Mauritania - Mining

More about the Economy of Mauritania.

Plans to exploit the high-grade iron ore deposits at Kedia, near Zouîrât, began in 1952 with the formation of the privately owned Mauritanian Iron Mines Company (Société Anonyme des Mines de Fer de Mauritanie--MIFERMA). With support from the World Bank, the French government, and the Mauritanian government, MIFERMA (owned by French, British, Italian, and West German steel interests) began operations in 1963. By 1966 MIFERMA had invested the equivalent of some US$200 million in mining facilities at Kedia, port facilities at Nouadhibou, and a rail line to carry the ore to port for export.

Iron mining quickly dominated Mauritania's economy. In 1966, after only three years of operations, iron mining contributed 28 percent to GDP and accounted for 92 percent of the value of all exports. The three surface mines at Kedia had a rich ore content of 65 percent. Mined by explosives from the sides of tall rock formations, the ore was loaded on 100-ton trucks for transport to the railhead. There, the ore was also crushed and sorted. The ore was then loaded on the world's heaviest trains (200 cars carrying a total of 20,000 tons, pulled by four locomotives, and averaging two kilometers in length) for transport to Nouadhibou for export. Normally, there was one trip daily in each direction along the 650- kilometer line.

Iron mining provided the income for Mauritania's economic development during the first two decades of independence. Construction of the mine, rail, and port facilities provided wages to thousands of laborers. By the late 1970s and early 1980s, the industry employed some 6,000 workers and accounted for about 10 percent of the jobs in the modern sector. Development of the mines and their associated infrastructure took the bulk of investment funds allocated under the first three national development plans. The iron mining industry had a substantial direct and indirect impact on the economy, and many industrial and construction enterprises worked primarily or exclusively for the iron company. By the mid- 1970s, iron operations consumed about 40 percent of the country's imports of fuel oil. At the same time, mining was responsible indirectly for about 25 percent of GDP because of its high consumption of public utilities (power and water), commerce, transportation, and services. Iron also provided nearly 30 percent of all government revenues, thereby making an important contribution to all public sector investment and current expenditures. By the early 1970s, the cumulative effects of the growth of iron mining on national accounts, along with rising demand and good world commodity prices, enabled Mauritania to be recategorized by the World Bank and United Nations (UN) from a "least developed country" to a "moderate-income developing country." This reclassification increased Mauritania's ability to borrow on the international market to finance its ambitious development plans.

The development of the iron mines also contributed directly to the country's rapid urbanization. At independence, the populations of Nouadhibou and Zouîrât were estimated at less than 5,000 each. By the mid-1970s, these two towns had more than quadrupled in size to around 20,000 to 30,000 people each. Mining revenues to the government also helped spur the growth of the administrative capital at Nouakchott, which grew from around 5,000 people in 1960 to over 125,000 people in the mid-1970s.

In 1974 Mauritania nationalized the mining industry as a part of its effort to establish economic independence under the second development plan. With substantial assistance from Arab members of the Organization of Petroleum Exporting Countries (OPEC), Mauritania bought out the European owners of MIFERMA. Transfer of ownership to the newly formed SNIM was smooth; the terms of the transfer kept the foreign expert personnel and managers on the job and maintained the commercial relationship with the former owners of MIFERMA.

The mid-1970s marked a turning point for Mauritania's economy. Two events adversely affected the mining sector. The first was the onset of the world recession in 1974 and 1975, caused by the sharp rise of world oil prices; the second was Mauritania's costly involvement in the Western Sahara conflict between 1976 and 1978. These events, along with a prolonged drought that began in the late 1960s, reversed Mauritania's iron- based economic growth.

From the beginning of mining operations in 1963, Mauritania's production and export of iron ore rose constantly for a decade. In 1974 ore exports reached their all-time high of 11.7 million tons. In the following year, with falling demand for steel in Western Europe, Mauritania's exports of iron ore declined by more than 25 percent, to 8.7 million tons. Between 1975 and 1987, iron ore exports averaged 8.5 million tons annually. Between 1976 and 1978, attacks on the rail line by the Polisario exacerbated the situation. In 1978 ore exports had fallen to 6.2 million tons. Mauritania's withdrawal from the war in mid-1978 allowed some recovery but did not affect the trend based on continued weak demand for iron ore on world markets.

