The Gold Report

Tanzania, where lower global minerals demand hurt its economy last year, expects a better 2010 with gold leading the mining sector's revival on the back of higher demand, a senior mining official said on Monday.

A steep contraction of Tanzania's mining industry in the first three months of 2009 cut the overall real economic expansion rate to 5,6 % from 7,1% the previous year, data released earlier this month showed.

"Certainly I think the (global economic) downward spiral has been arrested, things have stabilized a bit. . .and will have a positive impact on Africa and on Tanzania," Ami Mpungwe, chairperson of the Tanzania Chamber of Minerals and Energy, told Reuters on the sidelines of an Africa mining conference.

"For instance in the gold sub-sector, of course things are much better. . .(but) diamond, gemstones and, in our case, Tanzanite, the demand is still depressed and prices are still low," he said.

Tanzania is Africa's third largest gold producer, but also has reserves of uranium, nickel and coal and Mpungwe forecast the industry to contribute more than $1-billion to the nation's economy in 2010.

The global credit crunch saw investors flock to safe-haven gold stocks, while diamonds, driven mostly by demand from the luxury retail sector, has been slower to recover.

The second largest east African economy after Kenya, Tanzania's economy is largely dependent on its tourism, mining and agriculture sectors.

"Certainly we are expecting an upward movement in the demand, and therefore prices and activities, including (mining) investments and expansion. . .in the second half of 2010," he said.

Mpungwe said improved global demand and better prices combined with stability in the regulatory environment would all help growth in the mining sector.

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