Search This Blog

Thursday, 31 July 2014

Mining law delay may cost Kenya major investment

Regulatory uncertainty, corruption and infrastructural deficiencies could cost Kenya billions of shillings in lost investment.

Chris Bredenhann, PwC Africa Oil & Gas Advisory Leader, believes that delays in passing the Mining Bill, and the resulting regulatory uncertainty, could force investors to put their money elsewhere on the continent. He cited Nigeria’s example where delays cost the country between $50 million (Sh4.4 billion) and $100 million (Sh8.8billion) in lost investment.
The news comes after a review on Africa’s oil and gas industries published yesterday showed that key investors had delayed or cancelled projects elsewhere in Africa due to regulatory uncertainty or legislative delays.

In a phone interview on Wednesday, Bredenhann told the Star that delays increase the likelihood that exploration firms will target Kenya’s competitors: “There is evidence in Africa that companies indicated they had plans to invest but went elsewhere”.
“They cannot move forward with doubts, given the long-term nature of the needed investments,” he added.

Oil was first discovered in January 2012, by Tullow Oil Plc, but 18 months later the legal framework is still at the debate stage in parliament. The first off-shore gas deposits were found last September.

Mary M’Mukindia, an industry expert, said in a phone interview yesterday that she believed delays and poor regulation could impact heavily on gas exploration. “If there aren’t rigorous structures in place, including pricing structures or formulas which relate to generating electricity from gas, then that will impact negatively. We [Kenya] are are also competing for investment dollars with other attractive locations.” On the subject of infrastructure she added: “Definitely infrastructure is an issue. Back in June one of the logistical companies made a plea to Minister Balala over a bridge that is in danger of collapsing. It led to the gas exploration areas, so it would shut down the industry! And that is just one little bridge.”

The report adds pressure to Mining Minister Najib Balala, whose exclusive power to grant mineral rights contracts has this week been questioned by MPs. Members are now planning to introduce amendments that would create a board to exercise some of those powers and check against abuse, a move that will further delay the bill’s passing into law. The review details that, in other countries, companies indicated that uncertain regulatory framework was a significant impediment to developing an oil and gas business.

Although Kenya’s oil and gas industry is nascent, its challenges reflect those felt previously by organisations around the continent, with the top three issues of uncertain regulatory framework, corruption and poor physical infrastructure also identified as the biggest challenges facing Africa in 2010 and 2012.

The PwC report shows that despite issues, the oil and gas industry in East Africa continues to show substantial growth, with new hydrocarbon provinces developing at a significant pace.

Earlier this week analysts at Standard Bank reported that recent oil and gas discoveries have the potential to fundamentally transform Kenya’s economy through investment in road, rail, power and industrial infrastructure.

Source: The Star

Wednesday, 30 July 2014

New World Bank Project to support Kenya better & sustainabily manage its oil and gas development

The World Bank’s Board of Executive Directors today approved US$50 million for the Government of Kenya to strengthen its capacity to manage the oil and gas sector and the distribution of its revenues to create sustainable growth across all areas of the country’s economy.

With the recent discovery of oil, the International Development Association (IDA) credit for the Kenya Petroleum Technical Assistance Project (KEPTAP) will focus on development measures to generate more private investment in the country’s oil and gas industry, boost more efficient production, manage the impacts, allocate higher government oil and gas revenues for development priorities, and increase collaboration between the these extractives sectors and the domestic economy.

“The Government of Kenya acknowledges that the development of a successful petroleum sector is never about petroleum alone, but also about managing its impacts for sustainable development”,” said Diarietou Gaye, the World Bank’s Country Director for Kenya. “The World Bank supports the government’s efforts to streamline the petroleum sector to increase efficiency of decision-making related to policy formation, planning, investments, and private sector participation,”

Successful implementation of the project will pave the way for economic growth and enhanced well-being for the people of Kenya, contributing to poverty reduction and shared prosperity. Transparency and good governance in oil contracts and revenue will be ensured through stronger collaboration between the national and county governments hosting the new petroleum resources and also with civil society organizations, private sector and local communities in these areas.

In order to help stimulate economic growth in Kenya, the project will promote petroleum activities to contribute to fiscal and foreign exchange revenues. It will also support entrepreneurial activities by improving the investment climate for the private sector and enhancing the oil and gas legal and institutional framework.

In addition the project will support the drafting of key policy and planning documents as well as capacity building among existing government institutions and clarification of their roles and responsibilities. There is significant emphasis on training so government staff is well equipped to deliver the expected outcomes. The project will also increase vocational training capacity for the oil and gas sector of Kenya therefore increasing the availability of trained staff to the private sector.

“The project supports effective government management of the oil and gas industry through capacity building, technical assistance, training programs, and the development of a legal and institutional framework,” said Alexander Huurdeman, the World Bank Task Team Leader for the project. “We are excited for its implementation and the potential to create sustainable impacts for Kenya, including the development of a petroleum industry, improved transport infrastructure, expanded power supply, job creation, and positive economic benefits from strategic investment of the revenues generated.

Tuesday, 29 July 2014

Uganda’s hopes in extractives sector lie in EITI

Uganda has high expectations in the extractives sector, especially with an addition of oil and gas resource to the basket of the abundant mineral resources. However, these hopes can only be realised if the country agrees to sign up to the Extractive Industries Transparency Initiative (EITI).

The EITI is an international standard for transparency in extractive industry payments and receipts.