By the late 1970s, the worsening economic situation created the first in a series of financial crises for the state, whose revenues fell with declining iron ore exports. This decline affected the government's ability to meet increasing foreign debt obligations. An immediate result of this financial crisis was the government's decision to reorganize the nationalized mining sector as a part of an IMF-supported stabilization program. Following nationalization in 1974, SNIM controlled not only iron mining but also copper and gypsum mining, as well as other industries and trading activities related to mining. The most important benefits of this arrangement for SNIM were control over the national distribution of petroleum products through the Petroleum Products Commercial Union (Union Commerciale des Produits Pétroliers--UCPP); control of the explosives industry (with factories in Nouadhibou and Nouakchott); and participation in the Arab Metal Industries Company (Société Arabe des Industries Metallurgiques--SAMIA), which planned and later operated a steel rolling mill at Nouadhibou. Until 1978 SNIM's operations were the direct responsibility of the president of the republic and were administered by a board of supervisors composed of twelve members from the various ministries under the chairmanship of the minister of planning and mines.

The reorganization carried out between 1978 and 1979 led to SNIM's divestiture of many of these operations, particularly those related to copper and gypsum mining and petroleum products distribution. The financial reorganization of SNIM resulted in the sale of about 30 percent of the company's shares to new foreign investors, including the Arab Mining Company, the Islamic Development Bank, the government of Morocco, the government of Iraq, and the Kuwait Foreign Trading, Contracting, and Investment Company.

The critical importance of iron ore mining to the economy was underscored in the late 1970s by the ripple effects its decline had on the country's ability to meet its debt obligations. Prospects that the industry would continue to decline throughout the 1980s as the older Kedia deposits were exhausted led the government, with World Bank support, to embark on the US$500 million Guelbs Iron Ore Project in 1979. The sale of US$120 million worth of SNIM shares to Arab investors was one means of raising the capital for this massive project. Further support was guaranteed by large loans from the World Bank, the Saudi Fund, France's Central Fund for Economic Cooperation (Caisse Centrale de Coopération Economique--CCCE), the Kuwait Fund, the Arab Fund for Economic and Social Development, the Abu Dhabi Fund, and the European Investment Bank. Smaller loans were secured from the Japan Overseas Economic Cooperation Fund, the African Development Bank, and the OPEC Special Fund.

In late 1984, the first phase of the Guelbs project went into operation with the opening of new surface mines at El Rheins, located in the Zouîrât district, about twenty-two kilometers from the Kedia deposits. Because the ore from the new deposits was not as rich as the Kedia ore (38 percent pure iron content as compared with Kedia ore's 65 percent iron content), the project required the construction of concentration and beneficiation facilities to raise the ore content to competitive marketing levels before export. Transportation, water, power, housing, and port facilities were also upgraded at Zouîrât and Nouadhibou to handle what was expected to be increasing ore exports. By 1987, however, world demand for iron ore had not risen as expected, and the 1986 opening of new Brazilian mines increased overproduction worldwide. The Guelbs project was not expected to be cost effective for some time, if ever. Plans for a second-phase expansion were postponed in 1987; the Kedia deposits were still in operation in late 1987 and were expected to continue production into the 1990s.

Since 1975 the decline of the iron mining industry, as represented by its direct contribution to GDP, has been constant. During the 1960s, mining directly accounted for no less than 25 percent and as much as 33 percent of GDP at current market prices. If indirect contributions to related industries are factored in, these proportions rise. By the mid-1970s, with its direct contribution to GDP around 20 percent, mining's total contribution to GDP was still above 30 percent. After 1976 mining's direct contribution to GDP fell, so that between 1980 and 1985 it averaged 10 percent; by 1987 it was only 8.6 percent.

