Our Deal On Gold With Zamfara State, By Adegbite


The Minister of Mines and Steel Development, Olamilekan Adegbite, in this interview, provides an insight into the state of the solid minerals sector, clears air on gold mining in Zamfara, and says all hope is not lost on the revival of the Ajaokuta Steel Company by Russian experts.

How do you feel working in the APC government as a minister, especially at this very challenging time? 

This is my second time in public office, having worked in Ogun State as a commissioner. Coming to work as a minister is a bigger platform. It gives me the opportunity to affect many lives than I did at the state level. It’s been a fulfilling experience, especially under President Muhammadu Buhari, who has paid some attention to the steel sector. Previous governments didn’t pay so much attention to it. It is on record that the first and only time that we’ve got extra-budgetary fund from government to this sector was through President Muhammadu Buhari. That fund has helped to catapult the sector to a new height. We are now proud when we go out there to market the sector (Nigeria) as a mining destination. We are proud because we have verifiable data that we take along.This came from the fund the President gave us as extra-budgetary intervention fund. 

So, it’s fulfilling. We have the right person at the helm that is helping the sector. The mandate he gave is to diversify the economy through this sector, in order to generate employment and increase revenue base of government. Having sent us on that kind of errand, he has also supported us. We can always do more. The first intervention has been exhausted; we are asking for more

At what stage is the intervention of Russians in the revival of  Ajaokuta  Steel project?

When I came into office Ajaokuta was one of my pet projectsbecause it means so much to Nigerians. We have high hopes about Ajaokuta, and if we could bring this project to fruition, it would gladden the heart of a lot of NigeriansBeside that, Ajaokuta is a great potential for Nigeria. In terms of the employment it will generate a lot. In the plant itself, it is supposedto employ 10,000 engineers because the blast furnace is a continuum. Once you put it on, you don’t switch it off. You switch it off after about 15 or 20 years. And the switching off is gradual.

Now, in the upstream, there are about 14 minerals that feed into that plant to make steam. Each of those minerals would be minedin different locations in Nigeria. They will employ a lot of people. Once we produce liquid steel we have started our own industrial revolution. We will be able to make carswe can make engine blocs. Once you have flat sheets, you can now start making body parts. You can produce a lot of things, because steel is central to many technical products. This was why I approached the sector with a lot of enthusiasm and, I guess, my enthusiasm was infectious. The President supported that. I was sworn-in a minister on August 24, 2019, and we went to Russia in Octoberfor the Russia-African summit. At the summit, the President sought bilateral ties. We had a side meeting where the President specifically sought the help of Russians to  bring Ajaokuta backto life because they were the original builders. We hasought the help of the Americans; we have tried the British, and even the Indians. They failed. President Putin accepted and said they will help. That is why when I came back from Sochi, Russia, in 2019, I was very enthusiastic because we had plans. The plan was that by the third quarter of 2022, President Buhari would commission that plant and it would start to work. 

But, like we say, man proposes; God disposes. The Covid-19 pandemic put everything in abeyance. Before you can start work on a plant of that magnitude, you need to do a technical audit. This is a plant that was built in 1984, and since then it has worked intermittently. Before you can start work fully, you need to do technical audit. The Russians had set up a 60-man team that would work for 90 days with their Nigerian counterparts  those who had worked in Ajaokuta in the past. The government formed that presidential team. And we had funding. Five different sources had promised us money. Unfortunately, COVID-19 set in. Those experts were supposeto come in March last year; it was supposed to take about 90 days with those 60 people working with their Nigerian counterpartsThey would have done the audit in 90 days and come up with a document, that is called ‘Bill of Engineering Measurement and Evaluation, which would give us the precise cost of what it would take to resuscitate Ajaokuta. Once we had a figure the money was waiting. The same Russian team was going to come in to fix it and it will take them less than two years. That’s why we were thinking of reviving work in the third quarter of 2022. If we started the work in March 2020 by 2022 they would have finished with testing and commissioning, and all that. 

We were celebrating in October/November last year that coronavirus was going away, but the resurgence came in December/January. As we speak, those people are ready to come. Maybe, once they are vaccinated and they feel comfortable they will come, but the problem even with that is that theyve lost over a year. The work would have started in October 2019, but up till now nothing has happened. We’ve done a lot of paperwork, it’s for those experts to put boots on ground. In Ajaokuta, we’ve provided where they will staywe’ve got the logistics sorted out

What’s the funding arrangement like?

As recently as two weeks back, we were in discussion with five groups. They are competingthey know the potential that is in that place. It’s not as if they are coming together to give us money, they are competing. We have Afrexim bank; we have the Russian Export Centre, Stronghold Global, etc, who are saying we want to give you the money. And the money is not a loan to Nigeria, it’s a loan to the project, which will be paid by the project. That’s the beauty of it. We are saying Nigeria doesn’t want to take any loan on the project. A business case has been made that this is a viable project; we put money in it, that is why I am saying it’s a PPP. They put money and have the concession for a number of years. They will run the place, make money, pay the interest, make profit and the ownership reverts to Nigeria. You can decide to keep them as management consultants or you can ask them to go and Nigerians takeover from them. It can be 15 or 20 years. But the number of years would be determined by the audit. That is where we are.  We need to do the audit. 

