Madagascar – one of the world's poorest countries – could be transformed economically by its vast graphite reserves and their critical role in the global energy transition. As the second-largest producer of graphite globally, the country's high-quality reserves are vital as demand for electric vehicles (EVs) and energy storage systems soars.
With a carbon content of up to 97%, Madagascan graphite is highly valued for its purity, making it a key component in the production of lithium-ion batteries. This purity is crucial for the global supply chain, especially as demand for battery-grade graphite is expected to rocket by 500% by 2050, according to the World Bank. Additionally, following China's restrictions on graphite exports in October 2023, buyers are increasingly turning to Madagascar.
The country hosts major graphite deposits, with six large projects accounting for 3% of global production and 8% of worldwide reserves. It has estimated total graphite reserves and resources of 26mn tonnes, according to the Extractive Industries Transparency Initiative (EITI). Madagascar's mine production of natural graphite totalled about 100,000 metric tons in 2023, according to Statista.
The Vatomina and Sahamamy projects, operated by the British company Tirupati Graphite, are set to produce a combined 81,000mn tonnes per year (tpy). Meanwhile, the Canadian company NextSource Materials has invested $24mn in the Molo mine, aiming to produce 150,000 tpy when it is fully operational.
The island’s geological complexity – largely composed of schist with predominant constituents like mica and feldspar – hosts a wide range of minerals. These formations, intruded by granite, syenite, norite and pyroxenite, have created a highly mineralised belt that spans the central, northern and eastern provinces. Madagascar's mineral wealth is not limited to graphite; the country also possesses significant reserves of nickel, cobalt, ilmenite, chromite and rare earth elements (REEs), including neodymium and cerium. The sources of these REEs are monazite, bastnäsite and xenotime.
Energy resources such as coal, hydrocarbons and uranium are also present, along with precious and stones such as rubies, sapphires and emeralds. The country is one of the world's leading producers of sapphires, accounting for nearly 40% of global supply. Additionally, the island is rich in ornamental stone such as marble and jasper. Only 15% of Madagascar has been geologically surveyed, with many areas still unexplored or under-explored. The untapped reserves offer significant opportunities for economic growth.
Madagascar is home to significant chromite reserves, particularly in the Andriamena and Befandriana regions. It also has numerous small-scale gold deposits scattered throughout the island, particularly in the northwest. Its production is mainly artisanal. The island also boasts around 120,000 tonnes of cobalt reserves.
The country’s economy – with a GDP estimated at $16.5bn in 2024 – is heavily reliant on its mining sector. According to the International Monetary Fund, the country is expected to grow by 4.5% during 2024. Yet the island – the world’s fourth largest, covering an area of 587,040 square km – faces significant economic challenges. With a population of 30.6mn, per capita income is a meagre $538 per year. The inflation rate is estimated at 7.8%, and the state's general government gross debt stands at 56% of GDP. These economic indicators highlight the essential role that the mining sector, particularly the extraction of graphite, nickel and cobalt, plays in driving economic growth.
Antananarivo, the capital city, is home to 1.4mn people. President Andry Rajoelina, who has been in office since 2019, leads the government. Under his leadership the state has focused on leveraging its natural resources to spur economic development, particularly through reforms in the mining sector.
Madagascar’s mining industry is a key part of the economy, contributing 4% to GDP, according to the EITI. The country's artisanal and small-scale mining (ASM) sector accounts for around 1mn jobs. The industry also comprises 1.07% of government revenues and 32.2% of total exports. Its significance is highlighted by the growth in mining exports, particularly nickel and cobalt, which saw increases of 27.4% and 67.1% respectively in 2022. The total value of mining exports reached $1.9bn in 2022.
The Ambatovy Project in Atsinanana is the largest mining operation in the country, producing around 4.73mn tpy of run-of-mine (ROM) material in 2021, including 38,000 tonnes of nickel. The mine contains around 150 tonnes of proven and probable ore reserves, with an average nickel content of 1.04%. Owned by Sumitomo Corporation, one of Japan's largest trading and investment companies, and Korea Resources Corporation, a state-owned South Korean company, the project has attracted around $8bn in investment since it started operating in 2012, reflecting its strategic importance in the global nickel and cobalt supply chains.
Its operations are expected to continue until 2044. Located near Moramanga, around 200 km east of Antananarivo, Ambatovy involves significant open-cast mining and uses high-pressure acid leach (HPAL) technology to extract nickel and cobalt from lateritic ores. This advanced method requires specialised equipment, contributing to the project's overall cost.
Additionally, the mine's operators made major investments in infrastructure, including a 220-km slurry pipeline that transports processed ore to the coastal processing plant in Toamasina and the expansion of the Port of Toamasina to handle export operations. These infrastructure investments are vital for the project's success.
Following Ambatovy, the Marovinsty Mine, also in Atsinanana, is the second-largest, with 3.53mn tpy of ROM production. It mainly produce graphite. The QMM Mineral Sands Project in Anosy, owned by the Anglo-Australian mining company Rio Tinto and the Madagascan government, ranks third. This project is significant for its ilmenite production, a key mineral used to make titanium dioxide. It also yields monazite and zirsill, which are rich in REEs.
