1. Entering Nigeria’s Solid Minerals Sector

Q: Would you describe the deposits in particular sectors as world-class?

A: Yes. Exploration activity that has taken place to date has identified sufficient quantities of the following mineral resources to justify further exploration:

Gold, Coal, Bitumen, Lead, Zinc, Silver, Cassiterite, Tantalite, Rutile, Tin, Mica, Kaolin, Talc, Phosphate, Columbite, Phosphate, Gypsum, Magnesite, Barite, Bentonite, Molybdenite, Wolframite, Limestone, Gemstones, Diatomite, Soda Ash, Feldspar, Quartz, etc.

Q: What sources of information are available for a new entrant into Nigeria’s Solid Minerals Sector?

A: The following agencies can provide assistance and information to new entrants to the sector:

The Ministry
The Minister
Ministry of Solid Minerals Development
Plot 360, Adetokunbo Ademola Crescent
Wuse II, PMB 107
Abuja, Nigeria
Tel: +234(0) 9 523 6380
Fax: +234(0) 9 523 6518
Email: obiageli.ezekwesili@msmd.gov.ng
http://www.msmd.gov.ng

Geological Data
The Director General
Geological Survey of Nigeria Agency
UTB Close, Muhammadu Buhari Way
Central Business District
PMG 616 – Garki, Abuja
Tel: +234 (0) 9 273 1581
Fax: +234 (0) 9 523 6518
email: siyan.malomo@msmd.gov.ng
http://www.msmd.gov.ng

Mineral Titles
The Director,
Mining Cadastre Office
Plot 360, Adetokunbo Ademola Crescent
Wuse II
PMB 107, Abuja
Tel: +234(0) 9 672 5772
email: ibrahim.garba@msmd.gov.ng

Privatisation
Ministry of Solid Minerals Development
Annex 3, 5th Floor
Federal Secretariat Complex
Shehu Shagari Way
PMB 107, Abuja
Tel: +234(0) 802 032 1948
+234(0) 804 303 1974
+234(0) 805 398 4939
+234(0) 806 590 1937
Fax: +234(0) 9 523 6518
http://www.msmd.gov.ng/privatisation

Other Useful Web Addresses
Nigerian Investment Promotion http://www.nipc-nigeria.org
Bureau of Public Enterprises http://www.bpeng.org
Corprorate Affairs Commission http://www.cac.gov.ng

2. The New Legislation

Q: When will the new legislation come into force?
A: The new legislation is expected to be passed at the end of the first quarter in 2006

Q: Please brief us on the fiscal regime?
A: The following fiscal regime will apply to the mining industry under the new legislation:

Q: Who were the legal advisers who assisted in the planning and drafting of the new legislation, and which existing regimes have influenced the design of the new framework?

A: The law firm of AELEX advised on the drafting and preparation of the new legislation. Additional comments were provided by the law firm of Weber Wentzel Bowens (South Africa). The new legislation was modeled after the Chilean/World Bank model. It borrows best practices elements from various mining codes around the world. The legislation has been subjected to review in various fora with positive feedback. Commentary from the private sector was also incorporated into the final version of the legislation.

Q: How do you feel that the new legislation addresses issues of importance to new investors?

A: The new legislation takes into account all issues relevant to new investors.

• Transparency and fairness: The new mining regulation operates on a ‘first-come, first-served’ basis. All interested investors are eligible to apply.
• Security of Tenure: The mining cadastre system eliminates arbitrariness and discretion from the granting and revocation of mineral titles
• Autonomy: Governments role is redefined as administrator/regulator, rather than owner-operator
• Clarity: In recognition that mining requires long term investments, the legislation defines in detail all areas critical to operating in the sector.

Q: Does the new regime have the full support of the Government and will it form the basis of mining investment for the foreseeable future?

A: Yes. The new legislation has strong support from all arms of federal government, including both arms of the National Assembly, the Presidency and the ministry.

Q: Is there additional legislation intended to be introduced which will affect investment in the sector?

A: No. However, guidelines within the broader legislation are being developed. Prof. Otto of Denver, Colorado is providing some assistance on this.

