Ethiopia is Sitting on One of the World’s Greatest Untapped Gold Deposits
Ethiopia’s mining sector is undergoing a massive transformation with an increase in opportunities for investment. A wide variety of mineral resources are available in Ethiopia, according to recently conducted geological studies. The Ministry of Mines surveyed over half of the country’s geological landscapes and discovered large reserves of gold, petroleum, and potash as well as valuable deposits of coal, tantalum, copper, platinum, opals, rubies, and other gemstones. Recent explorations also have confirmed the deposit of tantalite, soda ash, and phosphate rock. Industrial and chemical minerals have also been identified. More explorations are taking place to find precious stones such as diamonds, sapphires, and other gemstones.
However, the mining sector currently accounts for a little over 1% of the Ethiopian economy. But the government anticipates that in a few years’ time, it will represent up to 10% of GDP. The business climate in Ethiopia has improved very much and it is still improving. In addition, for a business person or an investor, the most important things are that there must be sustained peace in the country, it must be a place where a large number of consumers exist, which Ethiopia has, it must be a place where trained or trainable labor is available, which Ethiopia also has, and last but not least the country must have convenient proximity to the world market places and Ethiopia is very strategically located in the world.
The other important factor is the practicality of the proclamations issued by the government. As time goes by and the government is improving its policies and methods of attracting investors, it does that by continuously improving the law of the land for investors. This country has many beautiful things as it relates to nature. The country has a culture that is very positive and strong. All of this is good for business. The only thing that the country has to struggle with is making sure that this is known to the world and this is not very easy to do for a less developed country. That is why any company, that wants to invest in Ethiopia or anywhere else needs to work hard in order to make sustainable growth for itself and the country as well.
As more international companies make way for Ethiopia’s mineral wealth, the country opened its door to license more than 300 companies to excavate its natural treasures. The government is offering a variety of incentives to attract investors, including tax holidays, import duty exemptions, lower royalty levels, and guarantees on selling rights.
Gold mining in Gambella
The Scandinavia-headquartered gold explorer and miner Akobo Minerals has renewed its existing exploration license of 182 km2 in the Akobo region of Ethiopia, which Akobo Minerals says is the result of many years of positive relationships with the Ethiopian Ministry of Mines. Akobo Minerals operates in the Gambela region and Dima Woreda, in southwest Ethiopia.
The exploration license renewal provides Akobo Minerals a three-year exploration period, with yearly renewals of up to ten years, as well as a solidified future presence in the Akobo project, thereby removing any concerns regarding the license’s length. It also means Akobo Minerals has the ability to think long-term about how to increase exploration activities and provides freedom to drill and mine the best targets across the entire license area.
Akobo Minerals has performed a ceremony to lay the foundation stone for its Segele mine in Ethiopia. This marks the start of the company’s next phase towards mining and gold production.
Initial production is expected to commence by the end of 2022, ramping up into 2023. Once fully operational, the company estimates annual production at Segele of around 45,000 ounces of gold. Over time, this can increase depending on future discoveries and upgrades of the processing plant.
Present at the ceremony were the Minister of Mining, Takele Uma, President of the Gambella region, Omod Ojulu, members of parliament, and other representatives from the Gambella regions, as well as staff and friends. The significant attendance shows solid local and national support for the project and, along with the company, they have high expectations for the great success of the project.
According to Mining Review, Akobo Minerals’ long-term goal is the discovery of 1.5- 2 million ounces of gold. According to the JORC standard that the company reports by, the company can only state the estimated volume and not the possible sales value of the gold. At the current moment gold trades around $1,970 per ounce.
Eng. Takele Uma said the new company will be able to produce over 70,000 ounces of gold every year once it is fully operational. Named Akobo Minerals, the company will be able to generate $100 million hard currency to the country annually by exporting gold, according to Eng. Takele, who shared a post on his official social media page.
Indicating that he has witnessed the commencement of operation by the company, along with Omod Ujulu, President of Gambella Region, the Minister stated that the installations of machinery for processing gold will be completed within one year.
In his speech at the ceremony, Jørgen Evjen, CEO of Akobo Minerals, said: “I feel honored, privileged, and proud to be here today. Honored to see you all here participating in this ceremony; privileged to have had the opportunity to work with Akobo Minerals for so many years; and proud of everything we have achieved.“
“I am particularly pleased with the efforts of our staff and supporters who have made this possible. It has not always been easy, but we have never given up. We listen, we find solutions, we take action and we set goals. We have created relationships, but also partnerships. We believe in a local and national presence.”
