Mining Sector Profile

1. Background to the Mineral Sector

Uganda lies within the African Plate which is a continental crust. Precambrian rocks ranging
from Achaean, Lower Proterozoic to Middle Proterozoic (4500 - 600 Million Years) dominate
the geology. Close to the eastern border with Kenya, lies a number of Cretaceous to Miocene
(145.5 - 5.3 Million Years) intrusive alkaline carbonatite complexes. The Rift Valley contains
Cenozoic (65 - 0.01 Million Years) to Recent sediments up to 4000 metres thick. These rocks are
endowed with a wide variety of minerals as evidenced by past mining records and the numerous
mineral occurrences in many parts of the country.

The mining industry in Uganda reached peak levels in the 1950’s and 1960’s when the sector
accounted for up to 30% of Uganda’s export earnings. However, political and economic
instability experienced in the country in the 1970’s and the recent global economic slowdown led
the sector to decline drastically. Currently, the energy sector’s contribution to total GDP, at
current prices, was the lowest in (Financial Year) FY2009/2010 with a share of only 0.3 percent.
It should be noted therefore that the decline is not a result of resource depletion but rather due to
the bad governance at one time but recently due to poor world prices of cobalt and copper,
among others.

The period after 1986 has been marked by a favourable business climate in Uganda and many
mining companies have taken up licenses in the mining sector. Over the last ten years the sector
has been growing positively with growth rates peaking 19.4% in FY 2006/07. In FY 2009/2010,
the sector grew by 12.8%. In terms of licenses taken, in 1999 there were 66 licenses issued in the
exploration and mining license categories combined; by the beginning of 2010 there was a total
of 517 licenses issued. Table 1 gives a breakdown of the categories of these licenses between
January and December 2009.
Table 1: Mineral Licensing Status January – December, 2009

These licenses cover the entire country but are generally concentrated in the more prospective
areas in southwest and southeast Uganda. The fact that parts of north and central Uganda are to
some extent under forest cover and at the same time have thick soils as a result of tropical
weathering, limited geological data render them not conducive for mineral investment.

2. Investment Opportunities in the Mineral Sector

The principal minerals that have been mined in the past, or are being mined at present or are
known to occur are discussed below, and the mineral occurrence map (Appendix 3) shows their
locations. In broad terms they can be divided into metallic and non-metallic minerals which
investors can prospect and mine.

2.1. Metallic Minerals

Beryl: Beryl is the main mineral from which the metal beryllium is extracted. It is associated
with pegmatites, mainly in Ntungamo, Bushenyi, Kanungu and Rukungiri districts, but also at
Mbale Estate and Lunya in Mubende and Mukono districts respectively. At one time in the early
1960's Uganda's beryl production accounted for 10% of world production. Production came
mainly from Mutaka in Bushenyi district, Kazumu in Ntungamo districts and Bulema and
Ishasha in Kanungu district. The deposits at Ishasha have the largest known potential.

Uses: Beryllium metal is used in making lightweight metal alloys for aircraft and in nuclear
reactors. The coloured (green) variety as emerald is a precious stone, but yet to be discovered in
Uganda.

Bismuth (bismutite): occurs in association with native gold and wolframite at Rwanzu in Kisoro
district; Kitahurira in Kabale district; Kitwa and Muramba in Kanungu district.
Uses: Bismuth is used in making special alloy steel.
Chromium (chromite): Chromite prospects are found in chlorite schists at Nakiloro located 16
km NE of Moroto town. The chromite here is associated with platinum, a precious metal. There
has been no chromite production to-date in Uganda.

Uses: Chromium is used in making special alloy steels and for chrome coating. Chromite as an
industrial mineral is used in metallurgical processing and in furnaces as a refractory.

Copper-Cobalt: Copper has been found at several localities in Uganda but the only significant
deposit discovered to-date has been at Kilembe, where copper-cobalt sulphide mineralization
occurs. The other areas where copper mineralization has been noted are Bobong in Karamoja
region and Kampono and Kitaka in Mbarara district. Copper is also reported in Buhweju,
Bushenyi district.

Although copper was first reported at Kilembe in 1908, the deposit was not brought into
production until 1956 on completion of the railway line to Kasese. Between 1957 and 1979 a
total of 16.29 million tons ore averaging 1.95% Cu and 0.18% Co were mined and treated to
yield 217,000 tons of blister copper which was exported, plus 1.1 million tons of cobaltiferous
pyrite (iron sulphide) which was stockpiled. The Kasese Cobalt Company has installed a 1,000-
ton per year cobalt plant and is processing the stockpile of pyrite concentrates.

The Kilembe mine ceased its production in 1982 and has since been on care and maintenance.
Proven reserves of copper at closure were 4.17 million tons with a copper content of 1.77%, with
opportunities to discover additional resources in the vicinity of the mine. In addition to copper
still in the ground, there is 5.5 million tons of cobalt in tailings (dumped material from previous
mining) at an average grade 0.114% Co.

Uses: Copper is mainly used in making electrical conductors. Cobalt is used in making special
alloys for the aerospace industry, electronics and high-tech industry. Cobalt salts are used in the
chemical industry and in tinting glass to give a blue colour.

Gold: Gold is widely distributed in Uganda but has been worked in only a few areas:
Kahengyere and Muti in Buhweju and Mashonga in Kyamuhunga in Bushenyi district; Kitaka in
Mbarara district; Chiruruma, Chilima, Bugarama, Mugyera in Kabale district; Murindi, Mpororo,
Rubuguri and Karamba in Kisoro district; Bikongozo valley in Rukungiri district; Kashenyi,
Kanungu, and Muramba in Kanungu district; Tira and Amonikakine in Busia district; Kamalenge
and Kisita in Mubende district; Rupa and Kamalera in Moroto district and Kafu River in Hoima
district. With the exception of Kisita, Kamalenge,Tira and Amonikakine where gold is being
recovered from reefs (hard rock), most of the gold is recovered from alluvial material.

