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Mineral Wealth Conference

KEYNOTE ADDRESS

By
H.E. Yoweri Kaguta Museveni
President of the Republic of Uganda

At the Mineral Wealth Conference

Speke Resort Munyonyo     -    1st October 2014

The Minister of Energy and Mineral Development, Chairman and Members of the Uganda Chamber of Mines and Petroleum and
All Participants,

I wish to take this opportunity to congratulate the emerging Chamber of Mines for organizing this Conference in which you are discussing what it takes to make Uganda a Mining Nation.

In my view, it is important for all of us to understand the characteristics of the mineral industry in order to clearly answer the question set by this conference – “What does it take to make Uganda a Mining Nation?”  The mineral industry is capital intensive, high risk, long term, requires high technology and the business is international in nature.

In that regard, to have a successful mining industry, Uganda has to be peaceful as investors will not risk the high capital required to explore for minerals and carryout mining if there is turmoil.  The country has to minimize the risk of finding economic mineral deposits by providing technical information and data to guide companies and people carrying out mineral exploration so that exploration programmes are focused and time is not wasted in unfruitful mineral exploration ventures.  The country has to provide the required infrastructure like roads and electricity to the mining areas to enable operations to take place in an efficient manner.  As a land locked country, the railway is important to enable processed mineral commodities gain access to the international markets.

In other-words Uganda has to create a conducive environment to attract tangible investments in the mining sector and I will therefore, outline the actions which the NRM Government has taken to stimulate the mining industry in the country.

Most Ugandans know that the long period of political and economic mismanagement of between 1971 and 1986 resulted into the destruction of much of the country's infrastructure and industries including the mining industry. For example, Kirwa Wolfram Mines Ltd. and Bjordal Wolfram Mines Ltd that were traditionally major producers of wolfram; Kilembe Mines Ltd that was producing blister copper; Tororo Industries and Chemicals Fertilizers (TICAF) that was producing fertilizers; The East African Glassworks Limited that was producing sheet glass; and African Ceramics Ltd that was producing ceramics closed during this period because of political instability.

In order to stimulate the mineral industry that had experienced serious decline, the NRM government conducted a review of the mineral sector in 2001 and identified four broad constraints/issues which were: i) lack of a Mineral Policy; ii) outdated and non-competitive Mining Legislation and Fiscal Regimes; iii) inadequate geoscience data and information; and iv) a constrained human capacity and inadequate infrastructure in terms of laboratories, computer hard and software as well as office space.

A Mineral Policy was put in place in 2001, with a goal of developing the mineral sector, for it to contribute significantly to sustainable national economic and social growth by creating gainful employment and providing alternative source of income particularly for the rural population in Uganda.

To overcome the key constraint of lack of modern technical data in the mineral sector, Government injected funds in 2004 to the tune of US$ 44.70million to carry out airborne geophysical surveys; detailed geological mapping and mineral resource assessments; capacity building; and rehabilitation of the dilapidated infrastructure like laboratories and office space. Some of you will remember that, that is the strategy which the NRM government used in the oil and gas sector and we now have very positive discoveries of petroleum.

An extensive acquisition, processing and interpretation of airborne geophysical data (magnetic, radiometric and selected electromagnetic) was undertaken from 2006 to 2009 covering 80% of the country. The airborne surveys were followed by ground geological mapping, geochemicalsurveys, and mineral resources assessments.The generated data from the surveys has resulted into the following major findings:-

(i)    New Iron ore deposits:
Using the new generated airborne geophysical data has led to the discovery of over 200 Million Tons of iron ore reserves from the 3 million tons which were known at Muko in Kigezi area. Now we have:-  50MT at Million Tons at Muko (Kisoro district); 48MT in areas of Buhara, Muyebe and Nyamiringa (Kabale district); 8MT at Nyamiyaga and Kazogo (Kisoro district); 55MT at Kinamiro/Rugando near Butogota (Kanungu district); 2MT at Mugabuzi (Kazo district); and 23MT at Bukusu (Manafwa district) and 45 million tonnes at Sukulu in Tororo District. Additional reserves have been established and are now more than the 45MT tonnes of iron ore that were previously known.  

(ii)    Kisita and Kamalenge gold prospects:
Using the new generated airborne geophysical data, the investors involved in exploration have identified a new target in eastern part of Kisita mining camp. Similarly, a new target at Kamalenge-Kyasampawo identified by the same airborne geophysical data has been confirmed to bear an estimated five (5) million troy ounces of gold on the surface. The planned drilling of the prospect by the investor will establish the extent of the ore body at depth and also come out with additional gold reserves.

(iii)    Increment of reserves at Namekhara vermiculite deposit in Manafwa district:
The mine currently operated by M/S Gulf Resources Limited used the new generated airborne geophysical data and carried out additional exploration work and established extra reserves that rose from the previous 5 million tonnes to the current 54.9 million tonnes of vermiculite. With the increased reserves established, the deposit is considered to be world class and the operators of the mine have recently installed a new plant with production capacity of 80 tonnes per day.