In countries participating in the EITI, companies are required to publish what they pay to governments and governments are required to publish what they receive from companies. For Uganda, only Tullow Oil Plc has done so.

The Ministry of Energy and Mineral Development recently conducted a two-day consultative workshop at Speke Resort Munyonyo to review the mineral policy, law and taxation. This is in addition to the highly-geared second edition of the Uganda Mining, Energy, Oil and Gas conference and exhibition scheduled for May 20 and 21 next year. Uganda Chamber of Mines and Petroleum, in partnership with the Energy ministry, is organising the 3rd Mineral Wealth Conference, 2014, scheduled for October 1 and 2, 2014. Its theme is: “Uganda’s Transformation: A New Era in Mining”.

These and other efforts are an indication that the extractive industry is taking centre stage in the governance of Uganda’s political economy. We appreciate that the Uganda government has interested itself with full force in investing in extractives resources. This is one way of enhancing its resource envelope to improve the standard of living for Ugandans and reach out to the poorest of the poor.

Hitherto, Uganda deliberately undertook the Sustainable Management of Mineral Resources Project (SMMRP), from 2008 to 2012, with financial and technical support from World Bank, African Development Bank and Nordic Development Fund. Under this project, the government undertook geo-surveys and mineral resources assessment in which it identified potential mineral target areas for exploration and development.

According to official records obtained from the Energy ministry, since 2012, more than 726 licences in mineral development and mining have been issued, up from 100 in the previous ten years. This means that Uganda’s prospective bases have increased over time, hence expanding the extractives sector as well as increased payments in terms of revenues from, so far, the concessional licences.

This will add onto the projected value of the 3.5 billion barrels of oil so far confirmed from Uganda’s additional golden resource, estimated to have so far contributed $2.4bn in foreign direct investment (FDI). The growing positive expectations and needs of the sector with the growing well-intentioned ideals of government, as stipulated in both the National Development Plan (NDP) and Vision 2040, need to be insulated by both the national and international bulletproofs.

This should be through signing up to EITI. Definitely, it is in the interest of government to see that Ugandans are getting out of poverty and enjoying services. That alone will earn the government support and, therefore, the next term in office. The EITI campaign benefits government more than the activists, especially CSO representatives and passionate individual campaigners.

In order to support government to spearhead the translation of natural resource wealth into better development for the local citizens, the EITI becomes the key centrepiece of the value-chain.

The EITI further increases public information, thereby empowering the public to put to task their government to account for every penny of the resource revenues, which many governments in Africa tend to fear. It also helps in enhancing revenue collection and management, for improved service delivery.

In other cases, EITI enhances opportunities for attracting investors; increases trust among key players in the governance and the service delivery chain (citizens, government, CSOs, private companies and investors), and hence makes it easy for constructive dialogues and effective prioritisation. The EITI debate should, therefore, be mainstreamed in all government undertakings, including the aforementioned events and other conferences.

Source: The Observer

Monday, 28 July 2014

Africa Oil & Tullow Oil likely to seek partner for Kenyan oil fields

Canadian explorer Africa Oil Corp. and its partner Tullow Oil are likely to bring in a third partner to help develop their oil discoveries in northern Kenya, Africa Oil's chief executive officer said.
The firms discovered oil reserves in Block 13 T and Block 10 BB in northern Kenya's South Lokichar Basin, estimated at a combined 600 million barrels.
Experts say those reserves are enough to make a pipeline viable even without factoring in crude deposits of 3.5 billion barrels, found in neighbouring Uganda.
"We will likely bring on a partner to help develop Lokichar Basin reserves but no timetable has been set," Keith Hill said in an email response over the weekend to questions from Reuters.
Oil discoveries in Uganda and Kenya and gas deposits found off Tanzania and Mozambique have turned east Africa into a hot spot for hydrocarbon exploration.
Kenya, Uganda and Rwanda have invited bids for a single consultant to oversee a feasibility study and initial design for the construction of a 1,300-kilometre (808-mile) pipeline to transport crude to the Kenyan coast.
In April, executives of both Tullow and Africa Oil said they aimed to submit development plans to the Kenyan government in late 2015 for their discoveries.

Africa Oil also holds licences for exploration blocks in Ethiopia and in Puntland, a semi-autonomous enclave in Somalia.
Hill said Africa Oil plans to spend some US$1.6 billion this year and next in exploration activity on its blocks in the three countries.
"Our gross budget this year is over US$800 million ... and we would expect a similar amount next year but (that) budget has not yet been approved," he said.
Africa Oil and its partner Marathon Oil Kenya Limited B.V., a unit of U.S.-based Marathon Oil Corporation have also discovered gas in Block 9 in northern Kenya.
Hill said while the amounts had not been proven, they estimated the gas discovered at the block's Sala-1 well at between 0.5 trillion and 1 trillion cubic feet, although tests were still being carried out.
"(We) will spud Sala-2 appraisal well before end of July to help confirm," he said.
When announcing the discovery in late June, Africa Oil said it had held discussions with the government and power companies to see how to fast-track a gas-to-power project at the site.
"We have held several meetings with GofK (Government of Kenya) to progress gas-to-power project terms and believe these will be sorted out in next 60 days," Hill said.
Source: Reuters

Friday, 25 July 2014

Results prove surface mineralisation of graphite project in Tanzania

The consistency of Australian company Kibaran Resources second group of assay results from the recent reverse circulation (RC) drill programme at its Epanko deposit within the Mahenge graphite project in Tanzania confirms significant graphite mineralisation at its surface.

