By Jason Mitchell June 10, 2024
Algeria — Africa’s biggest country by geographic area — is poised to become one of China’s biggest global suppliers of iron ore, enabling Beijing to move away from its reliance on Australian imports to feed its steel industry.
The country is Africa’s biggest natural gas producer and fourth largest oil producer but is also rich in minerals. As well as mining metals such as gold, iron ore, silver and zinc, Algeria produces a wide variety of industrial mineral commodities, including ammonia, barite, cement, clay (bentonite, common, kaolin), diatomite, dolomite, feldspar, gypsum, lime, perlite, phosphate rock, pumice and pumicite (pozzolan), salt, sand, gravel, schist, stone (limestone and marble), sulphur, travertine, tuff, and urea.
Yet iron ore is the country's stand-out mineral. The Gâra Djebilet deposit — located in the southwestern province of Tindouf — has reserves of 3.5bn metric tonnes (mt) and 1.7bn mt are exploitable. The ore contains 90% iron. It is one of the largest iron ore mother lodes in the world.
Algeria — the tenth biggest country in the world and the largest country in the Arab world — spans more than 2.38mn sq km, four times the size of France. But large swathes have not yet been explored for minerals, and mining contributes only 1% to GDP.
To diversify the economy away from oil and gas, the government is pushing three key mining projects — the Gâra Djebilet iron ore deposit, alongside an integrated steel plant; the Bled El Hadba phosphate project located at the eastern edge of the Saharan Atlas in the Tébessa region; and the Tala Hamza zinc-lead deposit located within the Oued Amizour permit area, some 15km from the Mediterranean city of Bejaia. The country is also intensifying its search for rare earth elements, which are highly prized internationally.
Moreover, Algeria is home to 46.6m people and, in 2024, the IMF estimated its total GDP at $267bn, with an income per head of $5,720 a year. The economy is forecast to expand by 3.8% this year and 3.1% next year. In 2024, inflation stands at 7.5% while general government gross debt is 46.4% of GDP, low by African standards. Despite its abundant mineral resources, the country’s mining sector makes a modest 1% contribution to GDP.
In August 2023, the government said $7bn-$10bn would be invested in developing the Gâra Djebilet mine, which spans a vast area of more than 125m sq km. In June of the same year, a partnership agreement was signed between FERAAL, the Algerian state-owned iron and steel company, and CMH, a Chinese consortium, to mine Gâra Djebilet West’s iron ore body.
The agreement paves the way for the establishment of two joint Algerian-Chinese companies — with the first focused on operating the mine and the second in Béchar district dedicated to constructing a complex for transforming the iron ore into semi-finished materials. In effect, it gives Baowu, the Beijing-owned steel conglomerate, control of the Gâra-Djebilet mine.
The mine aims to extract 2m mt of iron ore annually by 2026, with a long-term goal of reaching an extraction capacity of 50m mt per year by 2040. These ambitious targets underscore the scale of the project and its potential stimulus to the Algerian economy.
Currently, Beijing imports almost all its iron ore from only two countries — Australia (79%) and Brazil (19%) — but it wants to distance itself from Australia and diversify its iron ore sources amid a diplomatic spat between the two countries. Experts say that Algeria has turned out to be China's easy option to source iron ore.
Furthermore, China Railway Construction Corporation, a Chinese state-owned company, is laying a 6,000km new railway line from Gâra Djebilet across the North African Algerian desert. It is working with Travaux Publics, the Algerian state-owned civil engineer, on the railway project, which will connect the mine with the Dumiat Industrial Zone in the Bechar region, close to the Moroccan border. It will also link up with the Algerian national rail network. This infrastructure development project highlights the strategic cooperation between Algeria and China in the mining sector.
However, the mine has one big problem — the iron deposit contains more than eight times the acceptable level of phosphorus, a mineral that weakens the steel in which the iron ore is used. Removing the phosphorus is an intensely energy-consuming and polluting process, but the Chinese claim that they have overcome these challenges, making the massive investment in the mine and the associated infrastructure viable.
Algeria possesses another extensive high-grade iron ore deposit at Ouenza, near its eastern border. Open-cast mines at Ouenza feed the domestic steel industry.
Furthermore, in November 2023, Ozmert Algeria, a Turkish steel producer based in Algeria, said it had almost finished constructing its direct reduction iron plant in Thebes. At the first stage, the plant will have an annual production capacity of 500,000 mt.
Algeria has three distinct geographical zones. The northernmost is the Mediterranean Coast, which is a narrow strip along the northern edge, bordering the Mediterranean Sea. This area features fertile coastal plains backed by the Atlas Mountains. The High Plateaus is a vast plateau region south of the Atlas Mountains. This semi-arid zone experiences hotter summers and cooler winters with some freezing nights. But most of the country’s land surface is covered by the Sahara Desert, which occupies around 80% of the geographic area and dominates the southern region.
