Nyota Minerals Limited, a British company, will get a gold mining license by the end of September 2012 for operations at Tulu Kapi, western Ethiopia, in the Oromia regional state.
"It is only atentative programme," Sinkenesh Ejigu, minister of Mines, told Fortune, reluctant to confirm the date as final.
Nyota, which found a reserve in the area, has had an exploration license since May 2005. The presence of gold in Tulu Kapi has been known since the 1930s, when an Italian company conducted surface mining activities. The United Nations Development Programme (UNDP) along with the Ministry of Mines and Energy also conducted a detailed geological mapping and systematic exploration activities in 1970's. Tan Range Exploration Corporation (TREC) of Canada had also carried out exploration works for two years starting in 1996.
Nyota applied in May 2011 for a 10-year license to start mining on 11,000sqkm area. The company submitted technical feasibility study, confirming the presence of the gold reserves, and Environmental and Social Impact Assessment (ESIA). Teams of experts from the Ministry have visited the project area to verify whether the said reserve existed; Nyota, too, had to revise its technical feasibility studies as per the Ministry's direction, according to an official at the Ministry.
Nyota is expected to submit a Definitive Feasibility Study (DFS) in mid-August, says Kebede Hailu (PhD), Nyota's country manager. Although the final production is to be known in the DFS, the tentative production is set at 3,000kg a year.
The company has budgeted 200 million dollars to begin operation.
"Since the area does not have any infrastructure, we are expected to lay down everything," Kebede told Fortune.
The Ministry is also discussing a model contract that is to be signed with the company, according to sources. The contract between Nyota and the Ministry will need to be endorsed by the Council of Ministers.
If the deal goes through, the British company will become the second largest gold miner in Ethiopia after MIDROC Gold Mines PLC, which has an average yearly production of 4,500kg from its Legedembi Gold Mine located in Shakiso Borena in Oromia regional states.
In 2011/12 fiscal year alone, MIDROC has produced 2,910 kg of refined gold and sold it for 2.7 billion Br, according to the Ministry's data. It also paid 132.7million Br in royalties to the government.
The Ministry expects to issue 10 more production licenses in the 2012/13 fiscal year. National Mining Corporation (NMiC), a subsidiary of MIDROC, is also trying to acquire mining licenses at two sites in Oromia and Tigray regional states, where it is already conducting exploration activities. It claims that it has discovered the largest gold discoveries ever during its preliminary economic assessments.
According to the first report made by NMiC, the company could start production with 80,700kg of gold from its concession in Dawa, 130km west of Mekelle, which is alleged to have reserves of 550,000kg.
Stating the discovery is promising, however, Sinkinesh said that the company has been told to revise the findings in order to confirm the discoveries.