The Ilakaka Mine in Ihorombe, managed by the World Sapphire Group, and the Bemanevika Mine in Boeny, operated by Kraomita Malagasy, round out the top five mines, with ROM production levels of 0.67mn tpy and 0.14mn tpy respectively in 2021. Together, these top five mines produced around 9.2mn tpy of ROM in 2021.
Furthermore, the Molo mine, located in the southern part of Madagascar and operated by NextSource Materials, is another key project. It began commercial production of its superflake graphite concentrate in June 2023 after initiating plant commissioning in March 2023. With a current production capacity of 17,000 tpy and plans to expand to 150,000 tpy, the Molo mine is set to boost Madagascar's graphite output significantly.
In 2024, NextSource Materials secured a $91mn funding agreement with the International Finance Corporation, part of the World Bank, to finance this expansion. Saleable concentrate from the Molo mine was transported to the Port of Tulear in preparation for export in August 2024.
Madagascar offers several fiscal incentives for large-scale mining investments under the Law on Large-Scale Mining Investments, enacted in 2001. This law, which applies to companies investing MGA50bn ($25mn) or more, grants mining operators various benefits, including a temporary exemption from minimum corporate tax, reduced rates of common fiscal charges, additional deductions in corporate taxes, exemption from VAT on the import of materials, goods, and equipment, and low or no custom fees for specific depreciable items.
The 2023 Mining Code, which supersedes some aspects of the 2001 law, introduced significant updates to the regulatory framework, including an increase in the royalty rate from 2% to 5%, with a 30% reduction if the products are locally 'transformed'. However, the definition and application of 'transformed' remain unclear, leading to uncertainty for investors. The code also mandates a 3% contribution to a Mining Fund for Community and Social Investment, ensuring that mining benefits local communities. Additionally, it strengthens environmental regulations and requires mining companies to implement corporate social responsibility plans.
Despite these improvements, the code still contains gaps, particularly concerning critical minerals mining. Transparency International highlights that while the government has discretion in defining these minerals and controlling a quota of production for the domestic market, no specific strategies for their extraction have been established. The National Mines Committee (CNM) and Bureau du Cadastre Minier Madagascar (BCMM) have been given expanded roles in overseeing these activities.
Moreover, the country has been using the Extractive Industries Transparency Initiative (EITI) process to shed light on revenues collected by the government and to provide visibility on the mining sector, including estimates of how much government revenue could be lost through illicit gold exports.
Madagascar's mining sector faces several challenges, including inadequate infrastructure, a lack of skilled labour and environmental concerns. The island's infrastructure, particularly its transportation and energy networks, is underdeveloped, making it difficult to efficiently extract and transport minerals. The mining industry's heavy reliance on roads and ports, many of which are in poor condition, adds to operational costs and can slow down the exporting process. Additionally, the energy sector struggles to meet the demands of large-scale mining operations, with frequent power outages and insufficient capacity.
Another significant challenge is the shortage of skilled labour. While the state has a large workforce, there is a gap in the technical skills required for advanced mining operations. This skills gap often forces companies to bring in foreign expertise, which can be costly and limit the development of local talent. Efforts to improve education and vocational training are ongoing, but progress has been slow.
Environmental challenges also pose a serious threat to the island’s mining sector. Mineral extraction, especially of graphite and REEs, can lead to landscape degradation, loss of biodiversity and pollution of soil and water. In April 2024, a group of 64 villagers from the Anosy region filed a legal claim against Rio Tinto, alleging that pollution from the QIT Minerals Madagascar (QMM) mine in Fort Dauphin, which is 80% owned by Rio Tinto, has caused them to ingest dangerous levels of uranium and lead. The villagers claim that the mine has contaminated surrounding lakes and waterways, which up to 15,000 people rely on for drinking and domestic water supply.
Additionally, the Ambatovy Project has had a significant environmental impact. The construction of the mine led to the loss of 2,000 hectares of pristine rainforest, with severe consequences for local biodiversity. This has sparked criticism and highlighted the environmental risks associated with large-scale mining operations on the island.
This substantial and growing contribution of Madagascar in meeting global demand for critical minerals highlights the need for a dedicated critical minerals strategy to meet the challenges of upscaling mining in the country. These challenges are clearly illustrated in local disputes with existing mining operations. Stricter environmental regulations and more consistent application of environmental and social impact assessments are necessary to ensure that mining activities do not cause irreparable ecological damage.
Value addition and beneficiation within Madagascar’s mining sector are limited but increasingly prioritised. Currently, most minerals are exported in raw form, with little processing done domestically. The government’s economic plan – known as Plan Emergence Madagascar (PEM) – aims to improve value-added processes, particularly in the graphite and nickel industries. By processing these minerals within the country, Madagascar could increase export revenues, create more jobs and strengthen its position in the global market. But developing the infrastructure and technical expertise required for these processes remains a significant challenge.
Madagascar has tremendous opportunities, with its vast graphite reserves potentially positioning the country as a leader in the global energy transition. The $8bn investment in projects like Ambatovy highlights the strategic importance of the island's mineral wealth. However, to fully harness these resources and transform its mining sector into a powerful engine of economic growth, the country must establish a dedicated critical minerals strategy. This would help it take full advantage of the growing worldwide demand for these vital minerals.
