AMN - Libya needs to diversify into minerals – comment by Yolanda Torrisi

Libya has done very well from the oil industry for many years but it now seems the government is considering opening up the country to mining as the oil industry suffers along with the country’s economy. The geology of the large north African country indicates that there are significant reserves of gold, iron and magnesium.

With the nation’s proximity to the large European market that is pushing for more self-sufficiency in industry, including the supply of raw materials, there is plenty of merit in Libya gaining benefit from its minerals to diversify from its heavy reliance on oil. This reliance has seen the country’s economy suffer from the dual hammer-blow of a depressed global oil market and a blockade of the country’s oil production as part of an attempt to seize control of the country.

Minister of Economy of the Tripoli-based Government of National Accord (GNA), which is internationally recognised, Ali al-Issaoui, has introduced the concept to the global mining industry when he stated recently in Tunisia that he was ready to welcome international companies to exploit Libya’s mineral wealth.

He said: “This is a still virgin sector in Libya. We have geological studies that prove that we have underground wealth. If oil revenues continue to be lacking, we could have recourse to it.”

Historical studies show that iron ore reserves in the Libyan Sahara total 3.5 billion tonnes and in 2006 the country’s Minister of Industry and Mines stated that Libya had Africa’s third-largest iron ore reserves.

As far as gold is concerned, the Tibesti Mountains in the south are known to host gold which is being exploited by artisanal miners while it is also reported that Libya has large magnesium reserves.

Most of these mineral riches are in the country’s south in areas primarily controlled by armed Toubou and Tuareg groups.

While this does present difficulties, Ali al-Issaoui, says they are not insurmountable as evidenced by the activities of multinational oil companies who have operated continuously in the region despite security issues experienced since 2011.

The country’s oil blockade has increased the need for diversification with the Minister stating that it is costing Libya around US$50 million every day. With the aim of unseating GNA, supporters of Marshal Khalifa Haftar occupied the main terminals and oilfields in early February and this month his self-proclaimed Libyan National Army tried unsuccessfully to enter the capital Tripoli to seize power in a bitter and long-running struggle for power.

The impact of the blockade has been exacerbated by a dramatic decrease in demand from China which in the first half of 2019 was the third-largest buyer of crude oil from Libya with a daily rate of 105,000 barrels. Libya’s National Oil Company stated that oil production has dropped from 1.2 million barrels per day to just 110,000.

The economic loss from the blockade represents around 95% of tax revenue and as a result, the GUN government has slashed the budget by 30% and suspended all investments and infrastructure maintenance programs. The timing could not have been worse with the global oil market decline taking further toll along with the economic impact of the COVID-19 lockdown.

It is an encouraging start for mining that the Minister recognises the importance of the industry for the country’s future, although there is still quite some way to go and many difficulties to overcome.

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