URSABLOG: Discovering Algeria

I have to admit that I have overlooked Algeria for most of my life. I think I may have flown over it once or twice, but apart from that it hasn’t figured in my consciousness at all. It sits there in the north west of Africa, more or less minding its own business, and until my good friends at Splash 247 wrote a little article on it this week, I gave it little thought.

If I was in the tanker or gas industry of course, I would pay it far greater heed. But as a dry bulk man, I know that handies go there to discharge grain, and little more besides. But it turns out that not only is Algeria the largest country in Africa (hands up those that thought the largest was the Democratic Republic of Congo like me), it also is the tenth largest country in the world.

If I were French, I think I would have paid more attention to it to. I know Albert Camus was from there, played in goal there too, but beyond that, except the pieds noires, it is but a dim impression of a North African country like others. I admit this with some shame. I am interested in the world, and am a fan of geography of all shapes and sizes, but Algeria has, well, just fallen off the map for me. I apologise to all Algerians who may care about this glaring omission.

Splash 247 reported that:

A consortium composed of Metallurgacal [sic] Corporation of China, China International Water and Electric Corporation and Hunan Heyday Solar Corporation has signed up to carry out a feasibility study on the exploitation of Gara Djebilet iron ore in western Algeria.

Leaving aside the obvious implications of China importing iron ore from Algeria instead of Australia, and huge increase in tonne-mile demand that would occur, I started to look a bit further into Gara Djebilet.

It is based in the Tindouf province, tucked into the western area of Algeria, bordering Morocco and Western Sarah. Tindouf province is huge too, with a total land area larger than that of Switzerland and Austria combined. The population is sparse, officially 58,000, but there are at least 100,000 undocumented refugees spread out in various camps. Western Sahara has been at war with Morocco for over 40 years. Mauritania is unstable, and Algeria is one of the routes that southern migrants use to get to the Mediterranean and Europe beyond. A quick flyover using Google satellite makes grim viewing.

The environment itself is forbidding, as you would expect from the Sahara desert. But it is not all photogenic sand dunes. It is mountainous, and difficult, with one or two roads to service the entire area. But underneath all that sand, and mountainous terrain, there is iron ore, lots of it. This is what has led this Chinese consortium to Tindouf. But they are not the first.

In March 2016 Reuters reported:

Negotiations started last month in Algiers with officials from China Civil Engineering Construction Corporation (CCECC) for a partnership in the Gara Djebilet iron deposit in the southwestern province of Tindouf, the official told Reuters.

Whether there are any links between the CCECC and the consortium that have signed up now I don’t know, but I doubt it. The prize is real though:

Officials have estimated reserves in the Gara Djebilet deposit at around 2.5 billion tonnes of iron ore.

But I think I see the reason why the talks failed:

Talks with China also includes the construction of a 950-km railway line linking Tindouf to the Bechar province to help transport extracted iron to steel plants….. Officials have said Algeria would turn to China to fund several projects including a $3.2 billion port, the first time it has sought external financing in more than a decade as it looks for alternative funding because of the oil price drop.

This project seemed to be looking for funding from the One Belt One Road initiative, but even if the railway were be built, it would only have fed the existing steel works at Bechar, which is only about half-way to the sea at Oran, the nearest sizeable Algerian port. They were also right that a new port was needed, as none of the existing ports, including Oran, can handle large amounts of iron ore or capesizes. No mention was given of a link to the sea.

Reuters commented that “The industry and mines ministry official gave no details on how the Gara Djebilet project would be financed.”

Perhaps it is no surprise that the CCECC project went nowhere.

So in steps the new consortium. What have they agreed? It’s hard to say, except for the feasibility project itself which will cost in excess of $2bn, according to preliminary estimates. That there is iron ore there seems to be in no doubt, but how much and how good it is gets a bit confusing. Splash 247 says there are “estimated reserves of 1.7bn tonnes of ore grading 30% iron metal.” This is a little bit less than the 2.5 billion tonnes previously estimated.

And is the quality of the iron ore any good? I was under the impression that high quality ores were above 63% iron content and my memory seems to be correct:

Overall, the quality of iron ore is mainly judged based on the Fe [iron] content. More specifically, ores with Fe contents above 65% are regarded as high-grade ores; 62–64% medium- (or average) grade ores and those below 58% Fe are considered as low-grade ores.

So 30% seems very low, but something, maybe the geology I learned, very badly, during my BSc in Liverpool, told me to dig deeper. I am glad I did.

Iron is a very common mineral and is found everywhere in small amounts, including spinach and lentils, and is crucial to our health. But in order to be extracted and used to make ships, and fridges, and everything else, it has to be in the right compounds and in the right amounts. The compounds miners are looking for are iron oxides to be found in rocks bearing the minerals magnetite or hematite.

Magnetite ores are fairly widespread around the world but in order to become commercially viable, the rock formations where they are found need to contain around at least 25% iron. These ores are found in bands of metamorphosed sedimentary rocks, usually sandstone that has been squeezed and heated so that the minerals run into veins. These veins can be hundreds of metres thick and hundreds of kilometres long, but you can’t just dig them up and bung them in a blast furnace. Between 33% to 40% of the weight of these rocks should contain the mineral magnetite, which is then processed further into a product with a grading in excess of 64% iron by weight. To get the iron concentrated into a product that can be used, you will need a lot of water to get the waste materials, called tailings, out. Tailings dams are often used in this process, and recent history has show how dangerous and disruptive they can be.

Hematite ores, or direct shipping ores, come out of the ground at 63% or more iron content, so they are good to go. They are rarer than magnetite ores, but very valuable once they are found because they do not need much, if any processing.

It seems that the ores at Gara Djebilet are magnetite ores, which will need a large amount of processing, with water, before the ore will be able to be shipped and used. I remind you that Gara Djebilet is in the middle of the Sahara Desert.

It is clearer to me now why the China International Water and Electric Corporation and Hunan Heyday Solar Corporation have joined the Metallurgacal [sic] Corporation of China, and why the bill for the feasibility study is so large.

But surely the feasibility study must also address the small fact of how to get the ores, one assumes once they have been processed, to the sea, and where exactly they will be shipped from. The quickest way would be down to the Atlantic, through either Morocco or Western Sahara, but either way through a disputed war zone. There are no ports, or by the looks of things, even the makings of a port on the windswept Atlantic coast. The route to the Mediterranean goes via Bechar, but this is through difficult and mountainous terrain, and a new port is certainly necessary. It all seems to me to be easier to keep going back to Australia, or Brazil. But who am I to judge the ways and means of the CCP, who are surely somewhere behind all of this?

In any case, before I start rubbing my hands together at the huge amounts of tonne-mile demand to be added, or start dreaming of an Agadirmax, or an Oranmax, it seems odd that I have until now overlooked a huge country on the doorstep of Europe, and that it took an article about the Chinese agreeing to think about investing there to educate me. And as apparently Algeria has a long history of wine making, I am intrigued about the place, and am going to find out a bit more. It seems a bit rude to do otherwise.

Simon Ward

www.ursashipbrokers.com