MIDROC Gold has signed a 10-year agreement with the Ministry of Mines and Energy (MoME) on Tuesday, November 24, 2009, for the extraction of 20,483kg of gold from the Sakaro area, three kilometres from the existing Lega Dembi gold belt in the Guji Zone of the Oromia Regional State, about 500km southwest of Addis Abeba, where the company has been mining since 1998.
The new gold mine at Sakaro is second to the existing Lega Dembi mine that has been the main source of gold for MIDROC Gold Mine Plc. MIDROC is the only private company currently producing gold in Ethiopia since its acquisition of the mine at a cost of 172 million dollars in 1998 through the government's privatization program.
Signing the agreement, MIDROC Ethiopia CEO and general manager of MIDROC Gold plc, Arega Yirdaw (PhD), said the Sakaro mine came at a time when the Lega Dembi open pit mine, which it acquired from the government in 1998, had started dry up. MIDROC Gold has extracted 34,000kg of gold from Lega Dembi between 1998 and 2008, earning 466 million dollars.
He said that the new deal will bring a revenue of 564 million dollars, enabling it to pass to the government 130 million dollars in the form of royalties and tax.
The company spent 8.8 million dollars for the exploration and feasibility study and is also expecting to spend 28.4 million dollars in additional costs for pre-development works at the mine, which will start production in one month's time.
The Sakaro gold reserve was confirmed during a four-year exploration on a 9.71 square kilometres area where 124 boreholes with a total length of 34,450 metres were drilled.
MIDROC Gold Mine Plc started exploration in Sakaro in 2003. Arega says the search continues in hopes of finding more gold in the same area. The company is also exploring in Metekel and Menta Wuha areas of the Benishangul Gumuz and Amhara regional states respectively.
Currently, a number of companies are exploring in Wellega in the Oromia Regional State, in Tigray and Metekel. A total of 29 companies are exploring for various minerals in the country, according to Gebre Egziabher Mekonen, Minerals License and Administration Process head at MoME.
He said that a joint venture between Ezana, one of the companies under the Endowment Fund for Rehabilitation of Tigray (EFFORT), and Donia Beijing Plc, a Chinese company, have struck gold in western Tigray, although they are not expected to begin extraction of the precious metal.
Gebre Egziabher said that the two companies had been exploring for gold during the past eight years.
With an increasing number of miners in Ethiopia coupled with the increase in gold prices on the international market, Ethiopia's benefit from gold is showing steady growth. The nation has obtained 50 million dollars over the past four months from the sale of gold produced by MIDROC and traditional miners whose gold, unlike MIDROC, has to be sold directly to the National Bank of Ethiopia (NBE).
These traditional miners are expected to have licences. Gebre Egziabher said that traditional miners have been producing and selling up to 1,000kg of gold per year to NBE over the past four years. Unauthorized possession and marketing of gold could lead to confiscation of the product by the law of the land.
Traditional gold mining that supplies from four to 10kg of gold per day to CBE is being expanded in various parts of the country including Tigray, Benishangul Gumuz and Ginde Beret in the West Shewa Zone of the Oromia Regional State, according to the minister.
MIDROC Gold Mine Plc was established in 1998 by Mohamed Ali Al-Amoudi and his wife Sofia Salah who owns a 98pc share. The remaining two per cent share is owned by the Ethiopian government as a free-equity share.