The drilling programme focused on shallow, highly-weathered soft graphite mineralisation, as the liberation and preservation of large and jumbo flake size is paramount in maximising sales revenue. Results for the remaining 29 RC drill holes are expected to be released in the next few weeks.

The Mahenge project is a historically recognised graphite occurrence in south-east Tanzania. Past exploration work has identified course flake, excellent grade graphite material within the project area. The project hosts the Epanko Deposit – a 100%-owned graphite target comprising a western and eastern zone of mineralisation.

Thursday, 24 July 2014

Logistics eased in Zambian Copperbelt

Logistics and supply chain group Imperial Logistics has extended its African presence into northern Zambia, by establishing a transport depot in Ndola, in the Copperbelt Province. The new Zambian registered business forms part of group company Snyman Transport, and will operate as Snyman Transport Zambia.

Dougie Truter, chief executive officer of Imperial Logistics’ Africa division, says the new venture will enhance the group’s ability to provide transport and logistics services to the mining firms operating in the region, while creating employment opportunities for locals.

The new depot represents Imperial Logistics’ first undertaking in the Zambian Copperbelt Province, which encompasses the towns of Kitwe, Chingola and Ndola.

Wednesday, 23 July 2014

Namibian lead and zinc mine gets another chance

London exploration company North River Resources has secured a US12-million dollar equity funding commitment from private equity firm Greenstone Resources. It will be used to re-open its flagship Namib lead and zinc mine near Swakopmund in Namibia.

The company has released a mine development plan and site preparation and work to complete a feasibility study has begun. Consultants Snowden estimate a mine and plant capital expenditure of US25-million dollars, based on a 56-month production period, with 660 000 tonnes (t) of milled current inferred resources averaging 8,5% combined lead-zinc and 46 grams per tonne of silver.

Tuesday, 22 July 2014

Balancing act: resettling communities and mining

Laws regulating the resettlement of communities for mining projects are often not clear enough to avoid problems that could delay or even threaten the mine’s sustainability.

This is according to Robert Gyamfi, community relations and social responsibility manager at Golden Star (Bogoso/Prestea), a subsidiary of Golden Star Resources in Ghana, a mining company operating in Ghana. “Where minerals are discovered on or near a place where people are already living, governments face the difficult task of resettling communities to make way for mining. As custodians of a country’s mineral rights, governments have the right and duty to make these arrangements so that the mineral wealth can be turned into economic development,” Gyamfi says.

He stressed that the host communities granted mining companies a ‘social licence’ to operate, which went beyond simply meeting all the legal needs set by the host country.

Gyamfi was interviewed in Johannesburg recently when he attended the Community Relations Practice course offered by Synergy Global and Wits University’s Centre for Sustainability in Mining and Industry.

Monday, 21 July 2014

Africa Focused Diamond Company, Paragon Diamonds to start operations soon

Paragon Diamonds, the London-listed diamond company with a number of assets in Africa, aims to transform itself into a cash-generating diamond exploration and production company in Africa.

This is according to Simon Retter, Paragon’s chief financial officer, who spoke at the company’s AGM held in Guernsey recently.“We have a solid portfolio of multi-stage projects in world-class diamondiferous regions of Africa where we believe we can deliver significant value for shareholders,” Retter said.

The company’s flagship Lemphane kimberlite project in Lesotho is to start production soon, while Paragon is looking to advance its projects in Botswana and Zambia.“We continue to evaluate strategic and corporate opportunities to diversify our offering and will expose our shareholders to as much of the value chain as possible,” he said.

Lemphane is believed to be the last world-class kimberlite to be developed in Lesotho and is close to Gem Diamonds’ Letseng pipe, which is renowned for the recovery of exceptionally large and valuable diamonds.

Sunday, 20 July 2014

High recoveries in Burkina Faso

Preliminary metallurgical test work at Australian-listed West African Resources’ Mankarga 5 deposit on the Tanlouka Permit (part of the Boulsa Project) in Burkina Faso has returned positive results. The results from the 100μm bottle-roll tests conducted across all ore types and show high recoveries and low cyanide consumption, while representing potential recoveries from conventional milling and carbon in leach processing.

According to managing director Richard Hyde, the test work programme is continuing and results will be reported as they are received.

Saturday, 19 July 2014

Generators to back up Kansanshi mine in Zambia

Zest WEG Group is supplying containerized generator sets to First Quantum Mineral’s Kansanshi mine in Zambia. The order includes three 1 500 kilovolt ampere (kVA) and two 1 250 kVA generator sets. 

Bruce McCracken, sales manager for Zest WEG Group’s generator set division says each package comprises a Cummins QSK50G3 diesel engine coupled to a single bearing alternator rated for 550 volt and mounted on a purpose made simplex type base frame. Each combination set is enabled for singular or synchronous operation.

“The units can operate singularly or together, which facilitates and satisfies a larger electrical output from the generator backup system. In addition, the units act as back-up for each other in the event of failure of one unit. This ensures that back-up generator power will always be available to the mine.”

Friday, 18 July 2014

Bosch Projects to build Barloworld Power Biogas Power Plant

Bosch Projects has awarded a contract to Barloworld Power to supply equipment for a 4MW biogas-to-power project to be developed in Bronkhorstpruit. Bronkhorstspruit is 78km north-east of Boksburg in Gauteng. A large automobile manufacturer will use the clean electricity the project produces for its plant in Rosslyn, Pretoria.

