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P 230632Z NOV 09
FM AMEMBASSY ABUJA
TO RUEHC/SECSTATE WASHDC PRIORITY 7542
INFO RUEHOS/AMCONSUL LAGOS 2335
RUEHJO/AMCONSUL JOHANNESBURG 0137
RUEHZK/ECOWAS COLLECTIVE
RHEBAAA/DEPT OF ENERGY WASHDC
RUEATRS/DEPT OF TREASURY WASHDC
RUCPDOC/DEPT OF COMMERCE WASHDC
RUEHC/DEPT OF LABOR WASHDC
RUEHBJ/AMEMBASSY BEIJING 0058
RUEHBY/AMEMBASSY CANBERRA 0035
RUEHPE/AMEMBASSY LIMA 0013
RUEHLO/AMEMBASSY LONDON 0618
RUEHMO/AMEMBASSY MOSCOW 0096
RUEHNE/AMEMBASSY NEW DELHI 0028
RUEHFR/AMEMBASSY PARIS 0475
RUEHOT/AMEMBASSY OTTAWA 0075
RUEHSG/AMEMBASSY SANTIAGO 0019

UNCLAS SECTION 01 OF 06 ABUJA 002108 
 
SIPDIS 
 
STATE PASS USGS FOR MICAEL FOOSE, INTERNATIONAL PROGRAMS 
STATE PASS TO USAID AFR/SD FOR CURTIS, ATWOOD AND SCHLAGENHAUF 
STATE PASS TO USTDA-PAUL MARIN 
STATE PASS TO EXIM-JRICHTER 
STATE PASS TO USTR-LAURIE-ANN AGAMA 
STATE PASS TO OPIC-BARBARA GIBIAN AND STEVE SMITH 
STATE FOR EEB/ESC/IEC/ENR-DAVID HENRY, CBA 
STATE PASS TO S/CIEA-DAVID GOLDWYN AND MICHAEL SULLIVAN 
JOHANNESBURG FOR USTDA/JASON NAGY 
USDOE FOR GEORGE PERSON AND THOMAS SPERL, OPIA 
TREASURY FOR IERONIMO AND BARCAN, OAN 
DOC FOR 3317/ITA/OA/BURRESS AND 3130/USFC/OIO/ANESA/REED 
 
 
E.O.   12958: N/A 
TAGS: EMIN EPET ENRG EINV ETRD SENV SF NI
 
SUBJECT: NIGERIA SEEKS TO REKINDLE ITS DILAPIDATED MINING SECTOR - 
PLATEAU STATE 
 
ABUJA 00002108  001.2 OF 006 
 
 
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SUMMARY 
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¶1.  Nigeria is a leading hydrocarbon producer and has allowed its 
mineral sector to decline through an overdependence on oil and the 
relative neglect of its non-oil sectors.  The GON now seeks to 
restore its mineral sector and to declare itself "open for 
business."  It implemented new policy and legislation as of 2007 
that sought to create a more attractive minerals investment 
environment.  The GON still needs to establish implementing 
regulations to provide an investor-friendly framework.  The Embassy 
Minerals Team found enthusiasm for mining in the old tin mining 
capital of Jos in Plateau State, but existing mining activity is 
small-scale, vestigial and almost artisanal.  The World Bank has 
promulgated a small-scale mining program that has funded a mining 
institute in Jos and may be able to play a useful role.  The USGS 
may be able to partner some activities with the World Bank.  There 
is scope for further minerals assessment in other regions in 
Nigeria.  END SUMMARY. 
 
----------------------------------- 
OVERVIEW OF THE MINERALS TEAM VISIT 
----------------------------------- 
 
¶2.  The Minerals Team, comprised by Embassy Abuja Economic Counselor 
and Deputy Chief, Embassy Pretoria Minerals/Energy Officer and 
Specialist, and USGS Africa Coordinator, recently conducted meetings 
in Abuja and in and around the Plateau State capital of Jos to 
assess the status and potential of minerals production in Nigeria. 
The Minerals Team worked closely with former Commissioner of Mines 
Markus Pwajok and Engineer Francis Ahmadu to generate a full program 
of a working dinner with government representatives, three active 
mine visits, a tour of the Nesco Power Plant, and a Mining 
Roundtable at the Nigerian Institute of Mining.  The team also 
visited the Nigerian Extractive Industries Transparency Initiative 
(NEITI), the Ministry of Mines and Steel Development's Sustainable 
Management of Mineral Resources Project in Abuja (funded by the 
World Bank), and the Nigerian Geological Survey Agency in Abuja. 
 