What is business plan like? Is it going to include halting importation of steel?

If you want genuine steel, it comes from Ukraine and a little from Russia and China as well. So as a builder, I will prefer to use Ukrainian steel. Every importer who brings in steel will still have to go and test it. Go to Ukraine, they still use blast furnace, even in China. The Russians built a similar thing for China about the same time. That is what China is still using  the blast furnace technology. It’s the cheapest form of producing steel in the world. That is what we have in AjaokutaIf you want to produce steel in large volume, the blast furnace is the best system. Yes, there are more modern ones which you call the hack furnace, but that’s for small volume, the private sector.  Nigerians spend a lot of money and consume a lot of steel but if Ajaokuta was operation there import would have stopped. Ajaokuta is in three phases. Once, they start making money, they will go to phase two and then phase three. It will be a game changer for Nigeria. That is why I was so excited. And my enthusiasm was infectious and everybody was upbeat, but again, God is the master planner. 

How do you plan to standardize the mining sector, because we have many illegal miners in the system at the moment. Also, recently you presented gold mined from Zamfara to the president, and there Nigerians were told that the state will be producing gold and selling to the Central Bank of Nigeria. Why is Zamfara extracting its own natural resources and selling to government?

It was just a bar that was presented to the President, and it was presented by my ministry, and not by Zamfara. The bar that was purchased by the President was produced by this ministry from artisanal minersand it was refined in Turkey. What we did was to presented it as a possibility in our gold mining sector. It was a testrun, that Nigeria could achieve this (that is another way of earning foreign exchange).  It was a demonstration of the possibility that without selling oil we could increase our foreign exchange position by gold sourced locally.  And to even improve on that, we licensed three refineries in Nigeria. One is operating in Lagos, one is going to be in Abuja, and the other one will be in Kano. 

That particular bar we gave to the president is smelted to about94-95% purity. For you to take it to a bullion [international]standard, you need about 99.99% purity, which can only be achieved at refineries that are certified. The refinery in Lagos is being certified to produce bullion standard because once you have a bullion, it has a unique identification number which no other bullion in the world has. That is what we did as a demonstration that Nigeria can do that to shore up our foreign exchange position. The bar was purchased by the CBN and the money was paid into the federation account. 

To your first question, gold mining in Nigeria is being regulated. We have a Canadian company that is doing gold in Ilesha, that is core exploration. It’s quoted on the Toronto Stock Exchange. They’ve come into Nigeria and they are doing very well. I was there about two weeks ago. They’ve gone very far. Covid slowed them down. They were supposed to start exporting gold this March, but that is been delayed to about June/August because of covid. 

In formal mining of gold we are making progress because the company is mining. It’s a foreign company that has come and attained success. It is something that we canvass when we go abroad. Foreign companies are afraid because of all the negative things that they hear – Boko Haram, insecurity and the rest. But when they hear a story that a company came and succeeded and is exporting gold others  will want to come.  We overhyped all the insecurity issues. There is no country that doesn’t have its own share of security challenges.

Coming to issues of illegal miners, let’s look at it historically. Mining used to be the mainstay of the Nigerian economy. In the pre-independence, we had big British companies quoted on the floor of the London Metal Exchange for coal from Nigeria. But when oil came the government shifted its attention away from mining. In 1973, the indigenisation policy sent those companies packing. They left behind workerwho operated in the mines. These are the people  who know how to do mining. There were no companies to work for any longer. That was the beginning of the growth of artisanal mining in Nigeria. Their livelihood was based on this-subsistence living. Government has said that, as a policy, Nigerians who are into this kind of business should make a living  instead of throwing them into the unemployment market. We do not categories them as illegal. There is a department that is responsible for that. That department interfaces with the these artisanal miners. There is a programme here it’s remote sensing. We’ve got satellite up there, we can identify wherever artisanal mining is taking place. We send ground people there with their equipment; they canvass them and we try and bring them into the fold. Government has a lot of incentives, easy money (5% interest loan), we give equipment, we give training free, so many things,but for you to access this you must formalize into cooperatives. This is what people do and when they agree they take their particulars, including their biometric, phone numbers all other information, and they benefit from the incentives. If you derive this benefit from government, you must fulfill your own obligation by paying royalty. We are making a success of that.There are so many of them out there,  and they are very itinerant. If they hear that there is gold in any place they moveyou can’t catch them in one place. 

(Cuts in) The major concern is actually the Chinese? 