The Bronkhorspruit Biogas Power Plant is an independent power producer formed by Bio2Watt, which has a contract to purchase waste from Beefcor, a cattle farm in the area. 

About 40 000 tons per annum of cattle manure and a 20 000 tons of mixed organic waste will be fed into two anaerobic digesters. By using Caterpillar internal combustion gas generator sets, this will produce the biogas feedstock to create both heat and power.

Thursday, 17 July 2014

The buck stops with African governments on Power Production

Nations in sub-Saharan Africa need to boost efforts to create more conducive climates for investment from independent power producers (IPPs) if they are to remedy their severe shortfall in power generating capacity.

According to the Standard Bank Group’s David Humphrey, global head of power and infrastructure at the bank, “Africa’s deficit in power generating capacity is well documented. What is not always realised is that unless this is addressed timeously, other crucial investment cannot take place.”

He believes that to facilitate greater investment from the private sector, African governments need an integrated power policy to create an investment-friendly environment and need to implement a bankable IPP programme. Humphrey says governments also need to invest in strong regulators and develop a reliable regional distribution network.

Front-end engineering set up in Cameroon

GDF Sues and Société Nationale des Hydrocarbures are set to start front-end engineering design studies for their proposed liquid natural gas terminal in Cameroon. They want to complete the project in 2017.

The project comprises a production plant 30km south of Kribi on the southern coast of Cameroon and building a 270km offshore pipeline connecting offshore gas fields in Cameroon to the liquid natural gas terminal.

The liquification plant will have a production capacity of up to 3.5-million tons a year of liquid natural gas for the first train. The estimated project value is US2,5-billion dollars. 

Wednesday, 16 July 2014

New mining laws in Rwanda target large scale investors

The Rwandan Government is targeting large scale investors under the amended mining Law published yesterday in the Official Gazette, as part of efforts to ensure maximum productivity of the sector.

Challenged with under exploitation despite its enormous potential, the mining sector has shown signs that it can be Rwanda’s leading foreign exchange earner and according to the State minister for mining, Evode Imena, the new law marks an important shift.

“The main thing that has changed in the law is the provision of new types of licenses. With the previous law, we were only allowed to grant a license of five or 30 years – nothing in-between. Five years was for artisanal or small-scale mining, while 30 years was for large scale,” Imena said yesterday.“This was problematic because most mines tend to be small. It means they try to be organised and use skilled labour, but the duration of five years was too short for them, yet government was reluctant to grant 30 years to small-scale investors because they do not show capacity to manage mine concessions on a large-scale.”

“The duration of license now depends on the size and nature of mineral deposits, as well as the size of investment to be injected in a concession. This will be shown through a feasibility study conducted by the investor.”

“Now the smallest license will be for five years and the longest for 25 years, In-between we can give anything depending on the nature and size of the deposits,” the minister said.

The mining fraternity welcomed the new law. “The old one was unfavourable since it required an investor to only get a license of five or 30 years, many investors were not ready to carry out proper business plans because the duration given by government was not flexible,” Jean Malic Kalima, the president of Rwanda Mining Association, said.

“This is a long term sector and most investors look at the future. The new legislation will allow us to operate more professionally and profitably.”

Mining is the second largest export sector in Rwanda after agriculture, fetching US$228 million last year – from cassetirite, wolfram and coltan.

The sector employed at least 25,000 people by 2012, most of whom are artisanal or small scale miners.

The sector experienced its highest growth between 2008 and 2012, at 44 per cent per annum. However, this year, it has been heavily susceptible to price fluctuations on the international market.

Source: The New Times - Rwanda

African miners thinking green

African mining companies are exploring renewable energy technologies as a means of securing a stable supply of clean and cost-effective electricity for their operations.

Anglo Gold Ashanti’s Wouter Ferreira describes renewable energy as the future. The water and energy engineer of the Engineering Field Services arm of the company cites rising costs of electricity and unreliable supply as reason enough for the company to move into this arena.

Coenraad Pretorius, energy engineer of Anglo American, says renewable energy projects also have a role to play in the energy efficiency initiatives of the mining house. The company has implemented three small-scale solar projects and, he says, “has more in the making”.

Steel company ArcelorMittal has also been involved in smaller solar projects and is exploring gas as a potential source of fuel for electricity production.

Francois van der Bank, senior engineer at ArcelorMittal, agrees, saying that renewable energy can be invaluable to the company’s energy efficiency drive.

Tuesday, 15 July 2014

ESME grant enables solar light distributor to become key player in the Kenyan off grid market

Mibawa Supplies Limited is a Kenyan enterprise working to provide solar products to customers who cannot afford the high upfront costs associated with ‘one-off’ payment products. Selling the IndiGo product from Azuri Technologies a cost-effective pay-as-you-go alternative they are working to scale –up their distribution outlets and expand their reach across Kenya.

There is a solid solar technology network operating in Kenya. All products on offer have defining qualities that enable customers to choose which characteristics, power outputs and financial requirements are most suited to their needs. Due to the rapidly expanding nature of this sector, marketing has become a very important component in the business plans for many solar enterprises. Some of the most unique factors seen in the market today include pay-as-you go payment methods, which enable customers to pay for energy as they use it.

