Mining Sector


Kilembe Mines

Credit: Photo/Newvision

 

  Size and Structure

Uganda’s mining sector is at an early stage of development. Uganda currently produces a number of minerals valued at almost Ushs.180 billion.  In terms of output value the most produced minerals as of end of 2010 were: limestone, cobalt, Wolfram, Tin, Kaolin and pozzolana. Its contribution to GDP is small but has been steadily growing as the table below shows.

GDP by economic activity at current prices (Shs in Billions); Shs, fiscal year

Year 2007/2008 2008/2009 2009/2010 2010/2011 2011/2012
Mining & quarrying 73 81 106 134 180

Source: UBOS Statistical Abstract 2012

The airborne geophysical survey, geological mapping and geochemical sampling estimates over 27 types of minerals in significant commercial viable reserves.

The country-wide distribution of mineral deposits is presented in the Map of Uganda below.

Map Of Distribution Of Mineral Deposits


    Source: Ministry of Energy and Mineral Development

Graph of Statistical Analysis of Growth of Mining Activity Vis-a-vis GDP Growth

  Status Of Economic Activity In The Sector

 

There are three main categories of activities in the mining sector:

  • Large scale, formal mining;

This is practiced by big companies like Tororo Cement Ltd, Hima Cement, Kilembe Mines  Katwe Salt to mention but a few. All mining activities big or small operate under leases for a specified period of time. The operations are somewhat mechanized, but also rely highly on local, manual labour.

Although companies holding mining leases may be considered “large scale” in Uganda (both in terms of the legal framework and relative scale of activities), internationally these activities are considered to be comparatively small operations. As a simple comparison of “scale”, large scale mines around the World are increasingly processing ore at rates of up to 100,000 tonnes per day , while the extraction rate on some Uganda mining leases is on the order of 1,200 tonnes per day (when 40 trucks per day are operating).

  • Exploration;

Most active exploration in Uganda involves smaller Ugandan and/or foreign venture capital funded companies that are working at a much smaller scale. Although an exploration license provides neither the right to buy or mine minerals, a number of these companies are reportedly buying from artisanal miners. Many other companies seem to be speculators, holding exploration licenses with the intent of selling them to larger exploration investors. In addition to these companies, in Uganda (as in most countries), companies holding licenses to mine are also exploring with the intent of extending their mine life (by proving more reserves) or identifying new resources for development.

  • Artisanal and small scale mining (ASM);

Across Uganda, almost 200,000 Ugandan women and men use basic tools (like pick axes, hammers, shovels etc) to extract a wide range of minerals. These activities are predominantly informally organized, un-mechanized and often characterized by hazardous working conditions, lack of planning and issues related to child labour, poor health conditions and gender inequalities. Most often women and men enter the ASM sector (Artisanal and small scale mining) as it may be the most financially lucrative, most viable or sometimes the only livelihood option.

Because ASM is largely informal and unlicensed (and in many cases undertaken seasonally to supplement agricultural livelihoods), contributions to mineral production and local economies   are rarely captured by official statistics and men and women miners are often invisible to the mainstream or, in some cases, regarded as criminals . Consequently, they rarely receive adequate, if any, support to formalize and improve their activities in order to realize its full development potential. In most countries where ASM is taking place, miners face major challenges in formalizing and licensing their activities, largely due to challenges related to bureaucracy, cost, and literacy, among others. Exploration companies often use the presence of artisanal miners as an indication of mineral potential and, therefore, availability of “free” areas for licensing poses an additional challenge.

Each of the above groups is subject to different licensing provisions under the mining    legislation.

Table of Mineral Type Production Volume In Tonnes

  2004 2005 2006 2007
Limestone 4,28,775.90 5,40,755.60 4,25,610.70 4,47,462.80
Pozzolanic Materials 1,34,643.97 1,38,932.70 ,13,639.90 ,80,522.30
Vermiculite ,688.00 ,574.00 3,512.00 3,269.00
Colombite/Tantalite 0.38 0.3 0.1 0.1
Cobalt 459 637.8 689.2 636.3
Gold 1.5 0.05 0.02 0.03
Gypsum 181.2 85.3 121.2 168.2
Lead (Galena) - - 46 38
Wolfram 79.9 45.1 94.8 107.9
Kaolin 537 55 - 8,152.20
Iron ore - 08.5 - 366
Syenitic aggregates - 4,519.00 6,080.00 8,994.20
Total 5,67,366.85 6,88,013.35 6,49,793.92 7,49,717.03

          >
Source: Ministry Of Energy And Mineral Development Annual Report 2008

Table Of Mineral Exports, 2004-2007

Mineral Type Value UGX Millions
2004 2005 2006 2007
Limestone 2.03 0.8 1,451.84 309.67
Columbite/Tantalite 0 0.75 0 62.85
Cobalt 2.7 11.04 9,183.63 21,196.94
Gold 151.88 164.14 219.34 131,566.99
Lead (Galena) 0 0 76.46 6.06
Wolfram 0.04 5.6 88.3 63.15
Diamond 0 56.94 71.243 43.5
Tourmaline 0 0 3.7 45.02
Tin 0.01 0 8.63 0
Sapphire 0 0 0.87 0
Rubbies 0 0 1.74 0
Copper 0.12 0 0 52.95
Total 156.78 239.27 11,105.75 153,347.15

Source: Ministry of energy and mineral development Annual report 2008

Current Structure of players in the sector

At the beginning of 2010, a total of 611 mineral prospecting and exploration licenses were issued. Of these 99 Prospecting License (PL), 66 Exploration License (EL), 32 Location License (LL), 33 Mineral Dealers License (MDL), 2 Blasters Certificate (BL) and 2 Goldsmith’s License (GL) were granted, while 15 Exploration (ELs), and 5 Location Licenses (LLs) were renewed.

