Burundi Takes 15% Ownership of Kermas Nickel Project

Burundi’s government took a 15 percent stake in a project to build a nickel and iron mine led by Burundi Mining Metallurgy Ltd., said Danko Konchar, chief executive officer of Kermas Group, the majority owner.

The state’s stake in Burundi Musongati Mining, of which BMM holds the remaining 85 percent interest, was part of the terms of a mining-license agreement signed this month, Konchar said in a June 19 phone interview from Saint-Tropez, France.

The project will require investment of “a few hundred million dollars” to construct the mine and a facility to process 1 million metric tons of ore annually into iron, nickel and cobalt within the next five years, said Konchar. The goal to increase capacity at the plant to handle 5 million tons annually within a decade will cost about $3 billion, he said.

Burundi holds 6 percent of the world’s nickel reserves, with Musongati ranked as one of the 10 largest known deposits of the metal that have yet to be developed, according to the Tunis-based African Development Bank. The East African nation produces small amounts of tantalum, gold, limestone, niobium, tin and tungsten and also has deposits of copper, the U.S. Geological Survey says on its website.

Mineral resources at the Musongati mine are estimated at 250 million tons of ore, according to the USGS. Small-scale miners currently operate at southeastern Musongati and, like other mineral deposits in the country, its development has been hampered by inadequate electricity supplies, roads and railways.

Energy Shortages

The company plans to deal with energy shortages by developing hydro- and solar-power plants to generate as much as 800 megawatts of electricity, said Konchar. Metal shipments will be ferried by road about 180 kilometers (112 miles) to a railway link in Tanzania and then transported to the port at Dar es Salaam, said Konchar.

Kermas, based in the U.K. and with mining operations in South Africa, Zimbabwe and Turkey, has a 91 percent shareholding in BMM. BMM has spent about $100 million exploring in Burundi since receiving its exploration license in 2008, Konchar said. The start of mining production at Musongati has been delayed after the government previously set a target of 2012.

A 12-year war that ended about a decade ago plunged the economy into crisis, deterring investments including in mining and leaving Burundi one of Africa’s poorest nations, according to the African Development Bank.

Mining generated 3 percent of Burundi’s export earnings in 2010, behind coffee and tea exports which account for 87 percent, according to the lender.

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