Since receiving the first installment of their ESME grant, Mibawa have doubled the number of outlets and increased their staff head count to 15. The focus for the funds to date has been on marketing, increasing their visibility and also training staff to become technical advisors. They have also hired a marketing manager, produced radio adverts and used targeted advertising campaigns to increase awareness and knowledge of the benefits of their product of choice: the IndiGo solar system from Azuri that combines mobile phone and solar technology allowing customers to buy scratch cards to pay for their energy, just as they would for their mobile phones.

Besides creating a smart marketing strategy, an important factor in their success is the price of the IndiGo product, coupled with the repayment procedure. The deposit required for the IndiGo model is USD $151 (13,300KES) considerably cheaper than other models available. They also have a different repayment options, the repayments can be spread over 20 months or 80 weeks, where customers repay USD $1.5 (KES 140) per week through scratch cards top-ups. The initial deposit required of USD $17 (1,500KES) is also smaller than others on the market. Once the total sum has been paid, a small unlock fee of 600KES is required (USD $7) after which customers can own the light without any further payments.

To date, Mibawa Supplies Limited has sold 7000 units and now works to achieve a monthly sales target of 500 models. Looking forward, Mibawa wish to further increase their sales, and have been benefiting from a GIZ programme which links trained entrepreneurs to enterprises looking to scale-up. This initiative has permitted Mibawa Supplies to grow their staff team in both a quick and low cost manner.

"We have been very impressed with the progress that Mibawa has made to date and are confident that they will continue to succeed in this growing sector” says Martin Theuri, GVEP Business Mentor. The remaining ESME funding will assist Mibawa scale-up from the current customer base of 7,000 to over 10,000 as revenues from sales will be re-invested into the business and assist in sustainable growth.

An Independent Evaluation Committee has approved the disbursement of the last 30% of funds which the team plan to use for expansion in other regions. GVEP will continue to support Mibawa in an advisory and monitory capacity as they continue to grow.

ESME is an initiative that aims to support Energy SME Development in sub-Saharan Africa to foster local private entrepreneurship and invest in the provision of energy services in remote, un-served or under-served regions.

Posted by Meghan Smith

IMF advises Kenya to implement robust mining and monetary policies.

Kenya has to develop wise policies for natural resource management to mitigate geopolitical risks and weather related shocks, the International Monetary Fund mission to Kenya has said.

It told the government to also maintain a careful fiscal position consistent with the country’s medium term debt targets and strengthen capacity building in public financial management. It said the measures will strengthen the economy’s resilience from global shocks and support sustained growth.

“Once the recent oil and gas discoveries are confirmed to be commercially viable, they will have the potential to further accelerate economic growth and reduce drought-related risk and investment risks due to political changes,” head of the mission, Mauro Mecagni said.

He said Kenya’s strong reform record and economic performance in recent years shows a sustainable growth that is key in reaching the Vision 2030 development targets.

“Policies need to consolidate macroeconomic stability, address infrastructure gaps, and support the integration of the country in the global economy,” he said.

The IMF mission on Wednesday concluded a 14-day visit to Nairobi after holding consultation discussions with the state, the private sector and other stakeholders

Britain to fund South African carbon trading experiment

Britain will expand funding for a programme to help coal-rich South Africa develop a carbon trading market in an attempt to rein in its rising greenhouse gas emissions.
The British High Commission in Pretoria last week said it will fund a pilot emissions trading programme from next year to help companies prepare for a 120-rand-per-tonne ($11.21) carbon tax that is expected to come into force in 2016.
The value of the grant was not disclosed.
The launch of South African's carbon tax, which would apply to major emitters including steel giant ArcelorMittal, utility Eskom and petrochemical group Sasol, was delayed by one year to allow more time for planning and consultation with stakeholders.
The South African government earlier this year said major emitters will be allowed to use carbon offsets, which could be generated by investment in domestic or possibly regional clean energy sources, to help meet their tax obligations.
The British High Commission's grant, awarded through its Prosperity Fund, will for a second time go to Johannesburg-based Promethium Carbon.
"Funding from the Prosperity Fund will assist to fast track the development of a local carbon trading system in preparation for the carbon tax," said Robbie Louw, a director at Promethium.
Promethium was first selected by the Commission to carry out a 2013 preliminary study as to whether a carbon offset market could complement the tax and help ease costs for industry.

Promethium said the first phase of the study found such a market could function, so a second phase, expected to conclude next February, will focus on how to start trade and on launching a pilot market on the Johannesburg Stock Exchange from 2015
Promethium estimates South African offsets could reach prices of around 80-100 rand ($7.48-$9.35) per tonne in the first couple of years of the market's existence – or nearly 20 times the value of credits offsets in the U.N. carbon market, the world's largest and most liquid.
More than 80 percent of South Africa's soaring greenhouse gas emissions come from its energy sector, which is heavily reliant on coal – one of the country's major exports.
Expected to be phased in over time, the country's carbon tax is one of several initiatives, including a biofuels production incentive and higher vehicle emission taxes, which South Africa wants to launch to help reduce its growing carbon footprint.
($1 = 10.7009 South African Rand)
Source: Reuters

Monday, 14 July 2014

Vanoil an oil explorer seeks UN arbitration over Garissa blocks in Kenya

Vanoil Energy has said it will take Kenya to an international arbitrator following cancellation of its exploration licences in Garissa blocks.

The Canadian oil and gas explorer plans to seek arbitration at United Nations Commission on International Trade Law (UNCITRAL) following the revocation of its licences by Energy secretary Davies Chirchir last February.

Mr Chirchir revoked Vanoil's exploration licences forr blocks 3A and 3B located in Garissa after the firm failed to carry out work as per the production sharing contract (PSC) it signed with the government in 2007.