Moreover, ever since gaining independence from France in 1962, the country made a series of strategic economic decisions that made it reliant on its oil and gas production. Hydrocarbon production and export revenues remain central to the economy. Between 2016 and 2021, the sector accounted for 19% of GDP, 93% of product exports and 38% of government budget revenues, according to the World Bank.
Furthermore, Algeria is the top provider of natural gas to Europe, supplying the continent through two main entry points — the two Medgaz pipelines to Spain and the two TransMed pipelines to mainland Italy. The country also has tremendous potential in solar power and plans to construct and operate 3,000MW of photovoltaic solar parks.
Algeria is also among the biggest helium producers in the world. At 8bn cubic metres (cu m), it has the world’s third biggest helium gas reserves after Qatar (10bn cu m) and the US (8.5bn cu m). Its annual helium production reached 9m cu m in 2022. The country has great potential to meet the world’s demand for the gas.
However, the government — which has been led by President Abdelmadjid Tebboune since 2019 — wants to attract foreign direct investment to other business sectors and mining is a priority.
The mining industry is dominated by the public sector, with large and medium-sized state-owned enterprises controlling a significant portion of the mining for barite, bentonite, cement and phosphate rock. Meanwhile, the private sector holds sway over the extraction of aggregates, common clay, gypsum and sand. Lastly, there are several joint ventures between the state and the private sector for specific metals such as gold and steel.
Manal Group represents the government’s interests in the country’s mining sector. It includes Entreprise Nationale des Granulates — also known as National Aggregate Company — which produces gravel and pozzolan; Société des Mines de Phosphates, which is the country’s only producer of phosphate rock; Société des Mines de Fer d’Algérie, which produces iron ore; and Enterprise Nationale du Marbre, which produces marble.
As well as iron ore, Algeria is a significant global supplier of other minerals. In 2019, it was the world’s fourth-ranked producer of pumice and pumicite (pozzolan), accounting for 4.6% of total worldwide output.
Furthermore, moderate-grade phosphate rock deposits are found south of Tebessa at Djebel Onk. Around one-third supplies the Annaba fertiliser complex, with the remaining exported as raw material.
Non-ferrous metals are more scattered but hold economic significance. The El-Abed region near Tlemcen is the country’s main source of zinc and lead production. Additionally, mercury ore is extracted at Azzaba. The country is exploring possibilities to tap into previously unexploited resources like gold, copper and zinc.
Moreover, by the end of 2024, Algeria plans to complete its first minerals map covering all 35 provinces. Launched in 2022, this project aims to identify the country's main mineral deposits and should help several new mines get off the ground.
The country’s main mining law originates from 2014, though it became effective in August 2018. The legislation guarantees parity for all investors, allows separate surface and underground mine tenure, ensures that disputes can be appealed to international arbitrators, gives incentives for importing equipment for mining operations and provides custom-tariff exemptions and rebates on mineral extraction royalties. The mining sector is regulated by the Ministry of Industry and Mines.
The royalty on the value of mineral production ranges between 1.5% for solid combustibles and nonprecious metals and 6% for precious and semi-precious metals and gemstones. Additionally, a maximum of 2% of the profits is dedicated to post-mining rehabilitation. The law requires miners to pay a surface tax determined by the size of the concession area and no longer gives priority to state-owned companies over private companies in issuing mining permits.
In 2023, the government said it would like to reform the law to stimulate the mining sector further. It wants to devise a more transparent, stable and sustainable mining policy to encourage investment. This would include adopting a simplified, transparent framework — with the inclusion of appropriate guarantees — that benefits national and foreign investors, removing bureaucratic obstacles and reducing the timescale for studying mining bond applications.
Furthermore, since 2020, the government has taken steps to boost foreign and domestic investment by issuing a new hydrocarbons law, partly lifting restrictions on the foreign ownership of domestic firms and adopting a new investment law.
Meanwhile, in September 2021, the government’s action plan made the transition to a private sector-led growth and job creation model a priority. It includes bringing down public spending, reducing imports and boosting non-hydrocarbon exports.
However, the country’s mining sector faces significant challenges. Since gaining independence from France, the country has struggled to keep up with mining trends, especially diversification into hard rock mining. The desert climate has not been conducive to exploration and the mining sector is dominated by aggregate mining.
Algeria’s mining regions, particularly in the Sahara, lack well-developed infrastructure, hindering efficient extraction and transportation of the minerals. The government acknowledges the need for modernisation and investment in the sector, including upgrading infrastructure and adopting more sustainable mining practices.
However, the country’s short distance from European countries bordering the Mediterranean Sea — such as Portugal, Spain, France and Italy — is a big advantage.
Algeria’s mineral resources are a huge opportunity for the country to diversify away from oil and gas. Iron ore has the greatest potential. With vast reserves and ambitious development plans, Algeria could emerge as a key player in the international iron ore market, potentially reducing China's reliance on its traditional suppliers.
However, challenges such as high phosphorus content and environmental concerns must be addressed. As Algeria diversifies its economy away from oil and gas, the mining sector — supported by recent reforms and investments — could emerge as a crucial driver of economic growth.
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