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Uganda plans competitive bidding for mining licences

* Previous basis has been first-come-first-serve basis

* Country's mining sector seen as underexploited

By Elias Biryabarema

KAMPALA, Oct 1 (Reuters) - Uganda plans to start offering mineral prospecting and production licences on competitive bidding rather than on first-come-first-serve basis following a surge of investor interest, a senior official said on Monday.

The east African country's mining sector is viewed as underexploited with much of the activity dominated by small scale miners mainly involved in gold and cobalt, the nation's leading mineral exports.

Kabagambe Kaliisa, the permanent secretary ministry of energy and minerals, told a news conference at a regional mining gathering in Kampala that the change in policy, to commence next year, follows acquisition of vast geological data.

The data identified 16 mineral targets that reduced the risk of failure to find minerals by potential prospectors.

"The normal practice and policy has been that if you come and say this is my target, the commissioner is almost obligated to license you," Kabagambe said.

"The problem with that is that sometimes the next person may have a better proposal, a better programme, better financial standing and better experience ... since we have the mineral targets identified we don't have to follow the traditional way, we'll follow competitive bidding next year."

According to the energy ministry, geophysical surveys have been conducted on more than 80 percent of the country in recent years, confirming the existence of gold, base metals, uranium, rare earths, iron, titanium, vermiculite, diamond and other minerals in various locations.

Uganda is on the cusp of becoming a crude oil producer after commercial hydrocarbon deposits were discovered in the Albertine rift basin along its border with the Democratic Republic of Congo (DRC) in 2006.

The government estimates reserves at 3.5 billion barrels and says 30 percent of it is recoverable.

Kabagambe said the ministry was also going to start conducting a more rigorous scrutiny of applicants for prospecting rights because some speculators were securing licences only to sit on them for some time and then sell them to the next highest bidder for a profit.

"They hold ground and do no work ... so we'll be doing due diligence to find out whether you have financial capacity, technical capacity, whether you have the experience to carry out the work programme that you've been licensed to do," he said.

(Editing by James Macharia)

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Keywords: UGANDA MINING/