“We adhere to international standards and ethics at all times, and we aim to become the leading exploration and mining company in Ethiopia in the coming years. This is just the beginning for us. And last, but not least, I want to convey special thanks to the Minister of Mining, Takele Uma, for his leadership, visions, and faith in the project.”
With the support and cooperation of the government and local authorities, good progress is being made. Akobo Minerals has long stated that it is moving from a pure exploration company to commencing mining. The latest reports leave little doubt that there will now be significant mining in Segele for Akobo Minerals in the near future.
In the meantime, Akobo Minerals AB has appointed SpareBank 1 Markets AS to advise on project financing for its boutique gold mining operation for the Segele deposit in Ethiopia. As a financial adviser, SpareBank 1 Markets AS will work closely with Akobo Minerals to explore relevant funding opportunities – such as equity, bank debt, and offtake agreements – along with other strategic options that are available to the company in order to conduct and execute financing for the project. Construction of the small-scale plant project will commence as soon as financing is in place, with initial production start-up – and gold-producing operations – expected before the end of 2022. Jørgen Evjen comments:
“The announcement of our partnership with SpareBank 1 Markets AS to seek new additional funding for the company is a major next step in the development of our mining operation towards pouring of first gold by the end of the year.
“Our exploration team has been successful in finding more gold at greater depths as our project has developed. We have also secured long-term licenses and relationships with local and national authorities, as well as establishing a significant collaboration with Oromia Bank to develop new mining ventures in Ethiopia.”
Ethiopia’s hard currency earnings from gold export which several years ago used to generate over $600 million in a year, has shown dramatic decline during the political unrest the country went through especially since 2015 dropping to below $100 million. Meanwhile, since 2020, the industry has shown recovery generating over one hundred million dollars.
In addition to gold, Ethiopia is also rich with mineral resources such as iron ore, potash, sulfate, tantalite, gemstones, sapphire, Granite, Diatomite, Bentonite, Silica Sand, Marble, Kaolin, Feldspar, and other dimension stones, as well as cement raw materials such as LST, Gyp, Cly, and Pumice, among others.
Tulu Kapi Gold Mine
KEFI Gold and Copper PLC (AIM: KEFI, OTC: KFFLF) said the development of the Tulu Kapi gold project in Ethiopia has restarted after being postponed for five months on security concerns. Tulu Kapi is part of the KEFI-operated Ethiopia joint-venture Tulu Kapi Gold Mines Share Company (TKGM). AIM-traded KEFI said it has been monitoring the situation, alongside the country’s mining ministry, over the past two months and that the security situation has remained stable at both the site and the preferred transport routes. KEFI executive chairman Harry Anagnostaras-Adams said:
“It is great to see that Ethiopia has settled down so quickly over the past two months and that TKGM’s teams are back in the field for launch preparations, Everyone is now pushing for full project launch.”
According to Mining Magazine, the company said its principal contractors, Lycopodium – which is constructing the plant – and Corica – due to provide mine services – would deliver final costings for confirmation at the end of April 2022, adding that the anticipated final capital estimate for the project has not changed from previous guidance. It is now resuming work on refurbishing the existing site camp to accommodate the initial construction workforce. It has recently completed a detailed design for the procurement and construction of an all-weather access road, a water dam, and a permanent camp.
It has also begun work on the new processing plant, tailings storage facilities, mining fleet service area, and an on-site metallurgical testing laboratory. KEFI’s executive chairman said on-site teams have returned to work and are preparing for the final launch of the mine project.
“Kefi now has three advanced development gold and copper-gold projects with significant resource upside in two now-supportive jurisdictions of the Arabian Nubian Shield, and in which our beneficial interest is already the equivalent of 2.1 million oz gold.”
In Tulu Kapi, the plan is to build a project that will initially produce 140,000 ounces of gold per year at all-in sustaining costs of between US$800 and US$900 per ounce, depending on exactly how the gold price affects outgoing royalty payments. The initial open-pit life is set at eight years, but it seems likely that there will be a substantial underground operation, the precise nature of which has yet to be properly modeled.
