In December 2018, Nigeria began the journey to having its first ever gold refinery with a groundbreaking in Mowe, Ogun State. Nere Teriba, Managing Director/Vice Chairman of Kian Smith, the company behind the bold move, in this interview with BusinessDay’s Joshua Bassey says the target is to commence operations in the 2nd quarter of 2019. She also speaks on polices, successes and challenges facing the extractive industry.
What triggered Kian Smith’s vision to build Nigeria’s first gold refining?
If you look at the local extractive industry, you will see that there is a cycle in Africa, that we create raw materials but do not really add value. The value chain overall is lacking and it is not just in gold, as you will also see that flaw in agro-commodities like cocoa, cashew and even crude oil. I looked at it in terms of gold that it is a commodity that cuts across sectors: it is a financial instrument; it is for jewelry,at least for Nigeria. We are a people that benefit strongly from the value-addition chain. Gold jewelry is used culturally here as we have a strong market for gold. When you go to Sabongari market in Kano, we have about 2000 unique visitors for gold in that market from across Africa on a daily basis. So when you look at it, you will understand that we as a country culturally, we appreciate gold jewelry. So we are consuming down the valuechain while also selling our raw materials. We looked at it and saw a great opportunity to get involved in value addition as it will give great opportunity to create jobs for our people, not just jobs, but in revenue for our people at every stage. So those were some of the major reasons why we pushed for the refinery.
In December 2018, Kian Smith did the groundbreaking of the refinery. Can you give an insight into the level of work so far?
Right now, I will say we are still very much on target. We are under pressure to get this done by June, that is by the end of the 2ndquarter of this year. No doubt, it will be tight but we are working hard towards it. Hence we will keep it that way even if we are late, we will not be far off.
Have there been new investors in this sector in the last five months?
There are always investors’ interests, especially given the news on what the country is going for. In terms of policies, it’s been very encouraging to investors. We know that a lot of them have shown interest. However, we have concerns recently from the news that could be a turnoff to investors. I will say that some few months ago, investors were very bullish but now, I think they are cautiously observing. On one hand, some investors have been turned off, some other investors that we have been talking to, trying to make them see the more holistic picture, are remaining cautious.
What would you say is the reason for them remaining cautious?
When you are appearing on the international outlets and sending wrong messages to foreigners, it doesn’t send the right signals. It makes them wonder. In all, it depends on how news is being reported, as this creates perception, which has been the case since the nationlisation of our mining assets in the 70s. We have been a mining country, based on history. We had disruption in oil production due to the civil war, but mining was still there as we had a lot of foreign companies then in the 70s. All mining assets were indigenised , then the foreigners left and it is taking them a while to reconsider Nigeria.
So when suddenly some sensational headlines are put forth in the news, it scares them away even more. So, we are trying to make sure that the narrative is well spelt out: that the Nigerian government is not trying to tell foreigners to leave mining, and that the sector is well regulated. We are at a very sensitive stage as a country that we are trying to develop our mining assets; we are in competition with other countries in the region that have a stronger mining history.
What is the potential of the Nigerian mining industry?
The potential is great and I can give you like three minerals to think about. For tin, last year, we were among the top five in the world. It is interesting for the record as we don’t have a big tin mining industry in Nigeria, yet we still made top five, so it makes you sit down and think. The reason a place in Lagos is called Tincan Island is because of the tin. All the tin that was being produced in Plateau went down the railway which was being designed around our mineral deposit. Tin is a key material in the oil and gas industry because they use it for the pipeline. We are really on top of tin in Nigeria, not just in production, but also for the oil and gas industry. So often, the price of tin goes in line with the prices of oil and gas. So the potential is huge.
For gold, you are already aware of the narrative and the kind of investments going into that space. Just take a look at those two minerals as we don’t need to produce all things.
For instance, South Africa has been known for just two minerals which are gold and diamond. They have other things but are known for those two. So, as a mining country, we don’t need to think of the 44 that the government has identified. However, it is great to know that we have a lot more minerals than the two, but with just those two alone, I think the potential is vast.
How marketable are Nigerian minerals in the global market?
Let me speak on value addition for gold. Now, because there has been such a huge absence in the sector, there have been organisations and institutions that have taken up policies and guidelines for the definition of conflict minerals and scammers. In the absence of Nigeria being a big player, the people who make the rules are those who are buying, who are adding value and who are consuming. So the consumers are the ones adding value and have been the ones making the rules.
