BMI View: Tanzania's mining sector growth will decline as weak mineral prices will discourage production growth over coming years. Beyond our forecast period to 2019, the country's mining sector could diversify as various miners are looking to invest in the country's nickel, coal and uranium resources.
Tanzania holds vast deposits of coal, cobalt, copper, diamonds, gold, nickel, silver and uranium. Despite these positive aspects, we forecast the country's mining sector growth will decline over 2015-2019. In our view, weak gold prices will halt gold production growth and delay or halt new projects from coming online altogether. We forecast Tanzania's mining industry value to decline from USD0.80bn in 2015 to USD0.71bn in 2019. This is an average contraction of 3.6% year-on-year over 2015-2019, significantly lower than the average growth of 4.2% y-o-y over 2010-2014.
Despite the decline in production growth, Tanzania's mining industry will remain relatively significant in regional terms as the country is currently Africa's fourth-largest producer of gold and continues to produce growing numbers of diamonds. Beyond our forecast period, the sector will be boosted by increasing coal, nickel, and uranium production.
|Growth To Contract|
|Tanzania: Mining Industry Value (bn) & Growth y-o-y (%)|
|f = BMI forecast. Source: UN Data, BMI|
Although Tanzania's mining industry is relatively small in terms of value, it is responsible for a significant share of the country's export revenue. Major foreign investors in Tanzania's mining sector include Acacia Mining, (formerly African Barrick Gold) and AngloGold Ashanti. However, Tanzania's mining sector will remain relatively uncompetitive due to the country's high mining taxes and royalties. The mining code, updated in 2010 at the height of the commodities price boom, is relatively more burdensome than the mining codes of the bulk of other African countries. As such, Tanzania is likely to find itself at a competitive disadvantage as mining companies look to slash capital expenditure in an era of weakening commodity prices.
|Commodities||Mine||Mine Type||Primary Company||Secondary Company||Notes|
|na = not available. Source: Company Announcements, BMI|
|Coal - Thermal||Shikula||Open Pit||Syrah Resources Ltd (100%)||na||The project is under exploration stage.|
|Copper||Ibaga||Open Pit||Liontown Resources (100%)||na||Project is currently in exploration stage which shows high grades of Copper and Zinc products, Drilling to start in 2014.|
|Coal - Thermal||Rukwa||na||Kibo Mining||na||Resouces: 109 Mt (71.33 Mt Indicated/38.05 Mt Inferred).|
|Iron Ore||Liganga||na||NDC||Sichuan Hongda||July 2013 - The exploration findings have discovered over 364mnt of coal at the project. The project is expected to be completed by 2018.|
|Coal - Thermal||Mchuchuma||na||NDC||Sichuan Hongda||2013 - The project involves 3mnt per annum coal mine and is expected to be completed by 2017; July 2013 - The exploration findings have discovered over 219mnt of iron ore deposits.|
|Gold||Chunya||na||Shanta||na||Gold: 1.3moz resources. Production start date remains uncertain.|
Potential In The Long Term
Despite the ongoing problems hampering the country's mining sector, a number of new projects could support the sector's growth outlook over the coming years. For instance, the construction of a coal and iron ore mine plus a 600MW coal-fired power plant will begin in the coming quarters. The capital expenditure for the new coal and iron ore projects will total USD3bn, which will be provided by China's Sichuan Hongda. This supports our view that Chinese investment will support Africa's mineral growth outlook. The new iron ore and coal mines are expected to start production in 2018.