If that sounds a bit vague, then insight can at least be gleaned from one of the most recent underground drill hits. This measured ninety meters at three grams per tonne, which ought to be enough to keep the serious punters interested. “Plus,” says Anagnostaras-Adams, “we’ve got ground around the deposit. And usually, these things do come in clusters.”
“So, once again we are presented with a project with a clear development timetable and plenty of exploration upside. All things being equal, construction will get underway in the middle of this year, with build time slated for 24 months.”
According to New Business Ethiopia News, KEFI Gold and Copper plc at the end of last year, the ultimate parent company of Tulu Kapi Gold Mines S.C and KEFI Minerals Ethiopia Limited raised $18 million from its 5,000 shareholders on the London Stock Exchange.
“KEFI has a highly experienced senior team which has also managed some of the world’s largest mining companies demonstrates its full commitment to the development plans of the company, starting with Tulu Kapi.” Said Dr. Kebede Belete, Chairman of KEFI Minerals Ethiopia Limited and Deputy Chairman of Tulu Kapi Gold Mines.
”KEFI subsidiary KEFI Minerals Ethiopia Limited has already invested over US$70 million into Tulu Kapi Gold Mines Share Company and plans to further invest over $300 million for Tulu-Kapi project development, financed by its already assembled consortium which includes Africa’s leading gold plant designer Lycopodium, Africa’s leading mining services contractor Corica along with other specialists and African focused mining financiers.”
The Tulu Kapi Gold Project will generate direct employment for approximately 1,000 people from West Wolega and indirect employment for 5-10 times that number of people. According to the chairman, the modern discovery of the industrial scale gold deposit at Tulu Kapi was approximately 15 years ago and KEFI was invited to take control in 2014 to introduce the latest international standards to the project.
KEFI has since then updated the mine design and successfully worked hard with Government regulators in assisting with policy initiatives like international bank accounts, market-based interest rates, the right to use gold price insurance or hedging, 70/30 capital ratio in recognition of the capital intensity of industrial-scale mining and the encouragement of Ethiopian country membership for multilateral development banks which allocate capital to African countries in particular.
The Tulu Kapi Gold Project consortium includes major African multilateral development banks East African Trade and Development Bank, whose regional headquarters is in Addis Ababa, and African Finance Corporation, the huge Nigerian-based development bank. These two banks have already worked with the Ethiopian Government on several initiatives including their work with Tulu Kapi Gold Mines Share Company.
As part of the Tulu Kapi Project Consortium, the banks signed their initial deal terms sheets two years ago. Since then they have completed independent experts’ due diligence reports and now await security and other normal requirements like detailed documentation and insurances to be satisfied to support the launch of the project.
KEFI Minerals Ethiopia Limited
The Tulu Kapi gold deposit was discovered and mined on a small scale by an Italian consortium in the 1930s. Nyota Minerals Limited acquired the licenses in 2009 and then undertook extensive exploration and drilling which culminated in an initial DFS in December 2012 based on a 2.0Mtpa processing plant and capital expenditure totaling $290 million.
In December 2013, KEFI Minerals acquired 75% of Tulu Kapi for £4.5 million. This acquisition cost equates to only $10 per reserve ounce and provides the information collected from the historical expenditure of more than $50 million. In September 2014, KEFI acquired the remaining 25% of Tulu Kapi for £750,000 and 50 million shares.
The Ethiopian government became entitled to a 5% free-carry interest in Tulu Kapi upon granting of the Mining Licence in April 2015. The Exploration Licences held by KEFI Minerals (Ethiopia) Limited cover an area of approximately 200 square kilometers over and near the Tulu Kapi deposit.
The altitude of the project area is between 1,600m and 1,765m above sea level. The climate is temperate with annual rainfall averaging about 150cm. Tulu Kapi is located approximately 360km due west of Ethiopia’s capital, Addis Ababa. The main road to Addis Ababa is within 12km of Tulu Kapi and power lines on the main electricity grid are within 40km of the project.
The Untapped Potential
To the west of Ethiopia near the Sudanese border lies a place called the Asosa zone. This may be the location of the oldest gold mine in the world. Dating back some 6,000 years, it provided a key source of gold to the ancient Egyptian empire, whose great wealth was famous throughout the known world. It may even have supplied the Queen of Sheba with her lavish gifts of gold when she visited King Solomon of Israel almost 3,000 years ago.
