Algeria opens up to investment

GMA Resources reports that while it may not be the great gold rush of the mid-19th century in North America, Algeria is aiming to kick-start a minor minerals boom of its own, further opening up the country for exploration and development. At the beginning of June, the government announced the results of tenders for the exploration rights for nine separate blocks, with all but one going to companies from mineral-hungry China. Most of the blocks on offer have potential gold or copper ore deposits.

The Chinese firms CGC Overseas Construction and China Geo Engineering won the rights to conduct exploration at sites at Bled Medina, In Alaran, Aklet Danlel, Tinzebban, Tihimatine, Amescor and Chet Iller, with the winning bids ranging from $30,000 to $500,000. Canada’s Cancor Mines was the only other successful bidder in the tender, gaining exploration rights for a block at Tenchaffao. In total, Algeria earned $6 million from the exploration rights auction, a small amount if the sites prove commercially viable.

China’s interest in Algeria’s mining sector goes deeper than the successful bids at the June tender. Earlier this year, the Chinese company Shaolin signed two exploration contracts for sites in the provinces of Sétif, to the east of Algiers, and in Tamanrasset in the south, with both projects being run in partnership with Sonatrach, Algeria’s state-owned energy group. Both blocks are believed to contain deposits of gold, as well as zinc and lead.

Energy and Mines Minister Chakib Khelil has said Algeria wanted to attract more foreign investors. “We already have partnership accords with several partners. We want to develop this sector,” he said.

In late May, Liu Xuehong, the Vice President of China National Nuclear’s overseas uranium exploration unit, said the company was holding talks with Algeria over possibly buying into the country’s uranium mining sector. Faced with a potential shortage of fuel for its growing nuclear energy generation program, China has been shopping around for new suppliers. With more than 56,000 t of identified uranium reserves, Algeria could help China, plug the gap.

The rebirth of Algeria’s mining industry, especially the gold sector, has been a long time coming. Following independence in 1966 and the nationalization of the country’s mines, much of Algeria’s mining sector stagnated. Most of the state’s investments in the industry went towards developing the extensive oil and natural gas reserves. However, with the opening up of the economy in the late 1990s and as part of the drive to promote diversification and encourage investment, new legislation was passed in July 2001 allowing private and foreign companies to enter the mining sector. The new law guarantees equal treatment for all investors, allows for the separation of above ground and underground ownership, enshrines the right of appeal to international arbitration in the event of disputes and offers some incentives to investors importing equipment needed to conduct operations. 

The exact extent of Algeria’s gold reserves is hard to pinpoint, due to the lack of exploration and survey activity. As the sector opens up, and new players enter, more reserves are being identified. One enthusiastic supporter of the Algerian gold mining sector is Doug Perkins, chief executive officer of GMA Resources, which has a 52% interest in the Tirek gold mine and exploration project, with Sonatrach holding the remaining shares. While surveys carried out in the 1980s suggested deposits of 2.8 Moz, Perkins said recent studies show this could be almost doubled, with the mine’s potential being nearer 5 Moz. This should serve as an incentive to other overseas mining concerns, he said. “Mining companies would be seriously silly not to be in Algeria,” Perkins said in an interview with an industry publication in February.