¶3.  Plateau State has been associated with mining as far back as 
¶1902.  The British developed a robust exploitation of tin, 
columbite, and associated minerals during colonial times, but these 
suffered from tin price busts, under-investment, and nationalization 
over time.  The state government claims that there are very large 
reserves of tin-related columbite, cassiterite, and zircon minerals, 
which have specialized uses as tantalum, niobium, and alloy products 
Qwhich have specialized uses as tantalum, niobium, and alloy products 
used in aircraft engines and nuclear reactors.  In addition, there 
is significant potential for gemstones, lead, zinc, kaolin (for 
pharmaceuticals and detergents), tantalite (for computers, aircraft, 
and nuclear systems), gypsum, dimension stone, and titanium. 
 
--------------------------------------------- ---- 
MINING ROUND-TABLE - CHALLENGES AND OPPORTUNITIES 
--------------------------------------------- ---- 
 
¶4.  The flagship event for the Minerals Team was head-lining the 
Mining Roundtable at the Nigerian Institute of Mining on September 
29, which was televised and covered by the local press.  Economic 
Counselor noted the positive attributes for Jos in attracting mining 
 
ABUJA 00002108  002.2 OF 006 
 
 
investment: proven reserves, a reliable source of power, the 
plateau's relatively pleasant and healthy climate, and a good 
international school.  The key challenges he identified were: 
obtaining domestic or foreign financing, volatile commodity prices, 
and assuring a stable investment environment.  The Miner's 
Association and a number of other mining representatives asserted 
that there were adequate and economic mineral deposits and proven 
reserves in the region, although a few noted that the information 
was out-dated.  Consolidated Tin Mines (CTM) Managing Director Frank 
Kwueme said they had 80,000 tons of proven reserves of cassiterite 
and 14,000 tons of columbite under the 600 leases previously owned 
by Amalgamated Tin Mines.  He asserted that this was based on 
reliable (albeit old) work done by the British.  Kwueme applauded 
the decision of the Government of Nigeria to eventually privatize 
the 60 percent stake it held in CTM as a result of nationalization 
in 1972.  He and others noted that nationalization was an abject 
failure that created a legacy of under-investment in the sector. 
(He cited the image of the large, defunct Bucyrus Erie drag line 
that has rusted in place next to a flooded strip mine on the edge of 
Jos.)  Kwueme obserVPQCQQzthe 
sector.  An Environmental NGO and other participants noted the 
environmental and community safety contingent liability from years 
of mining and then neglect, resulting in around 4,000 flooded and, 
according to some, toxic, open-pits in the area.  The new law 
requires adequate rehabilitation, but it is unclear how effectively 
it will be implemented.  The new Nigerian Institute of Mining (NIM) 
was recognized as a useful establishment to develop human resources. 
 Pennsylvania State has been involved in curriculum development and 
will participate in a training of trainers program early in 2011. 
The World Bank-funded institute could be a partner for the USGS in 
Nigeria.  The team toured the facility which includes multiple 
classrooms and a minerals processing area, available for both 
research and practical use by miners.  The NIM Director declared the 
Qresearch and practical use by miners.  The NIM Director declared the 
roundtable such a success that he recommended continuing it on a 
quarterly basis and inviting other Embassies to participate, 
probably starting with Australia. 
 
-------------------------------- 
SMALL-SCALE AND ARTISANAL MINING 
-------------------------------- 
 
¶6.  The three active mines visited around Jos were small-scale, 
vestigial, and almost artisanal in scope.  Rayfield Mine 
owner/operator Joshua Egbagbe hosted the Minerals Team at his 
open-pit, "junior-miner" columbite mine on September 28.  He told 
the team that there was a potential production of 50-100 tons of 
columbite per month ($500,000 per month at current prices), but 
noted that the mine was substantially shut down because of the price 
drop.  He said he had partnered with a Russian interest and had 
entertained unrequited interest from Chinese and South African 
investors.  Egbagbe was critical of the Chinese as murky buyers and 
alleged that Chinese interests had unsuccessfully sought to steal 
rights to the ground beneath his mine.  He lets some 500 artisanal 
 
ABUJA 00002108  003.2 OF 006 
 
 
workers operate freely on the open-pit mine site.  It appeared to 
the Minerals Team that any serious investor would want to carefully 
remove the informal miners by job offers or by compartmentalizing 
their activities.  It was also apparent that any attempt to drive 
them off could easily result in the sabotage of his unfenced and 
unguarded equipment. 
 