The excitement in this part of the world is more about the future, however. Some local inhabitants already make a living from prospecting, and several mining companies have been active in the area in recent years, too. But what comes next could be on a much bigger scale: I have just co-published with my colleague, Owen Morgan, new geological research that suggests that much more treasure might be buried under the surface of this east African country than was previously thought.
The Asosa zone is made up of flatlands, rugged valleys, mountainous ridges, streams, and rivers. It is densely vegetated by bamboo and incense trees, with remnants of tropical rainforests along the river valleys. The zone, which is part of Ethiopia’s Benishangul-Gumuz region, is spotted with archaeological sites containing clues to how people lived here thousands of years ago, together with ancient mining pits and trenches.
Local inhabitants have long taken advantage of these riches. They pan for gold in Asosa’s streams and also extract the precious metal directly from outcropping rocks. More substantial exploitation of the region’s riches dates back to the Italian invasion of the 1930s. The Italians explored the Welega gold district in West Welega, south-east of Asosa.
Haile Selassie, emperor of Ethiopia from 1930 to 1974, believed the country had the potential to become a global leader in gold. But when the revolutionary Derg government deposed him and the country plunged into civil war, gold mining disappeared off the agenda for a decade and a half. It took until the early 2000s before the government started awarding exploration licenses.
Several mines are up and running, neither of them in Asosa. One is at Lega Dembi slightly to the east, owned by Saudi interests. The other, at Tigray in the north of the country, is owned by American mining giant Newmont, and just started production late last year. More is already on the way: the beneficiary of the Italian efforts from the 1930s in Welega is the Tulu Kapi gold prospect, containing 48 tonnes of gold. This was most recently acquired in 2013 by Cyprus-based mining group KEFI Minerals (market value: roughly US$2.3 billion (£1.7 billion)).
As for Asosa, the Egyptian company ASCOM made a significant gold discovery in the zone in 2016. It published a maiden resource statement that claimed the presence of – curiously the same number – 48 tonnes of gold. Yet this only looks like the beginning.
The Asosa zone geology is characterized by various kinds of volcanic and sedimentary rocks that are more than 600 million years old. The region has been intensely deformed by geological forces, resulting in everything from kilometer-long faults to tiny cracks known as veins which are only centimeters in length.
Some of these veins contain quartz, and it is mainly here that the region’s gold accumulated between 615m and 650m years ago – along with silver and various other minerals. The gold came from molten materials deep within the Earth finding their way upwards during a process known as subduction, where tectonic forces drive oceanic crust beneath a continent. This is comparable to the reasons behind gold deposits in island arcs like some of the ones in Indonesia and Papua New Guinea.
Our field observations and panning suggest that gold should be generally abundant across the Asoza zone – both in quartz veins but also elsewhere in the schist and pegmatite rocks in which they are located. We also see signs of substantial graphite deposits, which are important for everything from touch-screen tablets to lithium-ion batteries.
There is undoubtedly much more world-class gold within this area than has already been discovered, pointing to a promising source of income for the government for years to come – much of the region remains unexplored, after all. It probably is no exaggeration to say that Ethiopia’s gold potential could rival South Africa’s, which would put it somewhere around the top five gold-producing nations in the world.
There are still some substantial challenges, however. Dealing with governmental red tape can be difficult, however, the recent reform might invite investors from all over the world. In an area like the Asosa zone, there is dangerous wildlife to avoid, such as venomous snakes, baboons, and even monkeys. The vegetation also becomes forbiddingly wild during wet seasons, but the reward out way the cost. Besides the locals knows the area very well as such investor can use them as a tool to explore the region.
The important thing is to strike good working relationships with local inhabitants, showing the utmost respect to local cultures – it’s the ethical way to operate, and failing to do so can make life harder with the authorities in the capital. This includes the need to preserve the natural beauty of the region; gold mining already has a very bad international reputation for environmental damage.
With the right approach, however, western Ethiopia will be a literal gold mine that could bring economic benefit to the region. What the Queen of Sheba may have known 3,000 years ago, the modern world is finally rediscovering today.
Most of the regions in Ethiopia mainly Tigray, Benishangul Gumz, Gambella, Amhara, and Oromia, among others are endowed with gold reserves. The majority of gold is being produced by tens of thousands of artisan miners who conduct mining in the traditional way.