distortions of price of urea in Africa as compared to Europe where in parts of Africa the per tonne price may be more than 8x the price in Europe! As a result nitrogen deficiencies are ubiquitous in African croplands. While the partial answer to this lies in organic farming techniques – these techniques may not be able to support the heavy burden of expected future populations. Figure 16: Synthesis Energy Systems Gasification Technology Capture CO2, H2S

Low value feedstocks

Fluidized bed gasifier

Syngas – CO, H2, CH4

End products: Coal Chemicals - Glycol - Methanol: CH3OH - Olefins - CO - H2 - Ascetic acid

Downstream products: - Methanol for blending with fuel - Synthetic fuel - Dimethyl ether (DME) for blending with liquefied petroleum gas (LPG) - Ammonia and fertilisers - Synthetic natural gas (SNG) - Power - DRI from Iron ore - Fuel gas

Source: /www.coalworks.com.au/uploads/111414604Beijing congress 2010 Final.pdf

It important to note that the proposed Mafutha Sasol Project on the Waterberg Coalfield has been put on hold over issues of lack of clarity about large-scale coal gasification tests, uncertainty about the provision of a commercially viable carbon capture solution and government support in a public-private partnership (Cape Times, 2010). The Mozambican government too in its turn may be required to be directly involved in a synfuels project – but with its recent track record is perhaps in a better position than South Africa when it comes to 40

corporate certainty with regard to large projects. However, CO2 capture and storage, may present a significant problem in Mozambique as well, since there is little government awareness of CCS and since the geological storage capacity is unknown (de Coninck, et al, 2010). The Sasol Fischer-Tropsch process is the only commercially viable coal liquefaction process and as such puts South Africa in the forefront of coal liquefaction technology worldwide. It is unlikely that Sasol would have any reservations in opening a coal liquefaction plant in Mozambique should enough suitable coal be available and the economics of a project favourable. It has been reported that Vale has plans to produce 300M litres of diesel from coal per annum, in partnership with a Portuguese company (Macuahub, 2011n). 6.5.6.8. Coke production There is considerable argument with regard to whether it is possible to produce coke locally in Mozambique with the coking coal grades mines. It is believed that it is possible (even if not perhaps desirable) to produce high quality coke with only Moatize coking coal. However, even if making the assumption that the Mozambican hard coking coal (HCC) must be blended, it is important to note that since it is a very high quality product blending is done with cheaper, soft coking coals (Mallyon, 2010). Soft coking coals are more available and can be easily imported and will provide return cargoes from the coast to Tete. The excellent quality of the Benga coking coal can be seen in Figure 17. Figure 17: Quality of Benga Hard Coking Coal

Source: Riversdale Technical Studies

Mozambique coking coals fall well within the range of hard metallurgical coals, which are defined by Kirk-Othmer (undated) as coals having 18–32% volatile matter. Where coals outside of this range are used to produce hard metallurgical coke, blending is required. Coals are also blended to improve the quality of the coke and to optimise the shrinkage required to remove the coke from the ovens after initial swelling. The quality of the coke product is important and may depend on the guidelines provided by buyers. However, in

41

general, ash content should be less than 10%, sulphur should ideally be under 1% and the phosphorous content must also be low since both sulphur and phosphorous in a coking coal used in a blast furnace will cause the steel produced to be brittle (Kirk-Othmer undated). Coke is produced by the pyrolysis (heating in an oxygen free environment) of suitable coking coal. Gasses given off in the process are processed to produce an array of by-products. The by-products of the coking process are important and include a broad range of chemical products that can be used to stimulate further industry locally or exported. Coal tar for example is used in various medicated shampoos and skin products and can be refined and used to manufacture chemicals such as creosote oil, naphthalene, phenol and benzene. Ammonia gas recovered from coke ovens is used in the manufacture of nitric acid and of nitrogen rich agricultural fertilisers. Other downstream products include soap, aspirin, various solvents and dyes, plastics and fibres such as nylon and rayon (World Coal Institute, 2008). The hot gas is also used to heat the ovens. The coke making process does have environmental concerns due to escaping gas that needs to be carefully controlled. One of the important products that can be produced from coke oven gas is Di Methyl Ether (DME). DME (CH3OCH3), is a precursor to other organic compounds, it burns with little production of NOx or CO, and is considered as a clean fuel. It is conventionally produced by a two-step process of production, and then dehydation of methanol. The Japanese firm JFE developed a direct process to produce DME from coke oven gas, and have produced 17 kt in four demonstration tests running from 2-6 months in 2004 and 2005. DME is currently used principally as a solvent and a spray propellant for cosmetics, but it is considered to be an LP gas alternative, and can be used in the transportation industry and for small isolated power generation plants (de Mestier du Bourg, 2006). Although economical production of DME may still present some technical problems these will fade as the price of competing fuels increases. 6.5.6.9. Production of pulverized coal for pulverized coal injection smelting The possibility of producing pulverised coal for the pulverised coal injection (PCI) technology will depend on the precise coal quality produced in Tete as well as a local buyer. The considerable advantage that can be gained from producing PCI with lower quality coal to offset some of the usage of coking coal in a local blast furnace could make the production of steel from local iron ores very cost competitive, especially if the furnace is initially built with production using PCI as a standard option. One of the problems with the slow take-up of the technology is that many older furnaces are unsuitable and retrofitting is often not an option. 6.5.6.10. Other coal products Other important products of coal that Mozambique can consider producing as the industry grows are given in Table 12. Table 12: Other possible by-products of the Coal Industry Product

Uses

Activated Carbon

Filters

Carbon Fibre

Construction reinforcement, sports equipment

Silicon metal

Used to produce silicone, silane (experiencing growth due to its use in the production of low cost solar panels). These are used to produce a variety of products such as lubricants, water repellents, resins, cosmetics, shampoo, toothpaste etc.

Source: modified after World Coal Institute, 2008).

6.5.7. Coal development and the environment 42

CBM is extracted by drilling wells to the seam, dewatering the seam (which reduces the pressure) and then extracting the methane. The extraction of large quantities of (usually saline) water may lead to serious environmental problems and this needs to be carefully considered in the overall development plan for CBM production Carbon dioxide emissions in Mozambique will increase due to the exploitation of the coal resources. At present there are no carbon capture and storage (CCS) activities in Mozambique and the geological potential for CCS has not been established (de Coninck et al 2010). The most cost effective way of dealing with CCS is to ensure that it is included in the initial planning of projects. It is therefore important for the Mozambican government to consider including CCS provisions in the upcoming amendment to mining and environmental legislation. 6.5.8. Conclusion Coal has been mined sporadically in the Moatize basin for some time and it contains a proven 1,087 Mt (Sergeant, 2010) or estimated 2,000 Mt (Mining Journal, 2008) of coal, a large percentage of which of which is of coking quality. In 2009 Vale announced the $1.5bn Moatize coal project would go ahead. They planned to produce 11 Mtpa as from 2011. In October of that year the Mozambican government announced a loan of $500 M had been secured to build a railway line linking Moatize with the port of Nacala. Both the mine and the rail are at the point where they are to be tested, but the rail is not yet up to the standard required and it will be some time before the plans can be met. The Mucanha – Vuzi basin located on the north shore of lake Cahora Bassa has an estimated 3,600 Mt of coal (Mining Journal, 2000). There are indications that the export in 2011 will reach 2 Mt (from a 2010 base of 150 kt) with both the minister of Mineral Resources, Esperança Bias, as well as the minister of Transport Paulo Zucula, being firmly behind the on-time production and export (Allafrica, 2010a, Allafrica, 2010b). Besides the urgency to get the rail up to the level required to export large quantities of coal there should be an equal urgency in finding the best domestic uses for adding value to the coal through production of value added products or through the provision of electricity to manufacturing operations.

6.6. Copper 6.6.1. Market There is a strong demand for copper which can be seen in the strong price (see Figure 18). It is notable that the price is about 5x higher than it was when the Mintek reports were written. This is important in that the likelihood of the projects running now would be much greater than it would have been in 2002. In Figure 18 the relationship of the price and therefore demand with development is very clear as can be seen by the dramatic dip during the financial crisis. 6.6.2. Deposits Several small copper and nickel occurrences occur in the Tete Complex located just north of Tete, and the Atchiza Complex, just north of the Cahora Bassa dam. The Atchiza Complex holds Cr, Fe, Co, Ti, V, Ni, Au and PGE potential. Several lead and copper occurrences exist west and northwest of Changara in the Tete Province.

Figure 18: LME copper price, 1980-2011 43

Source: Mongabay.com

6.6.2.1. Chiduè The Chiduè deposit is a small copper deposit situated approximately 55 km north of Tete in the Moatize district. It is a skarn deposit and hosts copper, silver, gold and nickel mineralization. Ore minerals include bornite, chalcocite, chalcopyrite, malachite and native copper. It has five orebodies that have been described as “seams” in the results of the survey performed by General Chiduè Mining Company. Orebody 1 occurs as a seam concordant with dolomite and extends 450 m in the strike direction (E-W) and 467.5 m in the dip direction. Average thickness is about 7.98 m at a grade of 1.78% Cu. Orebody 2 extends 887.5m in the strike direction and 245 m in the dip direction with an average grade of 1.07% Cu. Orebody 3 extends 133 m in the strike direction and 290 m in the dip direction with an average thickness of 1.7 m at 2.24% Cu. Orebody 4 extends115 m in the strike direction and 90 m in the dip direction with an average thickness of 1.2 m at 0.35% Cu. Orebody 5 extends 142m along strike and 127 m in the dip direction, with an average thickness of 1.37 m at 1.33% Cu. The reserve of copper for the five orebodies was calculated to be 101.16 kt, with the average grade of copper ranging from 0.35 to 2.24%. The deposit also has cobalt, lead and minor gold (0.01 to 0.9 g/t) (Callaghan, 2002a). A later report by Recourses Minerals of Republic de Mozambique (1993) indicated that the mineralized belt has variable widths, and a length of 7.5 km extending from the Mavudzi River to the Massamba village. The total reserve of the five orebodies was calculated at 5.88 Mt, with a grade 1.72% Cu and 0.5 g/t Au. Overall the geological and geophysical information resulting from the exploration work showed that the Chiduè deposit is probably small (Callaghan, 2002a). 6.6.2.2. Fingoe The Fingoe (Muenguè) iron skarn deposit, located approximately 35 km southwest of Fingoe in the Tete Province, also hosts copper. African Eagle has signed a memorandum of agreement with Pan African Mining Corporation (“Pan Africa”) to explore and develop the Fingoe licence. The agreement results in a 2% net smelter return with respect to all mineral production by Pan African from the Fingoe licence area. The main focus area is the Fingoe Group, which consists of meta-sediments, BIF, carbonates, acid and mafic meta-volcanics, and ultramafic sills, extensively intruded by granitoids, mircogranites and diorites. Mineralisation consists of skarn-like copper-gold and iron occurrences, with disseminated copper sulphide, some with gold, associated with granitoid stocks (Armitage, 2007).

44

6.6.2.3. Mundoguara

The Mundoguara (Edmundian) deposit is situated approximately 10 km west of Manica on the southern flank of the Manica-Mutare greenstone belt in the Manica Province. Underground sub-level mining has occurred intermittently since 1902. During 1983 to 1989, approximately 91 kt of copper was produced from an ore containing 1.39% copper. The mineralised quartz-calcite veins consist mainly of mainly chalcopyrite (with subordinate pyrrhotite and pyrite, very minor galena). There are also small, but consistent amounts of scheelite (a tungsten ore), and gold (0.3 to 1.5 ppm). Silver content (9 to 60 ppm) is inconsistently present. Talc and chlorite gangue can result in difficulty in the flotation process but this should be able to be overcome with the use of the correct additives and careful monitoring. There is a significant future potential of discovering better grades of associated gold and nickel at this project. There is also potential of lateritic nickel in some of the high lying areas underlain by serpentinitic komatiite near the Zimbabwe border (Baobab, 2007). Initial drilling by Baobab Resources plc has indicated a small copper resource of 1.34 Mt grading 2.3% Cu, 0.18g/t Au, and 3.3g/t  Ag (Libertas, 2010). Transport infrastructure Although the access road the Mundoguara mine has been severely eroded it is still passable. Energy infrastructure The power lines to the Mundoguara mine were stripped prior to 2000 and only a few of the supporting poles were still in position in 2007.

6.7. Diamonds Although there are about 50 kimberlite pipes and dykes in the Niassa Province, little work has been done to evaluate them and there are no commercial sources of diamonds known in Mozambique. The kimberlites that are present are unlikely to carry commercial diamond deposits because they were not intruded through the craton. Alluvial micro-diamonds have been recovered from rivers draining from South Africa and Zimbabwe in the Gaza Province.

6.8. Dimension Stone 6.8.1. Resources Various types of dimension stone occur in Mozambique, including material of sedimentary, igneous and metamorphic origin. These include limestone and travertine (sedimentary); anorthosite, gabbro, granite, dolerite, rhyolite and syenite (igneous); marble, quartzite and serpentine (metamorphic). Many deposits have been exploited by a South African company, Marlin Granite, and an Italian company with a base in South Africa, Red Granito. The industry is economically constrained by the high cost of road transport (Callaghan, 2002a). East of Montepuez in Cabo Delgado, marble is exposed in four small quarries and shows three distinct lenses dipping at 40-60o southeast (Melezhik et al, 2007). The visible thickness of these lenses varies from 20-50m. The “tripartite marble unit” consisting of three disparate lenses consists of the lower calcite-dolomite marble, the middle grey dolomite marble and the upper white dolomite marble. Marble is produced at Cabo Delgado quarries and processed in the town of Pemba. Mozambique's marble resources were estimated to be 83 Mt (Ministry of Mineral Resources and Energy, 1995 reported in Afristone, 2011). Figure 19: Schematic geological map showing marble occurrences 45

Source: Melezhik and others (2007)

6.8.2. Deposits Some of the Karoo rhyolites, in the Maputo Province, (outside of the study area) have been quarried. Gabbro (‘grey granite’) from Chainça in Manica anorthosite from the Tete Suite is periodically quarried for export. 6.8.2.1. Mt Magatacata Mt Magatacata occurs some130 km inland from Beira and is a dioritic gabbro. Blocks of up to 15 m3 can be produced. The gabbro is suitable for high-quality external decorative applications and resources are estimated at 800,000 m3 (Mining Journal, 2000). Figure 20: White dolomite marble member

Source: Melezhik and others (2007) Showing banded, pale grey, dolomite marble with numerous inclusions, hammer head = 12 cm.

6.8.2.2. Mt Mesa Mt Mesa, is a gabbro-norite intrusion on the coast near Nacala. It has excellent properties for ornamental work, such as sculptures and monuments (Mining Journal, 2000). 46

6.8.2.3. Chonde hill Chonde hill is an intrusion of red granite, which occurs on the shore of Lake Nyasa. 6.8.2.4. Montepuez Marble deposit At Montepuez, Cabo Delgado, a white, greyish-white or grey coloured marble suitable for dimension stone occurs. This deposit has been mined since the colonial period and a processing plant produces various slabs and tiles. In 1995 it had a production of 60,000 m2 (Afristone, 2011). 6.8.2.5. Other deposits Other areas of interest are Muatuca-Mutupupa-Mazeze in Cabo Delgado Province; Metolola in Zambezia province; and the Natia deposits in Nampula province (Afristone, 2011). 6.8.3. Conclusion Mozambique has many rock types suitable for the dimension stone market. However, transport remains a major issue. As the country is built up and modernised as it will be with the much greater mining revenues that will be available, government should ensure that local dimension stone is used so far as possible in the facing of buildings. This will have the advantage of export replacement as well as giving the local dimension stone industry a lift, which may then allow it to export finished products to the world market.

6.9. Fluorite (Fluorspar) Mont Muambe is the most important fluorite deposit. Other deposits are the medium sized deposits at Djanguire, Cone N’gose, and Domba and smaller deposits at Canxixe, Djalire, Lupata, Massangulo and Xiluvo in Mozambique as well as Nkalonje in Malawi. An unnamed deposit of fluorite, covering an area of some 2.6 km2 occurs about 150 km southwest of Tete on the road to Changara (Callaghan, 2002a). 6.9.1. Resources The 6.5 km diameter Mont Muambe complex has been estimated to have a fluorite resource of 1.5 Mt. The recent work being done by Globe Metals and Mining has shown that there is a considerable amount of associated rare earths with the deposit. 6.9.2. Market Fluorspar is marketed in one of three grades, acid grade (> 97% CaF2), ceramic grade (85% to 95% CaF2) and metallurgical grade (60% to 85% CaF2). There are three major uses for fluorspar. The majority of production is used in the manufacture of hydrofluoric acid (HF). Most of the rest is used for producing aluminium fluoride (AlF3) or as a flux in a variety of applications including the manufacture of steel, primary aluminium production (Hall electrolytic process) and glass manufacture. It is also used in the production of enamels, welding rod coatings, fluocarbon and cement amongst others. It is also used in various lubricants and chemicals. The hydrofluoric acid (HF) industry uses finely ground fluorspar of acid grade which is usually the result of flotation. HF is the primary feedstock for the production of most organic and inorganic fluorine-bearing chemicals such as hydrofluorocarbons (HFCs) and hydrochlorofluorocarbons (HCFCs) used in refrigerants and air conditioning systems. Fluorine chemicals are also used for the production of thermoplastics such as Teflon. A small amount of fluorspar added to the furnace lowers the smelting temperature and assists in the removal of undesirable impurities to the slag. The industry standard for

47

metallurgical grade fluorspar is 85% CaF2 with SiO2 less than 5% and ideally not finer than 2 mm. Because of the high specific gravity fluorspar is easily upgraded by jigging. Because of its high transparency and very low dispersion, fluorspar is used for high end camera, microscope and telescope lenses. Global production in 2007 was 5.7Mt and due to the link with the steel industry and for use as a refrigerant it is expected to see a strong growth with an envisaged demand 7 Mt by 2030. Acid grade fluorspar accounted for 69% of fluorspar production in 2007. Since China is the biggest producer and consumer of fluorspar the Chinese price can be taken as a proxy for the world trade price. The price for acid grade fluorspar from China was $100/t (FOB) in 2000 and it peaked at $550/t in late 2008 (Miller, 2011). The price fell during the global economic crisis but is once again on the rise (Storuman, 2011). Prices in March 2010 were $300-360/t (FOB) Mexico for acid grade filtercake, 97% CaF2). The deposit contains rare earths (probably in monazite and pyrochlore) (Cilek, 1989). Woolley, 2001 indicates that the massive fluorite mineralization occurs in the zone between the carbonatite and the fenite. Blue and yellow fluorspar, rich in Be, Sr, Y and La, occurs in masses up to 20m thick (Woolley, 2001). Mont Muambe has an estimated resource of 1.42 Mt at 75-81% CaF2, which makes it a medium sized deposit. Globe Metals and Mining have completed first phase drilling on the Mont Muambe deposit targeting areas of known fluorite mineralization. Specific REO targets require further mapping and sampling to fully define the targets before drilling. This initial programme indicated multiple zones of high-grade fluorite mineralization, with significant REO grades. It appears as if the fluorite-REO mineralization is associated with a north striking carbonatite/fenite contact. Fluorite-REO mineralization occurs in subhorizontal zones ranging from a few metres up to about twenty metres thick. Although the true widths of intercepts are uncertain, significant fluorite intercepts varied from 3-15 m with CaF2 content of 11.6-62.2%. The most significant intercepts were in borehole MURC001 from 0-15m with 43.6% CaF2 and MURC011 between 18 and 33 m (15m) at 41.1% CaF2 (Stephens, 2011). Although not the area selected for rare earth mineralization, three intercepts were tested for their REO content. Very encouraging results were achieved (Table 13) with LREO enrichment especially in the carbonatite whilst HREO enrichment was associated with fluorite in fenite. As a result of the positive results, the other intercepts will be tested. Figure 21: The Monte Muambe project location

Source: Stephens, 2010

6.9.4. Transport and energy infrastructure It is about 35 km from Sena rail line and about 70 km by road from Tete. The Zambezi River is about 25 km from the deposit. The nearest substation in 2000 was about 42km distant. 49

Table 13: Significant results from trench MATR001 (main anomaly) – N. Machinga HOLE

FROM ( M)

TO ( M)

WIDTH (M)*

L A2 O 3 (PPM)

C E2 O 3 (PPM)

N D2 O 3 (PPM)

E U2 O 3 (PPM)

T B2 O 3 (PPM)

D Y2 O 3 (PPM)

E R2 O 3 (PPM)

Y B2 O 3 (PPM)

Y2 O3 (PPM)

TREO (PPM)

HREO (PPM)

HREO: TREO

MURC001

0

11

11

590

1049

458

32

16

100

58

50

611

3,306

996

29.9%

INCLUDING

5

7

2

746

1298

576

46

23

142

81

71

856

4,317

1,411

32.8%

MURC001

74

82

8

4,574

5,245

980

28

17

103

57

49

648

12,303

1,029

10.9%

INCLUDING

77

81

4

5,929

6,866

1,283

36

20

122

66

55

747

15,900

1,202

9.0%

MURC011

0

8

8

547

924

365

26

16

112

83

88

1182

3,650

1,638

45.9%

MURC011

22

33

11

665

1,149

444

27

15

104

75

79

970

3,866

1,400

38.4%

MURC013

28

52

14

255

515

284

53

25

129

46

32

596

2,326

1,081

46.6%

INCLUDING

28

46

18

281

575

319

62

29

145

50

35

647

2,594

1,200

47.7%

INCLUDING

50

52

2

368

467

252

50

28

173

67

43

925

2,656

1,493

55.9%

Source: Stephens (2011) *Note: Only selected rare earth elements are included in the table therefore the TREO column is more than the sum of the individual REO results presented

6.9.5. Conclusion The positive relief of the Mont Muambe deposit will allow low cost open cut mining. The ore will be crushed, milled and passed through a flotation concentrator to produce the acid grade, which is likely to be exported at that stage. The relative proximity to the rail means that once there is sufficient capacity the material can be easily transported by rail. However it is therefore essential that there is sufficient capacity on the Sena line (unless transport down the Zambezi becomes feasible) for this deposit to be developed. There will also be a requirement for power at the plant.

6.10. Gold 6.10.1. Introduction In Mozambique gold occurs in the northern province of Lichinga close to the Tanzanian border, southwest of Nampula in association with the pegmatite field, in the Zambezi SDI to the NW of Tete towards the Zambian border and in the Beira SDI towards Zimbabwe. These separate gold provinces are clear in Figure 22, which shows all of the known gold deposits in Mozambique as at 2002. Gold deposits occur in the Tete Province and in the Manica Province in the west and northwest of the project area. They occur in four geological settings (Callaghan 2002a): r Gold associated with the greenstone belt assemblage within Archaean rocks and which are similar to other goldfields in cratonic and cratonic edge positions in Zimbabwe, South Africa, Australia and Canada; r Gold associated with younger but similar rock types northwest of Tete; r Various alluvial deposits occurring generally associated with the Archaean gold belts; and r Gold occurring as a by-product in rock comprising quantities of specialist minerals associated with late phase igneous intrusions. The discussion of the gold deposits in Mozambique in Callaghan 2002a is thorough, and will not be repeated here. It is important to note that in the interim there have probably been only minor changes to the information available, except for the market and price which are discussed below, and that the issues of importance (to be discussed in the conclusion) relate to what happens to the gold after mining.

