The recent Ethiopia International Mining Conference, which took place in Addis Ababa on 24-24 September, is a timely reminder of the interest in mining in Ethiopia and the likely prospects for further development of that industry over the short to mid-term future.
The conference attracted hundreds of delegates from around the globe. Attendees reflected the full spectrum of those involved in the industry - from academics to geologists, professional advisers, developers, NGOs and finance providers. The various presenters and panellists reflected that broad interest and seemed to confirm the results of a poll taken by Mining Journal at the Indaba conference held in Cape Town earlier this year. That poll placed Ethiopia third (behind Ivory Coast and Burkina Faso) as the most favourable emerging markets in Africa for the development of mining activity.
Ethiopia, one of the most populous countries in Africa and with a booming local economy, is host to a wide variety of metals and other commodities. Potentially significant deposits of both base and precious metals exist as well as deposits of softer commodities such as potash and phosphate are known to exist. However, while there is much talk about the development of larger projects artisanal mining still accounts for around 90% of extracted mineral value in Ethiopia. This was reflected in the significant amount of discussion afforded to the artisanal sector at the recent conference.
Turning now to some of the current projects being pursued. The Tulu Kapi gold project, which was presented at the conference in Addis Ababa, is being developed by Kefi Minerals. The project involves a probable ore reserve in the region of one million ounces The development agreement between Kefi and the government was formalised in April 2015 and provides for a 20 year exploitation licence and, as provided for in the Minerals Law, a government free carried interest at the level of 5 per cent. The developer is working towards gold production commencing in 2017. In September of this year Kefi provided an update indicating that the peak funding requirement for the project had been reduced by $10 million and that equity funding would be raised at the level of the project company in order to minimise shareholder dilution. Already operating - and the largest gold producer in Ethiopia - is the Midroc project in Lega Dembi, previously a state- owned mine but privatised and transferred to Midroc Ethiopia in 1997.
A further project under development is the Danakil potash project in the Afar region located in the North East of Ethiopia. The deposit is part of the extensive Danakil Depression. Other sponsors seeking to develop projects in this Depression include Circum Minerals with a property covering some 365 square kilometres. Circum is now reportedly looking for a partner to assist in the development of the project given the substantial capital expenditure potentially involved (some reports place this at an amount of more than $2 billion). In addition Israel Chemicals Ltd. (having taken over Allana Potash Corp.) is developing a similar sized area next to the Circum deposit. The Depression in fact extends over the border into Eritrea where the national mining company has a 50 per cent interest in a project being explored.
Elsewhere East Africa Metals is in the course of developing the multi-metal Harvest project located 600 kilometres north of Addis Ababa. The same company is also developing the Adyabo project 264 kilometres to the west of the Harvest project. In a different part of the mining industry Gemfields is working on an exploration project for emeralds. Finally a potentially significant tantalum deposit exists at the Kenticha project located in the Oromia region of Southern Ethiopia. This deposit is in the process of being worked on by a group of partners.
Detractors from the potential for the development of the mining industry in Ethiopia point to the difficult political environment and the advantages enjoyed by those who keep close connections to the ruling political elite. On the other hand the political environment in Ethiopia has remained by and large stable, a position which is not enjoyed by several other African countries competing for investment. Corruption is widely regarded to be less of an issue than elsewhere in Africa. However, local bureaucracy and administration is generally under-resourced and under-developed with the consequence that permitting and other necessary day-to-day activity can be slow. Security of tenure and land rights can also raise difficulties - as can an occasionally fast and loose approach to the recognition of contracts. In addition there is a dearth of government funded centrally available geological data. On a positive note though Ethiopia has joined EITI as a candidate country.
In addition to these local challenges basic infrastructure - power, roads, etc - needs significant improvement. As a land-locked country security of access to ports remains a concern. Djibouti continues to be the main ocean access route although alternatives involving both Kenya and Somaliland are being evaluated and invested in. In relation to power Ethiopia possesses huge potential for hydropower generation and the proposed Renaissance Dam project would - at 6,000 MW - be one of the largest power plants in Africa.
The overall view at the conference was one of cautious confidence in the future. Ethiopia undoubtedly plays host to some very interesting deposits. The local economy is booming - the country has managed double- digit economic growth over the past decade thereby comfortably out-stripping most other African jurisdictions. While not all NGOs are confident that the mining industry will move to occupy a significant part of the local economy the World Bank has recently predicted that mining could contribute $2 billion to the local economy by 2025. That would represent a significant advance over the current position and most of those present at the conference seem to believe that this level of progress was certainly achievable.
This article was first published in Mining Journal, 5 October 2015