On January 28th the government announced plans to create a national mining company as part of the government's stated strategy of boosting the mining sector to wean the country off its long-standing dependence on oil. Currently, manganese extraction, by the Compagnie minière de l'Ogooué (Comilog), is the most important non-oil mining activity in the country. Although there is untapped potential in manganese mining, the country has considerable reserves of other minerals, including gold, iron and rare earths. A US$3bn iron mining mega-project at Belinga has been on hold since late 2007 but is expected to restart once negotiations between the state and the Chinese majority shareholder in the project, China National Machinery and Equipment, are concluded.

We estimate that world prices for metals in 2010 rose by a strong 39%. We forecast that prices will rise yet further in 2011 and 2012, albeit at the slower rates of 8.9% and 1.6% respectively. Therefore, the government's strategy of encouraging diversification into other minerals appears to be sound, at least in the medium term. However, it will not break the economy's more general dependence on the export of primary commodities, which leaves it vulnerable to commodity price fluctuations resulting from downturns in global industrial demand or speculative activity. Prices for the mainstay of Gabon's extractive sector, oil, are also estimated to have picked up in 2010, to US$80/barrel (Brent blend). We expect oil prices to average US$90/b in 2011, which should keep investor interest in the country's oil sector keen for when the postponed deepwater licensing round eventually takes place.

A national mining company may be good news for foreign investors, as it could co-ordinate activity in the sector while managing the state's interests better than the mines ministry has done hitherto. However, the government's plan to create a national oil firm, Gabon Oil Company (GOC), has not kept to schedule. The GOC was announced in March 2010 and was due to be operational by the end of the year, a deadline that has passed without explanation from the government. The resulting uncertainty is a cause for concern for foreign investors. If officials are hoping that the new national mining company will avoid a similar experience, its role will need to be clearly defined, as will its start date.