Kefi Minerals to Mine Silver, Gold in Oromia with $151.6m Investment over 20 Years


Ethiopia’s mining sector is attracting investors interested in mine deposits and not just exploration




Tolosa Shagi, minister of Mines, greeted members of the media on Monday, April 13, 2015, a few minutes before he signed a gold development agreement with Kefi Minerals, a UK based gold mining company. He was followed by Harry A. Adams, the non-executive chairman of the company.

Signed inside the newly completed headquarters of the Ministry, yet to be inaugurated, past Ararat Hotel, the agreement will see Ethiopia’s second gold development for export venture, after the lone Adolla Goldmine, the oldest in the country. Located in Gonji area, in western Wellega Zone of the Oromia Regional State, the open pit mine under the 20-year concession of Kefi Minerals has taken eight years to be developed. So were the companies involved in the exploration of a 130skm radius site [as they] changed hands one from the other: from Golden Prspect to Nyota and now Kefi.

Kefi Minerals has now completed a feasibility study to show a bankable reserve of 28tns of gold to be exploited beginning two years, thus generating a projected revenues of 1.06 billion dollars in 11 years, of which 130 million dollars is to be funnelled direct to the government’s coffer in a form of royalties and taxes, according to Adams. This will be an addition to the half a billion dollars Ethiopia receives every year from the exports of five tonnes of gold, mined from Adolla, and up to eight tonnes of gold by artisans, Tolosa told journalists.

Kefi Minerals is one of a growing number of foreign miners active in exploring and developing goldmines in Ethiopia. There are three companies [Ezana, Midroc and Askom] lined up to launch gold development over the next five years, according to the Minister.

“It will be a privilege to begin the real work,” said Adams during the press briefing after he signed the deal. “We will honour the trust you put upon us. Neither will we pretend it will be easy.”

The challenge will be to raise close to 100 million dollars from the banks to execute the feasibility study and work plan the Ministry has accepted, and compensate 260 households which will be relocated.         

 

A British company, Kefi Minerals Plc, has just been licensed for gold and silver mining with an investment capital of 151.6 million dollars in Oromia in an agreement signed on April 12, 2015.

Kefi Minerals will work on a seven square kilometre area in Beganj Wereda, in South Wellega, where it has conducted eight years of exploration and two years of feasibility study, according to Kebede Hailu(PhD), the company’s country manager. Its licence allows it engage in extraction for 20 years, with a possibility for renewal of not more than 10 years if the company requests it.

According to Kebede, the company has plans for further expansion projects within the allocated land. A feasibility study for additional underground extraction will start after two years, he said, in an area which is estimated to hold more than 6,200Kgs gold and silver. The production capacity of the company is expected to be 28,875Kg of gold and silver within the next 10 years, earning revenue of 1.2 billion dollars of foreign currency from export.

The Arabian-Nubian rocks, found in areas of Ethiopia, Eritrea, Egypt, Sudan, South Arabia, Somalia, Israel, Jordan and Yemen, were perceived to enclose less gold deposit, Kebede said. However, 10 years ago, such rocks were found to hold big gold deposits and hence, most companies are shifting their eyes to such places, Kebede told Fortune.

This perception has contributed to lower attraction of investors in the Ethiopian mining sector as most companies are interested in investing in countries which are well-known for their mine deposits rather than exploring in unknown places, he said.

Mining investment requires huge, long-term exploration activities, which need resources beyond the capacity of domestic investors, Mining Minister, Tolosa Shagi said. There is the possibility of two more companies beginning production in the next Growth and Transformation Plan (GTP II), he said.

The two companies, Ascom mining Ethiopia Plc and Midroc Gold Mine Plc’s subsidiary company have already finalised exploration works in Benishangul Gumuz region and are conducting a feasibility study.

Ethiopia produces eight tonnes of gold annually, both in the modern and traditional mechanisms of gold extraction. The major gold enriched areas of Ethiopia are the northern parts and Benishangul Gumuz area, according to Tolosa.

Currently, there are around 100 companies involved in exploration work in Ethiopia, but MIDROC Gold Mine Plc has for long dominated the gold extraction business in Ethiopia.

MIDROC Gold Mine Plc, established by Sheik Mohammed Hussein Ali Al-Amoudi and his wife Sofia Salah in 1998 with an initial capital of 51.6 million dollars, is a member of the MIDROC Ethiopia Technology Group and has a production capacity of around 3,000Kg of gold annually. MIDROC Gold Mine Plc signed a 10-year agreement with the then Ministry of Mines and Energy in November 2009 for the extraction of 20,483kg of gold from Sakaro in the Guji Zone of the Oromia Regional State.



By LUCY KASSA
FORTUNE STAFF WRITER

Published on April 20, 2015 [ Vol 15 ,No 781]


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