Most gold production has been by small producers who include licensed miners and artisans.
Production statistics from artisanal miners is only indicative given the fact that most operators
are not licensed and even the licensed ones tend to under-declare hence most of the gold is
transacted through dubious channels.
Uses: The commonest use of gold is in gold bullion, followed by jewelry and electronics
especially in the computer industry.

Iron Ore: Iron ore occurs principally as two types of minerals: hematite and magnetite.
Hematite of high quality (90-98% Fe2O3) occurs at Butare in Kabale district; Kashenyi,
Kyanyamuzinda and Kamena in Kisoro district with total resources in excess of 50 million tons,
which contains negligible sulphur, phosphorus and titanium. Hematite iron ore with a resource of
2 million tons occurs at Mugabuzi in Mbarara district; and also occurs at Nyaituma in Hoima
district. Hematite of about 2 million tones has been reported at Namugongo peninsula in Mayuge
district.
Magnetite is associated with the carbonatite complexes and it occurs in Bukusu at Nakhupa,
Nangalwe and Surumbusa and Namekhara in Manafwa district; Sukulu in Tororo district; Napak
in Napak district and Toror in Kotido district, all in Karamoja.

At Sukulu, magnetite occurs in residual soils with apatite (phosphate). A resource of 45 million
tons averaging 62% Fe, 2.6% P2O5 and 0.9% TiO2 has been estimated. Within Bukusu, 23
million tons has been estimated at Nakhupa, Nangalwe and Surumbusa sites, while Namekhara
contains an estimated resource of 18 million tons with 13% TiO2.

There has been very limited production of iron ore in Uganda to-date mainly for use as an
additive in the steel scrap smelting in Jinja and for special cement by Hima Cement.

Uses: The principal use of iron ore is in making of steel.

Lead: Galena, a mineral containing lead (with minor zinc and gold), occurs in quartz veins at
Kampono, Kanyambogo and Kitaka in Kitomi Forest, Ibanda district. It also occurs associated
with tin (cassiterite) at Kikagati. These deposits are all very small. Galena was mined only at
Kitaka and production totaled only 750 tons over a 13- year period to 1960 when mining
stopped.

Uses:In making motor vehicle batteries and heavy metal shield for nuclear radiation protection.

Lithium: Amblygonite the ore that contains lithium mineral is found to be associated with
pegmatites at Ruhuma in Kabale district; Mwerasandu, Lwamwire and Nyabushenyi in
Ntungamo district; Lunya in Mukono district; Nampeyo and Mbale Estate in Mubende district.

Lithium has been exploited only from the Nyabushenyi (Ntungamo) and Mbale Estate
(Mubende) pegmatites. Most of the pegmatites are small and of irregular bodies, which mitigates
against large-scale exploitation, but is well suited to small-scale production by local
entrepreneurs.

Uses: Amblygonite the ore of lithium is used mainly as a non-metallic mineral, especially in
chemicals.

Niobium-Tantalum (columbite-tantalite): The metals niobium (or columbium as it is sometimes

called) and tantalum are derived from the minerals columbite and tantalite respectively. The two
minerals usually occur together in association, in varying proportions. Columbite-tantalite occurs
in pegmatites at Kakanena, Nyanga, Rwakirenzi, Nyabushenyi, Rwenkanga and Dwata in
Ntungamo district; Jemubi and Kabira in Bushenyi district; Bulema in Kanungu district; Kihimbi
in Kisoro district and Lunya in Mukono district. The pegmatites are generally of small size with
irregular metal distribution.

Pyrochlore which is the most important niobium mineral occurs in carbonatites at Sukulu in
Tororo district; Bukusu Complex in Manafwa district; Napak in Moroto district and Toror in
Kotido district. The Sukulu phospahate deposit is potentially the most important source with a
resource of over 230 million tons of which 130 million tons average 0.2% Nb2O5.

Uses: in making carbon steels, super alloys, high strength low-alloy steels, stainless and heat-
resistant steels. The major end-use of tantalum is in production of electronic components and
batteries for cellular phones, and in alloys.

Tin (cassiterite): Several tin deposits occur throughout southwest Uganda in quartz-mica veins
in contact with granitic bodies intruded into shales and sandstone host rocks of Karagwe-
Ankolean System confirmed to be a tin-field province that extends southwest into Rwanda and
Congo and northern Tanzania. The individual veins are thin (rarely more than a metre in width)
irregular and of small tonnage potential.

Tin occurs in single veins at Mwerasandu, Kaina, Nyinamaherere in Ntungamo district; Kikagati
and Ndaniyankoko in Isingiro district and Burama Ridge on the Kabale/Ntungamo border.

Stockworks and sheeted vein swarms occur at Rwaminyinya in Kisoro district and Kitezo in
Mbarara district and these may have large tonnage potential.

Uganda's tin concentrate production 1927 to 2001 totaled about 13,000 tons. The bulk of this
production came from hard rock deposits, with minor eluvial production and no alluvial
production. The largest deposit was Mwerasandu in Ntungamo district and substantial production
also came from Kikagati in Isingiro district. Other producers were Rwaminyinya, Burama Ridge,
Ndaniyankoko, Kaina and Nyinamaherere.

Uses: Is used mainly for coating iron/steel to minimize rusting and also making cans for the food
industry.

Titanium (ilmenite/rutile): Titanium minerals occur in the magnetite-rich carbonatites at

Bukusu Complex in Mbale district and Sukulu in Tororo district. The Sukulu resource contains
significant titanium (approximately 13% TiO2), while those at Surumbusa in the Bukusu
Complex contain higher values (22% TiO2) locked up within the magnetite.

Uses: The main use of titanium is currently as a non-metallic mineral, especially as titanium
oxide pigment in paint, paper, rubber, etc. rather than as a metal. The metal is used in the
manufacture of corrosive resistant steel.