Anybody that is doing what is called artisanal miners is not illegal. What happened is that illegal miners who are foreigners that have come in without permit piggy back on artisanal miners. They  come with some substantial capital. These are the ones you see working illegally with machines. Most artisanal miners just have implements; they can’t afford an excavator that cost N100 million, it’s these illegal miners who have such money. The Chinese are the Number One culprit. We have a lot of Burkinabes, Ghanaians, others. Once you are not a Nigerian and  you are doing that you are illegal. Essentially, we are trying to curtail this. If you are able to bring artisanal miners into the cooperatives, these people who use them as a front for their illegalities  will be able curbed. Nigeria is so vast and these minerals abound everywhere. You have a lot of illegality,especially in Zamfara, it’s an issue. It has the largest quantum of gold in Nigeria and it’s close to the surface. People are just doing all sorts of illegality there. Government is trying, within limited resources. It’s takes a lot to go after these people, you need to go with a lot of hardware-military personnel-its money! As at 2018, the federal government setup a committee (mining police) which I chair. You have the IGP, chief of army staff, DG SSS, and DG NSCDC. To bring all this people together is money. Since I have been in office we’ve not been able to marshal this body because there is no funding for it. We are getting support from the office of the NSA; he is trying to help us in some of these issues.

On the misinformation that Zamfara is mining its own gold, what happened in the case of Zamfara was lack of communication. The governor was worried about the level of insecurity, as it was being fueled by gold trade. The bandits were getting gold and they were trading it for ammunition, that was why he came to the President. The CBN was not involved in that. He took some gold bars they had purchased from artisanal miners to the President, saying he wanted permission to buy the gold, with the knowledge and permission of the ministry. As an individual you can buy gold. We have what we call Private Mineral Buying Centre License. There was a lot sensation; the press did not give room for my voice; they preferred the controversy that was being brewed. I said, even governor Wike can set up a mineral buying company and buy gold in Zamfara, anybody can do it. You cannot do it as a subnational but as a company. Every state in Nigeria has a mineral buying company. Some states have oil fields which they took through companies. What was not communicated was that Zamfara got a license to buy gold through a mineral buying centre. What they were doing essentially was to take the gold away from the bandits because the bandits are not miners. The miners want to feed for the next meal. So, the governor started acquiring gold. That gold now belongs to the company that bought it. The CBN will not buy raw gold. It can only buy LBMA.  All the good the state government is showing you is 94%; it’s not tradable internationally. The CBN cannot use it as a foreign reserve.  The Zamfara thing was a misstatement, the governor was not communicating. If the man likes, he can send the gold he has acquired to the refinery in Lagos or Turkey. He will follow the proper process, have it refined to LBMA standard,and then sell to CBN. A lot of Nigerians now keep their money in gold. 

What is your ministry doing to address the issue of mining companies shortchanging host communities?

That your statement cannot be true except you are talking about illegal miners. Before you are given a mining license there is what is called community consent,’ without which you can’t get a license. A proper mining company must get a community consent. If I tell you that in this office there is gold worth about $10bn and as the owner I say I am not selling you can’t have the $10bn. That is how important the law is. You must have the consent of the owner of the place where you find your mineral. If they don’t give you consent you can’t explore it, we won’t even give you license. The conflict you are talking about occurs between illegal miners.  After the consent, you get the license before you can start work. There is what is called Community Development Agreement (CDA). These are graduated sets of promises spread over 5-10 years. It forms the contract we must sign. This is learnt from the oil industry where oil companies were prospering and the communities were worse off for it.

For instance, if I mine, say for one year. I am not making money yet, maybe all I can do is to give five people scholarship, it’s coded. By the fifth year when I am already making money, I will build a community hall for you or bring power. These are the things in the CDA. Now, as a witness to the agreement, if the company doesn’t want to do what it is supposed to do we sanction the company. At the same time, we do not allow the community to exploit the company. The company has to consider that in the first two years they are not making profit. They won’t promise anything big. But as they begin to do exploration and start making profit then your demands can go higher. They can give you road, power, in some cases, it involves monetary compensation. I have seen it happen with the one in Ilesha. Three weeks ago, I was in Osun and the company gave scholarship to about 26 people. They haven’t started making profit but they are spending. They’ve built schools, they are giving them water, they promised to give them power later. he agreement makes sure everybody benefits. 

When they flout this agreement what does the ministry do. There is a case in Kogi involving Dangote…?

We’ve intervened. There underground water was poisoned by coal, and of course, Dangote is constructing borehole for the community. We can stop Dangote from mining coal; we have the power. That coal case is not part of the agreement, it’s leeching! As they were mining coal the chemical leaked into the underground and entered the wells that people were drinking and people were getting sick. It was the consequence of the activities of the company. And the company is liable for that, so, we came in. They promised that they will construct boreholes that will give clean water and they are doing that. The case was brought before me. The minister of state visited personally and mediated between the company and the community. During that period the company stopped work because the community was already up-in-arms. It was only after the Minister’s visit that they were able to sit together and the company promised to make amends. Even in gold exploration, it can also happen. But you must prevent it.  In Dangote’s case it was something that happened inadvertently. I’msure the company is building the boreholes, as promised.