Mining’s old guard needs strong medicine
A new report details subpar investor returns in the mining industry over the last decade, particularly big cap diversified companies which have not adapted to new realities.
LAGOS – Nigeria’s first gold refinery is expected to more than triple its capacity within five years after operations begin next June, an executive at the company developing it said on Tuesday.
Nere Teriba, vice chairman of local firm Kian Smith Trade & Co, said the refinery would initially be able to produce three tonnes per month of gold and one tonne of silver, rising to 10 tonnes a month of gold and three tonnes of silver in five years.
Nigeria has largely untapped deposits of 44 minerals, which include gold, iron ore, coal, tin and zinc, in more than 500 locations spread across Africa’s most populous nation. But most of the mining is artisanal and the absence of gold refineries means value typically has not been added in the supply chain.
We are working with the government on a proposal to reduce import duties on gold ore
Construction workers broke ground at the refinery site in the southwestern state of Ogun last week. Teriba said work was expected to be completed by the end of February 2019 and production would start by the end of June.
“It is a five-year expansion plan to get to 10 tonnes a month of gold. Silver will probably go up to about three tonnes a month,” Teriba said in an interview with Reuters in Lagos.
The company said it would supply Nigeria’s central bank as well as the jewellery industry.
“The gold supply for the refinery will be coming from Nigeria … but also from the rest of Africa,” she said, adding that Kian Smith had a memorandum of understanding with a supplier to bring gold from Ghana, Sierra Leone and Tanzania.
She said one supplier had committed to providing a total of 100 kg each month from Ghana and Sierra Leone. Teriba did not identify the supplier.
Most ore will be sourced locally from various locations including the northwestern states of Zamfara, Kebbi and Kaduna, as well as the central states of Kwara and Niger. Teriba said the company had MoUs from about 200 gold suppliers.
Some 80 percent of mining in Nigeria is carried out on an artisanal basis and gold is routinely smuggled out of the country illegally to neighbouring Cameroon and Niger, as well as Togo before being registered in those countries.
Teriba said Kian Smith was in talks with the government after proposing an altered approach to import duties and royalties.
“We are working with the government on a proposal to reduce import duties on gold ore,” she said, adding that the company had asked the government to make refined gold bars and coins free of value-added tax.
Gold mines produce gold dore bars, a semi-pure version of the substance, which are sent to a refinery for further purification.
Under the current system, miners are responsible for paying the royalty on gold, an approach Teriba said caused “leakages” because most miners were artisanal. The refinery will seek to incentivise suppliers by paying royalties on their behalf.
She talks with the government on royalty payments were at an advanced stage.
(By Alexis Akwagyiram; Editing by Dale Hudson)
