The Global Iron Ore Mining Industry - Essay Example

? Iron Ore Production in Sudan al affiliation: Outline on Resource The natural iron ore resources in Sudan a) The Availability of Iron Ore in Sudan b) Statistics on iron ore reserves in Sudan c) Studies on Sudan’s iron ore deposits d) Analysis of the Undermining of Iron mining in Sudan Iron Ore Production In Sudan Introduction Despite the Global Iron Ore Mining Industry having undergone a highly volatile financial performance in recent years, having weathered double-digit declines as well as triple-digit revenue spikes, in the years ranging from 2008-2013, immediately after the extraordinary growth witnessed in the years 2010 and 2011, revenues throughout the industry were seen to contract due to the plummeting average price of iron ore, however, industry performance in the iron ore industry is expected to greatly recover mainly on the back of the rapidly rebounding iron ore prices. It is currently estimated that industry revenue will grow by about 4.7% to eventually total $264.3 billion over the year. Providing a great opportunity for investors. According to a recent KPMG report, the continuing global urbanization is set to drive the demand of steel, effectively doubling it by 2050 and at the current level of demand the iron ore reserves in Brazil’s Minas Gerias and Australia’s Pilbara will generally be exhausted by then. It is predicted that as the world gradually runs out of hematite deposits, there will spring the need for new sources of iron. One of countries that is seen to offer an amazing opportunity for the iron ore industry. Sudan’s full iron ore production potential has never been fully exploited nor has it been completely analyzed but its location next to Congo and the iron ore reserves that are already being mined have shown promising results. By investing in Sudan’s iron ore industry, investors from the GCC stand to reap immense benefits from the virgin iron ore industry in the country Resources In a study conducted by Waldelnour, et al. (2010), both the Western and Eastern parts of Khartoum have relatively rich iron ore deposits. The type of iron ore deposits that is seen to be available in these areas is generally found in the Mesozoic and especially so in the Upper Cretaceous. This iron ore is generally characterized by having a relatively high tonnage, in addition to its low-grade quality. However it is quite possible that if the country’s investment policy were to be reviewed so as to essentially favor investment in the iron and steel industry, this could have the potential resultant effect of entirely revolutionizing the steel industry in the country especially so in light of the fact that these deposits tend to cover vast expanses of land (Waldelnour, et al., 2010, pg. 2). Sudan’s rich mineral resources: Sudan’s rich mineral that could possibly be exploited by investors includes: According to Mann & Mendenhall, (1964), the Geological Department in Sudan published the Fodikwan Iron Deposits. Sudan’s Fodikwan group of deposits are found to be mainly located at approximately 21?-45’ N. latitude and between 36 ? -45’ E. Longitude this region is found to be in the areas around the north Red Sea Hills areas of the country, at an approximate distance of about nine miles inland from its Port Sudan-Halaiba Road. This is an estimated distance of about 167 miles from the country’s Port Sudan. The nearest harbor that can service any transportation of these iron ore resources is found to be at Marob, which is at a distance of approximately 12 miles from these deposits. It would be necessary for the country to develop a Jetty to support the loading of ships with the processed iron, steel or iron ore that has been mined from this region. The report also indicated that the iron deposits in the country can essentially be divided into the two categories of solid ore which is seen to constitute about 147,000 metric tons of relatively accessible ore containing about 60%Fe, while the mixed ore deposits were estimated to stand at 95,000 tons with an iron content ranging between 50%-60%Fe. This government reports is seen to conclude that the ore deposits are in the form of a sheet. However, other results released in a study conducted by Central Desert Mining Co. indicated much larger deposits of ore containing over 50% Fe to be about 1,923,176 tons while ore containing between 20-50% Fe to be about 420, 811 tons. The report by Mann & Mendenhall, (1964) also makes note of the fact that based on research on boreholes that were made by a team of researchers from Yugoslavia, there are apparently more iron ore reserves in the country than those indicated by the Sudan Geological Survey Report. The report also encouraged ongoing talks for the development of these mines in addition to recommending that economic feasibility studies should essentially be undertaken to start mining the iron using the relatively cheaper open pit method (Mann & Mendenhall, 1964, Pg. 16-18). In a statement by Abdul-Latif the Sudan Minster of Minerals, the six blocks of RNS5, RNS1 and RNS5 situated at Nahral-Neil State, NS6 and NS1, located at the Northern State and SK47 located at Kordofan State will made available to suitable developers for Iron ore mining. The suitability of the companies that will be chosen to undertake the mining operations will mainly be based on their general commitment to promoting Sudan’s iron and steel industry by undertaking to manufacture iron within the country of Sudan, this is in addition to their being able to fulfill the laid out terms pertaining to the required technical and financial ability. The minister further pointed out that by undertaking