50

Figure 22: Gold deposits in Mozambique 31°

14°

33° 54 56.3 56.2 60 58

34°

56.1

A

I

B

M

A

Z 15°

32°

57

59 62

61

65

63

35°

14°

64

67 15°

111

108

115

131

119

133

116 118

146 Cahora Bassa

Za mb ezi Riv er

16°

MALAWI

260

16°

315

E W 393

A

B

18°

405 407 445 404 419 426 429 447 452 450 466 468 482 485 479 486

I nd i an

Oce an

19°

Z

20°

367

B

19°

17°

M

18°

350

I

17°

412 Cantão* 410 Marianas* 409 Damp* 408 Morondo* 406 Estrela* 414 Old-Wednesday* 404 Mimosa 367 Passaru 119 Casula 315 Luenha 275 Cacanga* 260 Cansunça 146 Ponfir-Vubuè 118 Monte Nhamissale 116 Metosso 115 Catôa 67 Luangua 65 Messucuzi 64 Tchindundo 63 Mulolera 441 Paradox* 62 Alto Mepuli 440 Rosalina* 60 Chifumbazi 439 Joana* 61 Muendi 438 Herminia* 59 Alto Vubuè 437 A Rir* 58 Cacabanga 436 Donkey* 57 Malau-Chibalane 435 Colonelle* 56.3 Sta.Isobel 434 Brown* 56.2 Chibalene 433 Gold-Kop* 56.1 Fundão 432 Perdras Douradis*54 Missale 431 Laugh* 468 Mavita 430 Ivone* 466 Mussapa1 428 Mulato* 393 Caurezi 427 Capitaite* 350 Caniaculo 425 André* 133 Mecucuè1 424 Hong-Wong* 131 Capoche 423 Firenza* 111 Mese 422 Two-Fools* 108 Cabongo 419 Chimezi 486 Mussapa2 318 Chua* 485 Rotanda 416 Exelsior* 482 Xivume 413 Morgan* 479 Yankee-Grab

* Owing to the scale of the map and the close proximity of the deposits in the Manica region these deposits are not shown. 0

50

100km

31°

32°

33°

34°

20°

35°

POSITION OF GOLD DEPOSITS AND OCCURRENCES IN THE PROJECT AREA LISTED IN ORDER OF RANKING (Modified After The Republic Of Mozambique (2000) 1:1000 000

Map of Mineral Deposits and Occurrences)

Source: Callaghan 2002a

6.10.2. Market The most significant difference in the gold market today is the dramatic increase in price over the last 10 years (Figure 23). Furthermore, demand is currently on a 10 year high (World Gold Council, 2011, Figure 24), with annual demand growing 9% to 3,812.2 t. It is significant that jewellery demand has increased – perhaps showing that the economic downturn experienced in the previous few years is now over. Asian buying has been vigorous and central banks have now become net purchases of gold. Not surprisingly India 51

was the strongest growth market with total consumer growth (chiefly in the jewellery sector) at 66% above 2009. China showed a 70% growth in investment bars and coins in 2010. The gold price is showing signs of further strengthening and Mark Cutifani CEO of AngloGold Ashanti, speaking at the Reuters Global Mining and Steel Summit, said that gold may reach $1,600 per ounce in 2012. 6.10.3. Deposits Early work The Manica mining field situated in the southwestern part of the Manica Province, near the town of Manica has been a long term source of gold in Mozambique with early discoveries dating back to the 1500s. Early alluvial gold discoveries were made in the Luenha River (a small deposit some 40 km south-southwest of Tete) and its tributaries: Mazoe, Medzi and Cauresi as well as near Zumbo on the Zambezi River. Evidence of workings occurs near Changara and extends to Zimbabwe. Early colonial foraging parties exploited mainly alluvial and eluvial gold in the Manica district. In 1565, a Portuguese expedition arrived at the Manica mining field. In 1888, Colonel Paiva d’ Andrade claimed the Manica gold mines for his “Compahnia de Mozambique” and since then the records of gold mining operations in the Manica district have been recorded in documents of the Fomento Mineiro de Manica (Callaghan, 2002a). In the late 1800’s there was a gold rush in Manica and by 1900 there were 23 gold mining companies operating in the area (Ferraz and Munslow, 2000) with 140 individual proprietors of small mines and 1 300 claims registered. Some 9.53 t of gold was extracted from the area in the next 50 years. During 1948/49, lack of finance and technological expertise as well as the relatively low gold price post World War II resulted in a decrease of production. Figure 23: Gold price (2001-2011)

Source: www.kitco.com

52

Figure 24: Global gold demand and gold price 2004-2010)

Source: GFMS, LBMA as shown in World Gold Council 2011

Manica gold mining field The Manica Greenstone Belt forms the easternmost portion of the Odzi-Mutare-Manica Greenstone Belt (OMM). The OMM extends for 140 km from the Save River towards the east, through the Odzi and Mutare districts in Zimbabwe and is truncated in Mozambique by the Mozambique mobile belt. The greenstone belt forms a synclinal structure in the east and the easternmost 60 km portion has been regarded as productive. Of this the 25 km that occur in Mozambique is referred to as the “Manica Greenstone Belt” (Callaghan, 2002a). The official gold production (up to 1996) for the Manica goldfield is 9.8 t, of which 80% was derived from alluvial placer deposits. However, gold sold on the black market and preindustrial production was probably significant and the estimated production from 1889-1996 was estimated to be 11.5 t. It is likely that a considerable resource remains; the Mintek report estimated 4 t of lode gold and 19 t of placer gold to remain as a resource in the area (Callaghan 2002a). Four types of gold deposits occur in the Manica Greenstone Belt: r Gold associated with banded ironstone formation; r Gold occurring in quartz veins, r Alluvial gold and r Gold as a by-product in deposits hosting principal ore of a different commodity. In 1986, a resurgence of the gold price led to a rejuvenation of gold mining activity in the Manica region and agreements were made with international companies to further mining development. In 1987 ALMA (Aluvioes de Manica) was established as a joint venture between the Mozambiquan government (20%) and Lonrho (80%) to concentrate on the alluvial deposits. Benicon bought the mining rights of Lonrho in the Manica Province. Benicon mined in Manica from 1992 to 1997 when the gold price declined. Ferraz and Munslow, (2000) indicate the following as zones of interest in the Manica district: r MuKudo – close to the head of the Revue River r Marondo close the head of the Chua river r Chihururu (Chua valley) 53

r r r r r r r r r r

Nhahombwe, near the IFLOMA sawmill, Penhalonga Ndirire, Revue River after the IFLOMA sawmill Nhamachato, a suburb of Ndirire Chua pothole mine Andrade, on the Revue’s left bank (Note that Macuahub (2011f) reports that the Mozambican government is carrying out feasibility studies to reopen a number of old mines including Andrade.) Revue II in the area between Manica City and the Mavonde bridge Chimese River Musa River Nhamacuarara mine Mimosa zone

Ferraz and Munslow, (2000) indicate that artisanal gold mining is carried out mainly by peasants as a survival activity, often only seasonally, but that agriculture is the preferred activity. Dondeyne and others (2009), point out that about 20,000 people were taking part in artisanal mining when they did their research and that they produced some 480-600 kg of gold per year. More than 30 vein gold deposits are known to occur in the Manica Mining Field. Most have been exploited including Braganca, Cantao, Chua, Damp, Estrela, Excelsior, Guy Fawkes, Marianas, Old Wednesday, Richmond and Two Fools (Callaghan 2002a). A few of the mines are mentioned below but since there has only been limited activity since the Mintek reports not much has changed here except for the market and the reader is referred to the reports by Callaghan and Walker for more information. It is important to note however that several of the deposits are currently being subjected to feasibility studies. 6.10.3.1. Monarch Mine The Monarch gold deposit was mined (underground) from 1931 to 1949. Some 0.48 t of gold and 0.15 t of silver were produced. The Canadian company Mincor Resources Inc reopened the mine in 1993 and output was reported at 93 kg. The company intended to double output capacity and complete a drilling programme. However, the mine was closed in about 1997 and was on care and maintenance in 2002. The mine has had grades of up to 6.4 g/t and the focus of mining was mainly on the oxidised zone. Samples from Monarch contained 26% metallic sulphides and oxides, including 10.06% magnetite, 10.28% pyrrhotite, 4.82% pyrite and 1.5% arsenopyrite. The gold content averaged 10 g/t. The gold occurs both as free particles and in pyrite or other sulphides. The pyrite contains 3.5 to 9.2 g/t Au. (Callaghan, 2002a). 6.10.3.2. Braganca Sub-level mining at the Braganca vein gold deposit during 1903 to 1916 produced 0.51 t of gold at a grade of 15 g/t. At Braganca and Guy Fawkes the veins have been traced to depths of 150 to 200 m. 6.10.3.3. Dots Luck The mine is near Nampula, south of Nacala railway, near the N1 highway. It has an estimated resource of 5.2 tonnes of gold metal at an average grade of 2.44 g/t. The distribution of gold in the ferruginous quartzite is generally irregular across orebodies approximately 50 to 250m long with thickness between 2 and 30 m. Mining has taken place down to a depth of 90m. Macuahub (2011f) reports that the Mozambican government is carrying out feasibility studies to reopen a number of old mines including Dot’s Luck.

54

6.10.3.4. Fair Bride The Fair Bride mine has shown grades of up to 7.1 g/t in ferruginous quartzites. Some rich pockets of gold have been recorded. At this mine 10 kg of gold was extracted from a pocket containing 1 200 g/t gold! It is estimated to have a resource of 19.94 t of gold at an average grade of 2.39 g/t. It has previously been abandoned and is currently undergoing a feasibility study. 6.10.3.5. Guy Fawkes mine The Guy Fawkes mine is a vein deposit mine in the Manica Mining field. The veins have been traced out to about 200m. It has an estimated resource of 1.7 t of gold metal at 2.8 g/t. This would give an approximate ROM tonnage of 600 kt. The mine has been abandoned but due to the high gold price there is a mining feasibility study underway. 6.10.3.6. Johnny Walker mine Banded ironstone formations or ferruginous quartzites have been mined at the Johnny Walker Mine. The average grade of gold in ferruginous quartzites here are 6 g/t. Mining has occurred to a depth of 20-30 m in the Johnny Walker Mine. 6.10.3.7. Alluvial deposits in the Manica mining field In Mozambique, alluvial deposits occur in regions where the primary gold is hosted in banded ironstone formation and quartz veins. In the Manica Mining Field, alluvial gold occurs in the Revuè, Inhamucarara, Chua, Chimeze, Zambuzi, Musa, Inhamazonga and Munene rivers. Grades vary considerably and reserves are estimated at 19.2 t. Revué River valley alluvial workings have produced at least 8.5 t gold in the past. Since the dredge that was working the sediments had a depth capability of only 7.6 m there may still exist here a considerable resource between 7.6 and approximately 10 to 12 m. 6.10.3.8. Namama deposit The Namama project is in the Mejele area approximately 100 km southwest of Nampula. The area is accessed via sealed roads from Nampula. The Nacala rail line is some 50 km to the north. The project is situated on the Namama Belt of mid- to late Proterozoic age metasediments, mafic and ultramafic volcanics and intrusives, and granitoid gneisses. There are at least three phases of folding in the area. A 10 km thick iron sulphide unit (possible gossan) with a strike length of some 7 km (although more than 40 km has been indicated from aeromagnetic data) is characterised by pyrite or pyrrhotite mineralization. Chalcopyrite was recorded in the area in the past and early reconnaissance sampling in this project identified a zone of anomalous gold values approximately 3 km wide, and 12 km in strike length. African Eagle has undertaken stream panning, geological mapping, trial pitting, trenching and soil sampling. A 200 x 200 m grid soil sampling program identified several anomalous zones (Armitage, 2007). 6.10.4. Conclusion The gold price is stimulating new developments worldwide and Mozambique is no exception. Pan African Resources has announced plans to begin gold mining in the Manica Province of Mozambique by 2012. A feasibility study is reported to be under way, to be followed by an application for a mining licence. If the study is positive and licence application successful an open-pit operation producing 30 000 oz of gold per annum is envisaged. Other gold mining of an artisanal nature, both vein and alluvial deposits, continues in the Niassa Province as well as Manica Province. Although continued support from the state especially in terms of providing energy where required is important, it is the nature of gold mining that where the price of gold is good the gold will be mined if the mining is at all feasible.

55

The mining of gold by artisanal miners appears from the studies of Dondeyne and others (2009) to be inadequately controlled. None of the ‘designated areas” during their study were in gold rich areas, and river siltation and pollution continue unchecked (Dondeyne et al, 2009). The challenge lies in monitoring the process and in adding value to the gold within the country. Although the downstream route for gold is not long, it requires less financial support than most other beneficiation projects and little in the way of transport facilities. The success of a jewellery sector is as much about political will than anything else. The beneficiation of Mozambique’s gold production will add considerably to the value of exports and to the provision of jobs for craftsmen.

6.11. Graphite Graphite is such a fundamental contributor to industry and especially to future power applications that Agrawal Graphite Industries of India commented “No Graphite, no industry.” (Feytis, 2010). 6.11.1. Market The impact of the global recession on the industrial sector caused a significant drop in the graphite market during the last quarter of 2008 and during 2009 the market remained poor. However the Chinese government continues to discourage exports with export duties. In January 2008 a duty of 20 % was imposed. However, stocks remain high so that exploration and new mine startups are not expected to get off the ground until fears of a “double dip” in the world economy are past, and strong growth is recorded. Graphite is currently a growth market, with refractories remaining the largest end use, accounting for around one third of the total production of natural graphite. Modernization of the steel and iron industries in North America and Asia will consume large volumes of graphite, however future growth in this sector is likely to be lower than the growth in steel production since unit consumption of refractory material per ton of steel is falling as new steel mills are installed, especially in China. Part of the increased demand is because graphite has replaced asbestos in brake linings and pads. This also has current significance in Mozambique since asbestos was recently banned for use in the country. The growth of the lithium-ion battery market is expected to have a significant immediate effect on graphite demand, whilst fuel cells will provide ample future demand. Feytis (2010) indicates that the world market is expected to be short of graphite in 2020 due to the lithium-ion battery sector demand. The major players in the carbon and graphite market exert a good deal of market control, key players include the Cabot Corporation, Carbone Lorraine, Evonik Degussa, Grafil, GrafTech International, HEG Ltd., Hexcel, Mitsubishi Rayon, Morgan Crucible, Morgan Industrial Carbon, Nacionale de Grafite, Nippon Carbon, SGL Carbon, Showa Denko Carbon, Superior Graphite, Toho Tenax, Tokai Carbon, Toray Industries and Zoltek (miningtopnews, 2010). Due to tightening supplies control has shifted more towards miners in the last year. The top producers are (production capacity and country given in brackets) Jixi Liumao Graphite Resource Co. Ltd, [80-90 ktpa, China] Heilongjiang Aoyu Graphite Group Corp. [80 ktpa, China], Chenzhou Luteng Crystalline Graphite [70 ktpa, China], Nacional de Grafite [70 ktpa, Brazil], Karabeck Metal and Mining [50 ktpa, Turkey], Zavalyevsky Graphite Complex [40-60 ktpa,Ukraine], Qingdao Hensen [38 ktpa, China], Extractive Metaquina [3040 ktpa, Brazil], Lubei Yxiang Graphite [30 ktpa, China], Jilin Graphite Industry [30 ktpa, China], Qingdao Heilong, [30 ktpa, China], Luobei Yiyang [30 ktpa, China] (Roskill, 2009, in Feytis, 2010).

56

In the past the US, which has no natural flake graphite production, has imported large amounts of graphite from China, however quality and human rights issues, as well as China’s resistance to exporting scarce resources, militate against increasing this import. Although Mexico is close to the US, most of its graphite is amorphous and as a result not suited for some applications (fortunegraphite, 2010). Although all sectors of the graphite industry are expecting significant demand improvement, some analysts project that graphite will show an exponential increase due to its use in PEM fuel cells (fortunegraphite, 2010). By mid 2010 supply, especially from China – the world’s largest producer was tight. European producers have been shutting down in recent years, mainly due to the exhaustion of deposits (Feytis, 2010). Africa has good graphite potential but, Feytis (2010) quotes Rill from Superior Graphite as saying that the interest in in African deposits is “from a quality perspective but geopolitical and logistical issues will be hindrances”. 6.11.2. Properties and applications Graphite products are used in applications such as batteries, brake linings, refractory products (especially high purity flake graphite) in foundries and lubricants (graphite is resistant to oxidation and to heat up to 310ºC). It is also used in electrical applications due to its good electrical conductivity. Thermal technology and acid-leaching technique developments allow for higher purity graphite powders to now be produced and this trend is likely to lead to the development of new applications for graphite in high technology fields. This advanced technology has lead to the use of improved graphite in carbon-graphite composites, electronics, foils as well as friction materials and specialised lubricant applications. Innovative graphite product lines such as “graphoil” (a graphite cloth), will lead to a growing market. The use of graphite in fuel cells remains the most exciting new use although once the pebble bed reactors start to come on-line (note that South Africa has dropped its research and development efforts, but China is still following through), this will represent a significant usage. The core of a pebble bed reactor contains fuel-free machined graphite spheres at various stages together with fuel. 6.11.2.1. Graphite Structure Graphite consists of sheets of hexagonally bonded carbon atoms forming stable planar lattices. These sheets are connected with very weak bonds (Van der Waals forces) to other sheets. Additionally graphite is chemically inert, even at high temperature, and it has superb thermal and electrical conductivity. This unique combination of properties makes graphite valuable for a wide range of special applications especially in lubrication, even in situations of high temperature and pressure, as well as in applications where the resistance to aggressive chemicals and oxidation become important. 6.11.2.2. Fuel cells Of particular importance is the application in fuel cells that could consume as much graphite as all other uses combined (Olson, 2010). The most advanced type, the proton exchange membrane (PEM) fuel cell, is expected to become a significant power source within the coming decade. Fuel cell applications will include stationary and mobile units and they may be used as part of the heating system for individual households as well as for power plants (Graphit Kropfmühl, 2005). It is expected that an early application of the technology will be to market portable units supplying up to 100 W of electrical power to laptop computers. Promising trials have taken place using PEM Fuel Cells for vehicles where they provide a higher efficiency 57

than conventional internal combustion engines (Graphit Kropfmühl, 2005). About 45 kg of graphite is used in each cell stack for a motorcar. 6.11.3. Reserves and resources Letlapa’s estimate of the Mozambican resource is relatively small at about 10 Mt compared to the world inferred resource of more than 800 Mt. 6.11.4. Production China and India are the leading producers of graphite, accounting for nearly 85% of global graphite production (Table 14). China’s graphite production is expected to continue growing. New graphite mines have opened in Canada. 6.11.5. Price Prices have been static for 2 years with little change in most categories. As an example prices for large flake crystalline graphite +80 mesh ranged from $900 and $1,500 over the period January 2008 to November 2009 (www.indmin.com). Table 14: World graphite 2009 production and reserves Country

Mine Production (kt)

Reserves (kt)

Zambia

nd

4e

Brazil

77

360@

Canada

27

China

810

55,000

3

1,300

India

140

5,200

Korea, North

30

Madagascar

5

940

Malawi

nd

150e

Mexico

10

3,100

Mozambique

0

46e#

Norway

2

Other countries

5

Sri Lanka

3

Czech Republic

Ukraine

4,900

8

Total

1,120

71,000

e

Source: Olson (2010), and own estimates, @ Feytis 2010 gives Brazilian reserves at the nd 2 highest at 34.5% of the total!. nd = no data Estimated resources for Mozambique are much higher and may be in excess of 10 Mt, further work needs to be done to confirm reserves

6.11.6. Substitutes Although graphite is not easily substituted, artificial graphite can be made from petroleum coke. In steel making it may be substituted with scrap and calcined petroleum coke. In the case of foundry facings finely ground coke with olivine has been used. Molybdenum disulphide can be used as a dry lubricant, but is not ideal because of its greater sensitivity to oxidising conditions (Olson, 2010).

58

6.11.7. Graphite Deposits The area under consideration is rich in potential for the production of high grade flake graphite. A summary of the deposits is given in Table 15 6.11.8. Mozambique Graphite deposits occur in seven of the provinces in Mozambique, i.e. Cabo Delgado, Manica, Nampula, Niassa, Sofala, Tete, and Zambézia. All graphite occurrences are found in Proterozoic gneisses and schists. Graphite concentrations often occur close to limestones. In Mozambique, exploitation of graphite dates back to 1911 when mining commenced in the Angónia district of the Tete Province. Three mines, Metengo-Balame, Mauè and Satèmua, were in operation until 1955 (Callaghan, 2002a). Ancuabe was the most recent graphite mine producing; it was in operation until 1999 and had a capacity of 10 ktpa of high grade flake graphite concentrate (more than 98% carbon). The high cost of diesel fuel as well as inelastic world prices led to it being put on care and maintenance (Pekkala et al, 2008). Table 15: Graphite resources in the study area Locality Ancuabe

Status

Resource

Other

Operated 1994-1999, Current: Care and Maintenance. Feasibility: Graphit Kropfmuhl

Graphite#

~1-3 Mt 35Mt ore @ 3-10%# ~720 kt - 2.6Mt Graphite* 24Mt @ 3-11% Graphite

Licensed to Grafites de Ancuabe S.A.R.L. Graphite content 3-10% of the large-flake variety

Abandoned

>3kt

Mining started in 1951, reached an annual production of 300t

Chimutu$$ Evate – Utoca Gegaia

Occurrence

Gorongosa

Occurrence

North of Gorongosa

>2.5 kt graphite

2,500 t grading 70-74% C exported in 1953, C Volatiles:1.87%; Graphite:91.79%; ash: 6.18%

Jagaia

Occurrence

Near Itotone

Katengeza (Malawi)

157 kt Graphite 2.7 MT Ore @ 5.8%

Proven 1.7 Mt ore PSD >.25mm$$

Abandoned Itotone

Lynx Mine (Zimbabwe)

Production stopped

Macossa Mauè

Occurrence Abandoned

Mazeze Metengo Balama Metocheria

Near Karoi ~120 km south of Cahora Bassa dam

Abandoned

Small deposit

Big graphite crystals in stockwork and veins in anorthosites

540 kt Graphite 3.6 Mt @ 15-20%

13 km E of Mazeze and N of the main road Mazeze-Pemba

Occurrence

Stockwork and veins in anorthosites Big graphite crystals

Occurrence

Vein

172 kt Graphite 1.72 Mt @ 10% C

W of Monte Jocolo mountain 5 km E of the deposit Rio Uanapula. Zone is 4 km long, 10-20 m wide with a 35° inclination.

1.843 Mt graphite

Graphite zone of 3-5 km in length, thickness 15-60 m, C content 17.15%. The reserves

Monte Jocolo Monte Nipacue 59

Locality

Status

Resource 10.75 Mt @17.17%

Other up to a depth of 10 m, are estimated to 10,750 kt of graphite ore.

Namapa

Concentrated to 78% with 70% recovery

Nhamassonga

35 km northwest of Tete. Analysis at export: C volatiles: 1.4%, Graphite: 49%, Ash: 47.82%

Nhankar

Small Deposit 17.2kt Graphite

2 layers in gneiss and crystalline limestone

4.88 kt graphite (11.7%)

Flakes and up to 4 mm (mainly 0.4-2 mm) in quartz-albite schist. Processing trials, produced concentrates with up to 78% graphite at a recovery of 70%.+

Njoka (Zambia) Otaco-Ancone

Abandoned

Was mining in 1953 15% C

In the eastern Province, it consists of gneiss with flake graphite. Processing trials, produced concentrates (up to 87% flake graphite) with a poor recovery (39%). Due to the intimate association of mica with graphite.+

Inactive

387 kt Graphite 3.87 Mt Ore @10-17%

Graphitic zone with 30° inclination is 9-10 km long, 10-20 m thick. 10 km N of Mazeze, the original deposit Mazeze, which had been mined intermittently in the past

Inactive

774kt Graphite 5.16 Mt @ 15-20% C

Graphitic gneisses form a zone 3 km long 40-60 m wide. The zone trends NW-SE with inclination of 5°. 17 km NE of Metoro and near the road Pemba-Ancuabe

Inactive

180kt Graphite 1.2 Mt @15-22% C

The graphite zone is 8 km long, 20-70 m thick , with massive graphite

Satemua

Inactive

650 kt contained graphite to 100m

Graphite zone 1.2 km strike, 40 m thick, dipping at 40-60o NE Crystalline disseminated flakey graphite can be floated to 94% C. The deposit is about 1.3 km long, with an average thickness of 40 m and an incline of 40-60°. Flotation tests concentration to 94% C, 1% of moisture and 5% ash can be obtained. Opencast mining is feasible.