Tungsten (wolframite/scheelite): Numerous tungsten deposits occur in quartz vein type closely
associated with granitoid intrusions. Tungsten occurs in quartz veins closely associated with
granitoid intrusions at Nyamuliro (also called Bjordal Mine), Rushunga and Ruhija in Kabale
district; Kirwa, Mutolere, Rwamanyinya, Mpororo and Bahati in Kisoro district; Kyasampawo in
Mubende district, Buyaga in Lyantonde district and Nakaseta in Mityana district.

The main deposits that have been mined are Nyamuliro (also called Bjordal Mine), Kirwa,
Ruhija, Mutolere, Rwamanyinya and Bahati in Kabale and Kisoro districts. Others are
Kyasampawo and Mbale Estate in Mubende district and Buyaga in Rakai district.

Uganda's wolframite concentrate production from 1935 to 2001 totaled over 5,000 tons and this
came from the various low-grade deposits. Kirwa Mine one of the large producer from late
1940's to 1979 has a resource estimated at 1.25 million tons averaging 0.19% WO3. Bjordal
Mine is currently being re-developed by M/S Krone Uganda Ltd. and production is up to 15
tons/month.

Uses: Tungsten is mainly used in making armour plate in military equipment, manufacture of
filaments for electric bulbs and in making tungsten-carbide for drilling bits.

Silver: Silver occurs in association with galena at Kitaka in Mbarara district and in parts of
Mubende granite in Mubende district.

Uses: Silver is used for monetary purposes, plated silverware, photographic and chemical
industries and in electrical conductors.

Zinc: Zinc occurs with galena at Kitaka in Mbarara district.

Uses: Zinc is used in galvanizing, die castings, alloyed with copper to form brass, precipitating
gold and in medicines and chemicals.

2.2. Non-Metallic Minerals

Talc: Talc occurs at Itega-Manengo in Bushenyi district; Lolung-Moruamakale in Moroto

district and Kisinga in Kasese district.

Uses: Talc is used as an extender in paints, ceramics, radio tubes, refractories, toilet powders,
lotions and face creams.

Mica: Mica occurs at Morulem in Abim district; Lunya in Mukono district; Omwodulum in Lira
district and Paimol, Parobong, Kacharalum, Agili, Akwanga, Achumo, Kukor, Labwordwong,
Namokora, Naam and Okora in Pader district.

Uses: Mica is used in electrical insulation, electrical heater elements and filler in rubber and
plastics.
Graphite: Graphite occurs at Zeu in Nebbi district and Matidi and Acholibur in Kitgum district.

Uses: Graphite is used in pencils, brake linings, steel making, batteries, lubricants and
refractories.

Kyanite: Kyanite occurs at Ihunga and Kamirambuzi hills in Rukungiri district and near
Murchison falls in Masindi district..

Uses: Kyanite is used in spark plugs.

Aggregate, Crushed and Dimension Stone: Stone suitable for crushing is available in most parts
of the country. Granite, gneiss, quartzite and sandstone are widely distributed throughout the
areas of Precambrian Basement. Dolerite and amphibolite also occur in central and eastern
Uganda though they tend to be badly weathered. Volcanic tuffs and agglomerates occur
extensively in the southwest and east of the country. Marble occurs extensively in Karamoja
region.

Many granite prospects have been exploited for aggregates and still many new opportunities for
investment exist like in dimension stone. Exploitation of granite into suitable products needs
good infrastructure facilities and good market. It is therefore in this essence that granite
occurrences within 100 km from the centre of Kampala where infrastructure and marketing is
simplified are highlighted for investment purposes.

Uses: Stone is used in various forms in construction - as aggregate, hardcore, as building blocks
and wall cladding and the beautiful coloured rocks mostly granite, gnesiss, marble and gabbro
are used in the dimension stone industry as decorative tiles and blocks.

Clays: Clay deposits suitable for the manufacture of bricks, tiles, pottery, etc. are widely
distributed throughout Uganda. No detailed systematic investigation has been carried out
throughout the country except around a few areas such as Kajjansi in Wakiso district; Bugungu
near Jinja in Mukono district; Buteraniro in Mbarara district; Butende; Kasukengo in Masaka
district; Malawa in Tororo district and Butema in Hoima district.

They are of variable quality, in terms of iron and quartz content and therefore show a highly
variable reaction to firing. Careful and detailed investigation could show potential for better
quality clays, including refractory material and china clay.

Samples collected from these prospects were analysed in the laboratories of the Geological
Survey of Finland (GTK) for both physical and chemical properties.

They were found to be of variable quality, in terms of iron and quartz content and therefore show
a highly variable reaction to firing.

Uses: Clay is a major raw material for various bricks and tiles in the building industry and
pottery. High aluminous clays with low iron content are used in making refractory bricks for
lining furnaces, in making porcelain and in fine ceramics such as china ware (plates, cups),
sanitary ware (toilet pans, basins, etc.) and pipes.

Diatomite: Diatomite deposits are located at Panyango, Alui and Atar near Packwach in Nebbi
district and also farther north on the Amboso River within the Rift Valley sediments. The
diatomite occurs in horizons within clay beds and no detailed evaluation has been carried out.
The Packwach diatomite is very white and contains a large proportion of (> 60%) of diatoms in a
kaolin matrix. It has a good potential for the commercial production of both high-grade diatomite
and kaolin by hydro-cycloning or oil classification.

Uses: The main uses of diatomite are: as a filtering medium for beer and the food industry, as
well as a carrier in insecticides.

Feldspar: Feldspar is commonly associated with pegmatites found in the Precambrian

Basement. It occurs at Bulema in Kanungu district; Bugangari in Rukungiri district; Mutaka in
Bushenyi district; Nyabakweri in Ntungamo district and Lunya in Mukono district.

