EXPLORATION ’94 — UN exploration teams active globally

If one were to ask people on the street what they associate with the United Nations, the answer would probably be relief work in Somalia or peace-keeping in Bosnia, rather than mineral exploration in Yemen.

This report highlights a little known facet of UN activities: its mineral exploration work in developing countries.

International mining and exploration companies and industry specialists agree that the UN has achieved considerable success in initiating development and foreign investment in this field.

Since the mid-1980s, many developing countries have tried to open their markets to foreign investment. In many of these countries the mineral sector is considered vital to the revival of economies which have been stalled by years of protectionist measures and unsuccessful state interventions. In an effort to stimulate foreign investment in their mineral sectors, developing countries are revising their mining legislation, providing more favorable tax and profit repatriation terms, and streamlining their exploration and mine licensing procedures. Efforts are being made to upgrade national geological surveys and to train national staff in managing mineral resource information.

The UN has been conducting mineral surveys in developing countries for more than 30 years. UN teams are active in all stages of the exploration process from “grassroots” reconnaissance surveys through detailed investigations to pre-feasibility studies.

The purpose of the work is to provide basic geological information that investors can use to identify mineral targets for further exploration and development and for the establishment of new mines.

This report has been prepared as a supplement to the report of the Secretary-General in response to Economic and Social Council Resolution No. 1991/87, which calls for setting forth ways and means to facilitate the flow of financial resources and the transfer of technology to developing countries. The report is a “conference paper” for the Committee on Natural Resources of the Economic and Social Council.

This report is based on documents available in the library of the UN’s Mineral Resources Branch. The compilation is not complete since some reports, especially technical material collected by exploration projects prior to 1980, are not readily available.

UN exploration efforts grew out of the 1950-60 independence decade and the subsequent exodus of colonial expatriate expertise, technology and investment. In l958, the UN Secretariat was mandated to fill this vacuum in the mineral sector of developing countries. A special fund was established to pursue mineral exploration.

In 1966, the fund was placed under the Office of Technical Cooperation, predecessor of the United Nations Department of Technical Cooperation for Development (UNDTCD). Projects were funded principally by the United Nations Development Program (UNDP). Mineral sector activities

were the responsibility of UNDTCD’s Mineral Resources Branch. In March, 1992, UNDTCD became part of the United Nations Department of Economic and Social Development, subsequently reorganized as the Department for Development Support and Management Services.

To date, most UN mineral exploration projects have been implemented by the Mineral Resources Branch. The purpose of the work is the advancement of the mineral sectors of developing countries.

Its principal activities are twofold: exploration and the provision of new or previously compiled geological information, and “institution-strengthening”, that is, the establishment or improvement of ministries of mines, laboratories, training centres for national staff, mineral and fiscal legislation, etc.

The long-term objective is the overall development of countries in Eastern Europe, Africa, the Americas, Asia and the Pacific, many of which are known to be richly endowed with mineral resources.

The UN has executed more than 400 projects worldwide, of which 57% (230 projects) have been exploration oriented or include a considerable exploration component.

To date, total project expenditures exceed US$255 million, 91% of which was allocated to projects including an exploration-component. Compared with the mining industry, these budgets are relatively low. For example, the RTZ Group spent more than US$200 million on exploration in 1992 alone. However, while companies generally invest only in areas of low risk, the UN, in an effort to attract investment to neglected regions, works mostly in poorly-explored (virgin) territories or in areas that are less attractive to investors.

The UN seeks to address the investment imbalance that has greatly disadvantaged developing countries, including many with high mineral potential.

The annual worldwide capital expenditure of the mining industry on exploration has been declining, and is being directed mainly to industrialized countries and recently to Latin America, which together make up 76% of all 1992 exploration spending. Africa, which has a high mineral potential and holds one-fifth of the world’s land mass, received only 5% of this expenditure.

