The Technical File “Mining value chain promotes economic growth” by Grain Malunga featured below was initially published in Malawi’s Mining & Trade Review Issue Number 36 that is circulating this April 2016.
The full edition is available for download here. This monthly publication is edited by Marcel Chimwala.
Mining value chain promotes economic growth
BY Grain W. P. Malunga FIMMM Mineral Resources and Environmental Management Expert
The economic impact of mining goes beyond mineral extraction and processing. Other industries are created and benefit activities such as transportation, construction, equipment manufacturing, environmental management, geological services, education and research.
Mining generates employment, government revenues, and opportunities for economic growth and diversification. Local communities share some goods and services with the mine through community development activities and trade.
Mining value chain concept involves a range of primary activities that are responsible for the generation of value and a range of supporting activities that do not directly generate value but support the value generating activities.
Countries, such as China, have experienced economic transformation through diversified manufacturing industry arising from value chain and export of finished goods. All this has been possible through availability of cheap raw materials from Africa. It is possible for countries such as Malawi to discover and profitably exploit its mineral resources through promotion of investment related with mining value chain. This can be referred to as promoting local content to supply goods and services for the development of the mineral sector.
Mining Value Chain
Mining Value Chain (MVC) can be categorized in five segments; namely Exploration, Valuation, Mining, Beneficiation and Marketing. Exploration and valuation fall under primary activities, Mining and Beneficiation falls under Production and marketing falls under Demand. All these are supported by administrative infrastructure management, human resource management and technology (Research and development).
Mining is a long term investment undertaking and if properly managed brings long term high returns both for the investor and government. Mineral resource development that promotes value chain brings with it employment, skills development, technological advancement and meaningful trade (market and sales). Employment and skills development help with sustainable development through poverty alleviation.
- Geological mapping
- Pitting and trenching
- Reserve estimation
- Prefeasibility study
Benefits that come with exploration include opening up of infrastructure in rural areas such as roads, water, electricity, employment and skills transfer to local employees and to some extent corporate social responsibility that mainly deals with assistance with farm inputs, education materials and rehabilitation of water points such as boreholes.
- Feasibility study
- Social and environmental impact study
During valuation a lot of multidisciplinary tasks are undertaken and community engagement becomes a crucial part for obtaining Free Informed Prior Consent (FPIC) so that the project is accepted by the wider majority in the community. Professionals in the areas of geology, mining, metallurgy, mineral processing, economics and finance, and strategic environmental management are engaged. All these bring with them employment opportunities and the local community benefits in supporting the project with goods and services thereby opening further opportunities for trade.
- Surface stripping or adit development
- Drill and Blast (Ore and Waste)
- Load and Haul (Ore and Waste)
- Ore Transportation to Mill
- Ventilation and dewatering
- Stockpile Store and Reclaim
- Mine Services
- Mine Administration
Mining comes with it a diversity of goods and services through contract management and transformation of rural areas to urban environment bringing new opportunities of economic activities. New schools are built and others improved, health facilities are upgraded or built, reliable infrastructure such as roads, water and electricity are provided and subsistence agriculture becomes commercial and profitable. Development and improvement in local content triggers industrialization to manufacture goods that are required in mines. Supply chains are developed and improved.
- Washing and Screening
- Crushing, Grinding, Flotation, Thickening, and Filtration
- Tailing Disposals
- Mill Services
- Mill Administration
- Ore Stockpile and Reclaim
Beneficiation triggers economic activities that are also experienced in mining. Heavy industries in engineering and foundry sprout to support provision of spare parts, contracts in transport services are awarded, more technical jobs are available and value addition in minerals generate more revenue for companies and government while more employment and skills development and technologies are introduced.
- Slurry Pipeline Concentrate Transport
- Concentrate Thicken and Drying
- Stockpile Store, Reclaim
This chain promotes manufacturing of pipes for fluid flow and thick plastic sheeting and tarpaulin for containment of concentrates and prevention of polluting leakages.
- Product Shipping
• Supports Administration and other direct operation costs are included
• Revenues from payable metals
Marketing generates information on product demand and value addition. Freight forwarding, insurance and logistics bring improved service delivery. Skills in procurement and supply logistics are developed.
Negative Impacts of mining
Poor governance structures in government and inadequate laws and regulations have negative impacts on mining economic growth. Resource curse comes in when there is lack of transparency and accountability on government revenues and poor contract agreement negotiations. Usually revenue from mining benefits a few people and the nation suffers in managing its budget.
“Dutch Disease” can affect other manufacturing exporting industries when local currency value appreciates due to a strong mining sector. Other exporting industries become uncompetitive as their goods become expensive and these industries may suffer through low demand and low profitability.
Environmental laws need to be strong and sectoral institutions monitoring environmental programs in mining need to be adequately resourced and a responsible civil society helps in mediating on social environmental issues affecting local communities.
Our path to industrialisation and development should be rooted in the utilisation of agriculture and mineral resources to catalyse diversified industrial development. The country needs to promote local beneficiation and value addition of minerals to provide manufacturing feedstock and encourage import substitution of industrial mineral products.
Local participation in supply of goods and services to the mining sector will create employment and wealth to breed vibrant financial institutions that will offer competitive services for further growth of the manufacturing industry. Properly managed mining value chain will support government and local communities through investment in economic activities that go beyond post mining.
- African Union. 2009. African Mining Vision
- International Council on Mining and Metals:http:/www.icmm.com
- Mineral Information Institute: http:/www.miii.org