Iron ore was the nation's most important source of foreign exchange for twenty years; the value of iron ore exports relative to other exports fell below 50 percent for the first time in 1983. In that year, exports of fish overtook iron ore exports as Mauritania's most important foreign exchange earner. In 1985 iron ore represented 40 percent of total export earnings, down from an average of 80 percent between 1963 and 1980.

Despite these relative declines, iron mining remained a key factor in the overall economy. In terms of relative export percentages, mining's decline had little effect on day-to-day operations. In the 1984-86 period, levels of tons of iron ore shipped from Nouadhibou were actually higher than in the 1982-83 period. In 1985 SNIM was the country's largest employer after the government and accounted for over 40 percent of the jobs in public sector enterprises. In the 1970s, iron ore contributions to government revenues were estimated at around 30 percent of all government revenues. This percentage probably declined during the 1980s, but in late 1987 statistics were unavailable. Between 1981 and 1986, mining royalties contributed about 5 percent to government tax revenues. The industry's actual contributions were much higher, however, when taxes paid on business profits and wages and salaries, employers payroll taxes, turnover taxes, export taxes, and nontax revenues from public enterprises are taken into account.

Mining

Mauritania's mineral wealth has been exploited since Neolithic times. Archeological evidence of a copper mining and refining site near Akjoujt in west-central Mauritania dates from 500 to 1000 B.C. Modern exploitation of copper at Akjoujt and the more important iron ore deposits between Fdérik and Zouîrât began after independence.

Iron

In 1967 the Mauritanian government formed a joint venture company with French and other interests to create the Mining Company of Mauritania (Société des Mines de Mauritanie--SOMINA). SOMINA was created to exploit copper deposits at Akjoujt. Operations began in 1973 but closed in 1975 because of the combination of high operating costs (particularly for fuel) and falling world commodity prices for SOMINA's low-grade ore. In 1975 the company was sold to SNIM. SNIM reopened the mine and continued to operate it at a loss until 1978, when the government separated SOMINA from SNIM and closed the mine. In the early 1980s, plans were laid to reopen the mines with backing from the Jordan-based Arab Mining Company of Inchiri (Société Arabe des Mines de l'Inchiri--SAMIN). By 1987, however, SAMIN had abandoned plans to operate the copper mine because of continued low world commodity prices and the high costs of processing the low-grade ore with its high arsenic content. In a related development, SAMIN planned to open a plant at Akjoujt to process copper tailings for gold content. Operations were scheduled to begin in 1988.

In 1973 SNIM began exploitation of large deposits of gypsum located about fifty kilometers northeast of Nouakchott. Total reserves of 98 percent pure gypsum were estimated at 1 billion tons. SNIM's operations during the 1970s entailed the export by road of roughly 17,000 tons per year to cement factories in Senegal. Senegal in turn sold cement to Mauritania on a rebate basis. Rising transportation costs forced a halt to operations in 1981. In 1984 production of gypsum resumed under the newly created SAMIA. SNIM held equal shares in SAMIA with the Kuwait Foreign Trading, Contracting, and Investment Company. Output in 1985 was 5,470 tons, which were consumed locally in a crushing and bagging operation that imported clinker from Senegal to make cement. Plans in 1987 called for resuming exports of gypsum to Senegal by sea once the new Chinese-built Friendship Port at Nouakchott became operational.

In 1984 a consortium discovered large deposits of phosphates near the Senegalese border. Nonetheless, by 1987 no plans existed to exploit these deposits (estimated at 95 million tons of rock, averaging approximately 20 percent of phosphate pentoxide). The high cost of building the infrastructure and facilities needed to exploit the deposits, estimated in 1984 at US$400 million, made exploitation unlikely for the foreseeable future.

In 1985 seismic surveys conducted jointly by Occidental Oil Company of the United States, the Chinese Petroleum Corporation of Taiwan, and Yukong Limited of South Korea indicated a high possibility of petroleum and natural gas reserves in Mauritanian waters. In 1987 the Amoco Oil Company signed an agreement with the government for a production-sharing contract to conduct offshore explorations in a 920,000-hectare tract west of Nouakchott. The company began seismic acquisition work in late 1987 and planned to drill exploratory wells in 1988.

Copper, Gypsym, Phosphates, and Oil

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