On the other hand, African countries account for the majority of UN exploration efforts (60%). The remaining 40% is shared between Central and South America, the Caribbean, Asia, the Middle East and southeast Europe. The UN has conducted exploration surveys in 86 developing countries. The UN is credited by the mining community with several mineral exploration successes which have in some cases resuscitated previously moribund, and less economically developed, regions. Exploration in remote areas has, on occasion, been disparaged by some critics as “over-exploration”, that is, exploration for its own sake.

The UN has, however, taken a long-term approach. For example, one of the largest yet most controversial discoveries, the Musongati lateritic nickel deposit in land-locked Burundi, has been dormant since its discovery in the 1970s. The reasons are low nickel prices in the international market, and the lack of transportation routes near the deposit area. Nevertheless, two of the world’s largest mining companies have recently pursued the development of the deposit by starting to construct a railway.

Foreign direct investment as a result of UN exploration development efforts has taken place at different stages of the mineral exploration process. The governments of developing countries often seek assistance from the UN in the earlier phases of exploration, such as airborne geophysical surveys, which involve high cost and risk and are not profit-bearing in the short-term. After targets or anomalies are identified, the public and private sectors may undertake further exploration. The UN may execute the prospecting and sometimes pre-feasibility studies of mineral occurrences. When ore deposits are outlined, the UN may help developing countries identify prospective investors and assist in negotiations.

Whether it be exploration of a deposit, or design and operation of a mine, foreign investment will have a “snowball effect” on the developing countries, with a direct positive impact on employment, infrastructure, cash flow, transfer of technology, etc.

The following are a few examples of where UN exploration has led to considerable foreign investment, and subsequent economic and social development:

n In Mali, the UN, funded by UNDP, conducted exploration for more than 10 years. Expenditures exceeded US$8 million, and resulted in a major mineral find, the Syama gold mine in the Sikasso region. The first shipment of dore (semi-refined gold) went to Europe in 1990. The mine has been developed by BHP-UTAH (67%) and the government of Mali (33%), funded partially by the International Finance Corporation. The deposit is estimated to contain 100 tonnes gold.

n The Kabanga nickel-copper-cobalt sulphide occurrence in Tanzania was discovered in 1976. It attracted the interest of investors. In 1991, drilling by a Canadian company, in a joint venture with the Tanzanian government, indicated reserves of 3.5 million tonnes containing 5 million lb. nickel, 41 million cobalt and 83 mil
lion lb. copper. In January, 1993, a major international mining company agreed to fund all further exploration costs. n In Burundi, the Musongati nickeliferous laterite deposit was first investigated in 1975 by the UN. The parastatal Burundi Mining Co. followed up with a pre-feasibility study indicating 30,000 tonnes per year. No further work has been done for many years, because of the lack of infrastructure. Recently, two large international mining enterprises have taken an interest in the sulphide nickel potential of the deposit.

n UN work in Argentina at Bajo la Alumbrera greatly enhanced the knowledge and mineral potential of the area. In 1992, a Canadian company commenced drilling. So far, a mineral reserve analysis has indicated 337 million tonnes of proven and probable reserves grading 0.53% copper and 0.7 grams gold per tonne (using a 0.25% copper cutoff grade) to a depth of 330 metres. In the same country, the Bajo El Durazno area was also investigated by the UN in the 1970s and 1980s. In January, 1993, the Argentine government agency YMAD awarded the project to one bidder. This deposit is adjacent to the Alumbrera project in the province of Catamarca. It is believed to have the same porphyry copper characteristics as Alumbrera, but a higher gold potential (one drill hole intersected 6.3 grams gold).

n The Chaucha deposit in Ecuador was discovered by the UN in 1968. It attracted the attention of the Overseas Mineral Research Development Corp. of Japan. It was then passed on to AG Armeno Mines and Minerals (VSE). Currently, it is under the auspices of another Canadian company, which recently engaged consultants for a preliminary technical and economic analysis.

n In Myanmar (former Burma), the government, in its effort to revive its copper industry, began construction of a new plant in 1990, following the discovery of a copper deposit at Letpadaung Taung, which had been investigated by the UN in the 1970s.

— From the “Chronicle of the United Nations Mineral Resources Exploration in Developing Countries 1958-1993.”