Madagascar faces uphill struggle to revive bruised mining sector – by Drazen Jorgic and Lovasoa Rabary (Reuters U.S. – August 25, 2015)

ANTANANARIVO, Aug 25 (Reuters) – When foreign mining firms and Western donors were pulling funds out of Madagascar following a coup in 2009, Austral Resources chief executive Scott Reid did the opposite and poured money in to the Indian Ocean island.

Yet far from being rewarded, the company’s $3.5 million investment in drilling and exploration of a high-grade mine has turned sour. Austral’s permit to extract zircon, used in ceramics, has expired and the project is far from production.

Sliding global commodities prices have hindered the Australian firm but to Reid the main frustration has been bureaucracy and government failure to renew its permit which languishes in the mining ministry with about 4,000 others.

With woeful air links hobbling tourism and power outages holding back its textiles industry, the former French colony’s economic recovery after years of political turmoil hinges on the revival of its mining sector.

But without permits, most miners are unable to raise cash on stock markets or get loans to keep their projects alive. Recent political upheaval, including attempts by lawmakers to topple the government, have also eroded Madagascar’s lure to investors.

“It’s very difficult to justify investing in Madagascar when you see what’s happened here in the last five years,” Reid told Reuters in the capital Antananarivo.

It is miners like Reid that Madagascar must win over to revitalise its mining industry, which before a 2009 coup attracted 80 percent of the country’s foreign direct investment.

The peaceful election of President Hery Rajaonarimampianina in late 2013 was hailed as a new start for Madagascar, whose deposits of nickel, titanium, cobalt, iron, coal and uranium had last decade prompted the likes of Rio Tinto and Sherritt International to invest billions.

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