Price rises fire German mining revival

26th June 2011, Comments 0 comments

A gaping hole in a mountain stands out in the otherwise picturesque landscape here near the Czech border, heralding an unexpected rebirth of industrial mining in Germany.

The Oberwiesenthal pioneer venture in the Ore Mountains aims to prove that, with the meteoric rise of the price of raw materials on world markets, mining can be profitable again in high-wage, highly regulated Germany.

The project is miniature compared to the vast open-pit mines in countries such as China and Namibia.

But its success would be welcome in this depressed corner of former communist east Germany, which has seen its population depleted and the jobless rate soar since unification in 1990.

"Apart from tourism, we don't have much at the moment," the town's mayor Mirko Ernst, who enthusiastically backs the project, told AFP.

A small ski resort is the only real source of income for the town, and the population has shrunk to 2,000 from 5,000 in the last two decades.

But its other natural resources have remained untapped until now.

The Ore mountain chain bridging eastern Germany and the Czech Republic, is, as its name suggests, rich in silver, iron ore and uranium, which the East German mining group Wismut extracted and shipped to the Soviet Union until 1954. The company employed up to 6,000 people here at the time.

Prospecting carried out in the 1970s revealed the presence of fluorite, a mineral which, when it is ground into powder, can be used in the metals industry and even in creating the synthetic material Goretex.

But it was not until 2008 that a group of regional engineers, eyeing the skyrocketing prices of fluorite on global markets, came up with a scheme for mining it.

"That factor, combined with more modern extraction techniques, opened the door to a potentially profitable business," said the technical director of the project, Martin Zimmermann.

Mining has long been considered a losing proposition in most developed economies, according to the president of the German federation of raw materials, Heinz Norbert Schaechter.

"You have the labour costs but also costs linked to security and environmental norms, transportation and accessing the minerals," he said.

For these reasons, the western European mining sector has largely dried up, even in Germany's once mighty Ruhr Valley.

But the demand for minerals from around the world is so hot that "there is a lot of reason to believe that (the revival of mining in Germany) can be more than just a pastime," Schaechter said.

The Oberwiesenthal mine is the most advanced of a series of projects. Others are expected to follow, including a scheme to extract copper slate near the Polish border.

The removal of fluorite is expected to begin in mid-2012 and produce 180,000 tonnes per year with turnover estimated at current market prices of about 70 million euros (around $100 million).

Investors have already forked over about 18 million euros.

A ramp will lead into the deep shaft in the side of the mountain and an advance troop of workers is already hacking away at the face, progressing at a pace of about three metres (yards) per day.

But Zimmermann admits there is no guarantee of success.

"The project is complex," he says.

Schaechter, however, is bullish about the prospects of a revival of mining in western Europe.

"Investments in raw materials always end up being profitable," he said. "You just need money, courage and a long-term vision."

© 2011 AFP

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