The $700-million planned injection by Chinese State-owned mining company Shandong Iron and Steel into an iron-ore processing plant at the Tonkolili mine, in Sierra Leone, has further cemented the West African region’s strong mining outlook, BMI Research said on Friday.
The new investment, which was described as the largest industrial investment in the country’s history, followed Shandong’s acquisition of the remaining 75% stake it did not own from African Minerals in 2015 after the Ebola crisis halted operations and left the former owner in debt.
“This follows a growing trend of Western miners pulling out of the region owing to rising costs and debt loads [and] being replaced by risk-tolerant, government-backed Chinese investors,” BMI said in its latest industry trend analysis.
The emerging trend seemingly bodes well in certain respects for Sierra Leone, with BMI’s view that China’s provision of additional domestic infrastructure stimulus measures have propped up prices, contributing to a “very positive” past year for iron-ore.
“We believe Sierra Leone’s iron-ore production will remain on an uptrend in the coming years and the country will outpace Mauritania as the second-largest producer in Africa by 2019.”
The Tonkolili mine is considered to have access to some of the largest iron-ore resources in Africa.
“The mine’s current production capacity is 20-million tonnes a year and it was initially planned that the mine would eventually produce up to 35-million tonnes of iron-ore a year. All of the iron-ore mined at Tonkolili will be shipped to China, according to Shandong Iron And Steel,” BMI Research explained.
However, despite this, BMI Research maintained its forecast of a slowdown in iron-ore production growth in Sierra Leone from 15% in 2017 to 4.2% in 2021, as the Chinese-backed investment project was focused on the processing of iron-ore and was unlikely to impact its output significantly.
While the processing of the ore domestically could boost the labour market, it is still unclear whether local workers will be selected for the value-addition process.
“Further, the total contribution of Sierra Leone’s mining industry as a percentage of gross domestic product (GDP) is no longer as significant as it once was and will continue to decrease in the coming years, even as GDP growth increases,” the firm added.
GDP growth is expected to average less than 7% over the next ten years.
“Our view for iron-ore prices to moderate towards the end of 2017 and in 2018 could even put the whole investment at risk, which would be a big blow to an economy that has only recently started recovering from the Ebola crisis,” BMI Research concluded.  (Culled).

Source: awoko.org

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