About 10 tonnes of feldspar are reported to have been mined at Lunya during the 1940’s and
exported to Kenya for porcelain manufacture. Currently, none of the mentioned prospects is
producing feldspar although small quantities have been excavated from the Mutaka pegmatite
from time to time.

Southwestern Uganda has many pegmatites and there is a probability that those which have not
been heavily kaolinized contain recoverable quantities of feldspar.

Uses: Feldspar is used in ceramics as a flux and glaze, as well as in the glass industry in the
melting process.

Glass/silica Sand: Glass is made by fusing silica with soda and lime to produce a transparent,
colourless soda-lime silicate. Glass sands that form the main primary source of the silica need to
be free of impurities such as iron oxides, alumina and heavy minerals.

Narrow beaches along the shores of Lake Victoria and some islands contain deposits of glass
sand at several locations like Diimu and Bukakata in Masaka district; Lwera in Masaka district,
Nalumuli Bay and Nyimu Bay and Kome Island in Mukono district.

The highest quality (99.95% SiO2) glass sands have been mined from Kome Islands in the past
and exported to Kenya. At Diimu and Bukakata beaches, over 2 million tons of good quality
sands (99.93% SiO2 and 0.05% Fe2O3) have been delineated. The East African Glass Works
Ltd. mined and used glass sands from Bukakata for making glass in the 1960's.

Uses: Silica sand is the main ingredient in making glass.

Gypsum: Gypsum (selenite) occurs as float and in clay beds with Rift Valley sediments near
Kibuku in Bundibugyo distict. Resources have been estimated at 2 million tons of gypsum. There
has been only limited artisan production to-date and all was sold to Hima Cement, but was
stopped due to poor production methods. Gypsum also occurs at Lake Mburo in Kiruhura district
and at Kanyatete in Lake George basin sediments, Kasese district.

Uses: Gypsum is mainly used in the cement industry as an additive (4% content) to retard the
setting process while building; it is also used as Plaster of Paris in medical applications, and also
in making molds.

Kaolin: Kaolin is associated with Tertiary lateritisation in a number of localities at Namasera,

Migadde, Gombe and Buwambo in Wakiso district; Mutaka in Bushenyi district; Kisai (Koki) in
Rakai district, Kilembe in Kasese district, Kibalya in Bushenyi district, Binoni, Mparangasi and
Ngabinoni in Hoima district.

Mutaka kaolin is by far the best quality and can be up-graded to a product averaging 87%
kaolinite with 54% of the particles less than 2 microns in size and having brightness (80%
unfired; 87% fired).

Uses: It has potential use in paints, paper, pesticides and ceramics.

Limestone and Marble: Secondary limestones derived from lime leached from calcareous tufa
and from carbonate springs occur around an ancient shoreline of Lake George. They vary in type
from calcrete, tufa (lake derived limestone) and sinter . at Muhokya in Kasese district and Dura
in Kamwenge district, to true limestone at Hima in Kasese district.

At Muhokya the tufa deposit is of a high quality but is small in size and discountinous; it is being
mined for production of lime. At Dura, thick bands of almost pure aragonite occur in calcareous
sinters in a narrow valley. The deposit has been partially eroded away and there is approximately
2 million tons.

The Hima limestones are far more extensive and a resource of 20 million tons of variable quality
has been delineated. The deposit has a maximum thickness of 7.5 m and covers an area of
approximately 500 hectares. Out of 20 million tons, 6 million is suitable for Portland cement
manufacture.

Calcium carbonate occurs in carbonatite ring complexes at Sukulu and Tororo in Tororo district;
Napak in Moroto district and Toror in Kotido district. They are variable in composition and may
be high in phosphorous, due to associated apatite, and magnetite. Magnesium is variable and
rises to >8% at Napak. Marbles, usually high in magnesia occur extensively in Moroto and Moyo
districts. The marble has a range of shades from pure white, gray to a pink marble.

The major limestone deposits at Hima and Tororo have provided the major raw material for
Uganda's Portland cement industry. The old plant at Tororo set up in 1953 has been rehabilitated
and expanded by Tororo Cement Industries Ltd to produce 1,000 tons of cement per day. The
company has adopted the international standard ISO 9002. The limestone at Tororo has high
phosphorous content and hence cement is is manufactured after intensive selective mining.
Production of cement is also based on clinker being imported from Japan and India. The
company is mining marble in Moroto district, with encouraging results at Katikekile,. Hima's
current production is 900 tons per day.

Uses: Limestone is used for making cement and lime both of which are important inputs in the
construction industry. Lime is also used as soil conditioner in agriculture (to reduce soil acidity).
The main use of marble is as a raw material for marble tiles, but if low in magnesia is also used
in making Portland cement, and the white varieties are used to make calcium carbonate powder
used in paint and detergents.

Phosphates: Apatite is the main commercial ore of phosphate known in Uganda. The most
important occurrences are associated with carbonatites, the two largest being at Sukulu and
Bukusu. Weathering of the carbonatites has resulted in the residual concentration of apatite,
magnetite, vermiculite, pyrochlore, barite, and zircon and rare earth elements.

The total resource in three valleys at Sukulu is estimated at over 230 million tons, with still
further large resources under the laterite mantle. The apatite content is variable, averaging 13.1%
P2O5 and can be beneficiated to yield a product containing 40-42% P2O5. The deposit was
mined by the Tororo Industrial Chemicals and Fertilizers Ltd. (TICAF). with a 25,000 tons/year
single super-phosphate fertilizer plant at Tororo from 1964 to 1978.

Busumbu Ridge though a smaller deposit contains the richest concentration of phosphates in
Bukusu. The bulk of the deposit consists of soft apatite-bearing soil, varying from 3 - 25% P2O5.
A resource of 8.5 million tons averaging 13% P2O5 has been established. Busumbu Mining
Company commenced mining the deposit in 1944, with the concentrate exported to Kenya for
conversion to a low priced fertilizer soda phosphate with high citric solubility. It was not suitable
to convert the resource to super-phosphate owing to its high alumina and iron contents and
production ceased in 1963 when TICAF established their operation to manufacture commercial
fertilizers from the soils of Sukulu.

