Uganda ready for the big boys

After watching mining companies flock to its neighbours Tanzania and the Democratic Republic of the Congo, the government of Uganda realized it wasnt doing enough to promote the countrys mineral potential.

The last big name in Uganda was Falconbridge, which produced 16 million tonnes of copper from the Kilembe mine between 1956 and 1979, but in the next few weeks Rio Tinto (RTP-N, RIO-L) is expected to close a $5.75-million-deal with IBI (IBI-V) for its Ugandan vermiculite mine.

Joshua Tuhumwire, commissioner of Ugandas Department of Geological Survey and Mines hopes having Rio Tinto operating in Uganda will bring some much needed exploration attention.

I can assure you that once Rio Tinto arrives, other big mining companies will want to see where this big boy is and why he is there, Tuhumwire says.

Rio Tinto is a bonus that Tuhumwire hopes will make mining companies notice the steps the Geological Survey has taken to improve the countrys mining sector.

In December the Geological Survey began a $10.3-million airborne survey that will cover 80% of the country as a part of a program to commercialize the countrys mineral resources.

The project is being funded by the World Bank, the African Development Fund and the Nordic Development Fund.

Tuhumwire says that since the new mining act came into effect in 2004, the number of exploration licenses has increased to 220 compared to 50 before.

Tuhumwire says the lack of exploration in Uganda is a fallout of Idi Amin, who came into power after leading a military coup in 1971, and was responsible for the deaths of hundreds of thousands, drove out all foreigners and nationalized all businesses.

He left in 1979 but his legacy stayed on, says Tuhumwire. The mining activities that were taking place were all corrupt when he was in power.

As new exploration technologies and techniques developed in the 1970s and 80s in other parts of the world, nothing happened in Uganda.

In the mid 1980s, Tuhumwire says Uganda noticed a new wave of mining companies coming into Africa.

Ugandans have a different attitude they were a bit complacent and thought, Uganda is good, everybody will come here in mining, nobody came, Tuhumwire says. Companies went to Tanzania but nobody swam across Lake Victoria to come explore opportunities in Uganda so we said, there must be a problem.

In the early 1990s, Tuhumwire began going to mining conferences to drum up interest in Uganda but that was not enough. The government began a mineral sector program that is currently on going, aimed at improving geoscience data. The government has also sent Ugandans to study abroad to improve the countrys knowledge base.

Mining companies are taking note.

African Mineral Fields, a subsidiary of Magnus International (MGNU-O) began exploring in Uganda in May 2006. The company has four early stage gold properties for a total of 2,000 sq. km and 14 licenses. Airborne and magnetic surveys are currently being done and in June, the company will begin 5,000 metres of drilling on 5 gold targets at depths of 50 to 250 metres.

IBI president and CEO Gary Fitchett says he finds Uganda to be very investor friendly. The company has been in Uganda since 1999 and has been anxious for the Geological Surveys program.

He says IBI has built a strong base of relationship capital in Uganda.

In some places they discourage you but in Uganda they really bend over backwards to help you they want things to happen, Fitchett says.

Now that IBI has sold its vermiculite project to Rio Tinto, the company is focusing on several gold and uranium properties.

We are there on the ground floor with major success of bringing Rio Tinto into Uganda, says Fitchett. That will be a signal to the rest of the world.

Vangold (VAN-V) has licenses covering 60 sq. km in the Kilembe copper/cobalt belt, more than 250 sq. km within the Burundi-Tnazania nickel belt.