Simbe

Occurrence 973 kt graphite to 20 m 6.49Mt @ 15-20% C

9 km NE of the river Megaruma. 3 km long, 50-70 m thick, inclination 25-30°. Massive flaky graphite

6% C $$

PSD>0.25mm $$

Petauke (Mkonda) (Zambia)

Rio Megaruma

Rio Muaguide Ivanca Rio Uanapula

Taquinha Tuinchi (Malawi) Various sources # Cilek, 1989 * Pekkala et al, 2008 + Mitchell, 2009 $$ Malunga, 1997.

60

Graphite deposits in Mozambique occur mainly in high-grade metamorphic zones (amphibole or granulite facies) in metasedimentary graphitic rocks. Secondary enrichment of graphite in veins, fractures and fillings is fairly common due to regional ultrametamorphism. In Angonia, the graphitic zone is highly metamorphosed (granulitic-charnockitic facies) containing several areas rich in primary and epigenetic graphite. The Angonia region is known to host epigenetic graphite crystals (up to 15cm in length), which occur in stockworks and veins of hydrothermal origin (Callaghan, 2002a). 6.11.8.1. Ancuabe The abandoned Ancuabe mine and dressing plant are located 100 km west of the port of Pemba. Grafites de Ancuabe Lda. stopped production and placed the mine on care-andmaintenance due to the cost of supplying its own electricity using diesel fuel. Since then, Electricidade de Mozambique included the Ancuabe mine in its Cabo Delgado province rural electrification project. Power lines have been extended to the site of the mine from the national grid. Timcal and Kenmare have considered re-opening the mine. Club of Mozambique (2010a) quoting the Maputo-based daily Noticias, has reported that Graphit Kropfmuhl is interested in exploiting graphite deposits in the Ancuabe district of Cabo Delgado Province. The national director of mines, Eduardo Alexandre, is reported as saying that Graphit Kropfmuhl AG aims to begin mining graphite in Ancuabe in the first half of 2012. Graphit Kropfmuhl AG wants to launch an exploration programme at Mazeze in the Chiure district, where deposits of graphite are confirmed in two areas. The feasibility study will be submitted to the government in the first quarter of 2011 (Club of Mozambique, 2010a). The Ancuabe graphite deposit occurs as a zone 4 km long and is about 80 m thick (Mining Journal, 2000). Three ore types have been identified: primary ore, containing some 4.3% graphite (up to 50 m thick); eluvial ore containing 4.43% graphite (3m - 9 m thick); and colluvial ore containing 4.65% graphite (up to 80 m thick). The eluvial and colluvial ore make up about 15% of the deposit. It is estimated that total resources of some 35 Mt exist in the area (Mining Journal, 2000). Mitchel (1993) ran bench scale tests on three samples of Ancuabe graphite (fresh core with 11% graphite, weathered rock with 13% graphite and eluvial soil with 9% graphite). Air classification produced concentrates with up to 73% graphite and up to 71% recovery whilst froth flotation produced concentrates with up to 90% graphite and a recovery of up to 72%. In the case of the froth flotation test up to 85% of the head material was first rejected with air classification. Bateman set up a 7.5 ktpa multi-stage flotation process, followed by drying and screening to recover marketable graphite (Bateman, 2010 I see Figure 25). 6.11.8.2. Satemua Satemua is in the northeast of Tete province in the Angonia district. The graphite deposit occurs as veins and as eluvial material. The Satemua deposit is reported to contain over 5.6 Mt of ore grading some 6% graphite to a depth of 30 m (Mining Journal, 2000, Cilek, 1989), and a total of 650 kt of Graphite to 100m (Cilek, 1989). 6.11.9. Zambia 6.11.9.1. Njoka The graphite occurs in a quartz albite schist in the Eastern Province (53 km west of Lundazi, 1.6 km northwards from the Lundazi-Kazembe gravel road). Ore reserves to a depth of 5 m are 41,460 t containing 4,880 t graphite with an average grade of 11.7% fixed carbon (Ministry of Mines, 2010). Flakes up to 4 mm long (typically 0.4-2 mm) occur. Laboratory

61

processing trials, using single stage froth flotation, produced concentrates with up to 78% graphite at a recovery of 70% (Mitchell, 2009). 6.11.9.2. Petauke The graphite occurs in gneiss in the Eastern Province (north of Petauka). The deposit has a grade of 15% flake graphite. Processing trials produced high grade concentrate (up to 87% flake graphite) but low recovery (39%) was achieved due to the intimate association of mica with graphite (Mitchell, 2009). Figure 25: Ancuabe Graphite plant

Source: Bateman, 2010

6.11.10. Malawi 6.11.10.1. Chimutu Cooper (1949) indicates that the “main graphite area” is west of a line between Chimutu and Kwinyimbe Hill. Funds for exploratory work were approved prior to 1999 (Malunga, 1999). 6.11.10.2. Katengeza A feasibility study carried out in the 1990s indicated that the Katengaza deposit near Dowa (60 km NE of Lilongwe) had a 2.7 Mt ore resource averaging 5.83% graphite, giving a carbon resource of 157 kt (Malunga, 1999; Pitfield, 2009) of flake graphite. Of this resource 1.7 Mt is proven (Malunga, 1999). 6.11.10.3. Kongwe Mission A graphite occurrence ranging from about a metre to more than 30 m in thickness and containing 5-10% graphite in graphite gneiss occurs near the Kongwe mission station (Cooper, 1949). 6.11.10.4. Lobi Resources at Lobi are roughly estimated at 5 kt. The ore contains 4.2% carbon with a possible recovery of 86% of crucible grade flake graphite being achievable.

62

6.11.10.5. Ntcheu and Lilongwe Occurrences Malunga (1999) indicates that there are significant, undelineated resources at Ntcheu and Lilongwe. 6.11.11. Strategy Since a relatively good concentrate can be achieved using air classification, the ideal situation would be to air classify graphite to produce a 50% or better concentrate before transportation to a central processing point for final concentration. Since Graphit Kropfmühl has an interest in the deposit at Ancuabe it might be worthwhile for the Mozambican government to enter into discussions with them to produce high value end products within Mozambique from material sourced within the region.

6.12. Iron and steel From an infrastructural point of view the fact that the best iron opportunities identified are in Tete is both positive and negative. Positive if the intention is to go downstream and produce steel locally, but negative if the idea is to use the same rail as the coal exporters to export ore. 6.12.1. Market Iron ore is used almost exclusively for iron making and in the production of directly reduced iron (DRI), a raw material required to make crude steel. In a world perspective, crude steel production for the 64 countries reporting to the World Steel Association was estimated to be 119 Mt - an increase of 5.3% on January 2010 (Hunt, 2011). The estimated crude steel production mentioned in Callaghan 2002a was 800 Mt, since then production has risen markedly and reached a peak before the economic crises of 1.352 bt in 2007 (see Figure 26). In 2008 about 2 bt of ore produced some 932 Mt of iron and 66 Mt of DRI. When combined with over 475 Mt of scrap steel, this results in about 1.323 bt of crude steel (Worldsteel, 2009). Southern Africa holds 1% of the world’s iron ore reserves. South Africa is the largest steel producer in Africa (21st in the world) with 8.3 Mt produced in 2008, and is the 4th largest exporter (30.3 Mt in 2008). The biggest exporters of iron ore in 2007 were Brazil (269.4 Mt), Australia (268.6 Mt) and India (93.7 Mt) (Worldsteel, 2009). Very different from the Mintek report however is that the importing pattern is fundamentally dissimilar. In that report it was stated “The Western European countries (142 Mt) and Japan (132 Mt) are the largest importers.” (Callaghan, 2002a). In 2008 the largest importer was China (383.1 Mt) followed by Japan (138.9 Mt) and South Korea (43.7 Mt). (Worldsteel, 2009). This pattern bodes well for countries on the eastern seaboard of Africa since they are close to the new markets that have developed. Prices have followed a pattern similar to the demand/supply pattern with a peak in September 2008 of $98 per tonne. A sharp drop-off occurred due to the economic crisis but demand soon increased again with a concomitant increase in price. The price at the end of 2010 was $123/t. The prices from 2001-2010 are shown in Figure 27 and it is clear from this that the price now at about $123 is significantly better than the one mentioned in Callaghan (2002a) for January 2002 when it was $69 (and that was considered a high price at the time since in the longer term prices had been in the area of $50/t). This has a significant impact on the feasibility of iron ore projects.

63

Figure 26: World crude steel production 1950-2008

Source: Worldsteel, 2009

Figure 27: World iron ore prices 2001-2010 World Iron Ore Prices 2001-2010 140 120 100 80 $/t 60 40 20 0 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Year Source: Data from Worldsteel, 2009

64

6.12.2. Deposits 6.12.2.1. Changara The Changara Project area covers 525 km2 and is underlain by lower Proterozoic rocks of the Rushinga Group which flank the northeastern margin of the Zimbabwe Craton. Baobab Resources Plc considers the area, which hosts numerous occurrences of zinc, lead, manganese, iron ore, fluorite, copper and silver, to be highly prospective for SedEx / Broken Hill Type polymetallic base and precious metal mineralization (Baobabresources.com). Baobab Resources Plc has signed a Joint Venture Agreement between Southern Iron Limited and the Company's wholly owned Mozambique subsidiary, Capitol Resources Limitada in respect of the Changara deposit. Southern Iron may earn up to 80% interest in the project in a staged approach of investment, exploration and definitive feasibility studies. The Joint Venture is expected to accelerate exploration. Previous work carried out by Baobab identified several Broken Hill type base metal and manganese targets. Field activities were due to commence in September 2010 (Reuters, 2010c). There is insufficient information on this project to consider it any further at this stage. 6.12.2.2. Chitonge (Zambezi SDI) See Section 6.12.2.11 6.12.2.3. Honde (Beira SDI) The Honde deposit located along the banks of the Honde River, is a medium-sized sedimentary (banded ironstone formation – BIF) iron deposit approximately 55 km northeast of Manica. It was investigated in the past by Luossavaara-Kiirunavaara AB (LKAB) International. The deposits were estimated to contain some 100 Mt of ore at an average grade of 38% iron. 6.12.2.4. Lupata This is a small titaniferous iron deposit with an estimated resource of 12,3 Mt. 6.12.2.5. Machédua (Zambezi SDI) See Section 6.12.2.11 6.12.2.6. Massamba (Zambezi SDI) See Section 6.12.2.11 6.12.2.7. Mont Muande Mont Muande is a large magmatic iron skarn deposit about 25 km northwest of Tete. The resource estimate was given in Walker (2004) as 220 Mt of magnetite and 75 Mt of apatite. Phosphate is considered deleterious in an iron feedstock and has always been seen as a major drawback of this deposit. The Mont Muande was already recognized to have a notable resource in the 2002 Mintek report and it hosts both magnetite and apatite mineralization with the figures given in Callaghan (2002a) being: magnetite content: 26.9%; apatite content: 9.2%. Baobab Resources plc announced the signing of a joint venture with North River Resources plc on 15 November 2010 in which Baobab has the right to earn up to 90% equity in the project. Since the previous corridor studies completed by Mintek, Omegacorp delineated an anomalous corridor of iron (>15% Fe) and phosphorus (>1% P) extending from the original prospect area 4 km to the southwest during 2006-2007 (Trading Markets, 2011).

65

The deposit can bee seen as an adjunct to the Tete titanomagnetites (6.12.2.11) bit is also discussed further in this report in section 6.21.5.4 as a phosphate deposit. 6.12.2.8. Muenguè skarn (Zambezi SDI) The small Muenguè skarn deposit is located about 35 km southwest of Fingoe in the Tete Province (Callaghan 2002a). 6.12.2.9. Rioni-Tenge (Zambezi SDI) The medium-sized Rioni-Tenge titanomagnetite deposit is situated about 55 km northeast of Tete and is hosted by Ecca Group rocks of the Karoo Supergroup (Callaghan 2002a). 6.12.2.10. Singore deposit (Zambezi SDI) See Section 6.12.2.11 6.12.2.11. Tete titanomagnetites (Zambezi SDI) The Tete titanomagnetites outcrop in the basic gabbro-diorite Tete Complex. They were initially described during the construction of the railway line and have been known since the early 1900s. Many of the previously named deposits fall into the area currently being investigated by Baobab Resources plc. They can be broadly seen as the Tete titanomagnetites or the Singore and Massamba titanomagnetites at this stage. When the Mintek study on the area was done, there had not been any clear identification of a significant large deposit in the Tete complex. The mineralogy of the orebodies is fairly constant, consisting predominantly of intergrown magnetite and ilmenite. Many attempts have been made to separate the two minerals in the past, however, these efforts had not always been successful at the time of the Mintek study (Callaghan, 2002a). Exploration licences held by Baobab Resources, currently cover the Singore and Massamba vanadiferous titanomagnetite deposits of the Tete Mafic Complex (see Figure 28). Baobab commenced exploration in 2008 and has completed an aeromagnetic survey, field mapping and sampling and metallurgical bulk sample test work. Baobab has identified magnetiteilmenite mineralization over a strike length of 8 km in the Massamba area. The project includes two zones of magnetite-ilmenite mineralization, Massamba Group in the north and the Singore zone in the south. The Massamba Group zone is 8 km long and comprises five prospects (Chitongue Grande, Pequeno, Caangua, Chimbala and South Zone). The Chitongue Grande prospect, has a 47.7 Mt JORC inferred resource with a head grade of 25.3% Fe, 0.18% V2O5 and 9.69% TiO2 (announced to AIM on 24 September 2009), with a possible resource established by independent interpretation of 400-750 Mt to 250m depth. However, internal partings of non-mineralised waste material may not be preferentially mineable and would dilute the recovered grade. An estimate of the average concentrate grade is 63.7% Fe, 0.068% V2O5, 4.86% TiO2, 1.3% SiO2, 2.75% Al2O3, 0.001% P and 0.37% S. In a mass recovery study it is considered that significant improvement of the mass recovery could be achieved by blending Chitongue Grande feed with other, high recovery feedstocks (Baobab, 2010). The study showed that the ilmenite concentrate in particular might then be further processed to produce a saleable concentrate. Finally the report showed that based on a 300 Mt resource and 10 Mtpa mill throughput (see Table 16) the Tete project is likely to be economically viable if a magnetite mass recovery of 30% and a 15% credit for the V2O5 component of the ferro-vanadium concentrate could be achieved. It identified key 66

sensitivities to include: strip ratio, mass recovery, concentrate grade, V2O5 credit, resource base and mill throughput rate (Baobab, 2010). Figure 28: Baobab holdings on the Tete Complex

Source: (Baobab, 2010).

Table 16: Scenario parameters for scoping – Tete Iron ore project Resource Base

300 Mt

Mill throughput

10 Mtpa

Mine Life

30 y

Magnetite concentrate production

3 Mtpa

Magnetite concentrate grade

69% Fe / 0.8% V205

Ilmenite concentrate production

1.2 Mtpa

Ilmenite concentrate grade

50% TiO2 / 12% Fe

Capital Expenditure

$542 M

Operational Expenditure

$34/t (concentrate)

Transport (rail/port)

$21/t (concentrate)

Iron ore

$0.90/dmtu

V2O5 (assuming a 15% credit)

$32/kg

TiO2

$80/t (concentrate)

Source: Baobab, 2010

However even in the short period since the scoping was done there have been significant market changes. The price of iron ore price at the end of February 2011 stood at $1.8718/dmtu (see Figure 29, indexmundi.com), more than double the price used in the scoping study. This will have a significant positive effect on the project. Furthermore ilmenite price forecasts are at $100 plus for the foreseeable future compared to the $80/t used in the study.

67

6.12.2.12. Tsetserra, Mocuta, Cepucuto and Xigundo deposits (Beira SDI) The Tsetserra, Mocuta, Cepucuto and Xigundo deposits are small iron deposits which occur in BIF in the Mavita area.

6.13. Downstream opportunities associated with Tete Magnetite 6.13.1. Market and Technology Because new vanadium rich alloys have a high strength-to-weight ratio, vanadium consumption in steel manufacture has increased by 7% per tonne of steel produced over the past 10 years. Analysts speculate that the 2011 Japanese earthquake crisis will further increase demand for vanadium rich high-strength low alloy steel, in which the vanadium adds strength whilst producing a lighter alloy (Creamer, 2011; Van der Linde, 2011). Forecast steel demand for 2011 is 5.3% up at 1.3 bt (estimated before the Japanese earthquakes), since 85-90% of vanadium produced currently is used in steel manufacture (Van der Linde, 2011), the demand increase for vanadium is likely to be higher than 5%. Figure 29: Price of iron ore 200

Price of Iron ore

180

US cents per dmtu

160 140 120 100 80 60 40 20

Fe b08 Au g08 Fe b09 Au g09 Fe b10 Au g10 Fe b11

Fe b07 Au g07

Fe b06 Au g06

0

Source: Indexmundi.com

Non-ferrous vanadium alloys used in the aerospace and nuclear industries are also showing growth. Vanadium compounds are also used as catalysts and in the ceramics, glass, and dye industries. The market for vanadium is likely to be considerably strengthened by a recent breakthrough in the vanadium redox battery. A new electrolyte mix has been found to increase the energy capacity of these batteries by as much as 70%, reducing costs and offering wider usage options (Vanadium Investing news, 2011). New approaches to the recovery of vanadium from vanadium-bearing titaniferous magnetite ores, are being actively researched worldwide and the Australian resources company TNG Limited (ASX: TNG) announced on the 10th January 2011 that it had agreed with Mineral Engineering Technical Services Pty Ltd (METS) to jointly apply for full international patent protection for a new hydrometallurgical process to treat vanadiferous titanomagnetites. The process was tested on the Mount Peake and other Australian vanadium projects (TNG, 2011). The older pyrometallurgical process, which involved roasting followed by leaching is known to be environmentally unfriendly, is capital intensive and can have a high operating cost. The alternative hydrometallurgical approach developed by TNG and METS utilises the acid 68

leaching, solvent extraction and stripping to selectively recover the metals (TNG, 201). The positive testing of the process on a variety of Australian deposits indicates that it may well be useable in Mozambique on the vanadiferous titanomagnetites in Tete. This could lower costs and make the Massamba deposits more profitable. This is an area that deserves detailed analysis in a full spatial study with regard to the precise nature of the ore and processing options as well as all of the reagents likely to be needed as well as the possible downstream dynamics. The Maputo Metallurgical Complex discussed in Walker (2004) was based largely on sourcing magnetite ore resources imported from Palabora mine in South Africa and blending it with local ore. The Palabora Mining Company (PAM) has recovered and stockpiled magnetite since it started production in 1965 (Figure 30). PAM now sells two products developed from the stockpile; the first product developed was medium grade dense media separation magnetite. However since October 2006 PAM has been supplying magnetite concentrate to China National Minerals via Maputo and Richards Bay. The initial agreement was for the supply of up to 2 Mtpa. Last year it was reported that a 50 ktpa plant to convert iron-ore fines into metallic briquettes for use as a scrap supplement in electric steelmaking, would be developed in Phalaborwa. This is seen as a precursor of a new technology (Finesmelt) to a much bigger $120 M project to produce 500 ktpa of briquettes (Creamer, 2010). Figure 30: Palabora Mining Company 240 Mt Magnetite stockpile

Source: /www.palabora.co.za

Notwithstanding these developments which are likely to use 3 Mt or more of the PAM magnetite per annum it must be remembered the current production of magnetite by the mine is in the order of 3 Mtpa (2009: 2.845 Mty, 2010: 2.993 Mt), or in other words there still remains a resource of some 240 Mt on surface. Thus the MMC project as described by Walker (2004) may still be a possibility if the Chibuto heavy mineral sands project goes ahead. The second iron project described in Walker (2004) was for the production of sponge iron by directly reducing the ore with Moatize coal. This line of thought appears far more positive for the SDI and needs centred attention as a comparative project to the hydrometallurgical route in future in-depth studies. 6.13.2. Opportunities The opportunities presented here are dependent on the precise nature of the ore. However from the indications so far it appears that the ore from Mont Muande and that from the Massamba-Singore prospects may have to be treated differently. However some of the

69

material from the Massamba-Singore project may well be able to be blended with the Mont Muande ore. It is clear that the current rail system will not be able to manage any further outgoing material unless it is considered to be of high value. Furthermore, there is a need to find other uses for the coal and energy being produced so that value and jobs can be added to the economy and stress taken off the rail. It would therefore be ideal to treat all of the iron ore locally to produce steel. If the ilmenite concentrate is suitable it would also be ideal to smelt it locally. In the light of this new and significant discovery in Tete, and in the context of the degree of development in the coal mines, it is clear that for the foreseeable future any idea of continuation with the previously proposed Maputo Metallurgical Complex should take second place to the production of steel in the Tete region. Dependent on detailed analysis of the ore, the Mont Muande ore could be calcined and reduced on a fluidised bed on site, using coal from a local mine. The calcined magnetite will then be smelted. Options would be using a DC arc furnace using electricity produced from a local power plant or to use a blast furnace – possibly using the cheaper pulverized coal injection (PCI) technology (if PCI were to be produced locally) to produce pig iron. Using PCI would allow highly priced coking coal to still be available for the local production of coke for export, whilst the lower quality material that cannot withstand the transport costs could be used in the steel making process (see section 6.5.6.9 for more detail) Dependent on the precise nature of the ore from the Massamba- Singore projects this ore may also be feedstock for this process. However if it needs to be treated using a hydrometallurgical technique, the final product will still be a feedstock for the next stage of steel production. High purity pig iron smelted from ilmenite produced locally from the Massamba- Singore project, or if unsuitable transported from a coastal ilmenite smelting facility may then be mixed with the pig iron, blown with oxygen to oxidize excess carbon and converted to mild steel. Most of the product will be then cast to produce mild steel products. Once the Mont Muande and Massamba- Singore projects are mining and producing pig iron, the Nacala line will be complete and the Tanzanian and Burundian laterites should be in production. Ferrochrome from South Africa and laterite from Tanzania or Burundi can then be imported and the balance of the steel can be mixed with this imported ferrochrome and ferronickel, decarburised and continuously cast to produce austenitic stainless steel products. 6.13.2.1. Spatial Impact The spatial/geographical impact of the successful construction and operation of a plant to treat Mont Muande and Massimba-Singore ores would be significant. Firstly it would provide a variety of iron and steel products in the heart of the Tete district, which will soon be experiencing an unprecedented (in Mozambique) growth, and which will require a considerable amount of steel products. Assuming the products are sold at a sensible price determined from cost + profits price rather than at import parity price, this will supply steel at an excellent price into this market stimulating significant industrial growth possibilities, especially since there should be no shortage of power in the region. Export of high value excess steel products will be by the rail, and will essentially be replacing lower value coal products used in the process (especially if PCI is used). Because of the demand for rail usage by the coal industry it will make no sense to export raw ore from Tete. 6.13.2.2. Project Viability The options presented here do rely heavily on as yet incomplete exploration of the Mont Muande and Massamba-Singore project areas. However, assuming those projects to lead to a viable mining option, this developmental line is much more positive for Mozambique than the alternative presented in Walker (2004) since it assists in the take off (which is currently a problem that can be foreseen) of Tete power-station electricity as well as coal to reduce the 70

pressure on the rail. At the same time high value products will be produced inland in an area experiencing strong growth. All in all a very positive scenario and one which is considered highly probable if the ore proves to be of a suitable grade and the resource sufficient. 6.13.3. Conclusion The Tete iron project and Mont Muande represent the most important iron ore deposits currently known in the Tete region. The projects are about 33 km by road from the city of Tete and from the nearest connection to the current course of the Sena rail line. It is some 6 km from the Zambezi River. It is likely that this project will move to a mining phase within the next 5-10 years and a detailed study of the dynamics of various scenarios of export and local value addition and the impact that they will have on the SDI should be considered. Figure 31: Spatial dynamics of the magnetite project

Source: Modified after Walker (2004)

6.14. Kaolin Kaolin has been produced in the past in the Alto Ligonha pegmatite field but more often regarded as a waste product. Surprisingly, Pekkala (2008) indicates that kaolin has in the past only been produced as a by-product by the Ribaue pegmatite. In light of new developments in Mozambique it may be worthwhile to consider a plant to upgrade the clay minerals of the area. Kaolin and other clays have a major input into a variety of manufacturing processes. An in-depth study of the interconnectiveness of the new mining economy in Mozambique is clearly called for to estimate possible mineral input interactions and mass balances. Industrial minerals can be very valuable and in the case of kaolin (dependent on grade and treatment) prices can range from around $50 to as high as $600 per tonne. Cronwright (2005) reports that reserves of washed kaolin at Boa Esperanca pegmatite are 3,500 t, with 71

a further 390 kt of kaolinitized pegmatite untested, and that reserves at Muaine are calculated at 3.315 Mt. The pegmatites at Marropino, Naipa, Naquisuppa and Boila are also kaolinitized (Cronwright, 2005; Pekkala, 2008). The uses of kaolin are varied and it may be worthwhile to touch on just a few that may have a bearing in the area. Kaolin could be mixed with local graphite to produce pencil lead. It is widely used in the manufacture of pesticides due to its high absorption ability; pesticides are vital for the growing agricultural economy of the study area. It is used in pharmaceuticals and since Vale has announced that they are looking at the opening of a pharmaceutical factory there may be a take off for high grade kaolin in limited quantities. Due to its rheological and other properties kaolin is widely used in ceramics and in the manufacture of a range of sanitary ware and tiles. Its colour and heat resistance are the chief characteristics that make it useful in the plastics industry as a filler. Pekkala et al (2008) points out that the commercial production of bricks in many districts is at a standstill, however where the demand is high artisanal brickmakers produce bricks locally for the market. Artisanal brickmakers often utilize unsatisfactory raw materials and consume large quantities of firewood contributing to devegetation with the concomitant environmental problems. Mozambique has large clay deposits and as coal becomes more available Mozambique should encourage major brickworks at growth points throughout the country.