¶7.  The Rim Mine is a small-scale operation, reached by fording a 
small river.  (The Minerals Team shared boots and/or were ferried 
across on the backs of workers.)  This mine relies on a dilapidated 
pump to provide water for sluicing to provide primary separation of 
tin, ilmenite, and cassiterite-bearing ores, mined under a 60-foot 
over-burden.  The economics of the mine looked challenging, 
exacerbated by the antiquated pump.  The Minerals Team will look at 
potential sourcing of a jig that might be used by the NIM to help 
this and other mines increase the recovery of tin, ilmenite and 
cassiterite, for which much of the finer material is currently being 
washed down the river.  This mine is an old lease of Consolidated 
Tin Mines.  The Team also visited the small-scale Sho mine, which is 
exploiting kaolin and gypsum.  This mine employs a crusher to 
generate 90 tons per month of Kaolin worth $50 per ton.  The kaolin 
is used as a filler for detergent, paint, and fertilizer produced in 
Nigeria. 
 
--------------------------------------------- ----- 
VINTAGE HYDRO-PLANT PROVIDES RELIABLE POWER SOURCE 
--------------------------------------------- ----- 
 
¶8.  One strong point of Plateau State is that there is adequate 
power supply - albeit a British colonial vestige - which is unusual 
in Nigeria.  The team visited the 1929 British colonial vintage 
Nesco Power Plant which produces 25 megawatts out of an installed 
capacity of 33 megawatts.  The plant houses three turbines turned by 
gravity-fed water pipelines below the Kura dam.  The management is 
successfully maintaining the old equipment, selling power, and 
serving as a stand-by for the Nigerian grid in Plateau State.  Nesco 
provisions regular power to residential neighborhoods in Jos.  The 
Nesco Plant sits in a spectacular canyon off the Plateau escarpment. 
 The area looks like it has significant unrealized tourism 
potential. 
 
¶9.  Jos maintains a few vestiges of its British Colonial past, 
beyond fairly reliable power, although our working dinner on mining 
with government officials was plunged into embarrassing, momentary 
darkness when the power supply was cut off.  Former mining 
Qdarkness when the power supply was cut off.  Former mining 
management and workers housing is still visible.  There is a 
still-functioning golf course.  There are British tomb-stones in the 
churchyard surrounding the Anglican Church.  Jos is also blessed 
with a renowned international school that educates the local elite 
(such as our hosts) and the American missionaries based in Jos. 
 
---------------------- 
WORLD BANK INVOLVEMENT 
---------------------- 
 
 
¶10.  The World Bank has been supporting Nigeria's mineral 
development through at least two activities.  Nigeria began working 
with the World Bank in 2004 to develop the Nigeria Extractive 
Industries Transparency Initiative (NEITI).  Its purpose is to 
 
ABUJA 00002108  004.2 OF 006 
 
 
promote transparency and accountability in the management of 
Nigeria's oil, gas and mining revenues.  A visit to the NEITI office 
in Abuja revealed that Nigeria is viewed as an EITI "good pupil", 
implementing the initiative in its hydrocarbon sector as a way of 
building domestic trust and confidence.  NEITI Director Stan Rerri 
participated in an EITI workshop in South Africa, aimed at prodding 
South Africa to become an implementer and leader on the continent 
for EITI.  However, the NEITI management admitted to the Minerals 
Team that they had focused on energy and now needed to pay more 
attention to the NEITI needs of the mineral sector.  As part of this 
process, they announced plans to hire a mineral specialist as a 
technical consultant. 
 
 
¶11.  The World Bank also has been supporting Nigeria through the 
"Sustainable Management of Mineral Resources" project.  This project 
also began in 2004 and has provided Nigeria with approximately $120 
million in support.  The project's principal objectives are to 
increase Nigeria's capacity to manage Nigeria's mineral resources 
and to promote income generating opportunities through small-scale 
and artisanal mining.  It is scheduled to end in 2010, although 
there are plans for it to be extended.  (NOTE: It was this project 
that provided the support for the NIM.  END NOTE.)  The World Bank 
has implemented similar "Sustainable Management of Mineral 
Resources" projects in Mauritania, Madagascar, Mozambique, and 
Uganda and will probably start one in Tanzania in 2010. 
 
¶12.  The Minerals Team met with project coordinator Linus Adie in 
his Abuja office.  Nigeria is completing large geophysical and 
geochemical surveys as part of this project.  The geophysical 
company, Fugro, is currently finishing an airborne geophysical 
survey that will cover 54 percent of the country with 1.2 million 
line kilometers of data from flight lines spaced 500 meters apart. 
At the same time, Nigeria is working with the British Geological 
Survey on a $4 million regional geochemical sampling campaign.  Both 
these efforts will produce important new data which should be very 
helpful in identifying new targets for mineral exploration. 
 