Nilefos Limited, a local company, has acquired an Retention Licence for the Sukulu deposit. The
company is seeking for joint venture partners to develop the mines and manufacture phosphate
fertilizers and other by-products.

Uses: The major use of apatite is in making of fertilizers. Other uses include making of
detergents and chemicals.

Salt: Salt includes salt for human and animal consumption as well as various salts for industrial
uses. Salt has been extracted on a small-scale from hot springs at Kibiro in Hoima district and on
a larger scale from the floor of crater lakes at Katwe (22 millions of mixed salt) and Kasenyi in
Kasese district for many centuries. The salt is a mixture of sodium and potassium chlorides with
lesser amounts of sulphate and carbonates. The current method of production is based on solar
evaporation in ponds and the product is crude due to mixing of the salts during fractionation and
crystallization as well as with mud at the lake bottom.
Trona (sodium carbonate) occurs in the three areas, but on a larger scale at Katwe and Kasenyi.
It is associated with mixed salts (sodium and potassium chlorides) and gypsum (calcium
sulphate). At Katwe there is a resource of approximately 10 million tons of trona with mixed
salts.

Uses: Sodium chloride is for making of common salt for human consumption, and industrial
chemicals; potassium chloride is used making of potassium-based fertilizers; trona is used in
glass manufacturing.

Vermiculite: Vermiculite is known to occur at Sukulu in Tororo district and Bukusu carbonatite
Complex in Mbale district. The main occurrence at Bukusu is on a 10 km long semi-circular
ridge (Namekhara, Nakhupa, Surumbusa, Kabatola and Sikusi), where vermiculite flakes occur
in residual concentrations (from the leaching of phlogopite in carbonatite) below a surface cover
of 3-5 m magnetite rubble. Apart from Namekhara, it is only Kabatola that contains appreciable
quantities of vermiculite for exfoliation.

Recent exploration at Namekhara has delineated a resource of approximately 4 million tons of

high quality vermiculite, which is probably one of the best known at present in the world. Gulf
Resources (U) Ltd is currently mining and processing vermiculite with a planned output of
40,000 tons/year. Previous mining and processing activities were carried out by NPK Resources
Ltd, Carmin resources Ltd. of Canada and Rio Tinto of South Africa.

Uses: Vermiculite is used as an insulator, in making fireproof boards, as a replacement of

asbestos in brake linings, packaging materials, and lightweight concrete in construction. The
poorer grades of vermiculite are used in horticulture (flowers), tea nurseries and golf courses,
due to its ability to retain water over long period.

Platinum Group Minerals: Potential exists for platinum group metals (platinum, palladium and
rhodium) in layered intrusives in the Archaean greenstone belts and areas with ultrabasic rocks.
The high platinum assays of the Nakiloro chromite are indicative of this potential. Values as high
as 3.0 - 7.5 grams per ton have been obtained on samples. The geology of the area is similar to
the layered intrusives in South Africa, which have large deposits of platinum-group-metals
(PGM).

Nickel (?Co, Cu): Potential exists for both primary volcanogenic massive Ni-Cu sulphide and
secondary nickeliferous laterite deposits in/over ultramafics within Precambrian greenstone belts,
and Lower-Middle Proterozoic sediments, but this has not been fully investigated.

An airborne geophysical survey carried out in 1980 over southern Uganda, and later followed by
another similar survey of lower altitude and ground surveys identified magnetic bodies that are
favourable for hosting nickel and cobalt in Kafunjo, Ntungamo district and Rugaga in Mbarara
district, close to the border with Tanzania. Similar bodies in the same geological environment in
Kabanga, Tanzania have been found to contain nickel mineralization.

Diamond: Potential for diamond exists in a number of areas in Uganda. Discovery of the
diamonds in gravels occurred during prospecting for gold in Buhweju and a few small diamonds
were found at Kibale in 1938 and Butale in 1956. Consequently, exploration for diamonds in the
country was carried out in the period 1965-1974.

Although no economic deposits were discovered, small diamonds and indicator minerals were
discovered in many areas like southern Karamoja region, and Katakwi district. Cresta Mining
Co. Ltd carried out exploration for diamonds in the basic volcanics of Kabale and Kisoro
districts. Indicator minerals were identified and a follow-up work is recommended. Similarly, the
basic volcanics in Bushenyi district are expected to have diamonds.

Rare Earth Elements: Good potential exists for small, irregular deposits of limited tonnage in
pegmatites, but this has not been quantified. Potential exists for major deposits - the Sukulu
carbonatite contains some rare earth elements, but this has not been fully investigated.

2.3. Other Mineral Opportunities

Uranium: IBI Corporation’s prospective uranium land portfolio is comprised of approximately
2,882 square kilometres, primarily in Uganda. Geophysical interpretation of data from the recent
Uganda Aerial Minerals Survey of the country identified uranium mineralization on the
Company’s uranium lands, with more than 30 uranium anomalies being identified within the area
of the Company’s approximately 2,047 Km2 Mubende area exploration licenses. With rising
values of uranium, it is expected that anticipated demand for uranium for nuclear power
generation will exceed projected supply for decades. Investors with technical and financial
capability can work with IBI.

Kilembe Mines Ltd

Kilembe Mines Limited (KML) is still under care and maintenance. Government strategy to
resume mining has since been divestiture of majority shareholding to private partner who will
manage the Company. KML acquired two exploration licenses, surrounding the mining lease to
explore and add unto the proven reserves in readying for the resumption of mining. The
divestiture of the Company is following set procedures in the divestiture of entities owned by
Government of Uganda. As of current, the Transaction Advisor (J.T. Boyyd and PASS Ltd) are
at the last stage of enterprise preparation so that implementation of the KML divestiture can
begin so that potential companies can bid to acquire majority stake in the company.