efforts geared at encouraging the production of iron within the country, Sudan stood to benefit from the development of heavy industries in the country. (Sudan Embassy, n.d). Abdul-Latif Further pointed out that the country’s exposed rocks in the regions planned for development are essentially comparatively advantageous for mining operations as a result of their relatively close proximity to several energy sources that will be required to run operations at the mines that will be located in these areas. The areas are also served by good infrastructure that will serve to make it easier for mining operations to be conducted in these areas (Sudan Embassy, n.d). A study conducted by Seifelnassr, Moslim & Abouzeid, (2012), has shown that magnetic and gravity concentration techniques have been effectively used in the benefication of Sudanese Iron ore at Wadi Halfa. Although the iron ore content in the deposit averages at about 35% Fe the gravitation and magnetic techniques have been seen to help increase the concentration of the Fe to about 64% Fe (Seifelnassr, Moslim & Abouzeid, 2012, pg. 1). The findings by Waldelnour, et al. (2010) are seen to be further supported by similar findings by the United Nations Conference on Trade and Development (UNCTD). According to a report released by the UNCTD, the government of Sudan recently provided the organization with the results of a study that had been conducted to ascertain the quantity of iron ore deposits in the country as provided by the country’s Geological Research Authority. Although Iron ore deposits are seen to be found in various areas of the country, the most important areas are found to be mainly the areas to the western, eastern and central parts of the country. The deposits at Sufaya are found to have an estimated 12 million tons with about 40 to 50%Fe, and were mostly magnetite ores, the geological prospection that had been carried out at the Karnoy deposits indicated that the ore had about 60%Fe, preliminary results from the deposits at Abutuly were evaluated at about 35 million tons of reserves while the Korora deposits were found to mainly consist of magnetite with an estimated total reserve of 6.5 million tons with an estimated 48% of Fe. Although no major detailed geological studies have been undertaken, the existing surface estimations of the iron ore reserves in the country currently stand at about 1 billion tons (UNCTD, 1994, pg. 21). The production of Iron in Sudan is found to be commonly overlook, this trend is reflected in a report by Yager, (2002) that shows that despite the country having relatively large deposits of iron ore, it still continues to import iron ore in increasing quantities, Steel and Iron imports by the country are estimated to comprise approximately 6% of the country’s total imports. Steel mining industry is seen to be greatly undeveloped as compared to other mining industries such as cement with is estimated to stand at about 190,000 tons as compared to steel’s annual production of about 60,000 tons (Yager, 2002, Pg. 27.1). A number of developing countries have been able to successfully industrialize their countries by developing their iron and steel industries. According to a paper that was presented by the AISA Secretary General during a regional conference on Trade in Steel Products (2002), despite the varied attempts by various organizations such as the IMF to try and halt the industrialization process in some of the world’s developing countries, by causing these countries to effectively become mere dumping grounds for steels received from the developed countries, Sudan should be able to learn from these countries as some of these developing countries have been seen to develop their iron and steel industries which have helped serve as a conduit for lifting their economies away from the constant challenges of starvation and poverty and by their doing so, have been perceived to persistently pose as a significant threat for the economic wellbeing of the developed countries (Mohammed, 2002). However, of important notice to Sudan is that the various steel projects in these countries were seen to start as serious national projects, with the various governments in these countries being perceived to take a relatively very active interest in the development of iron and steel industries in their countries. A major example of how developed iron and steel industries can contribute to the general development of iron and steel industries in a country is seen in the development of Pandit Nehru of India, these were once commonly referred to as the giant structures that were seen to be coming up in Ruerkehela, Bhilai and Durgapur but later on in the late 1950s, they came to be referred to as the “Temples of Modern India” (Mohammed, 2002). Sudan can be able to learn a valuable lesson from countries like Saudi Arabia, Algeria as well as Saudi Arabia who despite having fabulous oil reserves similar to Sudan, were seen to considerably invest in developing their steel industries and have been noted to continuously be expanding these industries. Some more examples of other third world that have relatively developed steel and iron industries include Mexico, Indonesia as well as Venenzuela (Mohammed, 2002). Sudan minister of mineral Abdul-Latif has announced plans by the country to attempt to further develop its iron and steel industry by making preparations on a planned study of the general feasibility of the country undertaking to establish a steel and iron plant in the country’s Red Sea region, this will aid in providing more opportunities for GCC investors (Sudan Embassy, n.d). Outline on Competition 1. Challenges facing