When you look at it as a Nigerian, we produce tin, but are we really involved in IITRI (IIT Research Institute) and councils that are part of the conflict minerals resolution following the rules and standards? The answer is no. And it is the same thing for gold. For refiners of gold, most of Africans are not involved, so when there are discussions atOECD (Organisation for Economic Cooperation and Development), we are not part of it because Nigeria is not even an OECD country and the OECD is all about trade.
Same thing with diamond; it is not us producing it that are making the rules, it is the people who are in the council and we have to be on the table to be part of the people making the rules and being able to follow the rules. Hence, it’s not about them producing the minerals or gold. What we at Kian Smith are really focused on doing right now is dealing with Nigeria’s reputation internationally as a gold producer and not just as a gold producer but as a legal, clean gold producer. So we are working hard, interfacing with the World Gold Council, and the responsible jewelry council and even going to the OECD responsible mineral chain in Paris. Sometimes people wonder why we are doing what we are doing and we say no, there is no business per se in being an ambassador for Nigeria’s reputation for gold. It is more of a long-term investment for us where our product will have international recognition.
It is really marketing and branding because if you have a bad brand and we work better on it, before you know it, the perception will change and people will say yes, in Nigeria they have good gold because they are seeing us around. So presently we are having issues in meeting the international standards but it is really perception on one side and absence on another,which we are working upon.
For smaller miners of gold, funding remains a challenge. Will you support the idea of a designated bank for that purpose?
I do not think the issue is with a bank. Banks deal with other people’s money and if you want to loan other people’s money out, you will have to think on how you will get the money back as per the guarantee. The issue that I think has been in the mining sector is that they are organised in what we think is their disorganisation. For example, what we have been doing in the last two to three months is to register them with CAC (Corporate Affairs Commission) as business and we are getting them to have bank accounts. Two banks are working closely with us, Stanbic and Zenith Banks. They are going across the miners in making sure that they have bank accounts. We have also been strengthening them on capacity building programmes and formalisation. But the more we look at them, the more we see some of them are really beyond formalising in co-oporatives. So what we are doing is looking at those bigger dealers and saying, forget cooperatives, become bigger business, and we are helping them on that. With this, you are sensitising the banks as they become open to these people, get to know them, and establish a better relationship with them. From there, the banks begin to understand the industry and see how they can lend them money. If the banks are working with Kian Smith and know this small miner is our supplier, and they can see the history of that person, it is easy for the banks to come in after they have understood the business, the industry and the clients. But for now, you can’t ask the banks who haven’t understood the business or known how they are going to hold the suppliers or the clients to repay that loan to play effectively in that space. However, we are working greatly on that.
Do you see government policies driving the industry to gain global recognition?
I will say yes on one hand and no on the other hand. For example, Ministry of Mines and Steel Development has done their best in driving growth in the industry. They have policies on mining, formalisation of property and working with the private sector. That has been amazing. However, why I said no on the other hand is that a lot need to be done to propel the sector forward. The sector is a very interdependent sector and what is missing is that interwoven and interlinked agencies and ministries working together. That’s where I think we are lagging. But if you look at the Ministry of Mining and Steel Development, I will say yes, they are doing their best.
Again, going by the value chain, we need to look at gold as a financial instrument. Right now, no one is looking at gold from that perspective. Looking at the monetary policies, the forex policies, import duties, VAT (Value Added Tax). All those are issues that are very strong for gold which are not being addressed. And in fairness, all those policies are not under the jurisdictions of the minister of Mining and Steel Development. It’s something that should be an interlinked effort. Honestly, the sector is very complicated and it’s not that nothing has been done but we will love to see more synergies among the various actors.
Why have operators in the industry not come together to resolve some of these challenges?
There is mining, there is processing and there is the retail. What Kian Smith is doing is that we are in every part of the value chain for gold. So when we say investors are coming into the industry, we should ask ourselves what sector? If we say the mining sector, then that was what I answered you earlier that the Ministry of Mining, Steel and Development is doing excellently. There is no issue there; the only problem is the interdependence among operators. When you talk about gold, VAT is an issue on value addition, monetary policies and forex. Remember we are the first refinery hence we are dealing with issues that nobody has dealt with since there is no other gold refinery in the country. So for now in the sector of minerals, we at Kian Smith have to start finding the people even though they might not have the refining license who are interested to get into the value addition to come along and say, look we all need to work together to rebrand the perception of the industry internationally.