3. Mineral Sector Outlook

3.1. Annual production volume/value
The Government of Uganda put in place a Mineral Policy in 2001, whose goal is to develop the
mineral sector to enable it contribute to sustainable economic and social growth by creating
gainful employment and income, particularly to the rural population. The policy objectives are
to:
• stimulate investment in the mineral sector by promoting private participation;
• ensure that mineral wealth supports national economic and social development;
• regularize and improve artisanal and small scale mining;
• stimulate and mitigate the adverse social and environmental impacts of mineral exploitation;
• remove restrictive practices on women participation in the mineral sector and protect children
against mining hazards;
• develop and strengthen local capacity for mineral development; and
• add value to mineral ores and increase mineral trade.

Uganda currently produces a number of minerals valued at almost Ushs.100 billion. In terms of
output value the most produced minerals as of end of 2010 were: limestone, cobalt, Wolfram,
Tin, Kaolin and pozzolana. Table 2 lists the types of minerals by output and value.

Table 2: Mineral Production for January to December 2010 compared with 2009 figures
Table 2................................... continued

Source:Department of Geological Survey and Mines

**Average price of gold on LME and average URA monthly fixed exchange rates were used to
compute the average value of gold (and other minerals) over the year.
**Cobalt prices have been on the low for a long time subsequently resulting in a slump in
processing activity at KCCL. However, the figures improved significantly in 2010 compared to
2009 figures.

The Non Tax Revenue generated increased to UGX 3.96 billion in 2010 from UGX 2.75 billion
in 2009. In terms of revenue accruing from mineral operations, government earned UGX 2.436
billion, as non tax
revenue (NTR) accruing
from royalties and
mineral license fees.
Royalties alone
contributed UGX 3.1
billion and UGX 1.701
billion of the total
revenue generated
shared at a rate of 80%
for Central Government,
17% for Local
Governments of mining
districts and 3% to the
lawful landowner. It is
worthwhile noting that
the major contributors to
the revenue earned in
2009 were Tororo
Cement Ltd, Hima
Cement Ltd and Kasese
Cobalt Company Ltd.
Figure 1 shows the revenue Uganda earned from royalties between year 2006 to 2010 which
ranged between Ushs.1.8 billion in 2007 and Ushs.3.1 billion in 2010. With improvements in the
prices for cobalt and gold, the NTR resulting from royalties is expected to rise.

3.2. Employment trend in the Sector

The mineral sector is increasingly becoming very important in responding to the labour needs of
the country. If one considers artisanal mining, there are currently over 180 artisanal and small
scale miners in Uganda providing employment to over 20,000 miners with indirect & induced
labour numbering over 54,000. This sector has a multiplier effect of US$28.3/year according to
recent studies by artisanal and small scale miners.
3.3. Mineral Sector contribution to GDP
Mining and quarrying activities were estimated to have grown by 12.8 percent in fiscal year (FY)
2009/10 compared to a
4.3 percent increase
during the FY2008/09.
The growth in the
mining and quarrying
activities was due to
increased demand for
limestone, clay and
quarry products. The
sector’s contribution to
total GDP, at current
prices, has been the
lowest since FY2005/06
with a share of only 0.3
percent. Figure 2
compares the GDP
growth rates with those
of the mining sector
over a 5-year period
beginning FY2005/06.
In the FY2009/10, the
mining sector grew above that of the Gross Domestic Product. With a number of companies
acquiring mining licences it is expected that the sector’s prominence will be felt in the economy
in the coming years. Further, the Government of Uganda (GoU) has identified the development
of the country’s mineral resources as a major economic priority and has put in place an extensive
plan to bring this to fruition. Agencies such as the World Bank, the African Development Fund
and the Nordic Development Fund, have provided over US$47 million in funding to GoU to help
further these mineral development strategies and initiatives.

4. Key strengths (competitive factors) or unique selling propositions

4.1 Strategic location
Uganda occupies a strategic position in East Africa, which gives it the advantage for the eventual
development of exports of mineral products of Sudan, the Democratic Republic of Congo,
Rwanda, Burundi, Kenya and Tanzania and the COMESA region as a whole.

4.2 General investment incentives

Under the Income Tax Act, Cap.340 the mining companies are given special consideration
through a Variable Rate Income Tax (VRIT). The rationale for this arrangement is to capture a
competitive share of net cash flows for the government at different mine profitability levels
while at the same time providing suitable tax relief for projects. A minimum of 25% and a
maximum 45% VRIT have been put in place depending on the level of profitability. Also under
other tax provisions (like the East African Community Customs Management Act and Value
Added Tax Act, Cap.349), there is the duty free importation of mining plant and equipment with
VAT deferment facilities.
 4.3. Other incentives are:
• Investment protection under the Multilateral Investment Guarantee Agency (MIGA)
• Mineral exploration expenditures are expensed 100%
• Import taxes such as customs duty for all mining equipment is zero-rated
• There is externalisation of dividends and profits
• Generous depreciation allowance at 30% for all depreciable mining assets.

4.4 Availability of skills

The Department of Geological Survey and Mines is being funded to undertake surveys aimed at
providing the needed database to encourage investment in the sector, as well as the training of
relevant personnel. The Department also has a cross section of professional staff that may be
seconded on request, to companies wishing to commence new exploration programmes.
Makerere University in Kampala offers degree courses in geology and various disciplines of
engineering while a number of technicians are trained locally at Kyambogo University and other
Technical Institutes spread throughout the country.