6.15. Lithium Currently supply easily meets lithium demand. However as the need for and popularity of hybrid and electric cars grows there will be a great need for lithium, which is used in manufacturing the batteries. The total amount of potentially available lithium worldwide has been estimated at 15 Mt, of which 6.8 Mt is currently economically recoverable. Using the figures of 6.8 Mt of lithium and 400g of lithium per kWh this gives a total maximum lithium battery capacity of 17 billion kWh, which is enough for approximately 320 million electric cars with a 53 kWh battery (21.2 kg Li per battery). This type of demand may lead to significant shortage of supply for structural metallic applications and for batteries in other industries (NTC, 2010). Note however the counter argument of the TRU group; supply growth is seen to continue to outstrip demand, projects in the pipeline as well as expansions at existing mines could increase capacity to 40 ktpa within the next decade, lithium prices which fell in 2010 still remained depressed in January 2011. TRU (2011), indicates that the brine-based producers Chemetall, FMC and SQM have a natural cost advantage and that “Only a select few new projects could make it into profitable production…”. Argentina has recognised the growing importance of lithium and in March 2011 the governor of the Jujuy Province announced that lithium was a strategic mineral, and that all lithium projects must be studied by an expert commission before approval by either local or National authorities (Resource Investing News, 2011). Anderson (2011) sees the lithium demand at just over 25 kt in 2011 and increasing steadily to around 53 ktpa by 2020 (see Figure 32). Anderson (2011), considers that lithium batteries which accounted for 14% of the total lithium demand in 2007 will account for 40% of the demand in 2020, mainly for use in electric car batteries. Based on the supposition above that an electric car with a 53 kWh battery will use 21.2 kg of Li per car Anderson foresees one million electric cars per year being produced by 2020. Attention needs to be paid during in-depth studies on regional studies to the lithium potential of the area.

6.16. Limestone Extensive limestone deposits are developed in the tertiary Cheringoma Formation, which extends for about 100 km in a NNE to SSW direction from Muanza in the south to north of Inhaminga. To the north of the Muanza-Urema road, good quality limestone was discovered 72

in the localities of Codzo, Nhangatua, Conduè, Massiquidze, Muanza and Muerèdzi (from north to south). The last three deposits are the best, with stable thickness and quality. The southernmost deposit on the river Muerèdzi has a CaCO3 content over 85%. The deposit has a medium sized limestone resource of 10,23 Mt. In the whole area, there may be possible reserves of several hundred million tons (Callaghan, 2002a). Major limestone production is only taking place at Salamanga for CIMOC’s Matola cement plant. Coral limestone from Relanzapo near Nacala is mixed with imported clinker for cement production in the Nacala plants of CIMOS and ARJ Group. CIMOS has a third plant close to Beira in Dondo which uses limestone from Muanza quarry. Mozambique's limestone resources were reported to be nearly 39,8 Mt in 1995 (Mozambique Ministry of Mineral Resources and Energy, 1995 as quoted in Afristone, 2011).

Figure 32: Lithium demand curve

Source: Anderson 2011 (TRU Group)

Cimentos de Mocambique Sarl produces cement at its Dondo, Matola, and Nacala plants, which together had a total capacity of about 960 ktpa in 2008 (Yager 2011). However Afrique Avenir (2010) reports that current capacity is 500 ktpa and that the aim of 1 Mtpa is still to be reached. Macuahub (2011c) reports that a new grinding unit at the Cimentos de Moçambique cement factory in Matola is expected to double production capacity to 1.2 Mt by May 2012. A new grinding unit is also being installed at the Dondo cement plant Matola plant. Cimentos de Moçambique studies have indicated that Mozambican cement consumption will be 1.5 Mtpa in 2014 and 1.8 Mtpa in 2018 (Macuahub 2011c). Cimpor planned in 2008 to build a kiln at Dondo with a capacity of about 550 ktpa and to increase the clinker grinding capacity at Dondo to 600 ktpa from 240 ktpa, in the case of the Dondo plant the mill was being installed in August 2010 (Afrique Avenir, 2010). In April 2009, Cimentos de Nacala S.A. restarted production at its cement plant at Nacala (Yager 2011).

73

The South African group Pretoria Portland Cement (PPC) was reported to be planning to build a $200 M cement factory in the south of Mozambique with an installed cement capacity of 600 ktpa. Planned construction was expected to begin early in 2011 (Macuahub, 2010b), however there is no indication of this project on the PPC website. The British company Consolidated General Minerals has also been reported to have announced plans to build a $ 24 M, 110 tonne per hour plant for clinker processing and cement packing at the port of Beira (Macuahub, 2011b, Cgmplc, 2011)). Mozambique’s cement consumption increased to about 1 Mt in 2009 and since demand could not be locally met, cement imports increased (Yager 2011). Cement consumption is expected to show strong growth in the future and reach 1.5 Mtpa by 2015. If the nepheline syenite factory to produce cement, alumina, soda ash and potash goes ahead, Mozambique will easily meet its own cement requirements and will become a net exporter of cement Cement and coal industries tend to go hand in hand since in the normal process of cement production from limestone, silica, iron oxide and alumina, coal is used to heat the kiln in which the raw material experience partial melting at 1450oC to produce clinker. The clinker is then mixed with gypsum to control setting speed and ground to a fine powder. Cement kilns burn about 5 t of coal for every 10 t of cement produced. But the relationship of coal and cement is deeper than that. Coal combustion products (CCPs) are by-products of coal burnt in power stations. They include fly ash, bottom ash, boiler slag and flue gas desulphurisation gypsum and can be used to supplement cement in concrete in certain applications (World Coal Institute, 2008).

6.17. Monazite Monazite occurs widely in the study area in heavy mineral sand deposits as well as in rare earth and other deposits. Most commonly it would be seen as a mineral, which may tend to present environmental threats, however, it is the major ore of thorium and as such will almost certainly become a major fuel source in the medium term. Thorium is likely to replace uranium as a nuclear fuel and several countries including China and India are currently researching this technology. The advantages over uranium reactors are significant including safer operation (the reaction is not critical – it is stimulated by a photon beam and stops once the energy input is stopped), the waste products have a shorter half life and of course thorium is much more common that uranium. It is interesting to note that Great Western are in talks with South African mines that produce monazite as a by-product to reprocess it for them, creating an opportunity for both companies. In many cases the fundamental problem with separating out the monazite as a byproduct is that the companies do not have a licence to store and process radioactive products. Since Great Western now has a licence to store radioactive products at its mine in Steenkampskraal, it has overcome this hurdle (Hill, 2011).

6.18. Nepheline syenite The situation regarding the abundant nepheline syenites in Mozambique does not appear to have changed significantly since the previous report was written except in the aspect that there is now adequate coal available for the project. African development is beginning to gain momentum and the requirement for cement inland is likely to show a clear upturn as development continues which should further enhance the project potential. Besides the good revenues that could be earned from this project from alumina and especially clinker the aspect that has greatest direct developmental potential relates to the downstream industrial processes that are made possible with the availability of potash and soda ash. This project would also allow Mozambique to provide “complete” NPK fertilisers to the market. In the meantime the demand for nepheline syenite and feldspar, which was under pressure a few years ago, is increasing and is forecast to reach 12.8 Mt by the year 2015 (Global, 2011).

74

6.18.1. Overview Mozambique has extensive nepheline syenite deposits. Although the preliminary work done by Mintek showed (based on a few grab samples) that the silica and iron content may be higher than ideal, the Mozambican nepheline syenites still represent a significant deposit to mine with an expected mine life of about 200 years. Mining of these deposits for the production of clinker, alumina potash and soda ash opens up important industrial opportunities for Mozambique. Certainly this update of the scans would support the development of nepheline syenite mining if the deposits can be shown to be of sufficient quality when they undergo a full feasibility study, as well as supporting the proposed downstream route given in Callaghan (2003) and Walker (2004). One important note is that the project can only be viable based on the Russian process and that the technology licences would have to be sourced. It is also important to understand that although this is often seen as an alumina producing process it is rather a cement producing process with alumina, potash and soda ash as important by-products. It is stated in Callaghan (2003) that “An examination of the plants presently in operation unequivocally shows that they are essentially cement producers with alumina, potassium carbonate and sodium carbonate representing by-products. For every 1 t of alumina, 10-12 t of cement is produced and about 0.5-1 t of potassium carbonate and sodium carbonate in total. …. Due to the lower quality of the Mozambican nepheline, which has less Al2O3 and more SiO2 than the Russian material, the rate of cement and alumina is likely to be in the order of 15:1.” 6.18.2. Spatial Impact The spatial impact of a successful construction and operation of the nepheline syenite plant in the general area of Dona Ana (see Figure 33) as previously suggested will open up another industrial hub along the Sena rail route and provide long term growth (> 100 years of resource) to the area as well as making productive use of coal and energy provided by the development of the coal mines in Tete. Taken together with the proposed development of a steel mill based on iron from Mont Muande, Singore and Massamba, the cement production will provide the essentials of building a modern economy. Meanwhile the other by-products will provide important raw materials to further develop agriculture and the manufacturing industry. The development of the railway to Nacala and connection through to Malawi and with it the rest of the Nacala corridor are important to the movement of the cement (as clinker) for export into central Africa where demand will easily be met as well as for export. The demand for cement may be dramatically increased over the next 10 years since the Japanese economy will also need to rebuild after the disaster that they had in March 2011. 6.18.3. Project Viability There are several issues to be dealt with here. Firstly the most important issue to ascertain to establish viability is the overall quality of the ore in the various deposits. Assuming this shows that it is viable to mine the deposit for local production using the Russian process then it is important to establish whether there is sufficient limestone of a suitable quality available for a long term manufacturing project like this. It is likely that there is sufficient, since limestone is plentiful in the area, however this should form a part of an in-depth study of the project as a whole. Obtaining the technology licence could be a further hurdle, whilst finally the development of an industrial complex to ensure maximum beneficiation of the byproducts is important to Mozambique to ensure that the full benefit from the project filters through to the local economy. As stated in Walker (2004) “The viability of establishing a nepheline syenite project in the Zambezi Valley SDI rests on the degree to which the outputs (alumina, soda ash, clinker/belite mud, and potash) are beneficiated further. The spin-offs arising from the establishment of a plant utilising the soda ash by-products will be of significant economic value to the Mozambican economy.” Further requirements are well dealt with in Callaghan (2003) and Walker (2004).

75

Figure 33: Spatial dynamics of the nepheline syenite project

Source: Walker (2004) Note: Although not shown in this figure it will probably be ideal to export the majority of the excess clinker through Nacala once the transport routes are finalised.

6.19. Niobium (columbium) and tantalum Tantalum is an important input into a variety of modern equipment including such diverse items as cell phones, DVD players, PCs, digital cameras, LCD screens, jet turbine blades and nuclear reactors. Minerals containing tantalum and niobium are generally restricted in the Alto Ligonha pegmatites to the massive feldspar and sodalithic zones, however they may also occur in the wallrocks as they do in the Muhano and Majamala pegmatites (Pedro, 1986, reported in Cronwright 2005). These minerals are economically important especially considering the current strong demand for tantalum. Pekkala (2008) reports that Marropino is the only pegmatite being exploited for tantalite on a commercial scale. In January 2010, the US Frank-Dodd financial reform bill came into effect requiring US business to “state whether they source ‘conflict minerals’ from both Congo and neighboring countries” and to “report on steps taken to exclude conflict sources from their supply chains, backed by independent audits.” (Reisman, 2011). This international crackdown on sourcing tantalite from conflict areas has exacerbated the general scarcity and led to the sharp price rises. The tantalum market is growing by 5% per year (PAW, 2010). However supply has been under pressure for some years (see Table 17) and the suspension of mining at the worlds largest tantalum mine (Wodgina, in Western Australia) in December 2008 which had been producing 30% of the supply until that point shook the market considerably, and led to Mozambique being the world’s number two producer in 2009. 76

The expected market recovery during 2011 could see tantalite prices rising to above $120 a pound as industry looks for ‘ethically mined’ ore outside of the Democratic Republic of Congo (DRC). The DRC is currently the top global producer (Taylor, 2010). The price rise has continued unabated and a graph showing the prices over the last 5 years can be seen in Figure 34. Tantalum is not openly traded and actual prices may vary considerably from those recorded as official prices. It appears that actual prices paid for Ta2O5 passed $120 in January 2011. Development of tantalum production outside of the DRC is now seen as a priority and Commerce Resource Corp's Blue River Project in British Colombia, intends to produce up to 1 M lb of tantalum per year from late 2012. Existing stockpiles of tantalum could run dry within two years (Taylor 2010). Reisman, (2011) has speculated that the Wodgina mine would come back on stream if tantalum prices move above $100-120, but one must also keep in mind exchange rates and it is the price in AUS$ that will determine when Wodgina reopens. Table 17: World tantalum production – Tantalum content Country

2003

2004

2005

2006

2007

2008

2009e

Australia

973

985

854

478

441

557

81

Brazil

156

148

216

176

180

180

180

Burundi

6

5

9

3

9

16

16

Canada

55

57

63

56

45

40

25

Congo (DRC)

30

20

33

14

71

100

87

Ethiopia

25

45

49

57

52

37

37

Mozambique

54

205

81

27

56

110

113

Namibia

36

11

-

-

-

-

-

Nigeria

21

5

5

10

20

25

20

Rwanda

41

49

68

46

120

120

104

Somalia

-

-

-

-

-

3

2

Uganda

4

200Mt ore) and Evate (>155Mt) phosphate deposits are significant and could provide many years of inputs for a plant. Dorowa mine in Zimbabwe (see section 6.21.5.6) which currently supplies Zimphos produces an annual average of about 1.1Mt of ore yielding 132 kt of concentrate at 35.2% P205 (Fernandes 1995, in Van Straaten, 2002). Since a phosphate fertiliser producer will require a source of pyrite for sulphuric acid, a good mineable source that could supply to a suitable location for a factory should be found (note that dependent on the chemistry and processes used a coke oven by-product plant may be able to supply some or all of the required sulphur or sulphuric acid). If coke ovens are set up there should be no further intervention required with regard to provision of ammonia or ammonium sulphate, except to ensure that the environmental law is strict on prevention of NOx and SO2 emissions so that all of the ammonia vapours are condensed rather than incinerated. 10.8.7. Project sponsor or principal It is suggested that a company already working in this field in Africa is approached to bid for the project. A suggestion could be Foskor or Zimphos Foskor: Foskor Richards Bay: Tel : +27 35 902 3111 Physical Address 21 John Ross Parkway, Richards Bay, KwaZulu-Natal, 3900 Postal Address P.O Box 208, Richards Bay, 3900 Corporate Head Office Tel: +27 11 347 0600 135

Physical Address Block G, Riverview Office Park, Janadel Road, Midrand Postal Address P.O. Box 2494, Halfway House, 1685 Zimphos (Chemplex): Factory: P.O.Box AY 120 AMBY, Harare, Zimbabwe Telephone: +263 4 487803/6 Fax: +263 4 487934 E-mail: [email protected] Since Vale may already have an interest as noted in the 6 April 2011 news article by Macuahub (2011g), it can also be considered as a prospective sponsor. Vale Galib Chaim [email protected]

10.9. Mont Muambe fluorspar and plant 10.9.1. Location Mont Muambe hill to the southeast of Moatize. (-16.3167o:34.0833o) 10.9.2. Status Globe Metals and Mining have completed first phase drilling on the Mont Muambe deposit targeting areas of known fluorite mineralization. Multiple zones of high-grade fluorite mineralization, with significant REO grades have been delineated. 10.9.3. Short project description A brief discussion of the fluorspar is to be found in section 6.9. The Muambe Fluorspar project is at this stage the best fluorspar opportunity in Mozambique. Early investigations estimated an indicated resource of 400 kt at 70% CaF2 and an inferred resource of 600 kt to a depth of 110 m. The currently estimated resource is 1.5 Mt to a depth of 200 m. Recent work by Globe Metals and Mining has shown that there is a considerable amount of associated rare earths with the Mt Muambe deposit which will act as a sweetener to market. 10.9.4. Its contribution to the business case Fluorspar is marketed in one of three grades, acid grade, (> 97% CaF2), ceramic grade, (85% to 95% CaF2) and metallurgical grade, (60% to 85% CaF2). The aim of the Muambe deposit will be to produce acid grade filtercake which sells at around $250-300/t (FOB) Durban. Assuming a 15 year mine life and a production of 90 kt of product per annum this equates to about $22-27 M per annum income or about $330-405 M over the mine life. As a medium to small mine its production will equate to about 1% of global production and as such will have little effect on the market. To put this in context the Storuman project in Sweden intends to mine a fluorite deposit with an expected production of 103 ktpa over a period of 18 years to produce an estimated $616 M over the life of mine (Storuman, 2011). 10.9.5. Project linkages An alternative scenario will use the fluorspar as a flux for the Tete steel industry. 10.9.6. Interventions required There is no infrastructure at site. The nearest link to the Sena railway is 36 km away and the Zambezi River is 24 km distant. The nearest substation that can provide sufficient energy to the mine-site is 42 km away. This project has for many years been considered one that can be economically mined but the infrastructure has always been a millstone dragging it down. 136

Projects of this size and market risk profile cannot withstand the costs of infrastructure development and there should be a concerted effort to supply the required infrastructure in close consultation with the developers. 10.9.7. Project sponsor or principal Globe Metals and Mining PO Box 1811 West Perth WA 6872 Ground Floor, Suite 3, 16 Ord St West Perth WA 6005 Australia Telephone: +61 8 9486 1779 Facsimile: +61 8 9486 1718 email: [email protected]

137

This page is intentionally blank.

138

11. TRANSPORT INFRASTRUCTURE The 575 km Sena line that connects Moatize to Beira was being refurbished by a Rites-led consortium to carry around 6 Mtpa with a due date at the end of 2009 (Railway Gazette 2009). The first train to run on the new line reached Moatize on 30th January 2010 (Railway Gazette, 2010a). Railway Gazette (2010b) reports that CVRD purchased a 51% stake in Sociedade de Desenvolvimento do Corredor do Norte, which in turn has a 51% stake in Corredor de Desenvolvimentodo Norte (CDN) and Central East African Railways (CEAR). CDN holds the operating concession for the 872 km line from Nacala to Entre Lagos on the Malawian border, while CEAR holds the concession to operate the 797 km network in Malawi. CVRD will probably use the Nacala line to carry the output of the second phase of the Moatize coal project. First phase production will move south over the Sena railway to the port of Beira, but in the second phase a link will be built from Moatize to Malawi, joining up with the existing line to Nacala. During the week of 14th to 18th February 2011, an inspection was carried out of both Beira and Nacala ports, including the road and rail access infrastructure, and the transport sector review has been updated and expanded to present the current situation as of February 2011. The freight throughput in both ports has expanded considerably in the past few years, with total volumes handled by Beira and Nacala during 2010 being 2.4 Mtpa and 1.06 Mtpa respectively, including container throughput at 105 000 and 71 112 TEUs pa respectively – high enough to attract direct vessel calls. If the coal development programme proceeds as planned, both ports will see the throughput increase to more than 10 Mtpa within 3 to 5 years, dominated by coal exports, but also substantial increases in the importation of mining equipment and consumables. Coal exports from Moatize are expected to commence later in 2011, when the dredging of the access channel and the existing terminal upgrade is expected to be completed. Clearly the future development of the transport infrastructure serving the whole country will be dominated by the demand of the coal sector, which will also act as an incentive to promote the development of the mining sector as a whole.

11.1. Background The Zambezi valley is served by two regional road, rail and port transport corridors: r The Beira Corridor to the south, serving central Mozambique, and providing the main route for international trade for Malawi and Zimbabwe, and also including the port and rail infrastructure to serve the initial phase of the Moatize coal fields development. r The Nacala Corridor to the north serving northern Mozambique and Malawi (accounting for 20% of the Nacala port traffic). A new coal terminal and rail link to serve Moatize is also being planned, but not yet being implemented. The transport systems on both corridors were severely disrupted during the Mozambican civil war between 1975 and 1995, and 15 years later in 2010, remain partially dysfunctional. The possible development of the Moatize coalfields has motivated the reconstruction of the Sena railway to the port of Beira, but the transport logistics system for coal exports along either corridor has not yet been finalised although implementation has commenced on the Beira Corridor. The rail link to Malawi remains inoperable and most of the Zambezi valley suffers from a lack of all-weather transport infrastructure. However, the committed development of the Moatize coal export projects, likely to generate 25 Mtpa to 50 Mtpa of

139

exports and substantial imports of equipment, consumables and fuel, utilising both transport corridors, will bring about major improvements in all modes of transport serving the Zambezi valley – road, rail, port and air. The ‘design’ depth at Beira is 12 m, with the channel at 8 m below chart datum (CD), plus about 5 `m at high tide. The existing coal terminal at quay No 8, once reconstructed, will be limited to vessels sizes of about 45 000 DWT – the planned new terminal (Figure 55, Figure 56) is unlikely to be able to handle larger vessels. The depth at the quayside at Nacala container terminal is 14 m below CD, and 10 m at the general cargo quays, with no restriction of the marine access (more than 25 m in the bay, and the tide at Nacala is about 4 m). Figure 55: Beira Port – Position of Planned New Coal Terminal

The approximate port dimensional requirements for various vessel types are shown in Table 35.

