Portugal is trying to draw mining giants to extract minerals - Report
Reuters reported that Portugal's government is trying to draw mining giants to extract everything from iron ore to gold, silver and tungsten in the hope of cashing in on the 4% of revenues it will gain from each operation.
Mining giant Rio Tinto and the Portuguese government are currently putting the finishing touches on an experimental concession contract to mine iron ore in the north of the country in an investment that could be worth over EUR 1 billion.
Mr Ricardo Pinto, a mining advisor at the economy ministry, said that "With the strategy we have been pursuing for the mining sector, Portugal’s resources and its potential could rise up to twice current gross domestic product, which is to say more than EUR 200 billion."
It has granted 30 mining concessions since it came to power last year, which should add up to about 300 million euros in initial investments. About half of the concessions are at the prospecting stage, but many are expected to lead to production soon, drawing potentially much bigger investments. The gold deposits currently being investigated at Boa Fe in sunny Alentejo will be extracted in an open air mine, which takes much less time to activate than an underground mine. Existing mines that have been abandoned are now being reactivated.
Mr Peter Rose, an analyst at London based Fox Davies, an independent natural resources investment bank, said that "We see mining taking a key role in Portugal’s recovery. The geology and infrastructure is excellent and it is a void the private sector will fill."
Mr Rose said that Portugal's mining industry is a pretty compelling story, thanks to the high quality of resources, good local infrastructure and modest wages. The country's very name comes from Porto, a town that owes its development to mining by Romans along the Douro River, or River of Gold as they named it.
Under the terms of a EUR 78 billion bailout from the European Union and IMF, Portugal has launched sweeping austerity measures, with across the board tax hikes and wage cuts. Where the euro zone boom led previous governments to focus on public works financed by debt rather than on industries such as mining, the new centre right government is homing in on mining as an economic driver for the future. Despite its well known natural riches, especially in the Iberian Pyrite Belt, Portugal has overlooked the sector for decades due to depressed metal prices and the financial crisis in the 1980s.
Its mining history goes far beyond gold. The country possesses several world class deposits, such as tungsten in Panasqueira and iron in Moncorvo, both in the north, as well as copper in Neves Corvo, in the south of the country. It is currently Europe's fourth largest copper producer and a major producer of tin, tungsten and uranium. It produces 150 tonnes of wolframite ore per month in Panasqueira, while ravenous copper demand from China has pumped up production at Neves Corvo, where Canadian Swedish mining group Lundin mining estimates production of up to 57,000 tonnes of copper and 40,000 tonnes of zinc in 2012.
Moncorvo is about to be reactivated by giant Rio Tinto. Metal prices have risen to all time highs over the last decade due to demand from China, but also India and Brazil. Prices have stabilized recently but demand remains resilient and could provide a serious fillip for the country in these crisis times.
Mr Mario Machdo Leite, a board member of the National Geology Laboratory, said that "Metal prices have 15 to 20 year cycles and its pressing that we take advantage of the positive trend, because mineral resources contribute in a very expressive way to economic recovery. Rising metal prices and technologic development make extraction and processing more effective, allowing us now to have greater expectations of a resumption of mining."
Source - Reuters