Eritrea – newcomer to global mining

The emergence in the first quarter of this year of the first modern-day mine in Eritrea, Canadian-based Nevsun Resources Limited’s low cost, high grade Bisha goldcopper operation, marks an historic milestone in the development of the country that straddles the horn of Africa as a low-key but growing new entrant on the mining map of the world.

The government of Eritrea, as well as the foreign companies I spoke to there, are agreed that it is moving towards a mining boom, and they cite two basic reasons for this exciting situation – one provided by mother nature and the other strictly man-made.

First of all, mother nature. The director general of the department of mines in the Eritrean ministry of energy and mines, Alem Kibreab explains that a growing number of foreign companies are attracted to Eritrea because it sits on a patch of the Arabian Nubian Shield, the geological feature that stretches from Saudi Arabia and Yemen in the east to Sudan and Egypt in the west. “We are a small country, but over 60% of our land mass is covered by Nubian Shield rocks which are home to several rich gold and base metal mines in the region.

“I firmly believe that Eritrea is going to be one of the new entrants in the global mining arena,” he tells me. “I am on record as saying that reserves identified in Eritrea so far are only the tip of the iceberg, and I stand by that viewpoint.”

And there is more. “In the next five to ten years I expect the number of mining companies exploring and producing in Eritrea to have at least doubled to more than 30.”

Kibreab’s optimism is shared by the Eritrean ministry of energy and mines. “The prospective geology of the area, combined with the recent promising discoveries and an attractive and competitive investment regime, makes Eritrea one of the most attractive and rewarding mining investment opportunities in the world,” it claims on its website.

While it is true that Kibreab and the ministry could be accused of beating their own drum, their claims are given weight and credibility by the fact that the foreign mining companies which have moved into Eritrea are in full agreement on the geological potential.

In fact, they are keen to move ahead at full speed, and it is the Eritrean government that insists the mining sector must be developed slowly and carefully to prevent what Kibreab calls the resources curse, where oil and minerals have spawned corruption and violence elsewhere in Africa.

Now the human element, and Nevsun CEO Cliff Davis, the gold and copper pioneer of Eritrea, emphasises the strong support from the Eritrean government. “The ministry has always been very supportive of the industry, and the state of Eritrea has demonstrated over and over again that it honours its commitments. They are long-term thinkers and are interested in developing their resources for the generations in the future.”

Probably the most important contributing factor is the fact that Eritrea’s mining law is up-to-date, attractive and competitive, and provides considerable benefits and incentives to investors. The law sets the government’s stake in any mining project at 10% with an option to buy a further 30%, a small claim compared to other countries in the area like Egypt which mandates a 50% stake, Sudan at 60%, and then of course there’s Zimbabwe at 51%.

Tucker Barrie, an economic geologist and an expert on the Arabian Nubian Shield, says neighbouring countries have already taken note that foreign companies are now prospecting nearby. “It is not going to wash with any foreign company if Khartoum keeps asking for 60% of gold mining projects. That’s why even though it is 50 times the size of Eritrea, there is only one foreign company mining there,” he points out.

Analysts point out that an impending mining boom in Eritrea will challenge its oil-rich neighbours to make it easier for foreign companies to prospect across the massive geological structure in the region which is rich in base metals and gold. There are a number of other factors which combine to make Eritrea an attractive destination, and which make life a lot easier for the companies involved in this country.

“There is barely any vegetation cover obscuring the host rock, which makes exploration easy and cheaper; there is a fairly well developed infrastructure – the port is only a few hours’ drive from most of the deposits; there is a strong government commitment to develop the mining sector; and this commitment is enhanced by the full support of the regional and local administrations, the army and the communities where the companies operate,” Kibreab says.

Eritrea’s deposits are not likely to be larger than those in countries like South Africa or the Democratic Republic of Congo, but there is no doubt that income from royalties, taxes and new jobs could ease the government’s fiscal problems and spread more wealth among its five million people, many of whom are living on the margins of survival. An accelerating mining boom over the next five years could provide substantial support to other sectors,” says Kibreab, “and could provide a future lifeline for Eritrea’s impoverished economy.”

(Source: MiningReview)