140

Table 35: Approximate port dimensional requirements for various vessel types Type

DWT range

Length (m)

Beam (m)

Draft (m)

Handysize - old

10 000 – 34 000

160 - 200

20.0 – 27.0

Up to 11.0

500 –2 000

Handymax - new

20 000 – 50 000

200 - 230

Up to 32.2

Up to 12.5

1 500 – 4 000

Panamax

50 000 – 65 000

230 - 260

32.2

Up to 14.0

5 000

Post Panamax

65 000 - 85 000

Up to 366

48.8

Up to 15.2

6 000

Suez Max

140 000

> 300

46.0

Up to 16.0 Future 22m

10 000- 14 000

Capesize

Up to 300 000+

>300

>32.2 up to 50

More than 16 – 18.5 depending on hull shape

Equivalent TEU size

10 000 - +20 000

Figure 56: Beira Port Showing Position of Planned 50ha Coal Terminal

11.2. Current Status The Zambezi Valley falls within the natural catchment area for the port of Beira, which has distance advantage over the port of Nacala of 300 – 400 km, which translates into significant cost advantages of about $10-15/t for most goods. For many years Beira has had the major disadvantage of the lack of maintenance dredging and the depth of the 40 km long access channel, whereas Nacala has no access depth restrictions, but is a smaller port with fewer quays and vessel calls, and poor road and rail connections to the Zambezi Valley. However, Nacala is better suited than Beira for the development of a new dedicated high volume mineral export terminal to accommodate vessels larger than 45 000 DWT (Handymax). The current status of transport infrastructure development is described below. 11.2.1. Beira – Zambezi Corridor During the past 10 years, Beira port has suffered from the lack of maintenance dredging, which has gradually decreased the vessel size which can be accommodated in the port to 141

about 15 000 DWT (fully laden). A capital dredging contract has now been commenced to return the access channel and the turning basin to the design depth of 8 m below CD, allowing access for vessel with a draft of up to 13 m on the tide. This is expected to be completed during 2011, and will significantly improve the regional competitiveness of Beira port. The existing coal terminal, situated between general cargo quays 7 and 9, is in the process of being rehabilitated to serve as the initial but temporary coal export terminal to handle up to 6 Mtpa, until a new coal terminal is built. Beira port has an annual throughput of about 3.5 Mtpa including fuel imports for Malawi and Zimbabwe. Beira port has an assessed capacity of 5 Mtpa subject to completion of the channel dredging. Table 36: Port of Beira, Mozambique – as at February 2011 Natural Catchment Area

Central Mozambique, Zimbabwe, Zambia, Malawi

Volume of freight – total, import, export Mtpa

3 Mtpa, including fuel imports. Mostly imports.

No of berths, depths

12, including 1 oil terminals, new coal terminal being planned

Container Berths

4, 9.0m to 11.0m, operated by Cornelder

Container Equipment , Capacity

2 x40 t gantry cranes, 105 000 TEUs pa, 2 new gantry cranes on order

Container Volumes - total, import and export - TEUs

105 000 TEUs pa (2010).

Bulk berths & equipment

5 general cargo quays, cranes 5-20t, vacuvators, bagging, forklifts 3t &5t. Reach stackers. Existing cowl terminal and stock yard being upgraded

Marine Access

Via 40 km channel, 3,5m deep plus 5m tide, 60m wide – being dredged to -8m CD

Road Access

Good from Zimbabwe and Malawi

Rail Access

Poor via CCFB from Zimbabwe, equipment and track capacity problems. Sena line open but not yet operational, and no link to Malawi

Current Operational Status

Fully operational, general cargo and container terminals privatized to Cornelder, signs of congestion

Specific Problems / Issues

Main problem is silting due to lack of maintenance dredging, limited vessel size to about 15 000 DWT, depth 8 m on tide. After dredging,45 000 DWT

Planned Developments

Dredging commenced, new major coal export terminal planned, +8 Mtpa

Intervention / Assistance Required

Commitment needed to build new coal terminal. Performance of CCFB needs to be improved Potential for prime NS and SADC port, shortest road distance to copper belt

The main road routes within the Beira corridor are to Zimbabwe via Machipanda and to Malawi via Tete. The main road to Machipanda was rebuilt 10 to 15 years ago, but has now deteriorated. Both routes remain in general good condition, but rapidly deteriorating with some poor sections, mainly on the Pungue Flats near Beira, which are subject to occasional flooding and south of Changara on the Malawi route. The road trucks are limited to 48 t GVM, almost all single trailer, 6 axle artics (single trailer articulated trucks), operated by companies in Mozambique, Malawi and Zimbabwe. Access from Beira to the lower Zambezi is via the north-south N1 highway, crossing the Zambezi River at Caia, where a new toll bridge has recently been completed. Access to the Tete region and Malawi is via the existing Tete bridge, which is subject to load restrictions and is presently being repaired. The Sena railway (Figure 58), concessioned to Rites / Ircon, operating as CCFB, was reopened during 2010, but requires further work during 2011 to handle of the order of 7 Mtpa to 8 Mtpa of coal exports from Moatize. CFM has estimated that an additional $25 M needs to be spent on the Sena line. The rail concessionaire has been given notice to rectify outstanding contractual issues by the end of March 2011, but it seems likely that the operations will revert to CFM during 2011. The 88 km rail spur to Sena Sugar at Marromeu 142

was re-opened in 2009, but is not carrying any freight because of a dispute with CCFB on the tariffs. The CCFB rail tariffs on the Machipanda line are generally of the order of $0.10 per tkm, more than twice as much as the regional benchmark. The strategic link to the Malawi rail system through Vila Frontiera remains closed. The line is essentially intact, with 30 kg/m rail on steel sleepers, but with a section of 300 m of embankment washed away near Bangula. There no rail connection to the coalfields south of the Zambezi in the Tete region, and this will be a development constraint. Figure 57: Zambezi Valley Transport System – Main Features

Zambia  Rail  System concessioned to  NLPI,   operating  as  RSZ,  total   freight  2009,  0,8mtpa

Lusaka

Kapiri   Mposhi

TAZARA   CORRIDOR

Malawi MCHINJI

T4

Lilongwe

Zambia

ENTRE  LAGOS

M1

New  road   bridge  at Chirundu

River

CHIRUNDU Livingstone

A1 Chinhoyi

NORTH   SOUTH   CORRIDOR

Tete 103

102

EN1

Chimoio

FORBES  /   MACHIPANDA

A1

EN6

Zimbabwe Mozambique

Beira  Corridor   Border  Posts Beit Bridge

Railway To  South  Africa

Malawi  rail systemn   concessioned to  CEAR,   Mozambique  rail  system   and  port concessioned to   CDN  – international   railway  traffic  less  than   300  000 tpa

New  road  bridge   at  Caia

Marromeu Sugar  

Port  of  Beira  approx  2,5

mtpa,  capacity  5mtpa,  requires   urgent  dredging

BEIRA  CORRIDOR

Major Centres

Roads

VILA  NOVA Sena

A2

A3

Junctions  &  nodal   points

M6

Moatize  Coal NYAMAPANDA CUCHAMANO

Harare

Bulawayo

Blantyre

ZOBUE   MWANZA

Zambezi  

NACALA   CORRIDOR

Container  and  general  Cargo  quays concessioned to  Cornelder  – CFM  C   Railway  system  between  Beira   Zimbabwe  and  to  Malawi  and  Moatize   concessioned to  Rites/IRCON  – railway   to  Sena, Marromeu,  Malawi  and   Moatize  /  Tete,  being  reconstructed,   completion  2010

LIMPOPO   CORRIDOR

Several coal mining companies have investigated the possibility of using a barging system on the Zambezi River for coal exports of up to 10 Mtpa, requiring dredging of the river in some sections, but it seems unlikely to be implemented because of high operational risks during major floods, and because of likely environmental constraints. Both Vale and Riversdale now appear to be committed to coal exports via the Sena line in the first instance, and both have ordered / purchased mainline locomotives for this purpose. However, the Malawi government has initiated a scheme to develop the port of Nsanje on the Shire River to serve as the main container terminal for international trade, acting as a feeder port to Beira. This is unlikely to be competitive with the direct rail route to Beira, which will be both cheaper and faster. This could be the main reason for the reluctance to reopen the Malawi section of the line.

143

Figure 58: Beira Corridor, Sena rail system

Table 37: CCFB Rail Track Length

994 km – Beira Machipande 298 km, Dondo Moatize 540 km, Sena to Malawi border 43 km, Marromeu spur 88km

Track Gauge

1067 mm

Axle Loads

20,5 t

Rail Section

45 kg/m

Sleepers

Concrete on Sena line, steel / concrete on Machipanda line

Mainline Locomotives

10 GM 2000 hp, new 3000hp for Sena line

Freight Wagons

1000 refurbished plus approx 300 salvaged – only 250 operational in 201

Freight Volume (t)

0,789 Mtpa – fallen to about 0,250 Mtpa in 2010

Freight Volume (tkm)

Approx. 65 Mtkm

Freight Density (tkm/km)

Approx. 0,2 Mtkm/km (on the operational lines)

Current Operational Status

Concession to CCFB Beira to Machipanda, operational, but poor Sena line rehabilitation open but not yet completed Malawi link not yet completed

Specific Problems / Issues

As of August 2009, failure to agree on coal export tariffs with both CVRD and Riversdale from Moatize, and also sugar exports. Malawi link not being developed

Planned Developments

Further upgrading of the Sena line, likely maximum capacity of about 8 Mtpa

Intervention / Assistance Required

Possible institutional intervention required to ensure reopening of link to Malawi and improved operations to Zimbabwe

Including Sena line developments, but excluding planned coal exports

144

Both the Beira and the Nacala Corridor transport system are constrained in respect of the maximum future volumes of coal export that can be accommodated – Beira in respect of vessel size and Nacala in respect of the much longer land distance and consequent higher operational costs. If the Moatize coal field is to be developed to export more than 50 Mtpa, then the logical development will be to construct a new dedicated railway and specialised terminal to handle Cape sized vessels, routed along the shortest distance to the coast along the south bank of the Zambezi river, including a new bridge at Tete to link the north and south sides of the coal fields. This is being studied at present as a possible medium solution, which could also affect the future of the planned Nacala coal terminal.

11.3. Nacala Corridor The existing port at Nacala is the key port serving northern Mozambique and some regions of Malawi. The Nacala railway was built to serve northern Mozambique, and the link to Malawi was constructed as recently as 1970. There is not yet a direct tarred road link to Malawi. The existing port was developed in the 1950’s and is located in a deep bay that is suitable and designated for the development of a major coal export terminal to handle Cape sized vessels of +150 000 DWT. The short term development plan to 2020 can be seen in Figure 60. The new terminal development is likely to be based on a private sector investment by Vale, in conjunction with a major railway upgrade and extension to Moatize in Mozambique (approx. 1000 km). The disadvantage of Nacala in respect of the Zambezi valley is additional distance of about 400 km, which could add $8-$16 per tonne to the transport costs, depending on the commodities and the volumes. The existing Nacala port has an assessed capacity of about 2.5 Mtpa, well in excess of current throughput of 1.06 Mtpa, but the container terminal is congested and the port as a whole requires modernisation. A port development master plan has been prepared by JICA. Vale is reported to have contracted Zagope, an international construction company specialising in major projects such as airports, dams, tunnels, ports, roads, subways, railways and pipelines, to build a $1.6b coal terminal at the port of Nacala with a starting date of July 2011 (Macuahub, 2011l). Zagope was founded in 1967 and is based in Porto Salvo, Portugal. It is a subsidiary of Zagope SGPS which has a branch office in Mozambique. At the present time there is no direct surfaced road from Malawi to Nacala. In June 2009, AfDB approved the Nacala Road Corridor Project, designed to support the Nacala to Lusaka Corridor, SADC RTRN Route 20. The first phase includes paving the missing link of 510 km between Nampula and the Malawi border and constructing a bypass road around Lilongwe. Nacala is accessible from the N1 north south highway, which crosses the Zambezi via the new toll road bridge at Caia.

145

Figure 59: Nacala Corridor Railway System – CEAR and CDN New  planned  CVRD  Coal   Terminal  at  Nacala,  12  to  18 mtpa,  400  000  t  storage,   6000tph  loading,  20  m   depth,  max  vessel  172  000 dwt .

CEAR  section,  about   150km,  to  be  upgraded   to  40kg  rail

Proposed  new  CVRD  export   line  to  Nacala,  approx   220km  connection  to  CEAR  

77  km  section   very  poor   condition.

Moatize

Southern  Malawi rail   system Limbe to  Sena   remains Inoperational

Moatize  Coal  Mine,   +30 mtpa  exports,   via  Beira  and   Nacala

Nacala  Corridor  railway  – approx   970km  Moatize  to  Nacala,  40kg/m   track  18.5t  axle  loads,  74t  wagons,  7   trains  of  80  wagons  per  day.  Note  – no  alternative  tarred  road  route   between  Nacala  and  Malawi,  but   being  developed  (2011)

Port  of  Beira,  2.5 mtpa,  existing  bulk  coal  terminal   max  capacity  1.2 mtpa,  being  dredged  to  -­‐12m  by   end  2011  Note  – It  seems  likely  that  CVRD  will  build   a  new  coal  terminal  at  Beira  instead  of  Nacala  – Nov   2006

Sena  Line  -­‐564  km  Beira  to   Moatize,  45kg/m  rail,  20,5  t   axle  loads,  completed  2010,   operational  2011, concessioned to  Rites/Ircon,   operating  as  CCFB

CCFB

Port  of  Beira

Also showing the Sena / Beira Railway – all 1067 mm gauge

Figure 60: Nacala Short-term development plan - 2020

d ar

s

rY

er nd Co

nt

ai

ne

Fe St ya ock rd

Open Stoc

k yard

Access Road Widening

146

Co

By-pass Access Road for Bulk Cargoes

) 4m (-1 rf ha 0m W x4 0m iner a nt

32

New Rail Track for bulk cargoes

Table 38: Port of Nacala, Mozambique Natural Catchment Area

Northern Mozambique (agriculture), Malawi, eastern Zambia, Zambezi valley

Container Volumes - total of import and export - TEUs

1.06 Mtpa (2010)

No of berths, depths

5: 7.0, 9.7 & 14m

Container Berths

1: 14m deep, 335m long, second berth planned

Container Equipment, Capacity

22 t mobile crane (& Ships gear), 40 000 TEUs pa

Container Volumes - total, Imp, Exp - TEUs

71,000 TEUs pa, mostly imports

Bulk berths & equipment

3 quay cranes, 5t to 20t, 4 FELS cranes

Marine Access

Excellent - +25m

Road Access

Good, but not to Malawi – being developed

Rail Access

Via CDN / CEAR, privatised, poor performance, recently purchased by new investors (Insitec) – likely to be upgraded to handle coal exports

Current Operational Status

Privatised through CDN. Fully operational, container terminal congested, feeder port for Maputo and Durban, also direct vessel calls.

Specific Problems / Issues

Container terminal congestion, occasional problems of empty storage.

Planned Developments

Additional container berth planned, privately funded, major coal export terminal planned by VALE (remote from existing port) – up to 20mtpa

Intervention / Assistance Required

Lack of funding through Insitec, final go ahead needed on coal terminal, likely private sector investment

Table 39: CEAR/CDN rail to Nacala Track Length

919 km including link to Lichinga (agriculture)

Track Gauge

1067 mm

Axle Loads

20 t, some poor sections in Malawi

Rail Section

40 kg/m welded some 30 kg/m in Malawi

Sleepers

Concrete (French system with steel ties), steel and concrete in Malawi

Mainline Locomotives

6 (supplied by CDN, 2 leased from Sheltam), 12 x Bombardier /GE in Malawi, only few operational

Freight Wagons

n/a

Freight Volume (t)

0,238 Mtpa (cross border)

Freight Volume (tkm)

Approximately 120 Mtkm

Freight Density (tkm/km)

0,2 Mtkm/km

Current Operational Status

Concession to CDN CEAR, recently taken over by Insitec from RDC, operations not improved

Specific Problems / Issues

Low traffic volumes, not financially viable, poor 77 km section, poor link to Lichinga (agricultural) – link to Beira not implemented

Planned Developments

Financing for 77 km possibly from Vale , Lichinga (handled by CFM), coal exports from Moatize, up to 20 Mtpa, project announced to proceed in Sept 2009

Intervention / Assistance Required

Difficulties with finalizing contracts and commitments for coal exports

147

The operation of the Nacala rail system, which has been concessioned to CEAR and CDN in Malawi and Mozambique respectively, has been problematic for many years because of low volumes (low income) and consequent unsustainable operations. The commercial shareholding has been taken over by Mozambican interests and there are ongoing negotiations for the entry of a new operators and investor, based on the future prospect for coal exports from Moatize, which could render the railway service profitable. Coal export volumes in excess of 12 Mtpa are anticipated. The Malawi system mainly serves the agricultural export and import sector, and the railway has recently been extended to Chipata in Zambia, also to serve the agricultural sector. The Mozambican section of the line was rebuilt in the 1990’s, but a very poor section of 77 km remains up to the Malawi border. The Malawian section has a varied specification, and generally requires upgrading in order to increase reliability and competitiveness – it suffers from severe operational difficulties and lack of funding. 11.3.1. Planned Regional Developments The current and planned transport infrastructure projects within the Zambezi Valley: r Existing Beira Coal Terminal upgrade – construction commenced to be completed during 2011 to handle up to 6 Mtpa through berth No 8 – temporary solution for next 4 to 5 years, unsuitable location between general cargo and grain terminals, likely operational and environmental problems. Funded jointly by Vale and Riversdale Mining. r New Beira Coal Terminal – new export terminal for Moatize, to handle up to 12 Mtpa, to be developed upstream of the existing port. Maximum vessel size about 50 000 DWT, planned offshore transhipment to Cape sized vessels. To be developed by private sector (49%) as a multi user facility. r Upgrading of the Sena line to a higher capacity, but unlikely to exceed 8 Mtpa without new track on new alignment, possibly up to 12 Mtpa. The existing 3.5 km Dona Anna rail bridge is likely to be a constraint. Current concession seems likely to be cancelled, with operations returning to CFM r Development of a new dedicated heavy haul railway and new terminal to handle 30 Mtpa to 70 Mtpa of coal exports, located north of Beira, to accommodate Cape sized vessels – capital investment $3 - 5 billion. r Road to Malawi – development of a shorter and more direct road route via the N1 and Caia bridge to southern Malawi r New Zambezi River bridge at Tete – the existing bridge has load restrictions. A new bridge could connect the southern and northern sides of coal fields, possibly in conjunction with a new dedicated coal railway to a new marine terminal. r Rail to Malawi – the reopening of the Sena to Blantyre railway will provide the fastest and cheapest route for international trade for southern Malawi. r Rail to Harare – the main line requires further upgrading within Mozambique – realignment of sharp curves and steep gradients, to reduce track and equipment wear and improve safety. Presently in poor condition. r Shire River transport – development of the port of Nsanje (already constructed) to serve the lower Zambezi agricultural region. Will likely require operational subsidies. r Zambezi River transport – currently serving Sena sugar exports, until tariff agreement can be reached on rail. Can be used for transport of heavy equipment – construction and mining. Unlikely to be viable for large volumes of bulk, e.g., 10 Mtpa of coal. r Nacala port upgrade – upgrade of the existing port terminals is being planned, with an additional container berth. r New coal terminal at Nacala – it seems likely that a major 20 Mtpa coal export terminal will be built by the private sector, on the opposite side of the bay to the existing port, in conjunction with the railway upgrade – implementation has not yet commenced. r New road link to Malawi – a direct surfaced road link between Nampula, Cuambo and the Malawi border is being developed. About 20% of Nacala port throughput is transit traffic to and from Malawi. Nacala handled 220 kt of Malawi international trade, compared to 830 kt through Beira in 2010. 148

r Railway upgrade – the existing railway system will be extended by about 200 km to Nacala, and be upgraded to handle 12 Mtpa of coal exports in the first phase – later up to 20 Mtpa - private sector investment. All agreements are not yet in place, However Vale signed an agreement in April 2011 to use a portion of the Malawian rail system as a part of the upgrade and construction of a 1.5 billion Euro, 900 km long coal line from Moatize to Nacala, cutting through southern Malawi (Macuahub, 2011j). r Chipata Terminal – an inland cargo terminal is being planned for Chipata in Zambia, providing a direct rail link to Nacala, mainly to serve the agricultural sector, and possibly the mining sector.

11.4. Local locomotive manufacture Radio Mozambique reported that the transport and communications minister Paulo Zucula met with the Portuguese public works, transport and communications minister, António Mendonça, with the aim of setting up partnerships between the two states, in particular to locally manufacture railway trucks for the region (Macuahub, 2011d).

11.5. Possible barging of coal Riversdale mining has been investigating the possibility of barging coal down the Zambezi River and transferring it at sea to large cargo ships. Although this is unlikely to be economically favourable, the restriction on the amount of coal that will be able to be carried out on the Sena line is forcing companies to look at alternatives. Riversdale Mining has hired two companies to carry out environmental impact studies on such a project (Macuahub, 2011e). A preliminary environmental report was reported in the press on the 10th May 2011, (AllAfrica, 2011b). The report which looks at barging coal to Chinde, found that the most serious possible environmental impacvt would be a fuel spill but that this could be adequately mitigated against by using double sheathed pipes and valves that automatically shut off if any fuel is lost. Dredging of the river will cause an impact of “modrate significance” on the beaches of central Mozambique, which could become eroded (AllAfrica, 2011b). Letlapa would warn that this significance of this impact could be serious in terms of the tourism industry. The reader is referred to instances around Cape Town and especially Port Elizabeth in South Africa where coastal roadbiuilding or dune stabilisation has caused significant beach erosion by starving the beaches of the the natural flow of sand due to lonshore drift.

149

This page is intentionally blank.

150

12. ENERGY INFRASTRUCTURE Mozambique has a low level of electrification. Recent increases in the world wide demand for mineral resources and efforts by the government of Mozambique to attract investors to consider its mineral resources is likely to provide the impetus to improving the overall level of electrification in the near future. Due to the increasing demand for resources in the last 10 years, Electricidade de Mozambique (EDM) has been working on project preparations for various corridors and interacting extensively with investors. The recent economic downturn has led to a temporary slowdown of activity. Companies interested in exploration are still busy in various parts of Mozambique. Hence, EDM has continued to prepare projects for economic development of the country.

12.1. Electrical Network The electrical network in Mozambique (Figure 61) is owned and operated by the state utility Electricidade de Mozambique, EDM. The bulk of the generation is from Cahora Bassa hydropower station in the northern region of the country. 12.1.1. Expansion in Inhambane Provincial EDM director Eduardo Inhalo is reported to have indicated that work is underway to extend the grid to the capitals of Panda, Mabote and Funhalouro districts based on Cahora Bassa power. During 2010 four  generators  were  installed  in  the  Temane  gas-­‐fired   power  station  to  increase  power  output  from  1.8  MW  to  5  MW  (Club  of  Mozambique,  2011).

12.2. Electricity Generation The situation in Mozambique is such that there are two classifications of generation. The first one is an installed capacity of 233 MW intended for use inside Mozambique. The second form of generation is 2075 MW of electricity generated from Cahora Bassa intended for the South Africa market with Eskom as the offtake customer. The 2075 MW from Cahora Bassa project was constructed on the basis of availability of a low risk guaranteed large customer. Hence, a long term power purchase agreement contract was signed with Eskom as the buyer of electricity from the power station. The power station has five 400MW generating units of which four and half are contracted to Eskom. The fact that the majority of generation from Cahora Bassa is for a specific client means that the power generated here at present will not be able to supply the heavy demand foreseen by the growing mining industry. Furthermore, even if some of this power were to become available there are technical difficulties in tapping power off a DC transmission line. Therefore, in order to meet the requirements of the new mining developments, and possible concomitant industrial growth, new sources of electricity are required. EDM has been considering new sources of power such as the expansion of the Cahora Bassa north bank, the $2 bn Mphanda Nkuwa hydro power station 60 km downstream from Cahora Bassa and possible thermal generation power projects with primary energy from the coal in Tete province. Vale and Riversdale have been reported at various stages as considering large coal fired plants of 2400 and 1000-2000 MW respectively. However, due to the scale of these developments it is important that there is a clearly defined take-off with (low risk - long term) mining and manufacturing business in the pipeline as committed clients. This makes a compelling case for detailed spatial development studies to ensure that the planning of all aspects of the development corridors is synchronised and to both ensure against unnecessary development as well as giving companies planning

151

future developments the assurance that the supportive infrastructure will be in place on time for their own business development. To be able to provide the secure consistent power demanded by the future clients, it will be important to have back up ring feeder circuits, built in redundancies and even standby diesel power supplies. Figure 61: Mozambique Electricity transmission network, December 2010.

Source: http://www.edm.co.mz/images/stories/transporte.jpg

The Cahora Bassa north bank project is likely to go ahead with an expected generation capacity of 1000 MW. At the time of constructing Cahora Bassa main station the civil works for the north bank were also constructed excluding the preparation of the power house hall. The civil works for north bank were prepared for a future power station to meet the demand of internal customers.

