AMN - Chinese boost for mining in Sierra Leone - comment by Yolanda Torrisi

China continues to support the development of mining and associated infrastructure in Africa, including in countries such as Sierra Leone which have fallen out of favour with many western investors. Scared off by perceived sovereign risk, rising costs and debt loads, the withdrawal of previous miners and investors threatened to derail the progress of a number of nations but risk tolerant, government-backed, long-term Chinese investors have come to the rescue.

An example has been the US$700 million investment by Chinese state-owned mining company Shandong Iron and Steel in an iron ore processing plant at the Tonkolili mine in Sierra Leone, which BMI Research says signals China’s long-term commitment to mining in Africa. It is the largest industrial investment in the country’s history.

Shandong initially acquired 25% of Tonkolili from UK’s African Minerals in 2012 and obtained the remaining 75% for only $170 million in April 2015 as African Minerals had to stop operating the mine, with the ebola crisis and debt issues given as prime reasons.

Of course, the Chinese investment also rides on the back of a positive year for iron ore with global prices rising 81% during the course of 2016.

China has a deficit in iron ore and Tonkolili is considered to have access to some of Africa’s largest iron ore resources. The mine’s annual production capacity is 20 million tonnes and it was initially planned that it would eventually produce up to 35 million tonnes. All iron ore from the mine will be shipped to China.

Shandong’s latest investment is focused on processing and will not have a significant impact on the country’s iron ore output. Although BMI Research forecasts that the country’s iron ore production growth will slow from 15% in 2017 to 4.2% in 2021, it is still expected to surpass Mauritania as Africa’s second largest iron producer by 2019.

The added value of processing commodities domestically will ensure that the Shandong investment will benefit Sierra Leone’s labour market and knowledge base but the amount of this value will depend upon how many local workers are used at the Tonkolili plant.

Yolanda Torrisi is Chairperson of The African Mining Network and comments on African mining issues and the growing global interest in the African continent. Contact:yolanda@yolandatorrisi.com