(iv)    Marble/ limestone reserves in Karamoja Region
Recent geological mapping and mineral exploration targeting marble/limestone in Karamoja area has discovered over 300 million tons of marble/limestone. This will boost the cement industry as known deposits in Hima and Tororo are getting depleted.

Using the same new generated airborne geophysical dataintegrated with the ground geological mapping and mineral resources assessments, new potential targets that need to be studied in detail have been identified. These new targets need additional investigations through drilling to be undertaken by private investors in order to ascertain reserves of the following minerals:

i)    Gold mineralization in Zeu area, Zombo District; Kitaka-Buhweju area in Buhweju  district; Kafu River area in Hoima district; Kaliro-Ivukula  area in  Kaliro district; and Aboke-Aloi area in Lira district.

ii)    Nickel, platinum and chromium targets in Iganga, Kiryandongo district and Lamwo district.

iii)   Kimberlites (Diamond host rocks) targets in
       Kidera, Buyende district.

iv)   Limestones, Phosphates, Iron Ore, Titanium,
       Vermiculite and Rare Earth Elements in     
       Bukusu hills and their surroundings in   
       Manafwa district.

v)    Iron Ore in Mayuge and Kiryandongo district.

vi)   Bentonite Clays and Kaolin in Kaiso area of
       Hoima district.

vii)  Aluminous clay containing Rare Earth Elements
(REEs) in Makuutu-Buwaya, Mayuge district that are estimated at 3 billion tonnes.

Similarly, the new generated airborne geophysical data resulted into the discovery of over thirty (30) Uranium targets out of which ten (10) are considered priority uranium targets in Arua, Packwach, Gulu-Kitgum, Masindi, Hoima-Kibaale, Fort Portal, Mbarara and Ntungamo areas. These targets are considered to be first order priority for drilling.

Besides the technical interventions which I have outlined above, other fiscal and legal incentives have been put in place. Broadly, government has liberalized the economy, state monopolies have been reduced drastically and we allow free international flow of capital and externalization of dividends and profits.

In order to promote and sustain investment in the mineral sector, the government allows investors undertaking mineral exploration to import equipment used in the exploration activities at a zero rated tax. This is important because at this stage of exploration, the investor has not generated any income to be taxed. Similarly, under the tax provisions, Government has put in place a Variable Rate of Income Tax (VRIT) that depends on the profitability of the project. This intervention takes into consideration that global mineral prices always fluctuate and in that regard if the prices are high the investor will be taxed more and if the prices are low, the investor is taxed less money.

On the legal side, the NRM Government has created extra stability in terms of tenure of the mineral rights. For example, the Exploration License that previously took one (1) year, currently it takes seven (7) years and the Mining Lease is now for twenty one (21) years with a renewal period of fifteen (15) years. This intervention put in place by the Government provides a longer period for the investor to recover his/her invested money and also allows him/her to pay back the bank loans. However we do not allow speculators who get mineral rights and sit on them without doing any work.

The mining legislation also caters for the sharing of royalties, generated from the sale of minerals, by the Central Government, the Local Government and individuals or groups of landowners. This has created a strong partnership between the Central Government, Local Governments, Landowners and the investors where mining is taking place.

I wish to sensitize and impress upon everyone that there is need to embrace the Government’s policy of value addition to minerals before being exported. In that regard, it is important for the investors that are going to mine the minerals I have indicated above to add value and produce secondary products such as iron and steel, fertilizer sheet glass, metals, cement and other building materials. Government will ensure that inputs required for value addition especially energy used for processing of these mineral ore is available. The NRM government has an aggressive programme of increasing power generation by construction of new power plants like Karuma (600MW), Isimba (183MW), Ayago (680MW) and other small renewable power plants as well as thermal plants from our own petroleum, which will avail adequate electricity to the investors.

I know the country has had a challenge of availing coal  which can be used in iron ore processing to produce iron and steel products as the coal has to be imported all the way from Mozambique or from the interior of southern Tanzania. However, with the discovery of gas in the Albertinegraben in western Uganda where a total of 499 billion cubic feet of gas has been established, this will remove the constraint of the raw materials and enable processing of substantial quantities of iron ore into secondary finished iron and steel products. I am informed that 499 billion cubic feet of gas can produce 1 million tons of iron and steel per year for at least 50 years.

Government is working on expanding the railway network of standard gauge to the interior of the country in order to facilitate transportation of imports from outside the country and also support exportation of finished products to the external markets. This intervention will also support the investors in the mineral sector to export their finished products within the country, the region and also the international markets.

Some of the investors have brought to my attention the issue of VAT tax which is  being applied to mineral and petroleum  exploration projects prior to production where there is no cash flow and is therefore increasing the burden of raising extra investment  capital for project.  Government is considering this matter so that we can resolve it and end up with a win-win situation.

In conclusion, I wish to emphasize the point that the mining sector is very promising and has a lot of investment opportunities which Ugandans and the world community are invited to come and participate in. On our part as government, we shall continue to improve the business environment in the country in order to ensure that all investors are well guided in exploration, development and production of Uganda’s mineral resources.

For God and My Country!