Q: Is there separate legislation at the state level?

A: No. Mining falls under Nigeria’s exclusive legislation list, which means that only the federal government has the authority to legislate the sector. This ensures predictability and orderliness in the legislative framework across different states. However, private investors are required to seek consent from local communities prior to the take-off of mining activities. This consent process will be refereed by the Ministry of Solid Minerals development

3. The Mining Cadastre

Q: Please brief on the intended operation of the mining cadastre?

A: The mining cadastre will be the mechanism by which the federal government will grant new mining titles as of April, 2006. The intent is to have the cadastre operate as a fair, transparent, online system that grants titles on a first-come first-served basis to applicants who meet all the qualification criteria

Q: How will the interests of competing prospective licensees be treated in the mining cadastre?

A: The mining cadastre will operate on a first-come, first-served basis. The first application received will be given priority.

4. Geological Information

Q: How will the geological and technical information relating to investment opportunities be made available? How reliable is that information?

A: Information will be in the form of maps, reports, databases, and digital maps. Information meets world-class standards of reliability. The Geological Survey of Nigeria Agency (GSNA) has been strengthened and is actively working to build up the baseline geological data in the country. A two-phase airborne geophysics survey has been commissioned and is due to be completed in June, 2006. This first phase focuses on known mineral targets and will cover about 44% of Nigeria’s land mass. The second phase of the survey is scheduled to be completed by the end of 2006 and will cover the remaining 56% of the country’s land mass. Preliminary results from the first phase are now available for preview at GSNA. A geochemical analysis will also be commissioned shortly.

5. Policy Framework

Q: Are there any priorities for development in either Resources or Sectors?

A: Private investors will be allowed to choose their own priorities. However, the federal government will provide incentives to promote several policy objectives. Some of these include:

• Promotion of Small-scale and Artisanal Mining:
• Promotion of Mineral Beneficiation
• Promoting the development of local industry and infrastructure
• Promotion of Nigerian content development

Q: Are there areas in the solid minerals sector which are regarded as “strategic” for the Nigerian government?

A: Radioactive Minerals: Radioactive minerals (such as Uranium) are currently considered to be “security minerals”. For the time being, the federal government is interested in maintaining close oversight of prospecting activity related to this group of minerals to in consideration of global security and terrorism concerns.

Q: What is the attitude of the Nigerian Government towards empowerment/employee participation/skills transfer, and what would the ministry welcome in terms of these concepts?

A: We would strongly encourage potential investors in the sector to take a long term approach to their involvement. Such a mindset will be default require a focus on all the issues mentioned above

Q: What is the attitude of Government to the export of mined resources? – are there domestic requirements for minerals to be consumed or beneficiated in Nigeria itself?

A: No

Q: Are there existing Nigerian mining companies which you would wish to see supported/partnered by international partners?

A: No

Q: Are there any other major Nigerian Government themes which are relevant to a foreign investors consideration of the investment environment?

A: The development of the solid minerals sector is part of a broad and comprehensive reform program that is encapsulated by the NEEDS document. Implementation of NEEDS has been very successful and has achieved several important milestones (e.g. improved GDP growth, improving contributions of the non-oil sectors, and the recent BBB- sovereign rating for Nigeria by Fitch)

6. Privatisation

Q: Are the state-owned companies to be privatised? And will they be restructured first?

A: The two state-owned umbrella companies, Nigerian Mining Corporation (NMC) and Nigerian Coal Corporation (NCC) are being liquidated. Their mining properties and wholly owned subsidiaries will be offered for sale in the first phase of the privatisation exercise. Their partially-owned subsidiaries and joint ventures will be offered for sale in the second phase of the privatision program.

Q: What will happen to the existing obligations of the state owned companies?

A: In most cases, these obligations will be taken up by the government

Q: Which international companies have already expressed an interest in the sector?

A: Bitumen: Elf, Masefield, several Chinese companies
Gold: Junior mining companies including Greenfields, Dome Ventures, and others.
Coal: NTPC, BHP Billiton, Enel, CNPC, Anglo Coal

7. Investment Environment

Q: What measures are being taken to ensure that the situation in the Niger Delta is not repeated in the exploitation of other mineral resources?