152

Mphanda Nkuwa, which is expected to generate 1500 MW, will effectively depend on the flow of water from Cahora Bassa upstream. The result is that the two power stations will have common features. This presents a high risk situation since a large percentage of overall generation will be reliant on the outflow from the same dam, and water flow will have to be monitored and controlled very carefully to avoid flooding or reducing water too much on the river downstream from Cahora Bassa. Zambezi River Authorities will be involved extensively because if water flow is not monitored and controlled carefully it could lead to floods resulting in loss of life, crops and animals in the Zambezi river basin. On the other hand if the water is too restricted this could affect the river transport system. The Mozambican government is reported to have given the go-ahead to construct the $2.4 billion Mphanda Nkuwa hydroelectric plant in December 2010 (Katerere, 2010). Hidroelectrica de Mphanda Nkuwa will build the power station in collaboration with Electricidade de Mocambique, Brazil’s Camargo Correa SA (the worlds largest builder of hydroelectric facilities) and Mozambique’s Insitec SGPS SA. It was reported that the plant would have a capacity of 1500 megawatts (Katerere, 2010). The environmental impact study is currently underway and is expected to be completed by May 2011, after which the company hopes to get a green light from the environmental ministry by mid 2011 (Macuahub, 2011f). Building is likely to start in 2012 and to be completed 5-6 years later with the first four 350 MW turbines being commissioned 50 months after the start of construction. Electricity is one of Mozambique's most important contributions to SADC, which is currently facing a severe energy shortfall. The current total generating capacity in the SADC region is around 52,500 MW and it will require about 57,000 MW by the end of 2012.

12.3. Gas There has been increasing pressure in the last 10 years to move towards renewable and environmentally friendly sources of energy. It is generally considered better to use natural gas instead of coal as a primary source of energy if the option is available. Mozambique has natural gas, which is piped to Sasol. There are plans to explore natural gas as an alternative form of energy especially in the southern region around Maputo and Gaza provinces. If developed, this could be seen as a power supply to produce electricity in the development of the Chibuto project if the current tender has takers.

12.4. Electricity Transmission HVDC transmission line which was put into service in three stages in 1977-1979 runs south from Chaora Bassa parallel to the Zimbabwean border, to the Apollo sub-station in South Africa. It currently transmits 1920 MW of power to converter stations (Songo in Mozambique and Apollo in South Africa). There are two parallel 1,400 km DC lines between Songo and Apollo. The power from Cahora Bassa is converted from AC to DC at Songo substation in Mozambique, and transmitted through a 533 kV HVDC (high voltage direct current) transmission line to Apollo substation in South Africa. At Apollo the DC power is converted back to AC. In 2008 Eskom carried out an upgrade on the South African side. On the Mozambican side EDM is currently working on a proposal to upgrade this power with a project possibly starting in January 2012. Power to the southern part of Mozambique around the Maputo province is then supplied from the South African electrical system via 400 kV lines owned by Eskom. The arrangement is such that if Cahora Bassa is generating electricity and the 533kV HVDC is in service to Apollo, then EDM is charged wheeling (transmission) fees only by Eskom. However, if Cahora Bassa is not generating and the HVDC line has an outage, EDM still continues to receive power from Eskom. In such a situation, EDM is charged the full agreed tariff by Eskom as opposed to the lower wheeling charges.

153

The current arrangement is such that for the bulk of the existing loads the sources of power are towards the north of Mozambique and the load centres are mainly in the south, Maputo and Eskom Apollo substation. This creates an undesirable situation of long expensive and risky transmission lines from the north to the south. Figure 62: High Voltage Direct current Line

Source: Abb.com

12.4.1. North South AC and DC Transmission – inland backbone During the last few years EDM has been working on the possibility of implementing an alternating current transmission line and a direct current transmission line from Tete to the south. The reason for this is to take advantage of both AC and DC technologies. 12.4.1.1. AC Transmission Line The AC transmission line would enable EDM to tap off power and supply customers along the transmission line. This would supply power to most of the proposed mining areas in the central region of Tete and Beira. 12.4.1.2. DC Transmission Line The DC transmission line would enable EDM to transmit power further south to Maputo at a relatively lower capital cost as DC transmission lines usually represent a less costly option for very long distance lines. It is envisaged that if this DC line were implemented then Eskom would not need to supply power to the Maputo region. Such a scenario would mean a gain of about 900 MW into the South African network. This 900MW is the power that Eskom currently exports to Mozal. It does, however, appear as if the preliminary costs for these transmission lines are much higher than previously anticipated. EDM has indicated that a loan of about $1.7 bn will be obtained from the European Investment Bank (Bloomberg, 2010). Further investigative work on power flow and system stability of these long transmission lines will be required before implementation, and system redundancy in case of outages must be taken into account. 12.4.2. Mozambique – Malawi Interconnection The Southern Africa Power Pool (SAPP) was tasked to prioritise the implementation of interconnections. As part of this mandate the government of Mozambique has signed a loan agreement with the World Bank to construct an interconnection line with Malawi. 12.4.3. Mozambique – Zimbabwe interconnection There is an existing interconnection line from Cahora Bassa to Zimbabwe. This interconnector can deliver a maximum of 600 MW, however, this system is very weak, not 154

available most of the time and the system stability is questionable. The strengthening of this line will be considered later. The political instability in Zimbabwe makes it difficult to actively package this as a project. 12.4.4. Revenue Collection While carrying out all these electricity infrastructure developments for the mining sector EDM’s master plan incorporates the supply of electricity to the commercial and residential sector surrounding the mining projects. It is assumed that most of the people around the major mining developments will be employed and will be able to pay for the electricity consumed. This downstream economic development is expected to be an important contributor to the long term consumption of electrical power and forms an integral part of long term planning. 12.4.5. Conclusion Mozambique’s electricity demand is projected to grow by 11% per annum to 2015. However with an expected 5.9% decline in natural gas production and a 4.8% planned reduction in electricity output (for rehabilitation and maintenance on power stations, sub-stations and transmission lines) will lead to pressure on the electricity supply (Allafrica, 2010b). Solar powered energy is planned to make a contribution to the national grid. Foreign investment in this sector is encouraged.

155

This page is intentionally blank.

156

13. ENVIRONMENTAL ISSUES Mining can be divided into 3 phases: r The construction phase begins with infrastructure construction required for the mining and ends when the first load of ore is removed from the ground. r The operational phase starts when the first load of ore is removed from the mine and ends when the last load of ore is removed. r The final phase is the decommissioning phase, which begins when the last load of ore is removed and ends when the mine is given closure by the relevant authority. There may be a certain degree of overlap between the phases, for example, construction may continue after operation has begun, and rehabilitation may begin before operation ceases. Before building or mining can take place, it is imperative that the relevant environmental laws are considered and adhered to. Generally a full environmental impact assessment (EIA) will be required to be carried out by a registered environmental practitioner. This assessment will include consultation with interested and affected parties (I&AP’s). Concerns raised by any I&AP’s (individuals or organisation) should be considered and where possible mitigated. Alternatives to all proposed activities and processes should be considered and environmental impacts of all alternatives will need to be assessed in order to determine which alternative will most effectively allow mining activities to go on without destroying the surrounding environment irreparably. Both surface and underground mining will take place as part of the potential projects. Surface mining will have a greater and more noticeable impact on the environment than underground mining, however underground mining may cause greater damage at a later stage as a result of subsidence. Impacts will be greatest during the operation phase of the mine, and it will be the responsibility of the mine to follow a suitable environmental management plan during the decommissioning phase to return the environment to close to its pre-mining condition. Environmental impacts of activities associated with mining may include transportation of ore or refined products (road, rail or conveyer), refining of ore, and dumping of unwanted processed materials. It is anticipated that the refining processes will require potentially dangerous chemicals, which could be harmful or even fatal if contaminating surrounding water bodies. A dirty water treatment scheme will be required in order to ensure that liquids released into the surrounding environment will be harmless.

13.1. Climate Change Climate change is defined as the “long-term change in the statistical distribution of weather patterns over periods of time that range from decades to millions of years” (Wikipedia 2011a). However, modern usage of the term is often linked to global warming, which is predicted to result in increased sea levels, changes in rainfall patterns and volumes, extreme weather events and changes in agricultural yields (Wikipedia 2011b). For the mining sector, climate change is starting to feature increasingly on the agenda of mining companies and their suppliers. This can be seen by the fact that Deloitte is calling climate change one of the ten trends that are having the greatest impact on the mining sector (George Media Network 2011) and the fact that auditing firm KPMG is now recommending that mining companies “make climate change a strategic and fully integrated part of corporate policies, new initiatives, acquisitions, supplier relationships and business models” (KPMG 2011).

157

The recent floods in Australia have brought home the influence of extreme weather events on buyers of raw materials. It has been noted that several power utilities around the world had to find alternative supplies of coal, as their traditional Australian coal sources were unable to supply them due to forces that were deemed beyond their control. South Korean utilities, in particular, were badly affected as they keep low inventories of coal and didn’t have large stockpiles to assist them in this period of shortfall (Reuters 2011). While the memory of this may be shortlived once the Australian coal sector recovers, it appears likely that the power sector in future risk preparedness programmes may decide to alter its buying patterns in future by stockpiling more coal and ensuring that it has access to coal resources from diverse regions. This may result in a windfall for Mozambique, since coal could be bought from Mozambique and relationships cemented with coal miners in an area which would be considered geographically different to traditional Asian supply sources. Large mining companies that had to declare force majeure as a result of this recent environmental catastrophe, may, if they are prudent, consider their future acquisitions in the light of distributing geographical weather risk and consider whether acquisitions are likely to be influenced by adverse weather conditions that may affect mining in future. This may also bode well for the Mozambican mining sector, which may benefit from companies wanting to spread their geographic weather risk to other regions, including to sub-Saharan Africa. However, climate-change-concerned mining companies may also be calculating the likelihood of extreme weather events in the areas in which they operate. Many of the Crirsco mineral resource reporting codes, including JORC, SAMREC and NI43-101, already ask companies to consider whether the environment will in some way influence mining activities. However, this has historically been limited to describing the annual climate, as it would be experienced in an average year – but at least for internal planning purposes, wise planners may be beginning to look at a longer climate-description timescale to characterize typical weather events in a country. It is not certain how Mozambique would fair in an analysis of its vulnerability to extreme weather events. Mozambique has been noted for its vulnerability to tropical cyclones, floods and droughts – a situation which is worsened by its limited ability to forecast extreme weather events (Queface 2004). The country, which lies in the southern hemisphere, has also been badly affected by the La Nina events of late, which have led to above-average rainfall. About 13,000 people have been evacuated and 13 are known to have been killed. And this only a decade after the floods of 2000, which resulted in the deaths of 800 people (Wikipedia 2011c). These facts would suggest that, from a climate-change perspective, those who are risk adverse might think twice about situating mines in Mozambique because of its vulnerability to extreme weather events. Climate change may thus affect Mozambique’s mining sector in the following ways:r Possible diversification of minerals sourcing (which could result in a potential inflow of investment); r Geographical distribution of mineral acquisitions (which could result in a potential inflow of investment); and r Considerations on whether mines are likely to be affected by extreme weather events (which could result in a potential discouragement of investment into Mozambique). It is also important to note that climate change, while it is becoming a more important factor in mining decision making, is not yet as important as it may be in future. KPMG (2010) notes that fewer than 20% of mining sector participants surveyed believed that climate change is a significant driver for new initiatives in their organizations. However, for the Mozambican government it has been important to take cognisance of the increasing likelihood of significant weather events due to world climate change and the 158

impact that this has on business decisions. It is for this reason that a cyclone early warning system was established as a result of a partnership between the Instituto Nacional de Gestão de Calamidades [National Disaster Management Institute] (INGC), with other interested bodies and funded by USAID (Pereira et al 2010). The cyclone early warning system of Mozambique, which indicates the proximity of cyclones in three colour-codes (See Figure 63) was endorsed by the Government and is in use. Although the programme closed in early 2006 and with it external funding ended, local disaster committees with the support of the Mozambican red cross put what they had learned into practice during the February 2007 Cyclone Favio – alerting communities as necessary (Pereira et al 2010). Figure 63: Cyclone Early Warning System, Mozambique

Source: INGC et al (2003) as shown in Pereira et al (2010)

Similarly Mozambique has set up a simple but effective flood warning system in which individuals have been tasked with measuring rainfall, and checking river level gauges. If the river level rises above a certain point, trained assistants send a radio message to a central coordination point in Buzi. Here the messages are assessed and a decision made whether or not to issue a formal flood warning. Warnings are spread using megaphones or radio announcements. Local committees have been set up and trained to carry out evacuations 159

effectively (Pereira et al 2010). It appears that these warning methods are currently working successfully and in time can be supported with improved equipment as the economy grows. Notwithstanding the creditable developments in Mozambique, Patt and others (2010) indicate that it is in the immediate future (the next 2 decades) that the vulnerability of Mozambique and other third world countries will rise most rapidly to the effects of climate change. After that it is considered that with expected rates of development, Mozambique along with other least developed countries (LDCs) will be in a far better position to deal with adaption to climate change and that their need for external assistance should decrease. However Patt and others (2010) warn that their model is constrained and that if development is slower than expected the degree of self sufficiency will not be reached or if temperature increases are greater than 2 degrees the model will not hold, and the cumulative changes to ecosystems may be such that even developed countries may not be able to cope with the change. In order to lower the overall mining risk in Mozambique it may be of value to prioritise those areas that are likely to be less prone to extreme weather events, in the knowledge that these areas are likely to be preferred by investors (i.e. those not highlighted in Figure 64, for instance). Figure 64 : Areas vulnerable to cyclones

Source: Queface (2004)

160

14. MINERAL POLICY The recent paper on mineral scarcity by Kooroshy and others (2009) may influence world policy makers to rethink country policies around mineral resources, resource development and resource control. It is equally advisable that policy makers in Mozambique consider carefully the way forward. The non-renewable nature of mineral resources means that a country has only one opportunity to take the best route in mineral development and since Mozambique is in the fortunate position to have not yet travelled far on its route of mineral development it may still make those decisions now. Although it may be unpopular with mining companies it is likely that the state should take a degree of direct control over the mineral resource development of the country as do the US, China and Japan. One of the most important aspects of this should be a moderated level of mining with a well planned developmental approach to the extraction and local refining of minerals as well as a strong growth strategy to ensure industrialisation built out of the mineral resource strength. It is particularly important that Mozambique ensures that it supplies the maximum degree of knowledge as well as infrastructural support as is feasible to the minerals industry in order to allow for a vibrant exploration and mining sector. In this regard it is already doing well by having a licensing system that is functioning efficiently. In a series of interviews done by Letlapa all the respondents commented on the excellent level of operation of the licensing system and the only problems mentioned at all, were some minor incidences of petty corruption and the fact that the companies would like the process to be further speeded up (although all said that the turnover speed was satisfactory). However availability of geological maps, and books on the geology and mineral resources of Mozambique could be improved and would enhance general knowledge of the resource availability. High level, local processing of exploration samples as well as metallurgical services could be considered to support the industry. It is of the utmost importance that, where foreign countries make agreements for mineral access, there is a system in place that will allow Mozambique to fully replace the lost mineral capital with other forms of capital. Careful calculation should be done to ensure that in developing its mineral potential, the Mozambican people do not lose their overall capital position in being too keen to pursue a quick but unsustainable growth path which is not soundly based on an overall national development. Kooroshy and others (2009) indicate that, especially in the case of scarce minerals, it is to be expected that in the future these minerals may no longer be available on the open market with equal access to all bidders but may increasingly be available only to preferred bidders via long term contracts signed between “major corporations with heavy government involvement”. They also say that such contracts may carry clauses in which the country gaining access may be expected to transfer technology or provide political concessions or military aid. Where particular resources are in short supply within a country rationing may be considered.

14.1. Politics of mineral scarcity The idea of mineral scarcity is correctly rooted in a demand-supply equation in which demand gradually eclipses supply. It is also rooted in global geopolitics and attempts by countries to secure those minerals that they require and which they might be unable to acquire as a result of favouritism or stockpiling by a supplier nation, supplier company or cartel. Thus, the idea of mineral scarcity could actually be related to perceptions of whether the supply of a mineral might be limited in a relative sense (i.e. not available to a particular country) rather than limited in an absolute sense (i.e. not available at all globally). 161

The issue of which minerals are strategic and have to be acquired to secure or at least not lose a particular country’s position in global production, aeronautics, space, or some other area of specialization, has been around since the Cold War. During this period, countries inventoried their mineral resources and determined whether they had potential resources of various minerals that could be mined at a future stage. They also stockpiled minerals so as to ensure that they would always have sufficient of these strategic minerals to ensure their wellbeing. They discussed concerns over imports such as steel (and the associated minerals that are required in its production) and petroleum, as well as lesser-known metals minerals required for strategic weapons (Parthemore 2011). During the Cold War period, the then Soviet Union established strong relationships with many mineral supplying nations, and Western countries became fearful that they would be dependent on what were perceived to be pro-Soviet countries in Southern Africa and Eastern Europe (Parthemore 2011). Among the countries that many Western countries would have been concerned with was Mozambique, whose ruling party only abandoned Marxism in 1989 (CIA 2011). However, since the Cold War there is the sense that concerns over supplies of minerals are waning (Parthemore 2011), with the exception of energy minerals, petroleum and rare earths, which seem to be continuously in the news with associated concerns that countries may not be able to access these commodities in the long term. Many countries do not explicitly state their degree of dependency on particular minerals, and this has led some to suggest that there should be more open sharing of information about their mineral dependencies (Pathemore 2011). Considerable concern seems to surround the booming economic growth of India, China, Brazil and other countries, whether they can secure enough minerals for themselves and whether their demand for minerals will result in other countries going without (Pathemore 2011). For a country like Mozambique, and for mineral producers in Mozambique, global politics will inevitably enter into the supply relationships that are established. China, for instance, planned to invest $13bn in Mozambican industrial, tourism, mining and energy projects between 2010 and 2015; planned to build a car factory and hydroelectric dams; set up a “China Town” in Maputo; and introduce direct flights between Mozambique and Shanghai (The Economic Times 2010). China is also a leading consumer of steel, iron, manganese, nickel, zinc and other commodities. It is likely that it will play an important role in securing its own supplies of various commodities from Mozambique, and this will be assisted by the fact that it has extremely cordial relations with Mozambique, dating back to the early 1960s when Beijing supported the country’s independence from Portugal (Horta undated). India has set a bilateral trade target of $1bn by 2013 and has agreed to provide $500m worth of credit for infrastructure, agriculture and energy projects (Sharma 2010). India also has a voracious appetite for coal and is believed to be scouting particularly for coal in the Southern African region, because of a 70 Mtpa shortfall in its coal supply (SapaAFP 2011). India has made it clear that it is particularly interested in the country’s coal and will establish an institute for training in the coal sector and a planning institute for coal (Sharma 2010).

162

The country is also keen to reinforce the fact that it is part of the same “Indian Ocean Community” and that it has had a relationship that dates back to precolonial days (Sharma 2010). Brazil is also keen to cement ties with the country, and a consortium of businesses undertook at the end of 2010 to invest $500m in Mozambique (Mucari 2010). The South American emerging country has strong language and cultural ties that it wishes to exploit. Brazilian firm Vale has invested $1.5bn in the Moatize project, while energy company Camargo Correia is building a new Zambezi river dam (Mucari 2010). While it seems a bit mercenary, strong geopolitical ties may result in some countries gaining control over a lion’s share of Mozambique’s wealth while others do not fare as well. Also important will be the behaviour of the companies that are representatives of these emerging economies. There are already reports that some companies are not respectful of the local inhabitants or of the Mozambican environment, and these reports may eventually sour relations between these significant investors and Mozambique. Strategic minerals, and the access to them, will continue to be an issue for many countries, and their decisions to invest in a particular country will be made based on careful considerations. Some countries, such as the UK, have been quite open as to what would constitute a strategic mineral, and some of their criteria include (NTC 2010):r Whether production is dominated by one or a few countries; r Whether producing nations are politically and economically stable; r Whether there are falling production levels of a certain commodity; and r Whether the variety of uses and growing number of uses is likely to increase demand for a commodity. This suggests that the following commodities produced by Mozambique could be considered strategic by some:r Steam coal, which continues to be in demand as a result of increasing levels of affluence which is driving up the production of electricity. Some countries have already declared it a strategic mineral, while others are considering making it one r Coking coal, which is the reductant of choice for the burgeoning steel market r Rare earths, production of which is dominated by China, which produces 98.9% of world production (NTC 2010) r Flake graphite which has a growing number of hi-tech uses and could be important in some future energy technologies r Lithium which although widely produced, is expected to have a rapidly growing demand, mainly for use in batteries although demand for other uses is also likely to increase r Uranium and thorium, with hydrocarbons severely under pressure in the near term these are likely to represent the next phase of energy minerals for the provision of mass power. However, the UK, and other investing nations might be reticent to consider Mozambique as a reliable alternative source of minerals because of its political and economic stability rankings. The NTC has indicated that it considers South Africa’s supply of chromium as potentially associated with risk since it “is ranked "borderline" on the Failed States index, and in the poorest 15% of countries performing according to the Policy Potential index”. It has also noted that South Africa’s problems with infrastructure provision (electricity and water) pose a threat to the security of supply of platinum. However, these categorizations are likely to be even more appropriate to its Mozambican neighbour and may reflect that emerging and developed countries may also be wary of the country even whilst they are attracted by the country’s mineral potential.

163

This page is intentionally blank.

164

15. RESULTS OF DISCUSSIONS WITH INTERESTED PARTIES A questionnaire was broadly circulated in the industry and discussions where held with several businesses related to mining and exploration as well as a government official. Responses to the questionnaire were disappointing and several of the companies approached were not prepared to be interviewed. However the interviews held were fruitful and to a large extent the points that were made coincided between the various sectors. The results are summarised below.

15.1. Transport The single most discussed issue was that of an inadequate transport system to allow for both export and import of goods. The Sena railroad, is seen as being hopelessly inadequate and the road network poor. One suggestion that should be given careful consideration was that the department of transport should disclose a clear plan of action with delivery dates for an improved rail and road network. It was felt that once this was fully clarified foreign direct investment would once again pick up significantly in a planned fashion to bring projects on line as the proposed infrastructure was put in place. The potential of the Niassa district is seen as being hampered by poor infrastructure, but since this potential is not yet clear it is understandable that there is not much commitment to enhance the infrastructure here. It is however important that the area is given a degree of priority in government planning so that once (if?) further exploration outlines the reserves there is also a plan for the provision of the infrastructure.

15.2. Pegmatites Tantalum export through Namibia has been a problem, but during the period of this project there have been trial exports through Nacala. It is understood that Quelimane is also seen as a potential export point for tantalum. In the past there has been a considerable amount of dumping of kaolin in the area of the pegmatite mines, which is both wasteful and can present an environmental problem. However there is now interest in working the dumps.

15.3. Licensing In general there was satisfaction amongst respondents with the licensing procedures, however there was a feeling that the turnover time could be faster. It appears as if the step that takes the longest relates to the acceptance of the environmental impact assessment and it may be a good idea for government to look at the process here to see if it could be streamlined. Licencing turnover should always be done within the time limits of the regulations, currently the turnover is 2-3 times the regulated turnover speed.

15.4. Corruption Here again there appears to be very little problem in general. There were a couple of reports of minor corruption with clerical staff. However, no matter how small, this should be an issue of concern, since it may well grow if not controlled. There was one comment that concerned the interviewer very much – and that came from a company CEO who stated: “I am close to government, I can get anything I want from government within 48 hours”. Against the general background of respondents who are giving the authorities top marks and reporting little or no corruption, this comment appears at first to be positive, but on further reflection it may be indicating a degree of complacency that indicates a corrupt association that allows the respondent quick results to whatever they ask.

