Mining in Nigeria – a slumbering giant

Mining in Nigeria – a slumbering giant 

Despite the Nigerian governments’ efforts to revive mining in this vast and diverse country, the mineral sector in Nigeria has not yet reached its full potential.

By Steffen Kalbskope BSc (Hons), Pr.Sci.Nat, FGSSA, MSEG

Given its size and geological diversity, Nigeria ought to be a solid minerals powerhouse, but with the discovery and development of hydrocarbons in the early 1970s, alternative commodities were subsequently relegated to the cloakroom – the present 0.3% contribution to the GDP is a fact highlighted by many commentators including African Business’ February 2022 issueCan mining help to wean Nigeria off petrodollars?, but they also point to instability and legal challenges.

A glance at the map below shows that the Nigerian shield and its greenstone belts cover a two to three times larger area than the corresponding granite-greenstone terrane in Ghana, yet the annual gold output of the latter is probably 15 to 20 times greater. The Nigerian cratonic area encompasses Archean (2500-3650 Ma) and Paleoproterozoic (1700-2060 Ma) supracrustal suites reworked by Pan-African orogenesis (±600 Ma) plus lengthy craton-scale and second order shears with favourable lithological contrasts that provide the ideal environment for gold deposition.

The value of Ghanaian bauxite and manganese exceed base metals production from Nigeria’s greater landmass, and this takes no account of diamonds – Nigeria has prospective geology but zero systematic exploration.

Figure 1: Geological map of Nigeria and eastern part of the West African Craton
Key: Pink & pale violet = Basement and granitoids; Purple = Palaeoproterozoic gneiss & granitoids; Grey = undifferentiated basement; Green = Greenstone/schist belts; Pale blue in Ghana = undifferentiated granitic basement; Pale blue in Nigeria = mostly Mesozoic sediments

Given the hundreds of active artisanal mining sites and possibly more than two million persons involved, the unproven gold endowment ought to rank a lot higher than an estimated 1000-2000 tonnes gold metal potential resource target in Ghana. With respect to gold, Ecopheonix, Erin, Savannah Gold and Australian Mines were some of the internationally-focused companies that were involved with gold exploration in Nigeria from 2006-2012.

Most of these drilled several targets such as the well-known Birrin Gwarri deposit. However, none of these companies succeeded in establishing a gold mine. Savannah Gold was most likely to be one of the more successful companies and managed to do an early scoping study at Bin Yauri, Kebbi State, but failed to raise funds to advance the project in 2013 mainly due to Nigeria’s high risk investment perception, coupled with the global downturn in exploration.

Nevertheless, TSX-listed Thor Explorations, with an astute Nigerian geologist at the helm, successfully inaugurated production in Quarter 3 of 2021 at the Segilola gold mine in Osun State. Here, zones of mineralised quartz-veined schist in granodiorite have open pit resources of 518k ounces (oz) of gold grading 4 grams per tonne (g/t) and underground resources amounting to 114k oz averaging 5.6g/t with untested down-dip potential and neighbouring unexplored satellite targets.

Moreover, with hundreds of lead-zinc-copper-barite-fluorite (Pb-Zn-Cu-Ba-F) workings in the prospective 75 000km2 section of the Benue Trough, the annual production of 60 000 to 70 000 tonnes Pb-Zn ore and concentrate and ≈15000 tonnes of Ba hardly reflect the in-situ resource endowments. Based on surveys conducted by National Integrated Mineral Exploration Project (NIMEP) teams, this author estimates very preliminary non-JORC target potential Pb-Zn-Cu-Ba resources at a conservative 19 million tonnes per 100 vertical metres.

Targeting specific commodity groups

These facts spurred the government to not only amend the mining regulations in promulgating a far more investor-friendly mining act in 2007, but to implement NIMEP in 2017 targeting 5 commodity groups:

  • Gold: vein-type with associated base metals plus Platinum Group Elements nickel and chromite
  • Critical metals: tin, tantalum, niobium, lithium and rare earth elements
  • Lead, zinc and copper;
  • Barite; and
  • Iron and Steel

Committee for Mineral Reserves International Reporting Standards (CRIRSCO) compliant Qualified Persons (QPs) were embedded in the local exploration teams and supervising consultants to deliver interpretive spectral analysis, aeromagnetic plus radiometric and geological maps with detailed reports and plans from soil sampling and drilling selected high priority projects. Except for iron ore, all the contractors’ deliverables have been handed to the Nigerian Geological Survey Agency (NGSA) but the results have not yet been made public.

