AfDB Approves US$ 175 Million Loan for Mining Operation in Mauritania
Tunis, 16 September 2009 – The Board of Directors of the African Development Bank (AfDB) on Wednesday, 16 September 2009 in Tunis approved a US$175-million loan to finance the expansion of the Guelb El Rhein iron ore mine operations in Mauritania.
The National Industrial and Mining Company (SNIM) Guelb II Project involves developing an existing mine and constructing a new iron ore enrichment plant for the production of an additional 4 million tonnes of iron ore concentrates per year. The SNIM, which produces 11 million tonnes of iron per year, is a privileged partner of the Bank Group. Since 1978, the Bank has participated in the financing of five SNIM transactions, totaling UA 91 million, equivalent to US$ 143 million..
SNIM is the largest company in Mauritania, and the world’s seventh largest iron ore exporter. The government holds 78% equity participation in the company.
The quality of Guelb iron ore concentrate addresses customers’ concern (low silica content). SNIM enjoys a highly competitive position in Europe due to its low production costs and proximity to its traditional customers. It is also well placed to supply the Chinese market. The iron ore market remains cyclical and its development depends on the construction, infrastructure and automobile sectors, among others. The Guelb II project will enable SNIM to consolidate its position for the expected medium-term recovery.
The Guelb II Project is in line with the government’s strategy to develop the mining sector, which is one of the country’s engines of economic growth. The sector’s position has been strengthened in recent years under the impetus of a dynamic mining policy aimed at enhancing the attractiveness of the sector for private investment, diversifying mining production and, thereby, reducing the economy’s vulnerability.
For its second phase covering the 2006-2010 period, the Government’s Poverty 10 Reduction Strategy Paper (PRSP) reaffirms its support to the mining sector. The main challenge lies in completing major ongoing investment projects at SNIM likely to enable the mining company to significantly and sustainably exceed 12 million tones of exports, within a short time-frame.
The project to expand SNIM’s capacity is in line with the new Bank strategy in Mauritania, currently under preparation. Following early consultations with Mauritanian authorities, the new strategy will not only focus on infrastructure development, but also on strengthening economic and financial governance, and more particularly, improving the investment climate and business environment to foster enterprises development. It is also aligned to the Bank’s Private Sector Operations Strategy aimed at assisting national enterprises and developing the country’s natural resources.
In addition to the financing, the Bank has contributed significantly in maximizing the project’s environmental and social benefits. It mobilized significant resources to manage the preparation of the environmental framework study and the Environmental and Social Impact Assessment (ESIA), for the benefit of all donors. Finally, SNIM will create direct and indirect jobs and generate significant income for the Mauritanian government (by way of taxes and dividend) which will enable the country to pursue its growth in other key sectors (building, infrastructure, industry and housing).