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infrastructure investor

corporate interview Nnamdi Obiago, CEO of Nigerian mining company Proper Technologies, on how life for junior African mining companies is tough and why some mineral sites have to be abandoned
We must recognise that poverty is a huge problem and it is right that people want to improve their lives. We always aim to put communities first because if you cant work peacefully you cant work at all. But mining companies cannot solve all the worlds problems. In the first instance, our finances are severely constrained. Mining projects have a longgestation period with high up-front costs. Borrowing costs in Nigeria are extremely high, and interest rates of 20% or more are usual. If we added in huge community programmes you would end up seeing a lot of failed projects and little development.

In your decisions to explore and develop new areas, how important is having basic infrastructure in place already?

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For a small mining company like Proper Technologies, it is essential. We cannot get to mines if there are no roads and we wouldnt be able to get the minerals to market. We can overcome power shortages through using mobile generators, but water is essential. Nigeria is rich in tin, columbite, zinc, lead and barite but many mines are abandoned because the right infrastructure is not in place. Last year the Federal Government had to suspend its coal lease privatisation programme because of poor infrastructure. It is now looking at solutions that incorporate the provision of infrastructure alongside the granting of mining rights. Building infrastructure will be a part of the payment for the mine, but this will be very difficult for indigenous mining companies. We need an influx of mining majors who can partner with local firms. We know the geology and the local conditions, but do not have deep enough pockets or sufficient access to finance to build the infrastructure to kick-start the countrys mining industry. Government needs to do a better sales job of prospects in Nigeria and attract more attention from big mining companies.

How much of total project investment goes on support infrastructure when developing a new mine?

support and finance artesian groups and help meet some of their infrastructure and social needs. But the returns are too low to justify spending more than about 10% of mine development costs on infrastructure. As a real mining company, we might look to invest more in infrastructure, perhaps up to 25%, but this would really depend on the quality of the mine. Many good quality mines in Nigeria are economic non-starters because they lack basic infrastructure. Infrastructure development should be the responsibility of government, but the government also lacks funding and ideas on how to deliver. Mining companies could fill part of that gap. But this will only be effective if action is properly coordinated with government and by officials who understand the dynamics of our industry. The government tends to take unilateral decisions and therefore waste opportunities for synergies. We have the Miners Association of Nigeria, which would be more than happy to discuss these issues with government, if government were interested.

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Alain, Dreamstime.com

Nigeria exports oil and imports petrol. Is there a parallel in the mining industry?

Yes. Nigeria has vast tin and columbite resources yet we import tin plates and pay 25 times what wed have to if we manufactured them here. We totally fail to add value to our mineral resources. The government is trying to address this but you must recognise that our legacy infrastructure is geared towards export of raw materials. Current rehabilitation programmes will only restore our infrastructure to that same state.

What is your view on Chinese activity in Africa?

Do governments and local communities expect too much from mining companies?

I certainly admire the Chinese for their recent economic progress and their inputs into African development but I am aware they like to get their resources from Africa cheaply. Any deal you do with anyone should be properly scrutinised and evaluated, and this is particularly true if working with the Chinese. Their interests are primarily the development of their own economy and they are not always easy to deal with. Africa needs to cultivate a cadre of Chinese specialists in order for us to derive the maximum benefit from our relationship with China.

Currently, artesian miners carry out much mining in Nigeria. They are typically organised into small groups, often around family structures. These artesian miners have almost no capital to invest in infrastructure. One of the things we do is to

Local communities sometimes feel mining companies are out to steal their God-given resources. This is not the case. Responsible mining companies recognise that good community relations are essential in this business and that means supporting local development. But there has to be a balance. If a local community demands roads, water supplies, hospitals and schools before we even start exploring, we will be forced to look elsewhere and everyone loses out.

Nnamdi Obiago is CEO of Proper Technologies (www.propertechnologies.com), a Nigerian mining company established in 1989, which works in mining, metals trading and natural resource development. It is currently developing a plant for lead and zinc beneficiation in eastern Nigeria, reopening tantalite mines in western Nigeria and prospecting for tin and columbite in Nigeria's middle belt. He talked to Simon Griffiths