Mining for opportunities
Published: 30/04/2008 6:13 am
Srinivasan Iyer tracks the remarkable growth story of National Mining Company
May 11 marks the first anniversary of National Mining Company's (NMC) production of its first saleable copper concentrate. In a way this also heralded the rebirth of copper mining in the sultanate after nearly 12 years of inactivity, with NMC rewriting the history books in more ways than one. And here's why.
In the capital-intensive mining sector where it takes more than ten years to reap the first fruits of investment and yet some more to break even and make profits, NMC has managed to achieve its first sales revenue within six years of receiving its exploratory licence in 2001. This is a phenomenal achievement considering that NMC had to undertake a feasibility study, prove copper resources, undertake a drilling programme and adhere to best environmental practices as it went about its mining activities. In the meanwhile, NMC purchased the Lasail concentrator from Oman Mining Company in 2005 and extensively refurbished it and kept it ready to receive ore from the Hatta/Shinas copper mine.
According to industry experts, if a mining operation comes on-stream within seven to eight years, it is fast, and if it happens to take place within five or six years it's exceptional. But overall, there is a much longer lead-time involved, not to mention the cyclical nature of commodity prices.
Says Hafidh Soud al Busaidi, CEO of NMC, It's very easy to say mining companies are making a lot of money on account of the high prices. It takes a special character - someone with foresight and commitment - to invest in a mining venture. This says a lot about our chairman, Mohammed al Barwani."
Buoyed by the initial success, NMC, a subsidiary of MB Holding Company, is literally digging deeper by making some big investments and consolidating its operations. "We are currently in the process of consolidating our operations, which includes ramping up production rates and implementation of policies and procedures among other measures. We are also building a geological exploration department to scout for minerals in Oman and abroad," informs Busaidi.
NMC currently processes about 2,000 tonnes of ore per day and is undertaking a capacity expansion programme to ramp it up to 3,000 tonnes per day, which it expects to achieve by the third quarter of this year.
Even as NMC continues to exploit the Hatta/Shinas mine, it has undertaken preliminary exploration work at its Ghusayn concession, which has three distinct ore bodies that are approximately 1km apart. It is expected that these can be converted into proven reserves and developed in the latter part of 2008 and 2009. "Preliminary estimates show that there is approximately 7mn tonnes of copper ore with 2.5 per cent copper. We are undertaking definition drilling to identify the nature of the ore body, which will determine the mining and processing methods," says Busaidi.
Right now NMC has about 300 employees and there are plans to ramp up these numbers with an additional 150 employees over the next 12 months to keep pace with these developments. As against the government requirement of 35 per cent Omanisation in this sector, NMC is streets ahead of its peers with 60 per cent. Omanis man operations across the company and these include administration, finance, human resources and even the technical side.
"We are looking at a structured hiring programme to induct youth into the company. A batch of graduates from Sultan Qaboos University will start with NMC within the next few months." Industry analysts foresee a large growth in investment in the coming years. NMC has said that it is keen on exploring in other parts of the country; anything that's economically viable and will not limit itself to copper. It is looking at precious metals like gold and silver, energy minerals like coal and rare-earth minerals that are used in electronics.
As per the government's studies and estimates, Oman contains the "best exposed ophiolite suite of rocks. These rocks are favourable for copper, gold, silver, chromite, lead and zinc."
Even Busaidi backs it up by saying that Oman, given its unique geology, does have the potential. "We don't anticipate elephants, but modest size operations are viable at current prices. We are in the process of implementing an exploratory programme in Oman. We will undertake structural analysis of geology, identify areas of interest, mine modelling to work out costs and processes and market analysis, based on which we will make our final investment decision."
At current metal prices, almost everything looks viable. Despite fears of an impending global economic slowdown led by the US, copper prices in the first quarter of 2008 have gained about 26 per cent on account of strong demand from China. The three-month futures contract on London Metal Exchange stood at US$8,350 per tonne in early April. As things stand currently, NMC's operations are peaking at the right time and it looks set to reap rich rewards of the commodity price cycle.
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