15.5. New Law A respondent indicated that there were some legal changes currently being dealt with by the Mozambican government. There was concern about what might be contained in this and to what extent the changes may be undesirable to the industry. The feeling was that the law as

165

it stood currently was excellent. On the other hand the Mozambican mineral sector is developing rapidly and there are several issues which the current law may not cover in sufficient detail, especially as concerns radioactive materials, requirements for local downstream processing, carbon capture and storage (CCS), water usage and degradation especially in cases such as coal bed methane etc.

15.6. Explosives The import of mining explosives appears to be difficult and there is little competition in the local production in explosives. As a result the explosives that are obtainable often do not meet the standards required. There is clearly a huge market gap here with the rapidly expanding mining industry and government should encourage the development of new competitive companies in this area as well as in other sectors which provide input to mining companies. Although the downstream activity from mining is often considered in detail the supply to miners equally forms a critical part of the overall mining cluster and the opportunity to develop rapidly in this area is now at the beginning of the mining developmental cycle in the country.

15.7. Skills There appears to be a general lack of qualified and skilled people in Mozambique. This is not surprising since the mineral development has been fast and expected future development may even accelerate. It is essential that Mozambique ensures now that it provides for the necessary skills training at its universities, colleges and technical schools. An area where there is an urgent need is in the general area of management in which there appears to be a particular shortage. However as development continues there will be severe shortages in several scientific, engineering and technical areas and it is important that the country immediately takes action to be in a better position to redress these when they do occur.

166

16. CONCLUSIONS AND RECOMMENDATIONS Forecasting is an inexact science and the only thing that the forecaster is ever assured of is being wrong. However, in attempting to indicate a pathway for future development within the region covered by the Beira, Zambezi and Nacala spatial development initiatives, the mineral strategist has no other choice but to attempt to see into the future and to forecast likely events and scenarios. There is no doubt that the region under discussion in this document has considerable potential in the mineral sector as well as in other sectors. Looking at historical development throughout the world it can be seen that it is normally mineral sector development that allows the step upwards from third world rural society to first world industrialized society, and it is in the development of this sector that there must be clarity of purpose and policy to ensure that the opportunity is not missed. In essence, the problem being faced is how to develop discrete mineral potential into broadbased developmental reality. The opportunity to make the step from a third world primary industry based economy to a first world secondary and tertiary based industrial society presents itself right now to Mozambique and the region in general. Unless in-depth planning is carried out followed by decisive statesmanlike decision-making the opportunity is likely to be lost. The faster the correct decisions are made the better and at maximum there is probably a window of opportunity of two or three years in which to set the course for future development in the region to ensure a maximum benefit to the people. The fundamentals of what is required are simple, the detail complex. In the simplest terms, all mineral development must lead primarily to downstream processing in the region within the foreseeable future. Although it is well known that the provision of excellent transport services go hand in hand with development, these should NOT be seen simply as conduits to export raw materials. The current situation, where transport of raw materials out of the region is limited, can be seen as an advantage since it forces a second look at developmental opportunity within the region. That said, the development of the major transport routes in the SDIs should clearly continue at a good pace since they will still be essential for movement of goods both into and out of the region as development takes place. With the information at hand, it appears that the export of coal will be constrained by transport infrastructure for the near future. Due to this, the mining will also be limited unless suitable coal take-off is found. There are several projects, dealt with in the report, which can assist in improving the situation by using a proportion of the coal locally and therefore lowering the tonnage to be exported and increasing the value of goods for export. Although some of these projects may need a good deal of study, it is advisable to go through the process so that the best solution can be found for the region. It is virtually a certainty that with the background of this report and more in-depth study that many other opportunities will become apparent to broaden the options and allow for further densification of developmentwithin the SDIs. Nearly all of the opportunities dealt with in the report are interconnected and those, which will have the greatest direct impact on using the available power, lowering the tonnage burden and increasing revenue and job opportunities, are: r Coal fired power stations r Coke ovens to produce coke locally r Production of iron and steel based on Tete magnetite deposit preferably using PCI technology if appropriate r Production of titanium slag and HPPI (coastal, Tete and Malawi) r Nepheline syenite plant r Production of synfuels

167

Of these, it would appear that the coal-fired power stations should have the highest priority (although leading to the possible problem of what to do with the excess electrical power generated) followed by the establishment of coke ovens and then (if the mine is feasible) the production of iron and steel from the Tete magnetite deposit. The production of slag and HPPI is also an important part of the web of industry that can be built since the demand for scrap in a steel mill is likely to be too great to be easily filled and HPPI can suffice. The nepheline syenite plant and synfuels plant may have a very large impact, however the likelihood of them coming to fruition in the short to medium term is considered to be lower due to technological and environmental challenges. The extent to which fertiliser can be produced will depend on which of the mining and industrial projects get off the ground. However, its impact on agriculture is sure to be significant and it should be seen as an essential component of the overall plan. A simplified flowchart of some of these processes, showing the extent to which they are interconnected, is shown in Figure 65. Some of the projects lower in the listing given Table 34 should not be discounted, since they may found to be quite feasible if followed through. For example, a jewellery factory to produce finished products from local precious metals and gemstones can be relatively easily brought to fruition, especially if it follows a staged growth pattern and as tourism grows the products are heavily marketed. Similarly, markets for the various products of a zircon beneficiation plant should be investigated and the state should if necessary add incentive to a plant being built either by direct incentivisation of the plant or possibly disincentivising the export of zircon. Besides the projects that were rated there are many other opportunities that are important and deserve to be included in detailed planning within each SDI. Some of these are listed in the section on “Other projects for consideration” in section 9.3.2. With regard to the development of the coal mines themselves, unless and until either sufficient export transport capacity is available or attractive local take-off opportunities come on line, it will be increasingly difficult for each new operation to come to production. Moatize is on the verge of starting to mine and it is likely that Benga will be next online followed by Zambeze, Ncondezi and others. However, without transport or local take off being in place it is unlikely that either Zambeze or Ncondezi will in fact be able to start mining. It is therefore imperative that there should be the highest priority possible accorded to finding a solution and to setting out clear and transparent plans for the future development of the area. It is equally important that the planning process is brought to the attention of the mining houses and the international community, and that the results are open to them. In this way, even if it does mean that some mines will have to delay their planned opening, there will be confidence in the country and region because of having an open agenda and for planning ahead for the near and medium term. This is clearly the opportunity to make the important move into a modern industrialised economy and government should look at every opportunity possible to make the process of industrialisation work. The encouragement may require some innovative incentives to begin with and these should be seen in light of future revenues, import replacement and job creation.

168

Figure 65 : Simplified flowchart of some of the developmental projects discussed Local use and export of electricity

Synthetic fuel plant feasibility

Build thermal power Plant(s)

Synthetic fuel plant

Downstream Chemical Industry

Mine Nepheline Syenite

Build rail extension to Nepheline syenite cluster

Power for Industrial processes

Local use and export of chemicals and synfuel Ash and gypsum

Cement production

Local use and export Export of clinker

Clinker

Coal offtake

Nepheline Syenite: Cement alumina plant feasibility

Process Nepheline syenite

Alumina

Aluminium smelter

Soda ash

Ceramics / glass industry

Local use and export of aluminium Establish resource and mine clay and glass sands

Limestone Potash

Local use and export of fertiliser

Limestone quarry Ammonia

Fertiliser factory

Phosphate mine

Mont Muande/Evate apatite resource established

Gypsum

Coke oven feasibility

Coke oven

Upgrade agricultural industry

Slag

Downstream Chemical Industry

Local use and export of chemicals Local use and export of Coke Local use and export of steel

PCI feasibility for Tete magnetites

Pulverized coal

Iron and steel mills

HPPI

Magnetite / titanium mining

Ilmenite smelting Export titanium slag

Export excess

169

Tete / Mont Muande magnetite Resources and feasibility

Upgrade/rehabilitate Rail to Beira / Nacala to carry 50 Mtpa +

Multiple coal mines to produce steam coal and cokIng coal

Thermal Power Plant feasibility

REFERENCES African Energy, 2011. African energy acquires 100% interest in Chirundu and Kariba valley uranium projects. African Energy Resources Ltd. 8 March 2011. 3p. Afristone, 2011. Mozambique. Afristone.com Accessed 21 March 2011. Allafrica, 2010a. Mozambique: No Reason to Delay Start of Coal Exports. http://allafrica.com/stories/201011180146.html Accessed on 14 December 2010. Allafrica, 2010b. Mozambique: Plan for 2011 Envisages 7.2 Per Cent Growth. http://allafrica.com/stories /201012090279.html Accessed on 14 December 2010. Allafrica, 2011. Mozambique: Result of Chibuto Heavy Sands Tender Announced. 19 April 2011. Accessed, 21 April, 2011. Allafrica, 2011b. Preliminary Environmental Study Favours Coal Barges 10 May 2011. Accessed, 16 May, 2011. Anderson, E.R. 2011. Sustainable lithium supplies through 2020 in the face of sustainable market growth. TRU Group. Armitage, M. 2007. Pre-listing statement. African Eagle Resources 180p. Baobab, 2007. Baobab Resources plc. Placing announcement. 138p. Baobab, 2010. Interim Results for the 6 Months Ended 31 December 2010. Baobab Resources plc. 16p. Baobab, 2011. Monte Muande data review returns positive results. 31 January 2011. 11p. Baobab, 2011a. Changara project. Accessed 12 April, 2011. http://www.baobabresources.com/Pages/Project%20Pages/project_changara.html. Bateman, 2010. Industrial Minerals processing. www.bateman.co.za/brochures/Bateman_Com_IndustMinerals.pdf Accessed on 25 December 2010. Behre Dolbear, 2011. China moves to strengthen grip over supply of rare-earth metals. Global Mining news. Issue 345. February 14, 2011. Benham, A.J. and Brown, T.J. 2007. African mineral Production 2001-2005. A product of the World Mineral Statistics database. British Geological Survey, Keyworth Nottingham. ISBN 978-0-85272-597-9. 21p. BGS, 2002. Groundwater Quality: Mozambique. British Geological Survey. 4p BGS, 2010. Promoting Malawi’s Mineral Potential: BGS international activities. British Geological Survey, 2010. 20p. Billings Gazette, 2009. Coal Bed Methane. Wyoming federal judge overturns Montana water rules for gas drilling (Billings Gazette, Oct. 14, 2009). http://meic.org/waterquality/coal-bed-methane. Accessed on 4 March 2011. Bray, E.L. 2010. Bauxite and alumina. U.S. Geological Survey, Mineral Commodity Summaries, January 2010. Callaghan, C. (compiler) 2002a. Mineral scan of the Zambezi River and Beira Corridor Spatial Development Initiatives. 247p. Callaghan, C. (compiler) 2002b. Mineral scan of the Nacala Spatial Development Initiative Key Findings. Mintek Restricted Client Communication (unfinished) 47p. Callaghan, C. (compiler) 2004. Titanium oxides and Zircon Downstream Scan for the Limpopo Spatial development initiative. Mintek Restricted Client Communication. 137p.

170

Callaghan, C. (compiler) 2003. A  Pre-­‐Concept  Study  of  the  Production  of  Alumina  from  Nepheline   Syenite  in  Mozambique.   Canby, S. 2010. ExMin Associados Limitada Mozambuque. www.minex.org/serv05.htm Accessed on 11 December 2010. Cgmplc, 2011. Planned construction of a cement plant in Mozambique. Consolidated General Minerals plc. Regulatory story. RNS 2574D. Chopra, R. Mahtani, P. Hynes, D. and Heap, A. 2011. India Coking Coal update. Alert: Coking Coal under water. Citi Equities 10 January 2011. 8p. Club of Mozambique, 2010a. German company interested in exploiting Mozambican graphite. www.clubofMozambique.com Accessed 9 November 2010. Club of Mozambique, 2010b. Riversdale Mining to soon begin studies on thermal coal deposits in Tete, Mozambique. www.clubofMozambique.com Accessed 2 November 2010. Club of Mozambique, 2010c. Beacon Hill. http://www.clubofmozambique.com/solutions1/sectionnews.php?secao=mining&id= 20376&tipo=one Club of Mozambique, 2011. Electricity grid to be expanded in Inhambane.  10  March  2011.   http://www.clubofmozambique.com/solutions1/print_current.php?s...

CoAL, 2009. CoAL, Coal of Africa limited, Minesite forum, 2009. Presentation Cooper, W.G.G.1949. Annual report of the geological surveys Department for the year 1949. Government Printer, Zomba, Nyasaland. 5p. Cordell, D, Drangert, J-O., and White, S. 2009. The story of phosphorus: Global food security and food for thought. Global Environmental Change 19 (2009) 292–305. Elsevier. Creamer, T. 2011. Vanadium  use  may  rise  as  seismic-­‐vulnerable  territories  seek  

safeguards.  17  Mar  11.  Engineering  news.    

Creamer, M.  2011.  More mining demand in next 20 years than in past 10 000 years – Rio Tinto. 14th February 2011. Mining weekly.   Cronwright, M.S. 2005. A review of the rare-element pegmatites of the Alto Ligonha Pegmatite Province, northern Mozambique and exploration guidelines. Dissertation submitted in partial fulfilment of the requirements for the degree of Master of Science in the Department of Exploration Geology at Rhodes University Grahamstown South Africa. January 2005. 168p. De Coninck, H., Mikunda, T., Cuamba, B., Schultz, R. and Zhou, P. 2010. CCS in Southern Africa. An assessment of the rationale, possibilities and capacity needs to enable CO2 capture and storage in Botswana, Mozambique and Namibia. Energy research centre of the Netherlands. ECN-E-10-065. July 2010. 54p. De Mestier du Bourg, H. 2006. Future prospective of DME. 23rd World gas conference, Amsterdam, 2006. Dias, M.B. and Wilson, W.E. 2000. The Alto Ligonha pegmatites, Mozambique. The Mineralogical Record, 31, 459-497. Dibb, J and Hackett, D.  2010.  Noventa:  A  tipping  point  for  tantalum.  Canaccord  Genuity.  31  p.   http://noventa.net/pdf/26112010-­‐Canaccord-­‐UK-­‐Equity-­‐Research.pdf  Accessed  23  March   2011.    

171

Dill. H.G. 2007. A review of mineral resources in Malawi: With special reference to aluminium variation in mineral deposits. Journal of African Earth Sciences 47 pp 153–173. Dondeyne, S., Ndunguru, E., Rafael, P. and Bannerman, J. 2009. Artisanal mining in central Mozambique: Policy and environmental issues of concern. Resources Policy 34 (2009) 45–50. Elsevier. DMT, 2011. Coal making technology – service for the future. Accessed 27 03 2011. /www.dmt.de/fileadmin/PDF/Broschueren/Kokereitechnik/Service_for_future_eng_1 006.pdf. Econergy, 2008. Mozambique Biofuels assessment. Econergy International Corporation. 511 p. ENVIS, 2007. Utility bonanza from dust: Fly ash. Department of Forests, Ecology & Environment, Government of Karnataka. 8p. Essar, 2010. Prospectus. 672p. Ferraz, B. and Munslow, B. 2000. Sustainable development in Mozambique. Africa World Press. Feytis, A. 2010. The bright side of graphite. Industrial Minerals, July 2010. 7p. Fortunegraphite, 2010. Market demand. Fortune Graphite Inc., http://www.fortunegraphite.com/main/index.php?option=com_content&task=view&id =17&Itemid=46 Accessed 20 December 2010. GAC, 2011. Global Alumina Corporation. Industry overview. Accessed 19 March 2011. Globe 2010a. High-Grade Heavy Rare Earth Oxide Mineralisation Intersected at Machinga Rare Earth Project, Malawi. ASX/Media Announcement. 15 April 2010. Globe, 2010b. Updated JORC Resource Estimate – Kanyika Niobium Project. Globe Metals and Mining. 30th June 2010. Globe, 2010c. Mount Muambe Fluorite/REE Project – Completion of Drilling Program. ASX/Media Announcement. 2 December 2010. Globe, 2011. Power Feasibility Study – Mota-Engil – Kanyika Niobium Project. ASX/Media Announcement. 14 March 2011. Graphit Kropfmühl, 2005. Graphite for fuel cells. Graphit Kropfmühl AG High-tech in Raw Materials. 3 November 2005. 2p. Groat, L.A., Giuliani G., Marshall, D.M. 2008. Emerald deposits and occurrences: a review. Ore Geology Reviews 34, 87-112. Gwartney, J. Hall, J, and Lawson, R. 2010. Economic Freedom of the world. 2010 Annual report. Fraser Institute. 248p. Hains, D.H. and Mounde, C. 2010. Technical report on the Marropino project and Associated properties, Zambezia province, Mozambique. NI 43-101 Report. September 27, 2010. Scott Wilson Roscoe Postle Associates Inc. 252p. Hecht, J.E. 2005. Valuing the Resources of Mulanje Mountain: Study Design. Environmental Economics and Policy, Blantyre, Malawi. July 2005. 29p. Hill, M. 2011. Great  Western  eyeing  rare  earths  from  SA  titanium  tailings.  Mining  

Weekly.  26  May  2011.   Höök, M., Zittel, W., Schindler, J, Aleklett, K. 2008. A supply-driven forecast for the future global coal production. Contribution to ASPO, 2008.

172

Hunt, P. 2011. World Steel Production Report. ISSB Monthly World Steel Production Review. www.steelonthenet.com/production.html. Accessed 23 March 2011. Hunting, 1985. Phosphate deposits in Mozambique – Mineral development study. Hunting geology and geophysics limited. 30pp. IDC, 2011. Chemplex corporation limited. Accessed 23 March 2011. www.idc.co.zw/index.php?option=com_content&view=article&id=38&Itemid=52. IMF, 2009. Regional economic outlook: Sub-Saharan Africa Weathering the storm. ISBN 978-1-58906-857-5. 102p. Indexmundi 2010. Mozambique GDP - per capita (PPP). Data From the International Monetary Fund. www.indexmundi.com accessed 5 December 2010. Jacana, 2010. Mozambique. www.jacanaresources.com.au Accessed on 9 January 2011. Jasinski, 2011. Mineral Commodity Summaries 2011: Phosphate Rock. USGS National Minerals Information Center. 24 January 2011. p118-119. Katerere, F. 2010. Mozambique Bans Imports and Exports of Asbestos to Protect its Environment. Aug 25, 2010. http://www.bloomberg.com/news Bloomberg L.P. 1p. Accessed, December 2010. Kehoe, P. 2011. Quartertly activities report for the period ended 30 March 2011. Jacana Resources. 5p. Accessed 1 May 2011. http://www.jacanaresources.com.au/March%202011%20quarterly.pdf Kirk-Othmer undated. Kirk-Othmer Encyclopedia of chemical Technology. Kooroshy, J., Meindersma, C., Podkolinski, R., Rademaker, M., Sweijs, T., Diederen, A., Beerthuizen, M. and de Goede, S. 2009. Scarcity of Minerals: A strategic security issue. The Hague Centre for Strategic Studies NO 02 | 01 | 10. 148p. Lehto, T. and Gonçalves, R. 2008. Mineral resources potential in Mozambique. GTK Consortium Geological Surveys in Mozambique 2002–2007, edited by Yrjö Pekkala, Tapio Lehto & Hannu Mäkitie Geological Survey of Finland, Special Paper 48, 307– 321, 2008. Libertas. 2010. Baobab Resources plc (AIM:BAO). 21 June 2010. Lynas, 2010. Lynas receives approval from the government of Malawi to complete the acquisition of rare earths resource. 27 December 2010. Lynas Corporation. 5p. Mbendi, 2010. Mining in Mozambique. www.mbendi.com/indy/ming/af/mz/p0005.htm Accessed on 12 December 2010 Melezhik, V.A., Bingen. B., Fallick, A.E., Gorokhov, I.M., Kuznetsov, A.B., Sandstad, J.S., Solli , A., Bjerkgard, T., Henderson, I., Boyd, R., Jamal, D., Monize, A. 2007. Isotope chemostratigraphy of marbles in northeastern Mozambique: Apparent depositional ages and tectonostratigraphic implications. Precambrian Research 162 (2008) 540–558. MacDonald, A. 2011. September target for Riversdale exports. The Australia: Business, 3 March 2011. www.theaustralian.com.au/business/mining-energy/september-targetfor-riversdale-coal-exports/story-e6frg9e6-1226015235980 MacDonald, A. 2011a. DJ Vale’s Mozambique coal exports on track despite rail issues. Posted on: Thu, 17 Feb 2011. http://www.tradingmarkets.com/news/stockalert/vale_dj-vale-s-mozambique-coal-exports-on-track-despite-rail-issues1499003.html. Accessed 12 March 2011.

173

Macuahub, 2010a. Mozambique’s Nampula needs more water resources to develop. Macuahub. Accessed 23 March 2011. www.clubofmozambique.com/solutions1/sectionnews.php?secao=social_developm ent&id=19621&tipo=one. Macuahub, 2010b. Pretoria Portland Cement to build cement factory in Mozambique. http://www.macauhub.com.mo/en/2010/12/07/pretoria-portland-cement-to-buildcement-factory-in-mozambique/ Accessed 12 April 2011. Macuahub, 2011a. Australian company invests in tantalite processing unit in Mozambique. Macuahub March 16 2011. Macuahub, 2011b. British company Consolidated General Minerals plans to build cement factory in Mozambique. Macuahub 25 March, 2011. Accessed 12 April 2011. http://www.macauhub.com.mo/en/2011/03/25/british-company-consolidatedgeneral-mine. Macuahub, 2011c. Cimentos de Moçambique to double cement production capacity at Matola factory. March 16th, 2011. Accessed 12 April 2011. http://www.macauhub.com.mo/en/2011/03/16/cimentos-de-mocambique-to-doublecement-production-capacity-at-matola-factory/. Macuahub, 2011d. Portugal and Mozambique to create company to manufacture locomotives and rail trucks. Accessed 23 February 2011. http://www.macauhub.com.mo/en/print.php?pageurl=/en/news.php.  

Macuahub, 2011e. Riversdale Mining studies transfer at sea of coal mined in Mozambique. Accessed 23 February 2011. http://www.macauhub.com.mo/en/print.php?pageurl=/en/news.php.  

Macuahub, 2011f.  Mozambican  government  studies  reopening  of  former  mines.   http://www.macauhub.com.mo/en/print.php?pageurl=/en/news.php.  