iron ore mining in Sudan a) The under development of mining in Sudan. b) Effects of black market operations on Sudan’s mining industry. c) Sudan’s performance as compared to major iron producing countries. d) Africa’s mining operations. e) Exportation of iron ore to China. f) Under exploitation of Sudan’s iron ore reserves. Competition Sudan has been continuously affected by civil war for about 34 of the past 45 years. The country which is estimated to have a population of about 36 million people has been severely affected by the war that has seen it generate some 4 million displaced people as refugees over the course of the war. The constant fighting in the country is seen to have severely affected the mining operations in the country has been seen to result in the needless death of an approximated 2 million Sudanese people (Switzer, 2002, pg. 2). However, having recently come from the throes of war, Sudan is now ripe for investment by GCC investors and the country promises good returns. In a study funded by various credible international institutions, Switzer, (2002), the crisis that was seen to be severely impeding the country’s iron production capacity can essentially be blamed on a number of with some of the factor being ecological and related to the iron and other minerals mining industries in the country. Some of these ecological factors have been seen to include disagreements over the general control of some of these vital natural resources, the distribution of the income that is derived from the natural resources as well as conflict on the probable means to be employed in the production and means of management of these natural resources. All these factors have been seen to greatly contribute towards the under development of the country’s iron and steel industry (Switzer, 2002, pg. 4). The extraction of mineral ore resources is proving to be a rather daunting task in parts of Southern Sudan. As shown by Holland, (2013), in the absence of adequate infrastructural and legal facilities, since Southern Sudan voted to secede from the Larger Sudan, the miners have been forced to undertake black market operations where merchants take the gold across the border to sell to Kenyan traders and thereafter purchase stock to take back to their country. It is important for governments to ensure that they develop appropriate legal structures to ensure that the government does not go at a loss because of the black market trade when the traders happen to move the gold out of the country illegally and hence deny the government export revenue (Holland, 2013, Pg. 44). GCC investors will benefit from the planned government support that has been promised on the industry. The black market operations are seen to be critically challenging plans by the government to try and introduce relatively severe austerity measures. These measures were planned to be mainly centralized on expanding the government’s tax collection activities in addition to attempting to explore fresh sources of revenue to try and replace petrodollar revenue. These measures were implemented after Southern Sudan’s row with the Khartoum government over the revenue given to the Sudan government on oil produced in South Sudan. The Row resulted in the shutdown of the oil industry in South Sudan a factor that was seen to critically affect the government’s revenue collection as the revenue it collected from oil was seen to account for about 98% of the Southern Sudan government’s revenue (Holland, 2013, Pg. 44). According to the merchants selling the mineral across the border in black market operations, the main purpose why they buy the gold form the miners is to attempt to change currency. While the miners have been mainly concentrating on investing the fortune that they receive from the mining and black market operations in the more traditional method of investment and that is investing money in purchasing cattle. By implementing a set of new mining laws, government officials have been seen to hope that the laws will help stop the black market operations and encourage sellers to sell their minerals to government authorized and legitimate prospecting companies. This will serve to aid both the state and national governments to be able to reap immense benefits from the sale of the Sudan’s mineral vast wealth (Holland, 2013, Pg. 45). Despite having relatively large reserves of iron ore, Sudan is seen to essentially not feature among the world’s top producers of iron due to the fact that the country has opted to concentrate more on the production of gold, cement and other minerals as compared to Iron (US, Library of Congress, n.d). At a production capacity of an estimated 1.3 million tons a year, China is seen to be the world’s biggest producer of Iron, Mauritania and South Africa are seen to be the only African countries that happen to feature in the list of the Largest Iron producing countries in the world (Tuck, 2013, Pg 84-85). The United States was able to produced an estimated 54.7 million metric tons of Iron ore in 2011.As compared to this Sudan is faced with a huge challenge if it is to grow its production capacity so as to be able to effectively compete with these top producers (Tuck & Virta, 2013, pg 3.1). According to Tuck and Virta, (2013), various companies around the world were seen to continue to expand both their facilities and operations in addition to intensifying their efforts to investigate new deposits. It should be a challenge to the Sudan government that these countries are estimated to have used the approximate amount of $1.84 billion in efforts geared at investigating new iron deposits. Efforts by these countries lead to an increase