Defining prospective areas for all commodities has been limited by a budget that was of necessity, not designed to cover the entire nation. However, this work reinforces the potential and confirms and enlarges on the structural framework and prospectivity for mineralisation.

Small to medium scale mining on the rise

In parallel with this initiative, local and Chinese investors have been engaged over the past five to seven years in both small- to medium-scale mining ranging from local quarrying and buying from artisanal and small-scale mining (ASM) groups to commercial Pb-Zn mining with a few underground and larger open-pit operations.

To some extent, this is reflected in a growth of almost 20% in 2020 compared to 2019 if the tonnage metric alone is used, although these figures are heavily biased by construction and related materials. According to the Nigerian Extractive Industries Transparency Initiative solid minerals audit in 2018, 69 reporting companies out of the 720 companies that paid royalties in 2018 met the materiality threshold of 3-million Naira’s (USD8-million) royalty set for the report. Of this 69, less than 10% are involved in metalliferous although in 2018, Pb-Zn output was the third most valuable solid mineral.

Creation of the Sector Roadmap

Recognising the need for diversification and the weak value chain in the sector (i.e. little downstream processing), a Sector Roadmap was created and the federal government of Nigeria obtained credit from the International Development Association and The World bank to fund the Mineral Sector Support for Economic Diversification (MinDiver) project which is aimed at implementing the targets of the Sector Roadmap and revitalising the mining sector’s contribution to the economy.

The key focus of the MinDiver project includes:

  • Establishing a strong foundation for mining sector development;
  • Facilitating downstream sector development and enhance competitiveness; and
  • Monitoring and coordinating project management activities.

This includes formalisation and extension services to the ASM sector.

Within the context of a well-developed banking and financial services industry, in 2017, the federal government provided several tax incentives such as a new company going into the mining of solid minerals shall be exempt from income tax for the first three years of its operation.

The same measures provide accelerated capital allowance at 95% of qualified capital expenditure on solid minerals mining in the first year of use of the asset as well 0% import duties on equipment.

Additionally, in 2019, the Nigerian Investment Promotion Commission Act offered further incentives bringing the country in line with international best practice; https://pwcnigeria.typepad.com/files/nipcfirs_compendium-of-investment-incentives-in-nigeria_nov2017.pdf. While allowing for 100% ownership without any onerous restrictions on repatriation of dividends, the current policies suppress sentiments favouring resource nationalisation reducing the risk in this area compared to certain less well-developed nations.

In 2021, the Ministry of Mines and Steel Development (MMSD) updated and streamlined the registration and recording of licences, introducing a transparent cadastral system like that of, for example, Zambia and Mozambique, which employs a use-it-or-lose-it policy. The Mining Cadastral Office (MCO) awards mining titles on a first-come, first-serve basis.

Upgrading of power and transport infrastructure is ongoing, the most relevant project being the total rehabilitation of the railway from the Ajoaokuta Steelworks to Warri port.

Along with a well-staffed and cooperative Nigerian Geological Survey Agency (NGSA) who is able to supply significant essential geodata, the nation is poised for solid minerals development acceleration!

WhyAfrica provides you with business intelligence that matters. WhyAfrica specialises in African affairs and natural resources. Africa is our business, and we want it to be yours too. To subscribe to WhyAfrica’s free newsletter or digital magazine, and for more news on Africa, visit the website at www.whyafrica.co.za or send a direct message. WhyAfrica launched its first ever digital magazine in November 2021. The company will undertake a road trip through South Africa, Namibia, Zambia, Zimbabwe and Botswana in June and July 2022. If you are interested in sponsorship or advertising opportunities, please contact me at leon@whyafrica.co.za. We have a wide range of different packages and combo deals to give your company the greatest exposure to a rapidly growing, African readership.       

 [1] Gillman, A., Mawson, S., 2016, Updated Resource Estimate for the Segilola Gold Deposit, Osun State, Nigeria for Thor Explorations Ltd, March 2016, NI 43-101 Technical Report, www.sedar.com

 

Leave a Reply

Your email address will not be published.

two × two =