Vanoil’s management said it wants to recover its investment in the two blocks whose prospects have increased following Africa Oil Corp striking oil in the Anza Basin, where blocks 3A and 3B are located.

“Following the discovery of hydrocarbons with oil shows in the Sala-1 well in the Anza Graben announced by Africa Oil Corp, Vanoil believes the economic value of Blocks 3A and 3B may have materially increased,” said Vanoil chairman James Passin in a statement.

“While we would have preferred to proceed with the two wells programme approved by the Ministry of Energy, we are looking forward to vigorously pursuing all legal remedies.”

Africa Oil recently announced that it had discovered gas deposits in a 1,000 metre range at the Sala-1 site, but finer details on how much gas is available and if it is commercially viable will be known after more testing.

“Vanoil will now seek arbitration in order to recover its significant investment and lost profit opportunity in Blocks 3A and 3B,” said Mr Passin.

Parliament through its Energy and Transport Committee in June 2014 agreed with the Energy Minister’s decision after it found that Vanoil Energy was speculating with the oil blocks, which was in breach of the PSC.

The government has previously said that it would revoke licences of explorers who breach their production sharing contracts. The ministry had also cancelled Pancontinental Oil’s licence in late 2013, but the Australian explorer successfully negotiated for a one-year extension in May 2014.

Pancontinental is exploring for oil off Lamu where indications of hydrocarbons have been recorded. Kenya has recently attracted explorers following discovery of oil in Turkana.

The government has set rules to net more cash especially from sale of blocks by operators as well as formulate new taxes. 

Source: Business Daily

MUST READ: Tanzania: Leaked Agreement Shows Tanzania May Not Get a Good Deal for Nautral Gas

Natural gas is on the scene in Tanzania, and expectations are sky high. There are those who see this as the end of aid dependency, or the solution to the government's perennial money troubles. And of course, there are others who see this as a personal opportunity to get rich quick. But not everybody's expectations can or will be met.

Nobody knows exactly how much gas there is in Tanzania, though the latest discoveries brought the estimated deposits up to 51 trillion cubic feet (tcf). Equally, nobody knows how much of this it will be possible (and economic) to extract, and how much revenue will flow to the government as a result.

The IMF has had a go at working this out, in a paper published earlier this year. The results are expressed cautiously, surrounded by references to uncertainty, but suggest that the Tanzanian government could be looking at a peak of US$5-6bn revenue each year between 2029 and 2044. Given that for the past few years, official aid to Tanzania has ranged between $2-3bn annually, and the total tax revenue in the 2014/15 Tanzanian government budget is just over $6bn, we're talking potentially a lot of money. As the IMF report concluded:

"If a large-scale gas project goes ahead, the potential fiscal revenue would be substantial, and would facilitate government spending on priority investment. [This] could have a transformational impact on the economy."

More money for schools, hospitals, roads, etc. - so it's all good then.

Not so fast. As strong as the economic potential may be, unless the politics are right, the opportunity could easily be wasted.

There are worries that the Tanzanian government lacks either the capacity or the will to negotiate deals with investors that protect the interests of the Tanzanian public.

When a Production Sharing Agreement (PSA) between the state-owned Tanzania Petroleum Development Corporation (TPDC) and the Norwegian firm Statoil was leaked a couple of weeks ago, it revealed contract terms that are significantly less favourable to the government than had been expected. The terms were less favourable than either those of TPDC's model PSA or the assumptions used by the IMF in their analysis.

Exactly how much this contract will cost the government depends on how much gas the company produces, but it could easily be in the hundreds of millions of dollars per year. If production reaches 500 million cubic feet per day, the government could be losing as much $400m per year under this deal, compared to the model PSA. If production reaches 1,000 million cubic feet per day - which is very possible - the loss rises to over $900m per year[1]. And that's just from one deal.

Another indication of the scale involved here is that since the Norwegian government is Statoil's majority shareholder, the extra revenue to the Norwegian government from this deal could be worth more than double the total of all Norwegian aid to Tanzania since independence[2].

But perhaps just as worrying is the resounding silence that met the leak. It has not been covered in the Tanzanian media, even when reporting on gas-related issues or Statoil's other activities. And aside from a brief reference in a relatively obscure parliamentary committee report (pdf, Swahili) (which itself did not attract media coverage), no leading politician has stood up to publicly make noise about the deal.

Those in the know are discussing it in hushed tones on the side-lines of meetings, in the more private corners of social media, or in coded language. The vast majority are not in the know.

This does not bode well. One of the big political risks with oil and gas is that it can be seen by politicians and senior officials as 'easy' money that doesn't come with the kind of scrutiny that taxpayers demand when they pay their taxes and donors demand when they provide aid.

Unless somebody - the media, politicians, civil society - steps up to fill the gap, decision makers in government will be left free to make whatever decisions they choose, unencumbered by any need to protect the public interest. The Statoil PSA may well have cost Tanzania several billion dollars - yet it appears no-one is trying to hold those responsible to account.

So why the silence? It may be that the media and the politicians don't understand the significance of the deal, don't have the capacity to pick apart the leaked PSA's legal language to find the meat. It's certainly not easy to do. Alternatively, it may be that they don't care. Or it may be that they are scared.

Zitto Kabwe, an outspoken opposition MP, posted a quote on Twitter last week:

"Not a single developing country that derives the bulk of its export earnings from oil and gas is a democracy," wrote Larry Diamond and Jack Mosbacher.

