Interesting Article w/ mention of Cantex in YI was just looking for more info on Cantex in Yemen when I found this blog. Cantex is mentioned in the second paragraph. Interesting read. I couldn’t get the link to work so I put it below. This blog was found at mine.muarateweh.com. Im sure if you do a blog google search for Cantex Yemen you will be able to find it. Enjoy:
The Coming Mining Investment Boom in the Arabian Gulf
That there could be a coming boom in mining investments in the countries of the Gulf Cooperation Council (GCC: Saudi Arabia, Kuwait, Bahrain, Qatar, UAE, Oman) may seem to be an odd idea to many observers. We had a boom in local stocks and still have one in oil and real estate, but mining? While oil and “soft rock” is of course a well known topic in the region, mining “hard rock” is decisively less so. Although the Gulf is the second biggest buyer of gold in the world after India and enjoys the allure of diamonds as well, investments in mining companies have been relatively unpopular so far. There have been some (e.g. in Klondike Star, Unigold, Hunter Dickinson, Metalex), but they have been small compared to the importance of trading in the metal itself. The average Gulf investor wants to have his or her gold under the pillow (which can be a Swiss one, of course), not somewhere in the ground in funny places like the US or South Africa. Increased leverage is rather sought by playing the futures markets than by embarking on mining investments.
This is about to change. The expanding GCC aluminum and steel industries have already undertaken mining upstream investments to ensure feedstock security and with the expected IPO of state-owned Saudi Arabian mining company Maaden in 2007, the general investment public will become aware of the asset class. Such whetted investor appetite will need to go abroad afterwards: besides Maaden there are few mining investment possibilities in the Gulf. The Oman mining industry (mainly copper and chromite) is small and not publicly listed, while in the UAE some exploration has been done, but it is too early to tell whether any meaningful mining industry could develop out of these efforts. Remarkably, Yemen, where the publicly listed Canadian exploration company Cantex has identified significant nickel, copper and gold deposits, offers some potential.
The GCC countries are ramping up their aluminum industry to take advantage of cheap energy inputs, which can make up to 40 percent of production costs. Their worldwide market share is expected to rise from the current five percent to over 10 percent by 2010 and up to 18 percent by 2015. The steel industry is also rapidly expanding to satisfy the needs of the local construction boom. With booming commodity prices, GCC producers have started to worry about feedstock security and the bottom line. Dubai Aluminum (Dubal) has acquired a 25 percent stake in Canadian Global Alumina and the rights to the alumina produced in its Guinea refinery for $200 million. Furthermore, Dubal reached an agreement with Larsen & Toubro to develop a $3.6 billion alumina refinery with a capacity of 1.5 million tons each year and adjacent smelter in the Indian state of Orissa. As these projects still fall short of meeting the necessary supplies required by Dubal by a wide margin, further upstream acquisitions in the future are a possibility.
The GCC steel industry is no different. Demand for direct reduction iron ore pellets is expected to increase from 5 million tons to 24 million tons in 2012. Not surprisingly, Saudi Arabian Hadeed has taken up a 14.8 percent stake in Australian Sphere Investment and Qatari Qasco has bought a 9 percent stake in the same company. Sphere Investment owns a 50 percent interest in an iron ore mine site in Mauritania. Finally, upcoming Australian iron ore producer Grange Resources held talks with regional companies about a possible joint venture. Feedstock issues may have been behind the recent takeover of steel and iron ore pellet producer Gulf Industrial Investment Company (GIIC) by Gulf Investment Corporation (GIC) as well. GIC bought the 50 percent stake of its joint venture partner, Brazilian CVRD, to gain full control, with sources saying CVRD, which has a quasi monopoly of 90 percent of the worldwide market for iron ore pellets charged its joint venture partner prices that were too high.
So far mining investments by Gulf investors are still a phenomenon of industry insiders. With the IPO of Saudi mining giant Maaden in 2007, it will reach the general public. Maaden has four strategic units (precious metals, phosphate, aluminum and industrial metals). It plans to double gold production to 14 tons by 2009 and currently produces 14.2 tons of silver as a by-product. Its main expansion will be the Al Jalamid phosphate project and the Al Zabirah bauxite mine in the north of the country. Originally it was planned to spin off the precious metal unit via an IPO by the end of 2006. Now an IPO of all Maaden operations by mid-2007 is envisaged.
Al Jalamid is one of the largest phosphate deposits in the world with 1.6 billion tons indicated and 1.5 billion tons inferred resource. With financing from the Public Investment Fund (PIF), a railway to the industrial city of Jubail is planned. In Jubail, a $3.2 billion processing complex will produce various chemicals, detergents, animal food and 3 million tons of diammonium phosphate (DAP) fertilizer annually. Saudi Arabia aims to become the world’s third largest producer of phosphate fertilizers and capture 10 percent of the worldwide DAP market. The mineral endowments and the availability of low-cost gas energy and sulfur feedstock will make Maaden the lowest cost producer in the world, and the proximity of Asian markets represents an additional competitive advantage.
Aluminum projects in the neighboring countries UAE, Qatar and Oman rely on imported raw materials from the open market, from upstream mining investments and from their foreign joint venture partners (Alcan, Rio Tinto, Norsk Hydro). Al Zabirah is the first integrated aluminum company in the region and combines bauxite mining with a 623,000 ton aluminum smelter in Ras al Zor on the Gulf coast.
With the ambitious projects in Al Jalamid and Al Zabirah, industrial minerals like copper, zinc, magnesite and iron ore have attracted less attention. Saudi Arabia has some smaller deposits, which might be economically viable with lasting high commodity prices. The tantalum deposit of Ghurayyah deserves special attention as it is not only one of the largest in the world but also one of the exploration sites that is not licensed to Maaden but to a private mining company. In 2002, British Tertiary Mineral Plc acquired a five-year exclusive exploratory license for the deposit. With over 95,000 tons, it contains more reserves than the Greenbushes and Wodgina mines in Australia, which currently produce 53 percent of the world’s tantalum, a mineral that is essential in manufacturing computers and cellular phones.
Commodities are risky and volatile and part of the reluctance of GCC investors may well stem from an accurate risk assessment. After all, some of the older ones got burnt in the gold price slump after 1980 and the famous silver speculation hype of the Hunt brothers in the same year. They rather prefer to count their profits from the local real estate boom, while some others may have lost interest in equity investments after the GCC stock markets crashes in 2006. But as there is good reason to assume that the current boom in commodity prices will last some more years, notwithstanding considerable corrections on the way, there is a good chance that GCC investors’ interest will turn to foreign mining companies once Maaden has paved the way. In November 2006, South African mining giant Gold Fields had done a secondary listing at the Dubai International Financial Exchange (DIFX) – the first listing of a major international company at the exchange. In the same month, over 70 international mining companies gathered in Dubai at conferences of MineLLC and Value Relations. Granted, DIFX so far suffers from a lack of liquidity and the presence of the regional investment community at the mining conferences could have been bigger. But it is a start and if the commodity boom lasts, oil prices will not be left behind. The current account surplus of the GCC countries is now bigger than the one of China, thus, GCC investors will have the necessary chips to play the game.