Cuba ranks amongst the top six countries for proven nickel reserves and according to government forecasts released in April, it is expected to exceed 50,000t of nickel plus cobalt sulphide production this year.
However, aside from nickel, a major export product for the country since the mid-1990s, and even earlier, communist Cuba’s mineral sector has suffered years of underinvestment and even abandonment due to the fall of the Soviet Union and US-imposed sanctions.
Nevertheless, though detailed data is lacking, Cuba is thought to have one of the largest and most underexplored mafic and ultramafic – rocks rich in magnesium and iron – belts in the Caribbean region.
As such, according to the US Geological Survey, the region has significant potential for trade and investment that is currently ‘untapped’ and Cuba has been keen to access this revenue potential. In late-2014, reports state that the country’s Ministry of Foreign Trade and Investment presented a list of 246 projects, including mining, which it said would be open to foreign investment and could potentially attract $8bn into the country.
Subsequently, in April this year, Toronto-based Millbrook Minerals announced what it called “the first such agreement of its kind” to explore for gold, silver and other metals in Los Pasos project area of Cuba with state-owned mining company GeoMinera.
“The future of metals and mining in Cuba is exciting,” Millbrook Minerals chairman Mark Entwistle said in a recent press statement.
The constrains of geopolitics
To date, Canadian company Sherritt International is Cuba’s biggest mining investor, with a 50% stake in the Moa Joint Venture nickel project.
Sherritt chief executive David Pathe has previously praised Cuba, saying it is a “pretty stable place to do business”. He also noted that he wasn’t concerned about the recent change in leadership. Cuba’s new president, Miguel Díaz-Canel, who assumed office in April, is the first not to be a member of the Castro family for more than 40 years.
“Rather oddly, instability is quite the opposite of what we can expect from the new leader”, says Wood Mackenzie principal analyst, mining and metals fundamentals Adrian Gardner. “Díaz-Canel has already said he will not make any changes to the structure of the national fabric – including private ownership of corporate ventures.”
Swiss-based commodities giant Trafigura has increased Cuba’s mineral output with the start of production at its $278m Castellanos lead and zinc mine in north-western Cuba, producing 100,000t of zinc concentrate and 50,000t of lead concentrate annually, according to Emincar, overseer of the project.
Justo Hernández Pérez, Emincar deputy general manager, is bullish about the potential Cuba offers, exclaiming “this is just the start”, about the project in July.
However, despite the general positivity, mining firms investing and operating in Cuba still face several hurdles.
Although relations between Cuba and the US appeared to thaw in 2015 when sanctions were loosened under the Obama administration, they did not extend to restrictions of US investments in mining.
Gardner says the changes left it unclear if non-US companies are able to invest in or profit from Cuban-based mining ventures without still attracting sanctions themselves.
“This position has not changed, and so Cuba’s attempts to attract foreign investment in the mining sector have largely been unsuccessful,” he says.
Another challenge, Gardner adds, is where companies can sell their Cuba-derived products. For example, Sherritt, gets most of the mixed intermediate Ni-Co feed for its Fort Saskatchewan refinery that operates in Canada from its Moa Bay mine in Cuba.
“However, Sherritt cannot sell the briquettes leaving Fort Saskatchewan into the US, its closest market, because of US sanctions against Cuba,” explains Gardner. “In theory, the US would also penalise those countries/companies which buy the finished Ni briquettes emanating from Sherritt – so if Sherritt sells briquettes into Belgium, the US Government could pursue its claim against Cuba via the buyer of Sherritt’s briquettes in Belgium; though in practise the US does not do this.”
He adds that the Trafigura’s project, which started production at the end of 2017 and is now exporting concentrates, will face similar issues with where it can sell its feed.
The current US administration has yet to reveal its position towards Cuba but has said all policies are ‘under review’.
Getting Cuban minerals to market
“There’s still lots of ore in Cuba,” said Sherritt’s Pathe recently, adding “we fully expect to be in the nickel business in Cuba for many years to come”.
Pathe is likely positive because the island’s identified nickel reserves and mineral resources are extensive and with good grades. The nickel reserves in particular could be a boon for Cuba given that demand for nickel is set to increase significantly due to the anticipated growth in the electric vehicles market. Furthermore, geology and mineralogy present no issues as all identified nickel resources are laterites, rather than sulphides, which are well-understood and can be exploited via low-cost open-pit methods.
However, Gardner believes that due to lack of state investment and the absence of significant foreign development funds going forward, many of these reserves will remain unexploited.
“There will be no significant new nickel and cobalt tonnage coming from Cuba for the next decade,” he says, and “the country will most likely miss out on the next global step-change in demand for both”.
Gardner says Cuba’s anticipated 2018 production of mined nickel from two mines will amount to no more than 2.4% of global production.
So, what can Cuba do to turn a current few willing investors into more fervent global interest?
“Political and legislative choices need to be made by the new administration to capitalise on and benefit from the nation’s mineral reserves to attract foreign capital,” he says. “However, even though it is early days in Díaz-Canel’s tenure, the overtures made so far do not indicate that the required choices will be made.”