TROPICAL HEIGHTS AFRICA LIMITED
The Uganda mineral sector outlook is a promising one and points at a brighter future for Tropical Heights Africa Limited.The Government of Uganda put in place a Mineral Policy in 2001, whose goal is to develop the mineral sector to enable it contribute to sustainable economic and social growth by creating gainful employment and income, particularly to the rural population.
The policy objectives are to:
• stimulate investment in the mineral sector by promoting private participation;
• ensure that mineral wealth supports national economic and social development;
• regularize and improve artisanal and small scale mining;
• stimulate and mitigate the adverse social and environmental impacts of mineral exploitation;
• remove restrictive practices on women participation in the mineral sector and protect children against mining hazards;
• develop and strengthen local capacity for mineral development; and
• add value to mineral ores and increase mineral trade.
Uganda currently produces a number of minerals valued at almost Ushs.100 billion. In terms of output value the most produced minerals as of end of 2010 were: limestone, cobalt, Wolfram, Tin, Kaolin and pozzolana.
The Non Tax Revenue generated increased to UGX 3.96 billion in 2010 from UGX 2.75 billion in 2009. In terms of revenue accruing from mineral operations, government earned UGX 2.436 billion, as non tax revenue (NTR) accruing from royalties and mineral license fees. Royalties alone contributed UGX 3.1 billion and UGX 1.701 billion of the total revenue generated shared at a rate of 80% for Central Government, 17% for Local Governments of mining districts and 3% to the lawful landowner. With improvements in the prices for cobalt and gold, the NTR resulting from royalties is expected to rise.
Employment trend in the Sector is also on the increase.The mineral sector is increasingly becoming very important in responding to the labour needs of the country. If one considers artisanal mining, there are currently over 180 artisanal and small scale miners in Uganda providing employment to over 20,000 miners with indirect & induced labour numbering over 54,000. This sector has a multiplier effect of US$28.3/year according to recent studies.
Key strengths (competitive factors) or unique selling propositions of Uganda's mining sector include;
1. Strategic location
Uganda occupies a strategic position in East Africa, which gives it the advantage for the eventual development of exports of mineral products of Sudan, the Democratic Republic of Congo, Rwanda, Burundi, Kenya and Tanzania and the COMESA region as a whole.
2 General investment incentives Under the Income Tax Act, Cap.340 the mining companies are given special consideration through a Variable Rate Income Tax (VRIT). The rationale for this arrangement is to capture a competitive share of net cash flows for the government at different mine profitability levels while at the same time providing suitable tax relief for projects. A minimum of 25% and a maximum 45% VRIT have been put in place depending on the level of profitability. Also under other tax provisions (like the East African Community Customs Management Act and Value Added Tax Act, Cap.349), there is the duty free importation of mining plant and equipment with VAT deferment facilities.
3. Other incentives are:
• Investment protection under the Multilateral Investment Guarantee Agency (MIGA)
• Mineral exploration expenditures are expensed 100%
• Import taxes such as customs duty for all mining equipment is zero-rated
• There is externalisation of dividends and profits
• Generous depreciation allowance at 30% for all depreciable mining assets.
4.Availability of skills The Department of Geological Survey and Mines is being funded to undertake surveys aimed at providing the needed database to encourage investment in the sector, as well as the training of relevant personnel. The Department also has a cross section of professional staff that may be seconded on request, to companies wishing to commence new exploration programmes. Makerere University in Kampala offers degree courses in geology and various disciplines of engineering while a number of technicians are trained locally at Kyambogo University and other Technical Institutes spread throughout the country.
4.Sustainable Management of Mineral Resources Project (SMMRP) The country has 648,400 line kms of magnetic and radiometric, and 22,709 line kms of electromagnetic [EM] data covering the entire country except for the Karamoja region. The data was generated as a result of an airborne geophysical survey undertaken by M/s Fugro Airborne Survey with the latest technology and supervised by Patterson Grant and Watson (PGW) that emphasized provision of very high quality data and outputs. This data is being integrated using GIS, with ground geophysical data, enhanced satellite imagery, geological mapping and geochemical surveys to delineate areas of high mineral resource potential. The information is available to potential investors wishing to have detailed exploration and development of mines.
The year 2006 witnessed the highest value of exports mainly attributed to gold re-exports. Currently, gold and cobalt account for over 95% of all minerals exports from Uganda. The escalating values of gold, along with the accompanying investor interest, have grown in the recent past and, in all likelihood, will continue. As noted by Barrick Gold, the supply of gold continues to lag demand, making the exploration and development of new gold resource sources imperative and Uganda will reap big from these developments. For cobalt, refined global production was around 54,000 tonnes in 2009, with consumption at about 52,000 tonnes. Many reports estimated that 2009 saw a global surplus of some 2,460 tonnes, compared with a deficit of about 2,410 tonnes in 2008. In 2010, worldwide production was between 55,000-60,000 tonnes, yet demand peaked only 50,000 tonnes. In terms of prices, the best Russian cobalt, 99.3 currently trades above US$20 a lb which is still way off peaks of over US$48 a lb hit in March 2008 before the global economic slump was felt. All these reasons explain the cobalt stockpile in Uganda. In terms of major exports destinations, in 2010 the following minerals were exported as follows:
Cobalt (Netherlands, China and Belgium); Semi manufactured gold and articles of zinc (United Arab Emirates); Copper (U.K., UAE, Kenya, India, U.K., South Africa, Tanzania,); Articles of tantalum (U.K.); and articles of goldsmith (Germany). Generally, investment in mineral exploration is projected to increase from the current US$3 million to over US$50 million annually over the next five years. Fiscal revenues are expected to increase from US$ 1 million to US$ 35 million over the next five years. It is also projected that the value of mineral exports will increase from the current level of under US$40 million to over US$ 350 million by 2015. The importation of minerals for re-export explains why in most cases the amount produced in tonnes is much less than that of the exports for some commodities e.g. gold on the one side and on the flip side the amount exported is less than that produced for some commodities such as cobalt due to stockpiling as the global commodity prices plunge. The importation of minerals for re-export explains why in most cases the amount produced in tonnes is much less than that of the exports for some commodities e.g. gold on the one side and on the flip side the amount exported is less than that produced for some commodities such as cobalt due to stockpiling as the global commodity prices plunge. Mineral imports have been steadily rising from about US$11 million in 2005 to US$25 million by end of 2009.