In Tanzania, I fear we may be about to find out why.

Ben Taylor (@mtega) is an analyst and blogger, writing mainly about Tanzanian media and politics at He works forTwaweza, but writes here in a personal capacity - his views do not necessarily represent those of Twaweza.
[1] These figures are calculated based on 500MMscfd/1000MMscfd of "profit gas", which refers to the value of gas produced after the company's costs have been deducted.
[2] Statoil has a 65% stake in the PSA, of which the Norwegian government owns 67%. The calculation is therefore as follows: 65% x 67% x $900m x 15years = $5.9bn. Norway has given approximately $2.5bn in aid to Tanzania since 1961 (Source: World Bank).

Saturday, 12 July 2014

Goldplat's recovery on hold in Ghana

As part of the Ghanaian Government’s effort to legalise all mining operations in Ghana, the Environmental Protection Agency (EPA) continues to put pressure on better regulation of the mining industry.

The drive from the EPA has led to a change in regulating on toll-treatment at third-party processors. As a result, gold recovery company Goldplat’s agreement with gold producer Endeavour Resources to buy tailings from artisanal and small-scale miners, which are processed by Endeavour, has been temporarily suspended to allow Goldplats to obtain an extra permit from the EPA. The company is confident that this will be secured in the near term to allow the toll-treatment to continue at its standard capacity. 

Goldplat's gold recovery operation, which enjoys tax-free status until 2016, is in the country’s free port of Tema, and continues to generate revenues by recovering gold from mining by-products.

Friday, 11 July 2014

Cameroonian solar plant in the works

South African GSC Resources has advanced plans to develop a 500-megawatt (MW) solar power plant in Cameroon.

Now in the procedural stages of its life cycle, the project will increase the country’s national power distribution by up to 50% and is expected to cost US2.2-billion dollars to build. Also involved in the project are Canadian and South African engineering house Hatch Goba, and Germany’s Sun Value.

The project is in line with the Cameroonian government’s plans to spend US12-billion dollars to treble electricity production to 3 000MW by 2020 with a mix of hydro-power, solar and thermal projects.

Thursday, 10 July 2014

Burkina Faso fast-tracks gold project

Australian-listed gold and copper exploration company West African Resources hopes to start production at its Mankarga 5 gold deposit in Burkina Faso during the last quarter of next year. The company has set a goal of being a 50 000 ounce per annum producer within two years.
It secured a second-hand 1,6 million tonne per annum heap leach plant as part of its plan to fast-track the Mankarga 5 project.

Wednesday, 9 July 2014

Gold miner sheds Ethiopian shares

Nyota Minerals, the Australian gold explorater focused on East Africa, has entered a conditional agreement with KEFI Minerals (KEFI) to sell Nyota's remaining 25% direct interest in the Tulu Kapi Gold Project in Ethiopia for an aggregate consideration of BPD1,5-million comprising BPD750 000 in cash and 50 million new ordinary shares in KEFI.

Following the KEFI distribution, Nyota’s shareholding in KEFI will be zero, leaving Nyota with no interest, either direct or indirect, in the Tulu Kapi project and the proximal licences. The company’s remaining exploration asset will be the 100% owned licences, known as the Northern Blocks.

Key Nigerian refinery plans on course - Dangote Industries

The African Development Bank has approved a US300-million dollar loan to Dangote Industries to build and operate a greenfield crude oil refinery and a greenfield fertilizer manufacturing plant.

Both projects will produce prodcuts for consumption in Nigeria and neighboring African countries. The refinery and fertilizer plant will allow Nigeria, which relies on imported petroleum products and fertilizer, to progressively become self-sufficient and a major exporter.

The project will double the country’s refining capacity, reduce fuel imports by more than 80%, and eliminate fertiliser imports. The projects are expected to help Nigeria save US65-billion dollar in foreign exchange.

Tuesday, 8 July 2014

South African Energy policy still unclear

Energy-related themes in the 2014 State of the Nation Address by South African President Jacob Zuma included “radical” transformation of the country’s energy mix, structural changes in public sector entities to help them addressing energy challenges and a commitment towards developing two controversial energy options, nuclear and shale gas.

Zuma also touched on energy imports, Eskom, the Independent System and Market Operator Bill and Coal 3.

Due to the nature of Sona, details of challenges are often overlooked. “However, what does raise a red flag is the message being sent to potential overseas investors, directly and indirectly, the local manufacturing markets and service providers,” says Johan Muller, programme manager for energy and  environment at Frost & Sullivan.

“With such a strong emphasis on developing coal, nuclear and shale gas, several issues need resolution. Where does the proposed carbon tax fit in? Why the strong emphasis on nuclear? Should renewable energies not play a larger part in the energy mix, and is there more room for privatisation in the energy landscape?”

Aluminium project clears Guinea hurdle

Guinea's parliament has approved amendments in a deal with Emirates Global Aluminium, which will see the start of bauxite production in 2017 and the construction of a 2 million tonne per year alumina refinery from 2018.

"The National Assembly unanimously adopted the amendment of Global Alumina project," Saadou Nimaga, legal counsel of Guinea's mines ministry told Reuters late on Tuesday.

The adoption of the amendments clears the path for the project after the West African nation and Abu Dhabi state-owned investment fund Mubadala signed a $5bn agreement in November to develop a bauxite mine and an alumina refinery in minerals-rich Guinea.