of about 1.5 billion metric tons (Gt) of steel in the year 2011, from the 1.4 billion metric tones (Gt) of steel that were seen to be produced in the year 2010 (Tuck & Virta, 2013, pg 3.9). It is also of important notice to Sudan that according to the report by Tuck & Virta, (2013), trade in the world’s iron imports was reported to have increased by about 6.8% to about 1.12 Gt as compared to the imports that were recorded in the year 2010. This was seen to reflect a continuous trend that has seen relatively large year on year increases in the amount of imports that has been recorded over a period spanning the past 10 years. Africa’s full iron ore mining potential has largely not been achieved with its current production currently being mainly dominated by South Africa which is seen to contribute an about 40% of the total iron production on the continent. Given the manner in which iron ores in Africa are found to be spatially concentrated, it is found to be undoubtedly clear that Africa is evidently one of the foremost iron ore mining countries in the world. The various high grade iron ores that have seen to be present in some of the African countries are seen to have relatively high iron content and are a major source of iron extraction. If Africa were to implement better technology and infrastructure, it could potentially be able to easily be perceived to be the top iron ore mining and exploration continent. More explorations need to be carried out in some countries such as Sudan so as to ensure that they fully benefit from any deposits which may be found (Rachana, n.d). Although Sudan was recently able to export an estimated 40,000 tons of iron ore to China in several parts since its first ever iron ore shipment to the country in 1967, it is quite worrying that there has been relatively very little effort to increase this potential over the years. Ali Mahmoud, who happens to be Sudan’s minister of finance was keen to laud the efforts geared towards investing in the country’s electricity and mineral industries by the Republic of China (Sudan, n.d). Sudan should attempt to ensure that it directs some of the investments from the Republic of China towards its iron industry to promote their development. Mohamoud, further stated that mineral production in Sudan is poised to become a strong element in supporting the economy of the country. Sudan stands to gain immerse benefits from the experience that it stands to receive from China as well as China’s innate capability of upgrading the existing mineral resources investments in the country (Sudan, n.d). However, Sudan is seen to essentially be keen to implement various regulations designed to enforce environmental protection in the country even as various mining operations continue to be developed. The country is promoting the adoption of a variety of new environment friendly, technologically advanced and clean mining methods in the country’s various mining industries (Sudan, n.d). Chinese investment in the country can potentially lay a major role in helping Sudan iron production capability. According to US Library of Congress (n.d) There are a number of proven iron ore reserves in Sudan in various parts of the country that although they have been mined, the mining operations at these locations have been seen to be relatively small by the current international standards. The Library of Congress report further points out that there are an approximated 500 million tons of iron ore deposits in Sudan’s Fodikwan area that is located around the Red Sea Hills region of the country. The Sudan government had initially started a project back in the late 1980s to attempt to produce about 120,000 to 200,000 tons of iron ore each month. However, the report highlights the fact that the proper exploitation of the mineral reserves in Sudan will largely be dependent on the foreign companies that will be found to be willing to undertake the risk of exploiting the country’s minerals in light of the various insecurity and political problems that are seen to be facing the country. This is in addition to the foreign company having to face a variety of often unpredictable international market factors that might adversely affect their profit margins (US congress, n.d). Conclusion The mineral rich Sudan has in recent times created a good investment opportunity for GCC investors willing to invest in the country’s infant iron ore industry. With the plans to lay down new infrastructure as well as the announcement by the minerals minister informing of plans to open up new areas for investors, GCC investors are seen to be afforded more investment opportunity. Plans by the new South Sudan government to diversify the country’s economy from being mainly reliant on petroleum and build up the country’s steel industry is seen to help provide a favorable environment for GCC investors (Mandsen, 2013), . References: Holland, H. (2013). Mining law set to bring light to Juba’s black market. Gold Mining Journal, Jan/March Iss. 44-45. Mann, D & Mendenhall, J. (1964). A Report on Field examination of Mineral Deposits in Kassala province, Sudan. Retrieved from http://pdf.usaid.gov/pdf_docs/PNADX193.pdf. Rachana. (n.d.). Iron Ore Mining Exploration in Africa. Retrieved from: http://www.rachanaglobal.com/iron_ore_mining_exploration_africa.html. Seifelnassr, A., Moslim, E., & Abouzeid, A. (2012). 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Retrived from http://www.iisd.org/pdf/2002/envsec_oil_violence.pdf. Madsen, M. (2013) MINING INDABA 2013: South Sudan iron-rich and ‘open for business’, minister says. Retrived from http://www.nkmining.com/documents/Mining_Indaba_Article.pdf Read More