Market Report, "Tanzania Mining Report Q3 2016", published

From: Fast Market Research, Inc.
Published: Tue Jul 19 2016

Tanzania's gold sector will remain pressured by low gold prices, which will discourage production growth over coming years. Beyond our forecast period to 20 20 , the country's mining sector could diversify as various miners are looking to invest in the country's nickel, coal and uranium resources.

Latest Developments & Structural Trends

Tanzania holds vast deposits of coal, cobalt, copper, diamonds, gold, nickel, silver and uranium. Despite these positive aspects, we forecast the country's mining sector growth will decline over 2016-2020. In our view, weak gold prices will halt gold production growth and delay or halt new projects from coming online altogether. We expect Tanzania's mining industry value to decline from USD0.86bn in 2014 to USD0.82bn by 2020.

Regionally, Tanzania will follow a similar muted growth trajectory in comparison to the country's regional peers. Although Sub-Saharan Africa (SSA) holds significant growth potential due to the region's vast reserves of high-grade minerals, mine output growth will continue to face headwinds from a combination of low mineral prices, elevated production costs and a slowdown in capital expenditure (capex) over our forecast period to 2020 ( see: 'SSA's Growth To Find Floor In 2016', May 26)

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Tanzania, currently Africa's fourth-largest gold producer, will see modest growth in output due to mine closures and a limited number of projects in the pipeline. Ongoing labour unrest, illegal mining, power shortages and gold price weakness will also temper the sector's production outlook. Acacia Mining (formerly African Barrick Gold) and Resolute Mining have ceased production at two mines due to depleted reserves. Acacia Mining and AngloGold Ashanti have warned about impending job cuts in the north of the country. Given that Tanzania relies upon gold for over 40.0% of its exports, the downturn in the sector is likely to have serious repercussions for the economy as a whole.

Despite this, a number of new projects will ensure the country's production growth remains positive over the coming quarters. For instance, CATA Mining's Mara gold mine, the second largest project in the region, following Acacia Mining's North Mara gold mine, is expected to begin production in Q316. The miner has invested over USD54mn to develop the project. Further, Shanta Gold recorded gold production of 24.5 thousand ounces (koz) at its New Luika gold mine in Tanzania in Q315. The record production was benefited from a 33% q-o-q improvement in gold ore grade efficiencies and a 25% increase in tonnes milled during the quarter.

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