Madagascar - The development of the mining sector

The mining sector represents a pillar of Madagascar's emergence. With actions combined with the sectoral objectives of the State's General Policy, the Government has launched a major challenge to ensure that this sector can renew its contribution of tangible benefits at all levels, both nationally and internationally, for industrial development.

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In the past, Madagascar was primarily a country of artisanal mining, an activity that was almost entirely informal but far from marginal to the country's economy. It is known worldwide for its precious and semi-precious stones: sapphire, ruby, aquamarine, tourmaline, topaz, amethyst, emerald, and others. In the late 1990s, the sapphire and ruby rushes, symbolized by the sudden emergence of new mining towns in Ilakaka and Sakaraha, made the country one of the world's largest producers of these colored gems. Mining investments represented over 801 trillion foreign direct investment (FDI) in 2009 and 2010, amounting to $1.08 billion and $0.65 billion, respectively.

The recent launch of the megaprojects, Qit Madagascar Minerals (QMM) and Ambatovy, has marked a significant shift in scale, increasing the strategic importance of the region. The arrival of these two industrial players represents an investment of several billion dollars. Madagascar has experienced major development with the launch of these two world-class industrial projects.

Firstly, the exploitation of ilmenite (with a content of 60% in titanium dioxide gives it a superior quality) and of zirsill (mixture of zircon and ilmenite) in Tolagnaro (Fort Dauphin), launched in 2009 by the company QMM, owned at 80% by Rio Tinto and at 20% by the Malagasy State, the result of a total investment of 1.1 billion US dollars.

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Then came the exploitation of nickel and cobalt, as well as ammonium sulfate, a refining byproduct, launched in late 2012 by the Ambatovy Project. Located in Moramanga in the east, Ambatovy operates one of the world's largest lateritic nickel mines. The total investment is estimated at $8 billion (mine, pipeline, and refinery near the port of Tamatave). The joint venture is owned by three shareholders: Sherritt International Corporation, the project's developer; Sumitomo Corporation; and Korea Resources Corporation. In March 2020, the Canadian mining company announced its withdrawal from the Ambatovy joint venture. Sherritt decided to transfer its 121,000,000 TEU stake in the nickel plant to its two partners, thus reducing Sumitomo Corporation's shareholding to 54,181,000 TEU and Kores's to 45,821,000 TEU. In 2019, the Ambatovy project produced 33,733 tonnes of refined nickel and 2,900 tonnes of refined cobalt. The target for production during the first quarter of 2021 is 3,000 tonnes of nickel, a target set in response to the impact of the Covid-19 crisis. It should be noted that at full operational capacity, production will reach 60,000 tonnes of refined nickel, 5,600 tonnes of refined cobalt, and 210,000 tonnes of ammonium sulfate (fertilizer).

Some deposits could lead to medium-term development such as ilmenite from the East coast and Tuléar, coal from Sakoa, gold from Betsiaka and Maevatanana, iron from Soalala, bauxite from Manantenina and rare earths from Ampasindava and Fotadrevo.

For the Toliara mineral sands project, the mining company Base Ressources is not expected to make a final investment decision before September 2021. Discussions have been ongoing since the suspension of operations in Toliara in November 2019. If the final investment decision is positive, construction of the Toliara project is expected to last 26 months, with the first mineral shipments beginning in late 2023.

On the tax side, the State is considering setting variable rates for the mining royalty based on the profitability of the products exploited, instead of the current single rate of 2%, which applies regardless of the ore exploited.