From: Biniam Tekle (firstname.lastname@example.org)
Date: Thu Nov 19 2009 - 07:30:59 EST
Q+A-Eritrea's mining potential, players and risks
Thu Nov 19, 2009 6:53am EST
By Jeremy Clarke
ASMARA, Nov 19 (Reuters) - Eritrea is seen on the threshold of a mining
boom, with hopes it may boost its agriculture-based economy. But question
marks remain over security and sanctions, keeping foreign investors on their
WHAT'S THE HISTORY?
* Apart from small-scale artisan mining and some minor extraction by
Italians during the colonial era, Eritrea's mining potential is unexploited.
The main interests are gold, zinc and copper.
* Now more than a dozen foreign companies are exploring in Eritrea, with
licences held by groups from Australia, Canada, China, Libya and Britain.
* Most recently, Australia's Gippsland Ltd (GIP.AX: Quote, Profile,
Research, Stock Buzz) was last month granted three prospecting licences for
north-western Eritrea near the Sudanese border.
WHO IS GOING TO PRODUCE FIRST?
* Eritrea's most advanced project is Bisha, run by Canada's Nevsun Resources
Ltd (NSU.TO: Quote, Profile, Research, Stock Buzz). Its 27 million tonnes of
ore are believed to contain 1 million ounces of gold, 700-800 million pounds
of copper and 1 billion pounds of zinc.
* Nevsun spent a record $21.7 million on the project during the third
* The project most likely to start producing after Bisha is Zara, run by
Australia's Chalice Gold Mines (CHN.AX: Quote, Profile, Research, Stock
Buzz). The mine, also expected to hold 1 million ounces of gold, just
completed a scoping study. Production is expected in 2011.
* Analysts say Eritrea's economy can expect a welcome boost if its mineral
potential is effectively harnessed. The agriculture-based economy has
suffered from irregular rainfall and the global economic crisis, with aid
agencies fearful of widespread food shortages and hunger.
* Asmara is supportive of the industry -- it holds a 40 percent stake in the
Bisha project -- and welcomes building a base of skilled local workers. But,
analysts say, Asmara will not see a profit on its investment until 2012 at
* In a rare interview, President Isaias Afwerki told Reuters last month that
the industry was unlikely to affect the lives of ordinary Eritreans. "It
would be very damaging to expect improvement in the economy because we are
mining gold," he said. [ID:nLL161440]
WHAT ARE THE RISKS?
* Security -- Last month three Eritrean miners working for Chalice were
ambushed and executed on a remote road northwest of the capital. Officials
say it was an isolated incident, not a targeted attack. Relations with
Ethiopia and Djibouti remain hostile. Some bigger miners were scared off by
the 1998-2000 border war with Ethiopia that killed 70,000 people.
* "Resource curse" -- Geologists insist on the sector's potential, but
Asmara cautions it must be developed slowly to prevent the so-called
"resource curse" whereby oil and minerals have spawned corruption and
violence elsewhere in Africa.
* Sanctions -- The momentum towards imposing sanctions on Eritrea for its
alleged role in war-torn Somalia has grown in recent months. It remains
unclear how they may effect foreign companies, but according to one analyst,
any disruption to the burgeoning mining industry would put pressure on
- Sources: Reuters, industry sources, Eritrean government, company websites
(Editing by William Hardy)
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