NAIROBI, May 13 (Reuters) - Mining companies should be deterred from working in Eritrea and banned from raising capital or listing their securities in the United States due to Eritrea's rights abuse record, a U.S.-commissioned report said. The United States Commission on International Religious Freedom (USCIRF) said Eritrea's systematic violation of religious freedoms should mean prohibitive restrictions for foreign firms joining the nation's impending gold mining boom.
Some 16 foreign mining companies are operating in the Red Sea state. Canada's Nevsun Resources Ltd <NSU.TO> is expected to be the first to start producing gold later this year, followed some 12 months later by Australia's Chalice Gold Mines <CHN.AX>.
No U.S.-based mining company is operating in the country but analysts say an aggressive stance in Washington would heap pressure on Australia and Canada among others to follow suit.
"The U.S. government should ... prohibit any foreign company's raising capital or listing its securities in the United States while engaged in developing Eritrea's mineral resources," USCIRF said in its report released this month.
The government-funded commission was set up under the 1998 International Religious Freedom Act to give independent advice to the White House and Congress and make policy suggestions.
"Religious freedom violations continue in Eritrea. These violations include ... torture or other ill-treatment of religious prisoners, sometimes resulting in death," USCIRF said.
Rights groups claim more than 3,000 religious prisoners are being detained without charge in Eritrea, some in underground dungeons and old metal shipping containers in the desert.
Eritrea rejects all accusations relating to religious persecution, saying they are based on thin anecdotal evidence.
The only religions officially registered in Eritrea are Eritrean Orthodox, Roman Catholic, the Lutheran Evangelical Church of Eritrea, and Islam. Groups say Eritreans of other faiths, especially Jehovah's Witnesses and Baha'is, are routinely mistreated and harassed.
In response to the report, one Eritrea-based foreign miner insisted the industry was a positive force in the country.
"We are not a political organisation, we are a business and our presence is undeniably good for the average Eritrean," Timothy Strong, Eritrea manager for British mining company London Africa, told Reuters by email.
"The industry creates jobs, helps Eritrea mine its own resource and we contribute to local communities," Strong said.