Moma Mineral Sands Project


Overview

  • Reference: P-MZ-BAA-001
  • Approval date: 21/05/2003
  • Start date: 09/06/2005
  • Appraisal Date: 21/04/2003
  • Status: OngoingOnGo
  • Implementing Agency: ABSA RE KENMARE MOMA PROCESSING MINING LTD OFFSHORE PROCEEDS ACC
  • Location:

Description

The project, which is based on proven technology, entails dredge mining of titanium-bearing sands, the production of heavy minerals concentrate in a floating concentrator plant and the separation of final products in a separation plant. The annual production rate will be about 612,000 tons of ilmenite with three different grades, along with co-products of zircon and rutile of approximately 12,500 and 24,000 tons, respectively. The titanium oxide (ilmenite and rutile) is mainly used in the pigment, plastic and paper industries, while zircon is used for ceramic production. Total resources at Moma are estimated at 2.13 billion tons of ore containing 63 million tons of ilmenite. Initially a 20-year life span is planned, although the available resources can have longer economic life at the proposed production rate above. Momas ilmenite, has the potential to be used for both sulfate and chloride route feedstock, hence giving the project significant market advantage.


Rationale

Developmental Impact: The project supports the development objectives of GOM and the poverty reduction strategy. It is a major development and allows Mozambique to develop one of its largest mineral resources in a remote and underdeveloped province. Moreover, the project will have significant socio-economic and developmental impact. It also fosters economic integration in the SADC region as the construction contractor, most of the experienced mining personnel, two of the lenders and more than 50% of the goods and services are from S. Africa.

Economic and social Benefits: As noted earlier, the project will (a) create about 1,200 jobs for local people during construction and 436 during the operation phase; (b) various local contractors and suppliers will benefit from procurement of works, goods and services,(c) GOM will receive substantial taxation revenues from secondary project employees, corporate tax, royalty, import and other taxes generated from Mozambican enterprises that would supply goods and services to the project, and (d) value added. Furthermore, (e) training programs and work experience will result in broadening the skill base, (f) development of grid power, improved roads and additional services (schools, clinics, power and water supply) will develop and enhance the living standards of the local people: finally, (g) the project will generate USD 75 million per annum and has potential for future expansion.

Justificatio n: The province in which the project is located has low level of services; extremely limited infrastructure and high levels of unemployment characterize villages of the area. This project has the potential to make a significant number of positive contributions and represents a relatively sustainable (at least 20 years), moderately equitable, developmentally desi rable and efficiently uses resources of the Moma area. It is in line with the Bank's intervention in the private sector and GOM's plans for developing its natural resources as a major foreign earner. The Bank assistance will enable Mozambique to develop and beneficiate one of the largest titanium mineral sands deposit in the world.


Benefits

The economic benefits are primarily a result of increased employment opportunities, expansion of the skills base and the extension of services to one of the poorest district of the country. Further socio-economic impacts include local, national and provincial economic benefits as well as the expansion of the national tax base and higher tax revenue for the Mozambican Government. These direct and indirect benefits arise from construction and operation activities of the project.

4.11.2 Direct Benefits: The direct benefits to the country will arise from a number of sources including income taxes, royalty, payment of IFZ fees, duties paid on consumables and non-mining goods, et c. The project will provide strong economic impetus and at the same time stimulate industrial growth in Mozambique, and would provide significant economic benefits for the country.

4.11.3 Indirect benefits during Construction and Operation: at the peak of construction their contractors, a large number of Mozambicans will employed either directly by KMML and KMPL, or by contractors, subcontractors and suppliers. The government will get substantial taxation revenues from secondary taxation in the form of personal income tax on project employees. Moreover, there will be significant revenue generated from personal, corporate, value added, import and other taxes generated from the independent Mozambican enterprises that will be created to supply goods and services to the project.

4.11.4 Employment: The project will employ about 1,200 and 436 people during the construction and operation periods, respectively. Additionally, it is also estimated that about 1,500 jobs will be created outside the mine due to ancillary and support services required by the project. While the major socio-economic impact will be in the Nampula province in which the project is located, skilled and experienced workers will be recruited from other parts of the country. In due course, there is a plan to expand the operations, which will result in additional job opportunities.

4.11.5 Economic Development: The project will contribute to the economic and industrial development of the country, particularly Nampula Province, both through procurement of goods and services as well as through contribution to the local economy through wages and salaries. This will in turn foster the enterprises and entrepreneurship, thereby creating sustainable domestic com panies that will be owned and run by Mozambicans. As noted earlier, the project will generate export revenues of about US$ 75 million per annum or US$ 1.5 billion over the life of the project. Fu rther socio-economic impacts include local, national and provincial economic benefits as well as the expansion of the national tax base and higher tax revenue for the Mozambican Government. It will contribute up to 2.4 % per annum of Mozambiques GDP. Foreign exchange from the proj ect will contribute to the countrys balance of payments.

4.11.6 Social Development: The project is located in a remote and underdeveloped area. Hence, from social perspective, the devel opment of necessary infrastructure including roads, power and water supply, clinic, schools airstrip, and additional services will develop and enhance the living standard of the people in the project area and beyond. Furthermore, the local employees will be trained on-and-off the job. Training programs and work experience will result in strengthening the skill base of the employees, and will facilitate future creation of additional industrial and co mmercial projects.

4.11.7 The development of the project of this size and scope will act to further enhance the reputation of the country as a suitable location for direct foreign investment. It will demonstrate the effectiveness of progressive initiatives such IFZ scheme in attracting investment and act as a pathfinder for further investment in the country. Fi nally, the sponsor has established a Development Foundation of USD 100,000per annum or USD 2 million over the life of the project. The project companies Fund will be financed for local programs. The local community will also benefit from new infrastructure (roads and utilities) and proposed development foundation, which will be funded by the project companies for local programs.


Key contacts

M'PENG BAYOI Daniel Constant - OPSD4


Costs

Finance source Amount
ADBUSD 29,058,364
DeltaUSD 225,202,636
TotalUSD 254,261,000