  • Prospecting is performed under licence by individuals, companies and sometimes government to discover minerals.
  • Exploration is performed under licence to establish availability of viable quantities of minerals. This stage involves more capital to perform detailed geological surveys including diamond drilling to ascertain mineral concentration and volumes.
  • Commercial mining is performed under a mining lease. At present limestone is mined on a commercial / large scale and used to make cement. The main players are Lafarge, locally known as Hima Cement and Tororo Cement Ltd. Hima Cement mines limestone mainly from Kasese and Kamwenge. Tororo Cement Ltd mines limestone from Karamoja.
  • Mining leases for phosphates, gold and Iron Ore have been issued for mines at Tororo, Tira, in Busia District, Kisita in Mubende district and Ntungamo.

 

  • Location licences are issued to mainly individuals and communities operating at a very small un mechanised scale.
  • There many unlicensed individuals mining gold as artisan miners. Artisan miners are spread across several parts of the country including Karamoja, Bude – Kitodha in Namayingo, , and Buhweju.

              Demand Drivers and Resource Base Factors

     

    Demand Drivers

    • Demand for industrial minerals such as copper and Iron Ore is driven by global economic growth. Sustained growth in China and India is the main cause of increased demand for industrial minerals.  Coltan, a mineral found in several locations across Uganda is use in making Mobile Phones and electronic devices. Demand for Coltan is fuelled by demand for mobile phones which continues to grow.
    • Gold is held in reserve by governments. The global economic crisis has led to an increase in demand for Gold as governments stockpile it to boost their reserves instead of holding currencies like the US $ and Euro.
    • High demand for precious stones,  rare minerals including Gold and Diamonds is driven by increase in the personal wealth of individuals who use the gems as jewels.
    • Cultures in some parts of the world require gifts in form of precious stones like diamonds or gold  jewellery
    • Uganda’s conducive investment climate in terms of human resources, friendly tax regimes, physical resources like land and financial resources among others.
    • Favourable export market within and outside the East African countries.

     

    Resource Base Factors

    • Uganda has an abundant mineral resources base that has not yet been fully commercially exploited.

       Key Trends

    The Government of Uganda has identified the development of the country’s mineral resources as a major economic priority and has in place an extensive plan to bring this to fruition. Investment in mineral exploration is projected to increase from the current US$3 million to over US$50 million annually over the next five years It is projected that the industry will be the major driver in employment creation and GDP growth over the Vision period. In addition the lifeline industries will spur growth in the manufacturing, infrastructure development, agriculture and ICT industries.

    Figure 1, below shows the trend of licenses issued between 1999 and 2010 where the numbers grew from 66 licenses in 1999 to 611 in 2010. , an impressive growth.

     

     

     

    Distribution Of Mineral Deposits


    Source: Ministry of Energy and Mineral Development

    Investment and Business Opportunities

                    Prospecting

    • Mineral prospecting

    Exploration

    • Mineral exploration

    Value Addition

    • Production of gold, copper, Iron & steel, and fertilizers
    • Production of columbium and tantalum for export
    • Cement manufacturing for local consumption and export
    • Mining and use of Uranium for electricity generation
    • Cutting and polishing stone (like granite, marble and quartzite)
    • Making ventilation bricks, tiles, charcoal stoves and other ceramics
    • Carving stone (like marble) into candle holders, sculptures, ashtrays and other products.
    • Jewellery production

    Mine Development & exploitation

    • Mechanized mining
    • Establishment of mineral processing plants
    • Mining of Coltan for export
    •  Quarry development
    • Revival and operation of Kilembe Copper Mines and processing plants under Public Private Partnership

    Sector Specific Licensing Requirements
    These are available from the Department of Geological Surveys and Mining of the Ministry of Energy and Mineral Development. (Refer to Appendix 3)

    Sector Specific Incentives for Investors

    • A minimum of 25% and a maximum of 45% VRIT depending on the level of profitability.
    • Duty free importation of mining plant and equipment with VAT deferment facilities.
    • Investment protection under the Multilateral Investment Guarantee Agency (MIGA
    • Mineral exploration expenditures are expensed 100%
    • Import taxes such as customs duty for all mining equipment is zero-rate
    •  There is externalisation of dividends and profits
    • Generous depreciation allowance at 30% for all depreciable mining assets

     

     

     

     

     

    Useful Addresses and Contacts


    Ministry of Energy & Mineral Development, Amber House
    P. O. Box 7270, Kampala - UGANDA
    Tel: +256 41 4234733
    Fax: +256 41 4234732
    E-mail: psmemd@energy.go.ug
    Website:  www.energyandminerals.go.ug
    (Policy and Legislation oversight

    Head Department of Geology Makerere University
    P.O. Box 7062, Kampala
    Tel.+256-414-541258
    Fax. +256-414-541258/531061
    geology@sci.mak.ac.ug
    Licensing and granting of mineral rights

    Head Department of Geology Makerere University
    P.O. Box 7062, Kampala
    Tel.+256-414-541258
    Fax. +256-414-541258/531061
    geology@sci.mak.ac.ug

    Department of Geological Survey and Mines of Uganda
    Plot 21-29, Johnstone Road
    P.O. Box 9, Entebbe / Uganda
    Tel +256 414 320656/312 262902
    Fax +256 414 320364
    minerals@infocom.co.ug
    dgsm@minerals.go.ug
    www.uganda-mining.go.ug

    Uganda Metal Industries Association (UMIDA)
    P.O. Box 8752, Kampala
    Tel. +256-752-694567
    Fax:+256-414-530277
    (Licensing and granting of mineral rights