Expanding Phosphate Production

by Oxford Business Group

Algeria has launched an ambitious programme to make the country one of the world's leading producers of phosphate, a plan that if successful will add 50,000 new jobs to the economy and boost export earnings by billions of dollars.

We are open for business, the minister told a mining conference in Algiers on December 3. We have placed Algeria on the world map as a prominent player in the mining sector.

While Khelil said that last year's phosphate production of 1.5m tonnes was good, more than double output of six years ago, the current boom in mineral prices meant that Algeria needed to do more to build on its natural wealth.

Under the scheme, Algeria's main iron ore and phosphate mining company, Ferphos, is to expand both its mining and processing capacities. The programme, backed by both the ministry of mining and the ministry of industry and investment promotion, aims to see Algeria become the third largest phosphate producer in the world by 2020, after the US and China.

Officials project that by 2020, Algeria will be producing up to 30m tonnes of phosphate annually, bringing in export earnings of between $7 and $8bn a year.

In an interview with local press on October 22, Lakhdar Mebarki, CEO of the Ferphos Group, said the early indicators had been positive.

With the exports already carried out we confirmed that there is a good place for Algerian phosphate on the international market, he said.

However, Mebarki said it was difficult for Ferphos to establish an international presence, with competition becoming increasingly fierce.

Ferphos is already well on the way to answering Khelil's call to boost output. As of the end of October, the company looked on track to meet the 2m tonne target it had set for 2007, having produced more than 1.85m tonnes. The company said it aims to lift production to 4m tonnes by the end of 2010.

To keep to its schedule of doubling output by 2010, the company has announced plans to build a new processing plant at Bouchegouf, 450 km east of Algiers, with the capacity to turn out between 2m and 3m tonnes of phosphates a year.

Further down the track, similar facilities will be established at Mdarouche, while a third plant, with an annual capacity of 12m to 14m tonnes is to be built at Jijel, some 350 km east of the capital. All the processing facilities will be located close to the massive Djebel Onk mining complex in the province of Tebessa.

These plants will be fed by Algeria's phosphate reserves, currently estimated at some 2bn tonnes, enough to keep the industry operating at its proposed capacity for more than 65 years.

The Bouchegouf facility will not only be used to extract raw mineral phosphates but will also have the processing capacity to turn the material into fertilisers, adding value to export sales.

Having received initial approval for the project by the Council of State Participation (CPE), Ferphos is now waiting for final clearance to create a joint venture with a foreign partner, Mebarki said.

The main challenge being faced by Ferphos is the country's transportation infrastructure. The existing rail lines serving the regions where Ferphos currently operates do not have the capacity to meet the company's freighting needs. According to local press, Ferphos can only transport 1.2m tonnes of phosphate by rail each year, and had to establish its own road freight subsidiary to haul the additional 800,000 tonnes it produces.

The port of Annaba, through which Ferphos makes most of its exports, is also in need of an upgrade. The port's facilities will be hard put to handle the 2m tonnes of exports expected, let alone the 4m tonnes projected in just two years' time.

However, the announcement on December 15 that the government was going to spend $18bn on upgrading the country's rail network, including the opening of a new line in Tebessa, will go some way to easing Ferphos's concerns about land haulage.