Mining Madagascar - Malagasy Presidential candidate interview

Materials World magazine
1 Jul 2013

Melanie Rutherford speaks to Malagasy Presidential candidate Dr Emma Rasolovoahangy about the challenges the country faces in exploiting its abundant natural resources.

‘The mineral resources are the future of Madagascar.’ Emma Rasolovoahangy should know. The businesswoman running for presidency in the country’s forthcoming election is no stranger to the mining world. Founder of natural resources company PetroMad, which is currently in phase two oil exploration in Madagascar, and with several engineering degrees under her belt, Rasolovoahangy is set on turning her country towards a more prosperous future. Should she be successful in August’s elections (date correct as Materials World went to press), she intends to use the country’s wealth of natural resources to fuel the economy.

Madagascar already plays a significant role in world production of ilmenite, rutile and zirconium, and produces other important minerals such as chromite and rare earths. But while the country has long been reporting proven oil reserves, tied to extraction and production is a unique set of challenges. Something of a biodiversity hotspot (a staggering 90% of its wildlife is found nowhere else on Earth), Madagascar’s unique ecology is perhaps the biggest hurdle to overcome. ‘It is important for the future of Madagascar to protect this ecosystem, but it is also important that the Malagasy people develop the natural resources to turn around the economy,’ says Rasolovoahangy. But it’s not just the country’s ecology that is fragile. Corruption, political unrest and mass poverty all hinder the Malagasy people from exploiting their country’s abundant mineral reserves.

Nevertheless, Rasolovoahangy remains optimistic. In the short term, she says, responsible mining of Madagascar’s natural resources could generate hundreds of thousands of jobs, and in the long term it could turn around the economy. ‘The key is good governance, and transparency and maturity of the institution.’ And 46-year-old Rasolovoahangy certainly seems to have the credentials to back up her message that ‘I’m not just extracting oil but also protecting the environment’ and, in doing so, meeting the country’s conflicting needs.

Challenges to production

While many companies have flocked to explore oil in the country, few have stayed long enough to reach development stage, fleeing the country in the face of hostility from the Malagasy population. Only in January this year, 200 QIT Madagascar Minerals (QMM) staff were held hostage inside a mining compound by local protestors, who have long disputed the low price the company paid for their land. ‘The local people take matters into their own hands when a company doesn’t listen to them,’ says Rasolovoahangy, explaining that even she has to tread carefully. ‘The majority of the Malagasy think that [PetroMad] is not going to stay around long either, because everyone before me disappeared.’

Lack of major infrastructure is another factor that has hindered oil production in Madagascar, with companies needing to find large reserves in order to justify the capex required for production. With no oil refinery in the country, added production and shipping costs are preventing Madagascar from being competitive on the world market. But the situation is improving, says Rasolovoahangy. For example, when Occidental Petroleum Corporation first came to Madagascar in the 1970s, ‘They discovered oil, but not enough to amortise the upfront investment’. However, she says, advances in technology in the 1990s have since enabled companies to discover such large reserves, and while in the 1970s a barrel struggled to fetch more than US$12, ‘now [the price] has increased, they can easily amortise the cost’.

But reaching exploration stage is no easy task. In an effort to preserve the country’s unique ecology, the Madagascar Office of Environment requires mining companies to obtain a permit before exploration and extraction can commence. Once the permit has been granted, a company must agree to restore the area to its original state and produce a plan for how it will do so. ‘That means they have interest to follow through on the environmental protection,’ says Rasolovoahangy, explaining that even obtaining the permit can be a lengthy process – for PetroMad, it took one year. She explains that companies must provide information as detailed as who will be working for them, including their qualifications, where they live, even the kind of food they eat and the type of car they drive. ‘It takes a long time – but it’s worth it.’

The likes of Exxon, Distell, Total and Marex have all been granted permission to explore oil fields off the west coast of Madagascar, ‘and they should stay,’ says Rasolovoahangy. ‘I would like foreign companies to come to Madagascar, and work and invest here. We need that investment. We need the trade, we need the transfer of knowledge and the skills – and, of course, the management.’

Addressing the issues

While the Malagasy are slowly coming round to the idea that exploiting their country’s natural resources could benefit them, they remain wary – and understandably so, says Rasolovoahangy. ‘They are not really buying it yet. They ask why, if we’ve had this wealth for 60 years, have we not developed it already?’ They do not understand, she says, that to do so requires expensive importation of materials and equipment required for the infrastructure the country desperately lacks. ‘We have the talent and we have the resources. But the materials – Madagascar has to build this.’

