Long Overdue New Gold Miners Make 140.6m Br Investment


The ministry has a new approach to licensing the small-scale mining of gold




Two small scale mining companies are seeking gold and silver extraction licences to join the multi-billion Birr sector now dominated by MIDROC Gold.
These companies, Letto and Lozbez, completed their exploration work and submitted their feasibility studies to the Ministry of Mines (MoM) in September.
During the five years of the first Growth and Transformation Plan (GTP I), MIDROC Gold and artisanal miners had mined 26,547g and 43,434g of gold, according to MoM’s GTP I report. The government collects five per cent royalty from MIDROC, and lately the former has unsuccessfully tried to increase that to seven per cent.
Lozbez Mining Plc was established in June 2009 in Tigray Regional State after its partners separated from another company which was operating in Wellega Zone, Oromia. It had its exploration licence covering 438sqkm in Abergele in Temben wereda of Tigray.
It has now applied for a mining licence indicating a mining cost of 126 million Br. But it asking for a much smaller area of 8.3 square kilometres.
The area has large gold reserves, but the mining operation has been dominated by artisans, which attracted Lozbez’s interest in working in the area, said Yonas Tewelde, general manager of Lozbez.
Lozbez estimates that there could be 771,480 grams of silver and 3.9 million grams of gold reserve in the area, based on its exploration, which it conducted for the past six years.
Its feasibility forecasts that 55,546g of gold and 284,943g of silver will be mined in the first year, gradually growing to 69,433g of gold and 356,179g of silver a year, with seven per cent royalty payment to the government. It has indicated a selling price of 800Br and 11Br per gram for gold and silver, respectively.
The second company, Letto, has indicated a much lower investment cost of 14.6 million Br for the mining it wants to start on a 1.8sqkm area in Tulu Berkesa, which is found in Adela and Wadenie weredas in Guji Zone, Oromia. It has been exploring for gold for the past five years.
Despite the area and investment cost being significantly lower than those indicated for Lozbez in the northern part of the country, Letto’s feasibility study is claiming an annual extraction capacity of 540,000g in the first year, eventually reaching 675,000g of gold in six years. It is indicating the same price and royalty as Lozbez.
Months before receiving the requests of these two companies, MoM had, on April 12, 2015, licensed Kefi Minerals Plc, a UK company, for exploration in Beganj wereda, in Wolega, Oromia, with an investment cost of 151.6 million dollars. Such companies, including MIDROC, are large ones that require an extended period for exploration, Sisay Ayalew, director at the Mineral Licensing & Administration Directorate of MoM explained.
“What is going to be done in the next fiscal year as well as during the coming years of the second Growth & Transformation Plan (GTP II) is giving short time exploration licences which will increase the extraction quantity as well as export revenue,” Sisay said.
This will help to beat the reluctance of large companies to produce and sell when the price of gold is low in the international market, according to him. Whereas, Merga Qena’a, director of the Extractive Industries Transparency Initiative at MoM, was of the view that a higher number of smaller investors could attract larger ones to invest in the country. The Ministry of Mines has been renamed under the newly established cabinet as Ministry of Mines, Petroleum & Natural Gas,while the Minister, Tolosa Shagi, has remained in that position.



By LUCY KASSA
FORTUNE STAFF WRITER

Published on Oct 13,2015 [ Vol 16 ,No 806]


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