The project was previously owned by a consortium that included Dubai Aluminium (Dubal), Mubadala, BHP Billiton and Global Alumina and had planned to build a 2.8 million tonnes refinery.

The project was delayed after failing to raise funds following the financial crisis.
Mubadala and Dubal acquired the stakes of BHP and Global Alumina to form Emirates Global Aluminium.

It is set to become the world's fifth largest aluminium company by output this year and the Guinea project will enable it secure raw material for United Arab Emirates' aluminium plants.
Guinea is the world's top supplier of bauxite, the raw material used in aluminium production. Alumina is partially refined bauxite.

Under the agreement bauxite will be ready for export by 2017 and the refinery will be operational by 2022.

Source: Reuters

Monday, 7 July 2014

Burundi state takes stake in mine

Burundi’s government took a 15 percent stake in a project to build a nickel and iron mine led by Burundi Mining Metallurgy (BMM), Danko Konchar, the chief executive of Kermas Group, the majority owner, said last week. 

The state’s stake in Burundi Musongati Mining, of which BMM holds the remaining 85 percent interest, was part of the terms of a mining licence agreement signed this month, Konchar said. 

The project would require investment to construct the mine and a facility to process 1 million tons of ore annually into iron, nickel and cobalt within the next five years, said Konchar. The goal to increase capacity at the plant within a decade will cost about $3 billion (R31.9bn).

Source: Bloomberg

Cradle enters specialty market in Tanzania

Minerals process and project management company MDM Engineering has been appointed to carry out pre-feasibility studies (PFS) for Australian-based Cradle Resources’ Panda Hill Niobium Project in south-west Tanzania.  Niobium is used to harden steel alloys.

Cradle holds three valid mining licences to search for, mine, dig, mill, process, transport, use and market niobium. The project is in the preliminary stages of development with a scoping study having been completed in January this year. The Cradle board has approved the next level of project development which will consist of a fit-for-purpose PFS with the option to move directly onto a definitive feasibility study if the PFS results are positive.

MDM executive director George Bennett says: “The MDM team looks forward to working on the project which will be headed up by our niobium expert, Roger Leighton, one of MDM’s lead process engineers.  Our experience in Tanzania on African Barrick’s Bulyanhulu project will add great overall insight into working on this project.”

Friday, 4 July 2014

Tanzania - Illegal miners damaging mine infrastructure

Gemstone producer Richland Resources has lamented a “significant” increase in illegal underground mining at its Tanzania-based joint venture (JV) tanzanite operation with the State Mining Corporation of Tanzania (Stamico), claiming that illegal miners were entering underground areas from neighbouring blocks and presenting a danger to its employees.
“While 2013 saw the beginning of action by the Tanzanian government against illegal tanzanite miners, ultimately, a comprehensive solution failed to be implemented and one of our employees was tragically shot dead by armed attackers,” CEO Bernard Oliviersaid in the company’s year-end results statement on Wednesday.
According to the company, “very substantial" damage had also been made to mining infrastructure at its Bravo, Delta, Investor and CT shafts, accompanied by the “considerable” theft of gemstones, especially the high-quality gemstones.
Owing to the aggressive nature of the incursions, which saw the illegal miners carrying firearms and homemade explosive devices, and the moratorium placed on the group by the government to protect its workforce, production was again scaled back in the 2013 fiscal period. 

Olivier noted that, following the issue of the mining licence, the government coordinated an initial effort to clear illegal miners from Block C, which later resulted in the removal of illegal miners from the northern area of the block.

“Since that time, however, no further physical action has been taken by the government to clear illegal miners from the other areas of Block C. Safe and productive mining cannot be carried out by the company in any of the uncleared areas,” he commented.

The board said it had understood that, following the formalisation of the JV with Stamico in December, the illegal miners in Block C would be removed, allowing reinvestment in the mining infrastructure and therefore boosting production.

This had impacted on Richland’s financial position, with the company reporting revenue for the year ended December 31, of $11.6-million, 29% lower than the prior year’s $16.4-million.
Cost of sales, selling and distribution, and administrative expenses was $12.2-million for the year, representing a decrease of 37% on the prior year, primarily owing to the group's cost cutting measures, and the JV, which halved TML’s mine costs.

Other operating expenses for the year of $4.6-million were 54% lower than the prior year, predominantly owing to lower impairment charges and lower taxes and penalties.
The company posted a net loss for the year of $4.5-million, ending the year with a net cash position of $500 000.

Despite its challenges over the period, Richland again achieved a record volume production of tanzanite in 2013, with 3.45-million carats of tanzanite produced from processing 30 906 t of ore, with an average grade recovered of 112 ct/t.

“However, owing to government inaction, we continue to be unable to operate in most of the undersigned mining areas in the mining licence area, said the company.
In addition, following the JV agreement between Richland subsidiary TanzaniteOne Mining (TML) and Stamico, TML revenues for the second half of the year had been reduced to account for Stamico's 50% share of mine revenue.
This came as the company achieved a significant upgrade of its tanzanite resource at its Merelani mine, announcing a Joint Ore Reserves Committee- (Jorc-) compliant indicated resource of 30.6-million carats and a Jorc-compliant inferred resource of 74.4-million carats, totalling a combined resource of 105-million.
The on-mine cash cost at Merelani for the period fell 22% to $3.47/ct and was attributed to increased attention to efficiencies and the recycling of used equipment.
The mine’s dense media separation plant processed 30 906 t in 2013.