In an effort to change Malagasy attitudes to oil and gas exploration in the country, Rasolovoahangy has embarked on what she calls a listening tour, visiting local communities to hear their views as well as educating them as to how the country’s resources can be used to their advantage. She conducts regular discussions with the heads of the various villages and districts, as ‘a way for them to get things off their chest. They can tell me what the problem is and what they want.’ And it seems it be working. For the majority of those she has spoken to, oil is ‘the pride of the Malagasy – they want to push it forward’.

With Masters degrees in both environmental engineering and petrophysics and a PhD in Geophysics (a combination she says people are often surprised by), Rasolovoahangy is well placed to meet her country’s conflicting needs – preserving the fragile ecology while exploiting its natural resources. She has big plans for Madagascar should she be sworn into government. ‘We should maximise the contribution of the Malagasy people in the current phase of exploration, hire and train as many as possible, and excite them to try to start small businesses,’ she says. Her goals include generating jobs and developing communities, both of which she believes are immediately possible with the right kind of contract between the government and oil companies. ‘Each village in Madagascar has a wish list of what it wants to develop. Each year, the [extraction] companies pick which one they can do. They will keep developing and working with the community to repair roads or schools or hospitals. If each company actually takes part in this, it will impact on the economy.’

Rasolovoahangy looks to Europe and Asia for revenue management strategies that could work for her country, favouring the model adopted in Norway, where surplus revenue generated by its petroleum sector is deposited into a national fund. She believes that the system, which Norway introduced in the 1990s to counter the effects of a national decline in income and fluctuating oil prices, could help develop Madagascar, too. However, she explains, ‘We cannot apply the Norway model 100% because they are a little bit ahead of us. They only spend 20% of their oil revenue and invest 80%. Madagascar, on the other hand, might need [to spend] a little bit more – maybe 30% – because we are so far behind. We need to verify how much we are going to use and then invest [the rest] in a souvenir fund. That way, people are not going to be flooded with money all of a sudden, sit around and expect money to fall in their laps. They still have to work – and we still have to develop the human capital. We have to exercise the muscle to be able to work. To say, “Here are the resources – we have no capital to build a country, but we can work [in order] to build the country”.’

In an effort to avoid a repeat of past events, where multinational extraction companies brought with them their own equipment and staff before fleeing the country ‘without leaving a trace of development at all’, Rasolovoahangy looks to employ the kind of strategy adopted in Singapore. Here, the government has introduced a foreign worker levy payable by employers for low-end workers, ‘so most of the labour comes from the country,’ she explains. ‘We want to bring in industry that matches the skill level in Madagascar, and we decrease unemployment at the same time. We have to work very closely with extraction companies so the level of skill will go up, and we have to strengthen our education until the country has a whole chain of skills that will enable us to sustain development.’

Whether or not Rasolovoahangy’s vision for the future of her country and the potential of its natural resources will be realised, remains to be seen. The forthcoming elections are, she says, a turning point for her country – ‘to choose the right leader to do the right thing, and lead Madagascar to a bright future. The power is in the hands of the people.’  

Madagascar mining industry: the facts

In 2011, the combined mining and construction materials sector accounted for 1.6% of GDP.

In 2010, the mining sector grew by an estimated 228%.

Mining ilemite, rutile and zircon at Mandena in southeast Madagascar, in 2011 QMM set a target to reach full capacity of 750,000t a year of ilemite and 40,000t a year of zirsill by 2013.

Privately owned mining and mineral processing operations include gemstone, graphite, mineral sands, nickel and salt mines.

Australian company Aziana Ltd has been exploring for bauxite and gold since 2006, and in 2012 planned a gold drilling programme at Alakamisy, in central Madagascar’s Antananarivo province.

By the end of 2011, the Ambatovy joint venture (40% owned by Sherritt International Corp, Canada) mining nickel-cobalt laterite deposits on Madagascar’s east coast, had mined 948,083Mt at grades of 0.83% nickel and 0.07% cobalt. Reserves were estimated to be around 170 million Mt at 0.94% nickel and 0.82% cobalt.

After purchasing the undeveloped Ranobe mineral sands deposit located north of the Toliara port in southwest Madagascar in 2011 (resources estimated at 30Mt ilmetite, 2.5Mt zircon and 0.85Mt rutile), World Titanium Resources Ltd planned to mine 400,000t a year of ilemite and 43,000t a year of rutile and zircon concentrate, with production expected for 2014.

In the late 1990s, Madagascar was home to four graphite mining companies with a combined annual production of more than 16,000t of graphite a year. However, from 2005–2010, this fell to around 5,000t a year, a decline attributed to a combination of Chinese competition, poor market conditions and increased processing costs.

In December 2011, German company Tantalus Rare Earths AG estimated resources of 130Mt rare earth elements (at 0.08% grade) at its TRE project on the Ampasivinda Peninsula in northwest Madagascar. Around 20% of this was thought to be heavy rare earths.

Source: 2011 Minerals Yearbook, Madagascar, US Geological Survey