A combination of systemic banking problems and customs delays is threatening the successful implementation of the country’s second international mining project, a zinc mine near Bejaia in the northeast.
The expansion of a gold project in the south, the country’s first mining project to involve foreign participation, is also dependent on the resolution of logistical and administrative problems.
“The customs and fiscal compliance regime is top-heavy, cumbersome and leads to additional costs and additional risks,” says Kevin Moriarty, chief executive officer of Terramin Australia, which has a majority stake in the zinc project. “It appears there is no clear road map for customs people or companies to navigate the compliance framework for imports.”
The project, which promises to be one of the five-largest zinc projects in the world, has already been hit by administrative delays.
The addition of a second drilling rig was held up by three months while it was cleared by customs. Two further rigs arrived from Turkey on 6 November but are still being held by the authorities.
“The greatest non-technical risk to the project is not being able to get the plant through the port [of Bejaia] during the construction phase,” says Andrew Robertson, operations manager at Terramin. “It could cost us millions of dollars.”
UK-based GMA Resources, which is developing a gold mine at Amesmessa in partnership with state mining company Sonatrach SPP has suffered similar delays.
“In some cases, it can take two to three months to get a piece of equipment, which does not work in a just-in-time inventory situation,” says Gordon Perkins, chief executive officer of GMA.
The firm is due to begin production by the end of 2007, but plans to increase this in future could suffer.
“Our plan to increase production from 100,000 to 200,000 ounces a year is dependent on our exploration programme,” says Perkins. “But it also depends on our ability to get the right equipment and human resources.”
The problems lie with the complexity of the customs system and a failure to implement a 2001 mining law.
“There are about six different levels of customs administration to navigate, some of which seem rather arbitrary,” says Moriarty. “Some of the mining act regulations have only been implemented in the past 12 months, so often officials are not aware of the new rules. They often try to ensure that we are following regulations intended for government firms.”
Customs issues are exacerbated by the weak banking system. “It can take two months to process a payment to [overseas equipment] suppliers,” says Perkins.
Both companies hope to resolve the problems through negotiations with Algiers.
“If companies are having problems with customs, we are here to help,” says Energy & Mines Minister Chakib Khelil.