What should Nigerians be looking forward to when the gold refinery begin full operations?
Nigerians should be looking forward to being on the map. Very soon, Nigeria will become a gold market in West Africa, meaning that we will be refining gold, producing gold, and supplying gold to the financial industry like the CBN (Central Bank of Nigeria). For us, this is now another complete sector that will be adding a stronger economic impact to the country and not just oil. So for the diversification of revenue for the country, this is one aspect to it.
Furthermore, on the job side, it is really interesting for people to understand we are going to create jobs. The gold dealers, about 314 of them have registered under the CAC, each of these dealers has about 7000 people down the chain. So the first thing we will be doing is to fill up the gaps and work with the individual chain of supply with a lot of the people under them being formalised. The job creation that will arise from production and supplies will be exponential. Also, in revenue, we were just discussing with the minister of Mining and Steel Development that by helping some of these small miners to register, CAC has made money. Nigeria can save a lot with the 314 businesses that were created in about six weeks. Also, revenue will be made to FIRS (Federal Inland Revenue Service) as the 314 businesses have been brought into the tax net. So you can see all the benefits that will come to us in the country.
What is going to be the production capacity of the refinery?
The refinery will start with a production capacity of three tonnes per month of 99.99 per cent gold and one ton per month production of 99.99% silver.
There are 15 ECOWAS countries of which only three are known not to be producing gold and they are Cape Verde, Benin and Togo and even from those 15, Benin and Togo are huge in trading, that is, they know them for gold trade, hence we could say that the only country that is not known for the gold industry in ECOWAS is Cape Verde.
In the whole ECOWAS, we are a strong gold region and if this is compared to what we are doing here in Nigeria, the Nigerian market can take its place coupled with the fact that ECOWAS already has a strong treaty for trade. With this, it is really going to change the dynamics not just for Nigeria but ECOWAS in general.
So what we are doing is ensuring that people have a sense of fairness and not fear on how gold is going to work. By the end of June, part of what we will be doing at Kian Smith is that we are going to be among a group of people hosting the Gold West Africa Conference, which is going to be the first time ever. We are bringing the gold producing countries to Nigeria to meet and have a roundtable. We will be having the ministers from Burkina Faso, Niger, Mali, Senegal etc. If you look at the role that Nigeria is going to play even for gold across the West African region, we are a big brother in ECOWAS in general so we can do the same thing for gold trade.
Dubai and India are not known for mining gold but they are known for gold trade all around the world, hence Nigeria needs to look beyond gold mining. It shouldn’t even matter if we mine gold in Nigeria. The fact that, all around us, our neighbors mine or produce gold, is a lot.
Nigeria can become the Dubai of Africa because the appetite for gold is there, it is just left for us to harness that.
What have been the challenges you faced coming this far?
I will say it is the system in Nigeria. All the challenges we are going through in Nigeria are evident in every business and the things that we do. So you find that on one hand, there is a lot of distrust in anything that is new because it is not understood. And on the other hand, we have also seen a lot of acceptance. Honestly, the challenges have been numerous at every level.
Another challenge we have faced is that people hear gold and they hear minerals and they resort to rent seeking without really understanding the gestation period.
Gold mining is supposed to take about seven years. But people think mining gold is like oil and gas. I think such perception and understanding of the processes should be revisited. There are lots of challenges but we just need to focus on our goals.
How has your relationship with the CBN been?
It’s been good. Remember, they are a financial institution and don’t deal with things casually. However, they are very open in consultation to understand what is needed and the standard. We find them accessible as they should be and also conscious as they should be also. For the CBN, they have put forward the terms and the conditions for them buying gold which are clear to us thus, when we get started, we will meet their specific interests.
How is Kian Smith’s relationship with Mowe, thehost community?
It’s has been very good. That actually is a very unique situation for us. But then again, we are not mining. So maybe because our experience has been with the mining communities but this is not a mining community. We are only building a refinery there and people understand clearly that they are not the ones producing the minerals; the minerals are not coming from their land or their region and they also understand that there are other states where we can go to put up the facility. I think that has helped to balance it.
We are even looking at some kind of community projects to embark upon in May even before we open. The community has been loving and peaceful and we are hoping that this relationship continues.