Macuahub, 2011g. Brazil’s Vale to build fertilizer factory in Nacala-a-velha, Mozambique. April 6th 2011. Accessed 8 April, 2011. http://www.macauhub.com.mo/en/2011/04/06/brazil%E2%80%99s-vale-to-buildfertiliser-factory-in-nacala-a-velha-mozambique/. Macuahub, 2011h. Environmental impact study for Mphanda Nkua dam, in Mozambique, ready by May. February 23rd 2011. Accessed 8 April, 2011. Macuahub, 2011i. Mozambican-Canadian consortium awarded tender to explore heavy sands in Chibuto, Mozambique. April 20th, 2011. Accessed 21 April, 2011. Macuahub, 2011j. Brazil’s Vale to use part of Malawi’s rail system to transport coal from Mozambique. April 20th, 2011. Accessed 21 April, 2011. Macuahub, 2011k. Mozambique Gems’ unit for processing precious and semi-precious stones opens. Thursday. April 22, 2011. Macuahub, 2011l. Work on coal terminal in Nacala, Mozambique, due to begin in July. April 25th, 2011. Macuahub, 2011m. Mining company Companhia Mineira de Nabur granted heavy sands concession in Mozambique April 25 2011. http://www.macauhub.com.mo/en/2011/04/18/mining-company-companhia-mineirade-nabur-granted-heavy-sands-concession-in-mozambique/. Macuahub, 2011n. Coal gas may help Mozambique reduce cost of fuel imports. May 17, 2011. Accessed on May 17th 2011. http://www.macauhub.com.mo/en/2011/05/13/coal-gas-may-help-mozambiquereduce-cost-of-fuel-imports/

174

Malunga, G.W.P. 1997. Malawi Limestone Project. Summary. Mining and Lime Manufacturing. Feasibility Study. P::943/WP/Volume4.FES/PROMO/Sections1. MET-CHEM April 1997. 29p. Malunga, G.W.P. 1999. Mineral potential of the Nacala corridor, Malawi. Opportunities for mineral investment. www.sdnp.org.mw/geosoc-mw/mineralpotential.htm Accessed 24 December 2010. Malunga, 2001. Mineral potential of Malawi. Opportunities for mineral investment. June 2001. 12p Mantra, 2010. Zambezi Valley Project (ZVP) – Mozambique. http://mantraresources.com.au/?id=277. Accessed on 9 January 2011. Mining Journal, 2000. Mozambique Mining Annual Review. A supplement to mining Journal. 15p. Mining Journal, 2008. Mozambique Mining Annual Review. A supplement to mining Journal. 12p. Mining review, Undated. Mining industry to boost Mozambique. www.miningreview.com/node/18856 Accessed 7 December 2010. Mining-technology, 2010. Nippon Steel to Develop Mozambique Coal Mine in 2012. http://www.mining-technology.com/news/news100405.html. Accessed 2 November 2010. 1p. Mining-technology, 2011. Kayelekera Uranium Mine, Malawi. Accessed 23 March 2011. www.mining-technology.com/projects/kayelekerauraniummin/. Mining-technology, 2011a. Zambeze Coal Mine, Changara, Mozambique. Accessed 12 March 2011. http://www.mining-technology.com/projects/zambesecoalproject/. Miningtopnews, 2010. Global Carbon & Graphite Market to Exceed $8.1 Billion by 2012, According to New Report by Global Industry Analysts, Inc.Thursday, April 17th 2008. www.miningtopnews.com Accessed 20 December 2010. 1p. Ministry of Mines, 2010. Mining in Zambia. Accessed 21 December 2010. www.zambiamining.co.zm/industrialminerals.htm. Mintek, 1986. South Africa’s Potential for Mineral based added-value products. Mitchell, C.J. 1993. Flake Graphite: Industrial minerals Laboratory Manual. British Geological Survey, Technical report WG/92/30. Mineralogy and Petrology series. Mitchell, C.J. 2009. Industrial Mineral Resources of Zambia. British Geological Survey, UK & Boniface Muibeya, Geological Survey Department, Zambia, 17p. Mkango Resources Ltd. 2011. Songwe. QwikReport. Accessed 26 March 2011. /www.mkango.ca/s/qwikreport.asp?IsPopup=Y&printVersion=now&X8WQ=436787. Mórrígan, T. 2010. Peak Phosphorus. A Potential Food Security Crisis. Global Climate Change, Human Security, and Democracy. February 21, 2010. University of California Myers, T. 2005. Coal bed methane development. Presentation. Western mining action network. Neiva, A.M.R. and Leal Gomes, C.A.A. 2010. Geoquímica das turmalinas do grupo pegmatítico granítico Li-Cs-Ta de Naípa, Alto Ligonha, Mozambique. GEOTIC – Sociedade Geológica de Portugal VIII Congresso Nacional de Geologia. e -Terra http://e-terra.geopor.pt ISSN 1645-0388 Volume 13 – nº 4 2010. NEUI, 2011. Datang International Renewable Energy Development Company Limited. http://www.neui.com.cn/en/Item/Show.asp?m=113&d=8 Accessed, 14 April 2011.

175

Ncondezi. 2011. www.ncondezicoal.com/mineral-resource-statement.aspx, North River. 2011. North River Resources plc (‘North River’). Heads of Agreement signed with Jacana Resources Ltd. 4p.www.northriverresources.com/Announcements/Jacana_announcement_web_02. 02.11.pdf. Noventa, 2010. Issue of N1 43-101 Technical report. 19 October 2010. 6p. Olian, I. 2010a. African Queen Mines reports 5-year extension of the King Solomon prospecting license. Press release 2p. Olian, I. 2010b. Initial discovery holes at African Queen's King Solomon project. Press release 4p. Olson, D.W. 2010. Graphite (Natural) In: U.S. Geological Survey, Mineral Commodity Summaries, January 2010 p68-69. Papp, J.F. 2009. Niobium (Columbium) and tantalum 2007 [Advance release]. 2007 Minerals Yearbook. USGS. P52.1 – 52.14. Papp, J.F. 2011. Niobium (Columbium) and tantalum 2009 [Advance release]. 2009 Minerals Yearbook. USGS. P52.1 – 52.14. PAW, 2010. An Emerging Near-Term Tantalum Producer January 2010. Pacific Wildcat Resources Corp. Presentation 35 slides. Pekkala, Y., Kuivasaari, T., Gonçalves, R., Deus, M., Chaúque, F. & Almeida, C. 2008. Review of industrial minerals in Mozambique. Geological Survey of Finland, Special Paper 48, 289–306, 12 figures and 4 tables. In: Pekkala, Y. Lehto, T. and Mäkitie, H. (eds.) 2008. GTK Consortium Geological Surveys in Mozambique 2002–2007. Geological Survey of Finland, Special Paper 48. 321p. Phiri, A.T. Njoloma, J.P. Kanyama-Phiri, G.Y., Snapp, S. and Lowole, M.W. 2010. Maize yield response to the combined application of Tundulu rock phosphate and Pigeon Pea residues in Kasungu, Central Malawi. African Journal of Agricultural Research Vol. 5(11), pp. 1235-1242, 4 June, 2010. Pitfield, P.E.J. 2009. Mineral Potential of Malawi: 2 Mineral deposits associated with the Basement metamorphic and igneous rocks (precious and base metals, gemstones and industrial minerals. Ministry of Energy and mines. Republic of Malawi. 8p. Prinsloo, L. 2011. Second-half sales won’t be sufficient to eliminate interim losses – Sallies. Mining weekly. 4 March 2011. www.miningweekly.com/article/second-half-saleswont-be-sufficient-to-eliminate-first-half-losses-sallies-2011-03-04. Accessed 5 March 2011. Rademaker, M. and Kooroshy, J. 2010. The global challenge of mineral scarcity. The Hague Centre for Strategic Studies (HCSS). Essay for the Conference: Enriching the Planet, Empowering Europe - Optimising the use of natural resources for a more sustainable economy, The Hague, 26 & 27 April 2010. 6p. Railway Gazette, 2009. Moatize coal link funded. http://www.railwaygazette.com/nc/news 2p. Accessed 2 November 2010. Railway Gazette, 2010a. Sena Line trains return to Moatize. http://www.railwaygazette.com/nc/news 1p. Accessed 2 November 2010. Railway Gazette, 2010b. Mining drives African rail plans. http://www.railwaygazette.com/nc/news 2p. Accessed 2 November 2010. Reisman, L. 2011. Tantalum Prices About to Go Through The Roof? Metalminer. http://agmetalminer.com/2011/01/20/tantalum-prices-about-to-go-through-the-roof/ Accessed on 23 March 2011. 176

Resource Investing News, 2011. Lithium Projects in Argentina May Face Roadblock. http://resourceinvestingnews.com.  March  9  2011. Resource Star, 2010. Resource Star reports high grade results from Machinga niobium-rare earth project. ASX Release. 15 April 2010. 7p. Reuters, 2010. Great Western sees revenue surging once SA rare earths mine opens. Published: 4th November 2010. Creamer Media (Pty) Ltd. http://www.miningweekly.com 2p. Accessed 5 November 2010. Reuters, 2010. Major aluminium market developments in January. Reuters, 2010c. Baobab Resources Plc Announces Heads Of Agreement Signed For Changara Project. Monday, 19 Jul 2010. Accessed 23 March 2011. www.reuters.com/finance/stocks/keyDevelopments?symbol=BAO.L Reuters, 2011. Mozambique Ncondezi Coal plans to invest $400 mln. Accessed 24 March 2011. http://af.reuters.com/article/investingNews/idAFJOE72B05U20110312. Rift Valley, 2002. Kangankunde Stronianite – rare earths project, Malawi. Rift Valley resource Development Ltd. In formation Memorandum. RMG 2006. Long term metal prices and factors affecting them. For Alaska-Canada rail link. Raw Materials Group. October 2006. 33p. Rosa, D and Dias, M.B. 2008. Evaluation of emerald potential of Mozambican pegmatites using lithogeochemical methods. 5º Congresso Luso-Moçambicano de Engenharia. Maputo, 2-4 Setembro 2008. Abstract 2p. Schlüter, T. 2006. Geological Atlas of Africa. Springer-Verlag. 272 pp. Sergeant, B. 2010. Mozambique coal hotting up on Riversdale bid. www.mineweb.com accessed 14 December 2010. Stephens, J. 2009. Acquisition of High Grade Fluorite Project – Mozambique. ASX/Media Announcement. 6p. Stephens, J. 2010. Mount Muambe Fluorite/REE Project – Completion of Drilling Program. ASX/Media Announcement. 2 December 2010. 3p. Stephens, J. 2011. Drilling confirms high-grade fluorite plus REO discovery at Mount Muambe. ASX/Media Announcement. 2 March 2011. 5p. Storuman, 2011. Stourman. Tertiary Minerals plc. /www.tertiaryminerals.com/storuman.html Accessed 22 March 2011. Swanepoel, E. 2010. Globe buys Malawi rare-earths project. Mining Weekly. 24th May 2010. www.miningweekly.com/article/globe-buys-malawi-rare-earths-project-201005-24 Accessed 17 December 2010. Swanepoel, E. 2010a. Malawi niobium project’s resource up 77% – Globe. Mining Weekly 30th June, 2010. www.miningweekly.com/article/malawi-niobium-projects-resourceup-77-globe-2010-06-30 Accessed 20 March 2011. Swanepoel, E. 2011. Rising costs, skills shortages put iron-ore projects under pressure – BHP. /www.miningweekly.com/article/rising-costs-skills-shortages-and-politicalrisks-put-iron-ore-projects-under-pressure-bhp-2011-03-22 Accessed 23 March 2011. SGAB, 2003. Mining sector environmental and social assessment, Mozambique. Swedish Geological AB Report E1030. 53p. Steelguru, 2011. Mozambique Sena Rail port may attract USD 685 million. http://www.steelguru.com/sfTCPDF/getPDF/MTkyMTQ2/Mozambique_Sena_Rail_p ort_may_attract_USD_685_million.html Posted 21 Feb 2011. 177

Taylor,M. 2010. Tantalite to rise as conflict-free supplies needed. Reuters Africa. 10 November 2010. http://af.reuters.com/article/drcNews/idAFLDE6A01N320101110 Accessed 31 December 2010. Toovey, L.M. 2011 USDA forecasts good news for fertilizers. Potash investing news. Resource  Investing  News  -­‐  http://resourceinvestingnews.com.  Accessed  8  April  2011. TRU. 2011. TRU Group Inc supply-demand forecast - global lithium industry conference http://trugroup.com/Lithium-Market-Conference.html. Van Straaten. P. 2002. Rocks for crops. Agrominerals of sub-Saharan Africa. ICRAF, Nairobi, Kenya, 338pp. Vanadium Investing news, 2011. Advancements in Vanadium Redox Battery Could Improve Economic Viability. 7 April 2011. Accessed 8 April 2011. http://vanadiuminvestingnews.com/1382/advancements-in-vanadium-redox-batterycould-improve-economic-viability/. Van der Linde, D. 2011. Building Infrastructure Will Push Vanadium Demand. March  17,   2011.  Accessed 18 March 2011. http://vanadiuminvestingnews.com/1308/buildinginfrastructure-will-push-vanadium-demand/. Walker, M. (compiler) 2004. A Scan of the Opportunities Arising from Resource-based Projects in the Zambezi Valley, Mozambique. Mintek Restricted Client Communication.49p. Wikileaks, 2010. Wikileaks Mozambique 4/996. 09 December 2010. http://maschamba.com/eua/wikileaks-mocambique-4996/ accessed 13 December 2010. Wilson, 2011. Fluorspar. 2009 Minerals Yearbook. USGS. January 2011. Woolley, A.R. 2001. Alkaline rocks of the world. Part 3: Africa. The Natural history Museum, London. Published by: The Geological Society, Brassmill lane, Bath, UK. ISBN 186239-083-5. 366p World Coal Association, 2011. Improving efficiencies. http://www.worldcoal.org/coal-theenvironment/coal-use-the-environment/improving-efficiencies/. Accessed, 22 April 2011. World Coal Institute 2008. The coal resource. A comprehensive review of coal. World coal Institute. Written 2005, modified 2008. Worldsteel, 2009. World steel figures in 2009. Worldsteel Association. 2. Worldsteel, 2010. Fact Sheet. Steel industry by-products. Worldsteel Association. 2. Yager, T. 2008. The Mineral Industry of Mozambique (Advance release). U.S. Geological Survey Minerals Yearbook 2008. Yager, T. 2011. The Mineral Industry of Mozambique (Advance release). U.S. Geological Survey Minerals Yearbook 2009. Yeo, G.2011. The Karoo sandstone-hosted uranium deposits at Mutanga, Zambia. Denison Mines Corp. 2p. www.pdac.ca/pdac/conv/2011/pdf/presentations/ts-uraniumyeo.pdf. DISTRIBUTION Copy Number 1-5

Issued to Mark Pearson

178

APPENDICES

179

APPENDIX I. Commodity

Unit

“Granite”

m3

1996

Aggregate

m3

Bauxite

kt

11.46

Bentonite

kt

11.85

Beryl

1997

MINERAL PRODUCTION OF MOZAMBIQUE 1998

1999

2000

2001

2002

2003

2004

2005

2006

759

661.5

669.7

539

520.8

2198

283

265

592.36

490.74

795.73

742.50

779.58

850.92

1179

8.22

6.13

7.88

8.13

9.59

9.12

11.79

8.98

9.52

11.07

13.78

11.13

11.18

29.99

21.87

16.17

25.31

20.57

17.87

4.27

t

18.8

0.8

54

78.3

27.3

146.3

16.4

Carbonate rock

kt

585.6

729.2

1,301

1,348

1,593

654.2

155.9

Clay

kt

84.02

100.18

108.23

32.03

222.05

Dumortierite

t

40

40

113

10

664

Garnet

t

5.8

10.33

Graphite

kt

3.28

5.13

5.89

4.01

Marble

m2

9,881

13,820

2,736

16,296

14,640

15,303

9,980

10,227

13,666

12,153

12.825

Marble

m3

744

251

117

117

453

320

453

320

617

509

472

Quartz

t

24.7

31.3

31

173.5

294.7

195.1

Salt@

kt

10

80

80

80

80

Sand

kt

299.54

464.68

795.81

1372.03

1429.74

833.11

1404.18

Tantalite

kt

0.025

0.027

0.047

0.189

0.712

0.088

0.051

Source: Pekkala et al, 2008;

60

@

Benham and Brown, 2007

180

50

APPENDIX II.

METHODOLOGY

Introduction A database of projects in Mozambique was created and rated against likely mid term future demand, whether or not the deposit is “taken”, understood metallurgical difficulties in processing, downstream beneficiation opportunity, mining or ‘mineability’, logistics and energy. In the case of whether a property was “taken” this was related directly to whether or not there was a prospecting, or mining right owner – properties with neither where accorded a high (5) and those with a low (1) mark. All other assessments were rated according to the best knowledge of the team in regards the value of the deposit, and its ease to bring to mineability with 5 being most favourable and 1 least favourable. It is important to indicate here that in all cases this was a rather mechanistic process since at this level of study with more than 500 possible deposits to consider the amount of information that could be put together to support decision making was limited. Once initial work with demand, mineral rights, deposit size mining and metallurgy where in place, the rest of the work was done on a select group of deposits

Factors Taken into Consideration Typical aspects to consider are listed below. When not a lot of detail is known of individual projects, ratings are broadly estimated at a high level and based on knowledge of typical mineralisation styles which are generally encountered. 1. Future demand a. Current demand b. Mineral scarcity issues c. New technologies d. Geopolitical factors 2. Whether a deposit is “taken” a. Issue of exploration or mining rights 3. Metallurgy a. Level of ease of processing b. Market availability of processing techniques 4. Mining a. ·Geometry of mineralisation b. ·Surface topography c. ·Ease of ore/waste distinguishability – selectivity requirements d. ·Mining skills requirements – technical difficulty e. ·Grade / quality control requirements f. ·Geotechnical conditions, slope stability-- hanging wall conditions g. Hydrology – too much, too little water. 5. Logistics 6. Energy a. Proximity of the deposit to existing electricity infrastructure (still awaiting confirmation as to currency of the map used from EdM) b. Deposits closest to exiting network rated 5. 181

c. Rating drops off for deposits progressively further away from the existing grid. d. New isolated generation, possibly mini hydropower, closer to the deposit is a possibility. However, this option was not considered at this point. e. Areas near generation projects were given higher ratings. f. The risk in the ratings of geomorphological features were not considered in this broad rating. 7. Downstream a. Ease of downstream opportunities b. Job opportunities c. Foreign exchange earnings

182

APPENDIX III.

DIRECT IMPACTS – FLOWSHEETS

Source: Walker 2004

183

Source: Walker 2004.

NOTE: Wilson 2011 indicates that the US is phasing out the use of HF in Gasoline alkylation due to a series of leaks that have been experienced.

184

Fig 3: Mineral sands downstream project

Upstream Inputs: - Coal or gas - Heavy mineral sands deposits - Electricity - Other inputs

MINERAL SANDS DOWNSTREAM PROJECT

TiO2 PIGMENT PLANT Fig 3A Source: Walker 2004.

ZIRCON CHEMICALS PLANT Fig 3B

.

185

HIGH PURITY PIG IRON PLANT Fig 3C

BRICK MAKING

Fig 3A: TiO2 PIGMENT PLANT Upstream Inputs: -Petroleum coke -Slag -Natural gas -Salt (Namibia/Australia) -Oxygen -Water -Coating chemicals -Energy Chlorine (local) Fig 3A(i)

TiO2 PIGMENT PLANT

Beneficiated products -Pigments

Paint Manufacture -car paint -latex paint -acrylic paint

Plastic manufacture -PVC -polyolefins -polyethelines

By-products

Coated Paper Manufacture

Other uses -Food colourant -Cosmetics -ink -rubber

Ferric chloride (FeCl3) -flocculating agent for water treatment -removal of hexavalent chromium from liquids -etching agent for engraving, photography and printed circuitry -disinfectant -sewage deodoriser -petroleum refining -tannery waste treatment -glycerine manufacture and purification -pesticides, fertilisers, soaps, deodorants

Paint Plastic Paper Foodstuffs, cosmetics Industry, Municipal

186

Source: Walker, 2004

Fig 3A(i): CHLOR ALKALI CHEMICAL PLANT

Upstream Inputs -Salt (imported - Namibia) -Energy

CHLOR ALKALI CHEMICAL PLANT

Outputs -Hydrogen (H2) -Chlorine (Cl) -Caustic Soda (NaOH) -Hydrochloric acid (HCL)

Zircon Chemical Plant Fig 3B

TiO2 Pigment Plant Fig 3A

Margarine production (H2)

Foodstuffs

Source: Walker, 2004

187

Detergent manufacture

Industry

Water treatment

Municipal

Fig 3B: ZIRCON CHEMICALS

Upstream Inputs: - Water - Electricity - HCl - Caustic Soda (NaOH) - Sulphuric acid - NaO(SiO2)3.3

ZIRCON CHEMICALS PLANT

Beneficiated products - Cheap crude zirconia - Crude zirconia with 80% reduction in radioactivity - Pure zirconia - Acid zirconium sulphate tetrahydrate (AZST) - Zirconium carbonate Fig 3B(i) Source: Walker, 2004

188

By-products - Sodium silicate - precipitated silica - silica gel Fig 3B(ii) - other silicates

Waste products: - Sodium chloride (NaCl)

Fig 3B(i): BENEFICIATED PRODUCTS FROM ZIRCON CHEMICALS PLANT

AZST

BENEFICIATED ZIRCONIUM PRODUCTS

ZrO2 (crude)

UV stabilised TiO2 pigment Feedstock for the production of a wide variety of Zr chemicals

Paint manufacture

Zirconyl acetate

Catalyst in silicone waterproofing Cosmetics -lipstick, foundation, mascara UV block lotions

ZOC (zirconium oxychloride)

ZrO2 (pure)

Ceramic Pigment grade

Glass grade

-Zircon-iron pink -Zircon-vanadium blue -Zircon-praseodymium yellow -Zircon-vanadium yellows and oranges

-Specialised optical and ophthalmic glass -TV glass -High purity ceramics -Optical fibres

Electronic grade

-Dielectric components -Piezoelectric components

Paint Cosmetics Ceramics

Stabilized zirconia

Glass, Ceramics

Electronics

Industrial, Medical, Auto Industry

Refractory applications, high wear and corrosive environments

Oxygen sensors High temp. induction furnace Alumina-zirconia-silica (AZS) Magnesia-zirconia refractory bricks Structural ceramics -pump components, bearings, seals valves -Deepwell down-hole valves and seats Bioceramics -hip joints -bone replacement -dental ceramics Low wear ceramics -high density balls and mill grinding media, -engine parts, machine components -Thread and wire guides -marine pump seats and shaft guides Forming dies -Copper extrusion and wire drawing -powder compacting dies Cutting Application -Blades, scissors, shears, cutting tools Coatings -Thermal barrier plasma spray Fuel cells -oxygen ion conductor membrane Electrolysis -electrolysis of hydrogen from water Electrical components -electrodes, filters transducers etc Resonators -acceleration sensors, buzzer elements, ultrasound applications Catalysts -car exhaust catalysts, alkylation, condensation, cracking

Source: Walker, 2004

189

TiO2 pigment coating Rubber additive Paint dryer Feedstock for the production of a wide variety of zirconium chemicals

“Cubic Zirconia” for jewellery

Zircon sulphates

Zirconium carbonates

TiO2 pigment coating Leather tanning

Manufacture of advanced Zr salts Automotive catalysts Photocatalysts Paint driers Paper sizing Water repellent Antiperspirant

Auto industry, Paint, Paper, Pharaceuticals

Paint, tanning

Fig 3B(ii): BY-PRODUCTS OF A ZIRCON CHEMICALS PLANT

SODIUM SILICATES

Siliceous sodium silicate

SOLID Water Treatment - corrosion control in piping systems Paint Manufacture -glazes and enamels Other uses LIQUID Soaps Detergents Industrial cleaners Silica products - gels - sols - catalysts - molecular sieves Adhesives Cement additive Paints and coatings Water treatment -corrosion control Foundry moulds and cores Ore flotation

Precipitated silica

Alkaline sodium silicate -Sodium metasilicate anhydrous -Sodium metasilicate pentahydrate - Sodium sesquisilicate - Sodium orthosilicate anhydrous - sodium orthosilicate hydrate

Detergent formulations Dishwashing compounds Heavy duty cleaners Laundry operations Floor cleaners Dairy cleaners Metal cleaners Paint removers Soil stabilisers Paper mill operations Textile finishing

Colloidal silica

Silica gel

Specialty fillers and carriers

Electronics Pulp and paper - fibrous refractory binder Investment castings - binder

Paint manufacture - flatting agent Industrial use - anticaking agent

Tyre Manufacture Footware Manufacture Rubber reinforcement Paint Manufacture - lacquers - filmcoating - water based paints - polyurethane formulations Specialised products - inkjet papers and films - toothpaste manufacture - personal care items - cell separators in batteries

Potassium Silicate

Ethyl Silicate

Paints (zinc rich) Welding rods H2SO4 production B&W TV sets

Paint Manufacture - zinc rich primer Investment casting -Binder

Paint Paint

Detergents, agriculture, paper

Paint, toiletries, general industry

Paint, detergents, Metallurgy and chemical industries

Source: Walker, 2004

190

Fused Silica

Other Silicates

Calcium, aluminium & magnesium silicates

Pesticides Rubber Manufacture

Pharmaceuticals Cosmetics Foodstuffs Modification of polymers

Magnesium silicates

Polyurethane foam Industrial uses - catalyst - cleaner - carrier for flavours - carrier for fragrances - Anticaking agents

Lithium silicates

Binder for moisture resistance

APPENDIX IV.

QUESTIONNAIRE USED

191

192

193

“Mozambique has a three year window of opportunity to create a suitable policy environment to promote maximum local beneficiation of the extensive mineral resources in the Tete province”