KAMPALA —As Uganda gears up to drill its first oil in 2025, little to nothing is said, deliberately or not—about other natural resources of equal or greater importance like Iron ore.
In the period 2007-2008, the Directorate of Geological Survey and Mines (DGSM) which is under the Ministry of Energy and Mineral Development, carried out a geological exploration in Kabale district by airborne magnetic surveys.
Seven prospective areas: Buhara, Katuna-1, Kicumbi, Karukara, Katuna-2, Kamuterere and Nyamiringa were surveyed. Additionally, two others—Muruhita and Mwiguriro were mapped, and delineated for survey. The result, an estimated 73,889,927 metric tons of iron ore were discovered, buried under the mapped prospects.
Electric imaging investigations also conducted in the Rutenga prospect area in Kabale district showed presence of iron ore.
In Uganda, iron ore reserves occur abundantly in Kisoro, Kabale, Tororo and Kanungu districts.
The Uganda Investment Authority (UIA) places the total deposits of Iron ore in Uganda at 500 million tons, with 200 million tons confirmed in the Kigezi region alone; according to a government geological survey carried out in the period 2014-2015.
“Out of the over 500 million tons of iron ore available in the country, only 0.0033% is being utilised per year,” reads UIA’s official website.
Iron is the world’s most commonly used metal and its ore makes up to 95% of steel. It’s used primarily in structures, ships, automobiles and machinery. The consumption of iron ore grows by 10% per year.
The biggest producers of iron are: China, Brazil, Australia, India, Russia, Ukraine and South Africa.
China is presently the leading importer of iron ore at 1.07 billion tons as of 2019, according to statista.com, trailed by Japan and South Korea.
As of 26 November 2021, a ton of iron ore goes for $100.50. This comes after the mineral recorded an all time high price of $230 a ton, in May 2021.
With the boom in the property market, together with increased demand for steel, cars and appliances; the demand for iron ore is only bound to increase.
Therefore, the reserves in Uganda (500 million tons), at the current trading price of ($100.50), are grossly valued at $50.250 billion. Besides, the mineral’s reserves in Kabale district in: Buhara, Katuna-1, Kicumbi, Karukara, Katuna-2, Kamuterere, Muruhita and Mwiguriro are currently valued at $7.425 billion going by the market value.
Still and all, the price of iron ore has been forecast by analysts to rest at $150 a ton; this will snowball the valuation of Uganda’s ore to about $75 billion.
This means that the reserves in Kigezi alone (placed at 200 million tons by UIA), are more valuable than the proceeds Uganda will take home from its 1.4 billion recoverable barrels of oil located on the shores of Lake Albert.
“Commercialization of Ugandan oil is expected to generate cumulative government revenues between $5 and $9 billion over the project life time,” confirms a 2020 Oxfam report.
Of course, factoring in the particularity that Uganda’s crude is waxy; and can be a hard sell because it has to be kept warm to remain in a liquid flowable state; thereupon, affirming it won’t fetch the same price as the benchmark Brent crude on the market.
In conformity with DGSM’s report for the financial year (FY) 2017/18; it’s attested that Uganda’s iron ore is being exploited hence the issuing of export permits. The report shows that for the FY 2017/18, 9,000,000kgs (9,000 tons) were captured for export as per permits issued, at a gross value of 675 million Uganda shillings approximately $188,402.
Interestingly, a ton of iron ore in 2017/18 ranged between $52 and $99. Meaning—the values recorded as per permits issued by DGSM should have ranged between $468,000 to $891,000 and not a paltry 675 million Uganda shillings ($188,402).
Suspiciously, Bank of Uganda’s composition of exports neither confirms nor captures statistical data involving the export of iron ore.
The price of the rock has been forecast to reach highs of over $150 a ton, because of a lingering shortage that has been caused by a trade dispute between China (largest consumer) and Australia.
This trade tension resulted from Australia making public calls for an international investigation into the origins of COVID 19; and its criticism of China over the crackdown on dissents in Hong Kong and human rights abuses in Xinjiang.
This action by Australia, started a butterfly effect, that is showing signs of benefitting Africa. This is mainly attributed to Australia’s actions greatly irking China; and resulting in China looking to replace Australian iron ore with African ore— starting with the biggest undeveloped iron ore deposit in the world — Simandou, Guinea.
As of 2019, the Department of Foreign Affairs and Trade, and the Australian Bureau of Statistics revealed that overtime, Australia had exported Iron ore to China to the tune of over $45 billion. This void, is now going to be filled by Africa, with Uganda in line to get a slice of the pie.
It goes without saying that since after world war II, there has been a scare of the depletion of Iron ore that has carried on to-date; with geoscientists foreseeing its exhaustion in 30-70 years. This panic, is going to keep its price high.
Importantly, the major economic constraint in the exploitation of iron ore is the position of the ore relative to the market. Not the size or grade of iron ore reserves.
Applaudingly for Uganda, most of the areas with large amounts of iron ore are traversed by Uganda’s railway network save for the Kigezi region, that can be connected to the existing railway network in Kasese by a roughly 223 kilometre rail extension from Kasese to Kabale through Ishaka.
In light of these facts, no mineral is going to transform Uganda if the terms of exploration and exploitation are unfavourable for the nationals, and if Uganda is marred by poor leadership.
Nonetheless, in handling iron ore, Uganda can copy the government of Botswana under Seretse Khama which renegotiated the diamond mining agreement to guarantee itself the lion’s share (50%) of the diamonds’ revenue.
By doing so, Botswana moved from being the world’s third poorest country in 1966 to having a surplus budget in the mid ‘70s.
The failure to embody a nationalistic, corrupt-free and meritocratic public governance system, in handling Uganda’s resources, is going to bury the country in an oubliette.
Independent Financial, Investment Analyst