A: The Niger Delta is in the southernmost part of the country and is the area from which most of the country’s oil is produced. Nigeria’s other mineral endowments on the other hand are spread almost evenly over the rest of the country’s vast land mass. The new policy and legislative framework for the mining sector is designed to ensure harmonious engagement of private companies and local communities. A community development framework is a prerequisite for the commencement of mining activities.

Q: What is the Government’s approach to dealing with the unrest in the Niger Delta?

A: There are genuine issues of agitation in the Niger Delta. These are issues that touch on the constitutional provisions for how to share the country’s benefits that derive from the exploitation of oil, or in fact any extractive minerals, and the appropriate behaviour for private companies operating within a community. The government is trying to resolve these issues through dialogue with the local communities. Forums for such dialogue include the last national political conference. In addition, there are constitutional amendment review mechanisms that are being pursued. The government is using these mechanisms and forums to engage the genuine agitators in the Niger delta. However, in addition to the genuine agitators, there are criminal gangs that are opportunistically taking advantage of the ongoing debate. The government will take every measure necessary to maintain orderly and civil behaviour in this respect.

Q: What is the situation with infrastructure in the country and what is the government doing to improve it?

A: As a result of the ongoing debt write-off program, additional resources will be freed for investment in the economy. Infrastructure investment is a key area of strategic importance for the country. In addition, recently passed legislation provides a framework for private-sector participation in infrastructure. The Nigerian Power Sector Bill matches with international standards, and several companies including the oil multinationals are now independent producers.

Q: What is the progress of the Governments Economic Reform Prrogram?

A: The economic reform program is proceeding very well. The basic tenets of the program are captured in the NEEDS document, which is the governments economic development roadmap. These include the following:

• Improved Marco-Economic Stability
• Better Governance and Anti-Corruption
• Improved Public Expenditure Management
• Accelerated Privatisation and Liberalisation
• Strengthened Public Service and Improved Service Delivery
• Strengthened Financial Sector
• Improved Infrastructure
• Simplified Tax, Trade, and Tariff Policy

The overall goal of the economic reform program is to achieve sustainable, pro-employment GDP growth of 10% in 2006 and beyond.

Recently, the success of Nigeria's economic reform program has been receiving strong affirmation from international quarters. For example, Paris Club debt relief coupled with Nigeria’s first ever sovereign ratings by Fitch and Moody’s, which both assigned BBB- ratings to Nigeria, have boosted the country’s efforts to attract foreign direct investment into the country.

The cancellation of a substantial part of Nigeria's debt by the Paris Club and the subsequent signing of instruments for the defraying of the remainder by the Federal Government are also opening new financing opportunities for private and public sector projects.

8. Environmental Issues

Q: What approach will be taken to remedy environmental damage left over as a result of past mining activities?

A: A comprehensive environmental audit of all past mining activity is currently underway. Provisions have been made for environmental remediation where necessary.

Q: How will environmental remediation be handled going forward?

A: Going forward, the new legislation defines guidelines for mining activity. Environmental baseline studies will be required prior to the take-off of mining, and environmental remediation will also be compulsory. The new legislation has provisions for mining companies to contribute to a sinking fund to ensure that in the future, the government is not bearing all the cost for environmental remediation

9. Other Issues

Q: Will you continue as Minister to ensure that implementation of all that has been achieved to date is carried through to fruition?

I will continue as Minister for as long as the President requires my services

Q: Are there any regional issues/synergies which you would wish us to have regard for in our assessment of opportunities?

A: Nigeria is part of the global community and as such, we encourage potential operators in the sector to adopt global best practices (e.g. the Kimberly process)

Q: What further work is to be done under the World Bank initiative relating to the sector? Will the World Bank offer support for new investors?

A: The World Bank will provide support for Airborne geophysics, laboratories, mineral assay work, and data generation to support investment decisions.
The World Bank will not be providing direct support to traditional investors, although there will be a funding structure put in place to support the development of small-scale mining for poverty alleviation.