Eritrea sees gold as mining takes root after fits and starts
April 30, 2006, 19 hours, 54 minutes and 19 seconds ago.
By Andnetwork .com
Thirteen years after winning independence, Eritrea is looking underground to pump life into its struggling economy as international mining companies begin work in earnest.
Initially beset by fits and starts, including a brief government suspension of their operations, five extraction firms share high hopes for the gold, copper and zinc reserves of Africa's newest nation.
Canadian Nevsun Resources and Sunridge Gold, US-Canadian Sanu Resources, Canadian-Eritrean MDN/Eritrean Minerals Corporation and Australia's Sub-Sahara have all entered the potentially lucrative search for minerals in Eritrea.
Although none has yet begun to extract, they have started preparatory work and Nevsun's Bisha mine in western Eritrea - the biggest project in the country - is expected to be the first to come on line in 2008, officials said.
"We hope the others will follow later," said Alem Kibreab, director general of Mines at the Ministry of Energy and Mines. "Mining will boost the economy, employment, the currency," he said in a recent interview. "But it has to be sustainable development."
Alem estimates the Bisha project alone will directly employ up to 400 people and provide ten times that number with indirect jobs, such as truck drivers and port workers.
Eritrean officials are reluctant to discuss how much revenue they expect from mining, but diplomatic sources say it could generate hundreds of million of dollars a year.
"The money will start coming in by the end of 2008", the director of Nevsun in Eritrea, Stan Rogers, said.
Based on geological surveys, Nevsun believes its miners will extract gold for the first two years, before hitting a copper reserve beneath for another two years and then zinc, he said.
"It's like a three-layered cake," Rogers said, expressing confidence that the Vancouver-based firm, which also operates in Mali, would more than recoup its initial investment.
Eritrean officials say Nevsun has spent $20 million on its projects thus far in the country with the figure expected to rise to $150 million once extraction begins at Bisha. But while operations are progressing smoothly now, that was not always the case as a British geologist working for Nevsun was murdered near the Bisha site in April 2003 in what the government said at the time may have been terrorism.
Then, in September 2004, Asmara ordered the three companies then working in Eritrea to stop work without explanation. The order - seen by diplomats here as a negotiating tactic to win an increase from 20 to 30 percent the number of shares the government can own in the operations - was rescinded five months later after intense negotiations.
Eritrean officials refuse to discuss specifics of the stop-work order but allow it was a questionable move as it spooked mining company investors and management.
"We will not make the same mistake again," Alem said. "It was due to our lack of experience, the idea was genuine: check that our 1995 mining law covered everything. "The companies are to be commended for the patience they showed," he said.
Nevsun's Rogers said that since the stop-work order was rescinded, there have been no problems.
If companies are attracted to Eritrea, it is because mining there is not a new phenomenon. Gold production in Eritrea was recorded in the times of the Pharaohs of the Fourth Dynasty, and there are records of gold mining during the Portuguese occupation in the 17th century.
Modern mining came with the advent of the Italians at the end of the 19th century, said Alem.
It then stagnated during Eritrea's thirty-year struggle for independence from Ethiopia, from 1961 to 1991, and was hindered by the arch-rival's bloody 1998-2000 border war.
Some diplomats have privately expressed concern that revenue from the mining might be used to fund arms purchases, particularly as tensions with Ethiopia remain high.
But Alem vehemently dismissed those concerns. "Why do people portray us as a belligerent society? The government spends a lot on schools and hospitals. We hope for peace, we know what guns can do," he said.
Source: METIMES