4.5. Sustainable Management of Mineral Resources Project (SMMRP)

The country has 648,400 line kms of magnetic and radiometric, and 22,709 line kms of
electromagnetic [EM] data covering the entire country except for the Karamoja region. The data
was generated as a result of an airborne geophysical survey undertaken by M/s Fugro Airborne
Survey with the latest technology and supervised by Patterson Grant and Watson (PGW) that
emphasized provision of very high quality data and outputs. This data is being integrated using
GIS, with ground geophysical data, enhanced satellite imagery, geological mapping and
geochemical surveys to delineate areas of high mineral resource potential. The information is
available to potential investors wishing to have detailed exploration and development of mines.

5. Regulatory Framework/Licenses required for operation in the sector

5.1. Licencing
The Mining Act 2003 repealed and replaced the Mining Act 1964, Cap. 248, with a new
legislation on mining and mineral development, which conforms, and otherwise gives effect, to
the relevant provisions of the Constitution; to vest the ownership and control of all minerals in
Uganda in the Government. The Act also provides for the acquisition of mineral rights; and other
related matters. Subject to the provisions of this Act, a person may acquire the right to search for,
retain, mine and dispose of any mineral in Uganda by acquiring such right under and in
accordance with the provisions of this Act.

Licensing for exploration and mining activities follows same procedures. It involves filling of
forms available at the office of the Commissioner of the Department of Geological Survey and
Mines (DGSM) and submitting them for assessment, paying assessment fees to the bank, getting
a Uganda Revenue Authority (URA) receipt invoice, and then submitting it to the Commissioner
for granting the license.

5.2. Types of Licenses and Mineral Rights

In order to operationalize the Mineral Policy, a new legislation, Mining Act, 2003 was enacted
and appropriate regulations (The Mining Regulations 2004) were gazetted thereby replacing the
Act of 1964 which was out-dated in many respects. The provisions in the new Act conform to the
contemporary industry conditions and practices. They include:
• Prospecting Licence - the licence is granted to the holder to prospect for minerals around the
country and the licence is non-exclusive. It is granted for one year and is not renewable.
• Exploration Licence - the licence area is to a maximum of 500 sq. km and duration of 3 years,
renewable for two terms of 2 years each. On each renewal, half the area is relinquished.
• Retention Licence - the licence is a new feature in the law. It is granted to the holder of an
exploration licence in cases when the identified mineral deposit cannot be exploited due to
economic reasons. Its duration is 3 years, renewable once for 2 years.
• Mining Lease - the licence is for mining operations and is granted for 21 years and is renewable
for 15 years.
• Location Licence – the licence is for mining operations of a smaller investment where
expenditure to achieve production will not exceed 500 currency points (a currency point is worth
20,000 Uganda shillings). It is granted to citizens of Uganda or in case of corporate, only where
citizens of Uganda hold at least 51% of ownership. Its duration is 2 years, renewable for other
terms of 2 years each.

5.3. Aspects/conditions to observe while acquiring licences/mineral rights

• Royalties - All minerals obtained from any mineral right are subjected to royalty payment for
example: precious stones - 5% of the gross value, precious metals - 3% of the gross value, base
metals and ores - 3% of the gross value, and industrial minerals vary from 500 to 3000 Uganda
shillings per tonne.
• Adequate Compensation - the law provides for fair compensation upon disturbance of surface
rights of landowner or lawful occupier.
• Mineral Agreements – the law provides that the investor and government sign agreements
relating to operations in order to stabilize legal, social and economic obligations of either party.
• Environment - the law has provisions on environment protection peculiar to mining operations.

5.4. Role of the Geological Survey and Mines Department (GSMD)

The GSMD is the technical arm of MEMD and directly responsible for the implementation of the
mineral policy. The duties include inter alia carrying out administration, supervising, regulating,
monitoring, enforcing, training, providing extension services (collect, collate, process, analyse,
archive and disseminate geoscience data) and promoting other sectoral activities.

5.5. Mineral Regulations, 2004 (www.mining.co.ug )

These regulations operationalise the Mining Act. They contain procedures/application forms for
acquiring the various licences like: prospecting, exploration, retention, location, mining lease,
export/movement permits, mineral dealer’s license, Goldsmith’s license, certificate of
amalgamation of location/mining lease, certificate of cessation/suspension/curtailment of
working obligations, among others. Applications for these licenses are made to the
Commissioner, GSMD and in many instances through the Office of Chief Administrative Officer
at the district level.
5.6. Other Laws:
Other important laws enacted by the Government of Uganda that affect mining and exploration,
besides the Mining Act 2003 and Mining Regulations 2004, include:
• The National Environment Act 2003
• The Land Act 1998 (currently under revision)
• The Land Regulations Act 2004
• Registration of Titles Act 2000
• Contracts Act 2000
• The Arbitration and Conciliation Act 2000

6. Mineral Exports/Imports
Under section 117 of the Act, the Commissioner may grant to any person an import permit to
import minerals into Uganda on conditions prescribed by law and any such person shall make a
declaration before a customs officer regarding the type and quantity of minerals imported, after
which the customs officer shall certify the import permit.

An import permit is issued only on payment of the prescribed fee and before any minerals are re-
exported from Uganda, the relevant import permit is then surrendered to a customs officer who
submits it to the Ministry of Energy and Mineral Development. Similarly, under section 116 of
the Act, the Commissioner may also grant to any person an export/movement permit for
exporting minerals outside Uganda.

