Mining to Become Ethiopia’s Economic Backbone
Mining to Become Ethiopia’s Economic Backbone
March 9, 2013 | Filed under: Business | Posted by: Editorial_Staff
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Ethiopia has vast untapped mineral resources
AFRICANGLOBE – Africa was at the fore of the Prospectors and Developers Association of Canada’s 2013 show, with projects from West, Central and Southern Africa firing the imagination of many delegates and even grabbing several headlines. One region worthy of close attention is Ethiopia.
The wars and famines that scourged the country three decades ago are, thankfully, a thing of the past. Today, Ethiopia is rapidly changing and has recorded constant growth over the past several years. This is having a noticeable impact. For example, infant-mortality rates have fallen by 40% since 2000, according to The Economist. Low wages are rising and the agricultural sector, still the most important component in terms of gross domestic product, is being modernised at a quickening pace.
However, there are still many challenges. For example, inflationary pressures need to be kept in check, while overhauling the country’s road and rail access remains pressing. Power is another critical concern. To help overcome these problems, Ethiopia is looking to develop a progressive resource sector, with particular attention being paid to mining and minerals extraction. For this to happen, the country continues to require foreign investment and mining expertise.
“Ethiopia is a big country, with a population of over 90-million. We are fast-tacking our development, aiming to become a country of middle-income earners,” said Ethiopia’s Minister of Mines, Sinkinesh Ejigu. “We are seeking development partners [in the mining sector], and want to work with them to deliver mutual benefits and profits.”
Ethiopia’s mineral base is varied and, given that there is still plenty of mileage for modern exploration, has the potential to be vast.
“We have gold, tantalite, platinum, coal, phosphate, potash and many others. Currently, we have about 135 companies working on 245 licences. The mining sector already adds greatly to the nation’s wealth; for example, in 2011/12, the sector contributed $654-million,” Ejigu said.
Tax breaks have been introduced and cost recoveries made available to facilitate the entrance of mining companies into Ethiopia, she said. “We are asking for the private sector to stand by its obligations, while we in government will play our part. With mutual understanding, the outlook is positive.”
Ensuring that mining codes and accompanying legislation are transparent has been particularly important, she added.
“We want to be competitive and transparent. The latest amendments to our mining laws occurred in 2010 and were designed to be as clear as possible. A relationship with a mining company is a long-term one and we want people to know that the government will keep its promises. At the same time, they must understand that our laws are binding,” she said.
“The extractive industry deals with nonrenewables and we want to get things right,” she continued. “This includes keeping a careful eye on the environmental impact. We want to take a twenty-first-century approach; we want to engage with communities affected [by mining projects] and show them the benefits available, while we also want companies to understand their responsibilities from a socioeconomic perspective.”
Of Ethiopia’s metals and mineral potential, perhaps potash has garnered some of the greatest interest. The Minister highlighted Allana Potash’s Dallol project, which has proven sylvinite reserves of 32.97-million tons, grading 28% potassium chloride, and probable reserves of 60.81-million tons, grading 28.8%. The project will entail brine solution mining, with evaporation ponds to produce potash-bearing crystals, which will then be processed and shipped to market.
“Our numbers are pretty robust,” said Allana’s senior VP exploration, Peter MacLean. “For example, our capital expenditure is $642-million, which is down from our preliminary economic assessment, as the Dijbouti port authority has since agreed to build the new port at Tadjoura. We’ll be focused on building our warehouse and conveyor belts etc, while they are responsible for the port, ship loader and other support equipment.”
This touches on one of land-locked Ethiopia’s main historic hurdles: reliable infrastructure and access to the sea. The Minister acknowledged this, stressing that improving rail links and rail capacity to Dijbouti was a central concern. “The finance for this is available and has been secured for construction work,” Ejigu said.
For Allana, another issue would be connecting the Dallol project to the main road running 70 km to the south.
“The government has indicated that they’ll build a road for the last 70 km needed. But if they’re unable to, then we’ve budgeted funds in the feasibility study to cover this. We’d spend $7-million to build a gravel haul road. The terrain is flat and easy to build on,” MacLean said.
“There’s also no national power grid [we can tap into] at the moment,” MacLean added. “We’ll have to rely on heavy fuel oil generators, as we’ll require about 24 MW of power […] The cost of the generators is not prohibitive, but to haul the fuel up to project will take time and will be a logistical effort. However, there’s been talk about power creation from the highlands; we’ll definitely hook into the grid if this becomes available.”
“We haven’t got a final sales destination yet. Geographically, we’re close to India and our reach can encompass China and the Far East’s agricultural centres as well,” he said. “We’ll be shipping at around one-million tons a year, so we’re not a mega-project compared with something in Saskatchewan. But our capex is reasonable, so it’s feasible for us to develop, build and operate this project ourselves.”
At a wider level, Ethiopia is hoping for a combination of potash sales at home and abroad. “For potash sales, we hope to see a mix of domestic consumption and foreign sales. Again, this will be a great plus for our economic growth plans,” Ejigu said.
“The Ministry and government want the mining sector to be a backbone of Ethiopian industry,” she added. “We don’t want to go back to the days of a command economy. Partnerships are the way forward and the private sector is the engine for our development. Working together, we can make history in Ethiopia.”
By: Simon Rees
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