¶13.  The Nigerian Geological Survey Agency (NGSA) is one of the 
principal recipients of support from the "Sustainable Management of 
Mineral Resources" project.  The USGS visited the agency and met 
with its director, Dr. Syian Malomo.  The agency was started in 1903 
with a focus on the columbite and tin resources of the Jos plateau. 
Qwith a focus on the columbite and tin resources of the Jos plateau. 
It currently has a staff of about 800.  Its main office is in Abuja, 
but it has regional offices for geochemistry in Kaduna, geohazards 
in Awka, and marine and coastal geosciences in Yenagoa.  They are 
strongly focused on work that will attract private sector investment 
in Nigeria's resources.  The NGSA reported that they were visited by 
65 potential investors in 2008, of whom 22 percent were Chinese, 18 
percent were South African, 12 percent were US, 8 percent were 
Australian, and 40 percent were others.  During the visit, the NGSA 
announced their intention to support a visit next year by the USGS, 
during which time the USGS would present a course on methods for 
estimating undiscovered mineral resources. 
 
--------------------------------------------- ------- 
POSITIVE MINING LEGISLATION, BUT REGULATIONS DELAYED 
--------------------------------------------- ------- 
 
¶14.  The Nigerian government has made a decision to promote 
 
ABUJA 00002108  005.2 OF 006 
 
 
exploration and development investment in its solid minerals sector 
following almost 50 years of neglect.  Nigeria was one of the 
world's biggest producers of tin, but a combination of Dutch 
Disease, caused by the discovery of oil, and nationalization of 
mines following independence in 1960 has reduced the mining industry 
to a few small mines and hundreds of informal (subsistent) workings. 
 The government produced a new minerals policy document and a 
minerals and mining act in 2007 in an attempt to encourage 
investment.  The accompanying regulations have not yet been 
published and are still being negotiated, although industry has been 
minimally consulted. 
 
¶15.  The National Minerals and Metals Policy of January 2008 makes 
clear that minerals are owned by the state and are to be exploited 
for the benefit of Nigerians.  It makes clear government's intention 
that industry must be driven by private investment, management, and 
operation.  It also appears to be an "apple pie" expression of all 
the things a potential investor wants to hear.  In this respect, it 
is little different from mining policies the world over.  Its main 
tenet is the privatization of the industry, security of tenure, and 
minimum government interference in the running of mines and 
marketing of product.  Indigenization and adding value to raw 
materials is an expressed goal of the government. 
 
¶16.  The Nigerian Minerals and Mining Act of 2007 addresses most 
aspects of the governance of the mineral industry, the various types 
of permits, leases and licenses available, their qualifying 
requirements and durations, and time limits in which government 
officials must reply to the respective applications, usually within 
30 to 45 days.  These include: 
 
-- reconnaissance permit for one year and renewable, 
-- exploration license for three years and renewable, 
-- small-scale mining lease for a time dependent on the particular 
circumstances, 
-- mining lease for 25 years and renewable, 
-- quarry lease for five years and renewable, and 
-- water use permit, presumably for the period of the specific right 
granted. 
 
¶17.  Important elements are the requirements for environmental 
management, access to a deposit with compensation to land-owners for 
damages incurred, freedom to market mineral products, freedom to 
maintain off-shore revenues for purchases of capital equipment and 
supplies, together with other concessions, conditions, stipulations, 
and requirements.  One concerning aspect is the mining company's 
Qand requirements.  One concerning aspect is the mining company's 
need to negotiate a consensus social plan and "approval-to-mine" 
from all affected communities, which introduces uncertainty and has 
the potential to delay or even prevent the start of proposed mining 
operations.  Specific implementation details must await the 
publishing of the Regulations.  South African Mining Expert Peter 
Leon recently publicly characterized Nigeria's mining regime and 
cadastre as effective and a potential model for South Africa. 
 
------- 
COMMENT 
------- 
 
¶18.  Nigeria still has a long way to go to demonstrate large, 
commercial reserves that can draw domestic and foreign investors. 
 
ABUJA 00002108  006.2 OF 006 
 
 
Large-scale investment will require proven reserves, a stable 
investment environment, and some assurance on environment and other 
liabilities.  Nigeria seems to have lost its culture for mining as a 
result of nationalism, neglect, and under-investment.  There are 
opportunities for the USGS and other agencies to provide some 
assistance to contribute to the GON's new-found objective to develop 
its solid minerals sector.  Jos and the Plateau State appear to be a 
likely target, given their history of tin-mining and the remains of 
a once-thriving mining culture.  Jos and the Plateau State have many 
qualities that could lure investment, but the area has experienced 
some recent political conflict over political franchise and 
perceived disenfranchisement between ethnic/religious groups. 
 
¶19.  Embassy Abuja, Embassy Pretoria and the U.S. Geological Service 
cooperated in the production of this telegram. 
 
Sanders