The importation of minerals for re-export explains why in most cases the amount produced in
tonnes is much less than that of the exports for some commodities e.g. gold on the one side and
on the flip side the amount exported is less than that produced for some commodities such as
cobalt due to stockpiling as global commodity prices plunge. The decline in production coupled
with fluctuating market rates for minerals consequentially affected the mineral exports, showing
a decline in export value since 2006.
Figure 3 shows the trend of mineral export for gold and cobalt between 2005 and 2009. The year
2006 witnessed the highest value of exports mainly attributed to gold re-exports. Currently, gold
and cobalt account for over 95% of all minerals exports from Uganda. The escalating values of
gold, along with the accompanying investor interest, have grown in the recent past and, in all
likelihood, will continue. As noted by Barrick Gold, the supply of gold continues to lag demand,
making the exploration and development of new gold resource sources imperative and Uganda
will reap big from these developments.
For cobalt, refined global production was around 54,000 tonnes in 2009, with consumption at
about 52,000 tonnes.
Many reports estimated
that 2009 saw a global
surplus of some 2,460
tonnes, compared with a
deficit of about 2,410
tonnes in 2008. In 2010,
worldwide production
was between 55,000-
60,000 tonnes, yet
demand peaked only
50,000 tonnes. In terms
of prices, the best
Russian cobalt, 99.3
currently trades above
US$20 a lb which is still
way off peaks of over
US$48 a lb hit in March
2008 before the global
economic slump was
felt. All these reasons
explain the cobalt stockpile in Uganda.
In terms of major exports destinations, in 2010 the following minerals were exported as follows:
Cobalt (Netherlands, China and Belgium); Semi manufactured gold and articles of zinc (United
Arab Emirates); Copper (U.K., UAE, Kenya, India, U.K., South Africa, Tanzania,); Articles of
tantalum (U.K.); and articles of goldsmith (Germany).

Generally, investment in mineral exploration is projected to increase from the current US$3
million to over US$50
million annually over the
next five years. Fiscal
revenues are expected to
increase from US$ 1
million to US$ 35
million over the next
five years. It is also
projected that the value
of mineral exports will
increase from the current
level of under US$40
million to over US$ 350
million by 2015.

The importation of
minerals for re-export
explains why in most
cases the amount
produced in tonnes is
much less than that of
the exports for some commodities e.g. gold on the one side and on the flip side the amount
exported is less than that produced for some commodities such as cobalt due to stockpiling as the
global commodity prices plunge. The importation of minerals for re-export explains why in most
cases the amount produced in tonnes is much less than that of the exports for some commodities
e.g. gold on the one side and on the flip side the amount exported is less than that produced for
some commodities such as cobalt due to stockpiling as the global commodity prices plunge.

Mineral imports have been steadily rising from about US$11 million in 2005 to US$25 million
by end of 2009. Figure 4 shows the trend of import from 2005-2009. Gold is the major import.
Uganda also imports some rough diamond to the tune of US$150,000 annually.

7. Key Investors in the sector, Examples

A number of exploration and mining concessions were granted, renewed or expired. By the end
of 2010, there were 611 mining licenses issued to companies. Below are examples of some of the
big companies holding mining licenses:
• Hima Cement Ltd for mining limestone and purchasing of pozzolanic materials in Kasese and
Kabarole districts. The company holds mineral dealers license in base metals as well as in non-
metallic (industrial/ building) minerals, with UGX 803,858,662/-earned as NTR in 2009.
• Tororo Cement Ltd for mining and exploration of limestone and pozzolanic materials in
Tororo, Moroto, Mbale and Kapchorwa districts, with UGX 803,213,035/- earned as NTR in
2009.
• Kasese Cobalt Company Ltd continued with production of cobalt and the running of a sub-lease
for limestone quarrying at Hima, with UGX 428,373,155/- earned as NTR in 2009.
• African Mineral Fields Limited for exploration for gold, platinum group of metals (PGM), and
base metals in Ntungamo, Mukono, Kamwenge, Bushenyi, and Mbarara districts.
• Vangold Resources Limited, acquired seven non producing artisan beryllium mines and
secured nine joint ventures with exploration licenses holders including Rwenzori Copper and
Nickel, Beryllium Exploration Limited, Dome Mines Limited adjacent to the Kilembe copper –
Cobalt.
• AUC Mining Company which is developing a gold mine at Kamalenge in Mubende District.
• In early 2006, IBI Corporation, (“IBI” TSX-V) made a decision to change its strategy from
being a single industrial minerals company successfully mining and globally marketing
vermiculite, to become a high-value minerals exploration and development company, focused on
Uganda. Subsequently, IBI sold its Namekara Uganda Vermiculite Mine to mining giant Rio
Tinto for US $5 million in March 2007, with final closing in March of 2008. The Company’s
strategic mission in Uganda is now twofold: exploration for and development of potential
uranium resources and investing in promising gold opportunities.

8. Investment trends in the mining sector

8.1. Licenses Issued
The Government of Uganda has identified the development of the country’s mineral resources as
a major economic priority and has in place an extensive plan to bring this to fruition. Investment
in mineral exploration is projected to increase from the current US$3 million to over US$50
million annually over the next five years.

At the beginning of
2010, a total of 517
licenses issued. Of these
99 Prospecting License
(PL), 66 Exploration
License (EL), 32
Location License (LL),
33 Mineral Dealers
License (MDL), 2
Blasters Certificate (BL)
and 2 Goldsmith’s
License (GL) were
granted, while 15
Exploration (ELs), and 5
Location Licenses (LLs)
were renewed. Figure 3
shows the trend of
licenses issued between
1999 and 2010 where
the numbers grew from
66 licenses in 1999 to 517 in 2010, an impressive growth.

8.2. Airborne Geophysical Data

The rise in the number of licenses issued is attributed to the proper dissemination of geophysical
data. As of end of 2009, a number of companies had accessed this data as depicted in Table 3.
Appendix2 also gives a list of other companies that are active in the mineral sector in Uganda.

Table 3: List of Companies that acquired Airborne Geophysical Data in 2009

Source: MEMD, Annual report 2009/10
9. Appendices
Appendix 2: Companies with significant mining operations in Uganda

Source: Department of Geological Surveys and Mines

Appendix 3: Map Showing Mineral Occurrences in Uganda

Source: Department Geological Survey and Mines

Appendix 4: Mineral Royalties by Contributing Mining Companies, 2010

Source: Department of Geological Survey and Mines