The Reporter (Addis Ababa)

17 May 2014

Ethiopia: Opportunities, Challenges in the Mining Sector

The Ethiopian Peoples' Revolutionary Democratic Front (EPRDF-led) government has been criticized for not giving due attention to the mining sector.

Critics say that the senior government officials do not consider the mining sector an engine of growth. The government on its part argues that it does not want to venture into the mineral exploration and production sector, which is capital intensive and risky. Instead, the government wants to gather basic geological data, promote the mining sector, encourage foreign and local companies to engage in exploration and mining activities and regulate the sector.

The Ministry of Mines last week organized a two-day consultative workshop for the media and communication professionals as well as the mining companies in the Bishoftu town. State minister for the Ministry of Mines, Tewodros Gebregzabher, who chaired the meeting, said that since mineral resources are non-renewable, mining activity should be wisely undertaken. "Mining activity should be undertaken in a very transparent manner. We recently have been accepted as candidate member of the Extractive Industry Transparency Initiative.

Our intension is not securing a license from a foreign entity. Since we are working for our people we should be accountable to our own people, " Tewodros said. He said that the Ministry of Mines is tasked with licensing, administering and promoting the mining sector. He acknowledges that the media has a paramount role in promoting the mining sector.

"Our economic development does not hinge on the mining sector. We are implementing agricultural led industrialization strategy. But the mining sector could assist this transition by generating more foreign currency and substituting imports. We want to use the mining sector for expediting our economic development.

" Ethiopia has an immense mineral potential. Gold is being discovered in different parts of the country. A huge potash deposit was discovered in the Afar Regional State estimated at more than one billion tons. Tantalum has been mined in the Borena Zone of the Oromia Regional State. Platinum is mined in the Yubdo locality in Western Wollega.

Gemstones including opal, emerald and sapphire are found in the Amhara, Oromia, Afar and Somali Regional States. Iron ore and coal are also available in bulk in the Wollega, Illubabor and Chilga localities. There is a huge geothermal reserve in the East Africa Rift System in the east and northeast parts of the country with a potential to generate 5,000 MW of electric power.

The country also has a potential to be an oil producing country. Two gas fields have been discovered in the Calub and Hilala localities in the Ogaden basin, a vast arid land in southeastern Ethiopia. Another gas discovery was also reported by the Malaysian oil and gas giant, Petronas.

Tewodros said that the investment in the mining sector is increasing adding that the ministry has issued more than 260 exploration and mining licenses. The investment in the mining sector has reached 14 billion birr. The country earns more than 800 million dollars from mineral exports with gold taking the lion's share. The Ethiopian government now wants to limit itself to the gathering and dissemination of geological data as well as regulating the sector. The Ethiopian Geological Survey is tasked with generating basic geological data. Geological survey

Traditional mining has been exercised in Ethiopia for thousands of years. However, modern mining activity was undertaken during the reign of Emperor Tewodros II. British professionals have mined iron ore and manufactured some equipment. It was during the reign of Emperor Menelik II that foreigners secured mining licensing from the government of Ethiopia for the first time.

But it was in the 1960s that coordinated modern mineral exploration projects were launched when the Ethiopian Geological Survey was established. Chief geologist Hundie Melka explains that the primary objective of the Ethiopian Geological Survey is to generate basic geosciences data.

The survey produces geological maps and gathers geological data useful for mineral and petroleum exploration projects. It also identifies ideal locations for deep water well drilling and confers the data to users.

The Ethiopian Geological survey runs a geochemical laboratory that renders laboratorial services for companies and individuals engaged in mineral exploration, production and trading businesses. The survey also provides water well and mineral exploration well drilling services. The survey undertakes studies on natural calamities like volcanoes, landslides and earthquakes.

Mining licensing and administration:

The Minerals Licensing and Administration Directorate at the Ministry of Mines is responsible for the issuance of mineral exploration and mining licenses. According to Sisay Ayalew, minerals licensing and administration directorate director, the department administers about 270 licenses. Sisay said that there are companies who are undertaking advanced exploration work and are about to commence mining activity. On the other hand, Sisay said there are some companies who did not fulfill their commitments.

The ministry is criticized for failing to issue mineral exploration licenses promptly. Both the Ethiopian geological survey and the ministry are hard hit by high staff turnover. Only last year twenty senior geologists left the Ethiopian geological survey in search for better pay.

The loss of talent has also seriously affected the ministry, thwarting it from rendering efficient services to the public. Tewodros said the ministry is recurring and training new professionals. He said that the ministry is also working with universities and technical and vocational education training colleges in training geologists and mining engineers. Regarding companies' license terminations, Tewodros said that some companies keep exploration licenses idle.

"There are a number of companies who undertaken a remarkable exploration activates. But some of the companies secure an exploration area and they wonder here and there searching for buyers. These are broker companies. We do not tolerate these kinds of companies who try to deceive the government," he said.

Concerning mining companies who reportedly left the country, Tewodros said that companies engaged in mineral exploration may or may not find economically viable mineral deposits. "If the deposit is feasible they will proceed to the next step. But if the exploration work is not fruitful they will relinquish the concession."

Artisanal miners:

Gold has been panned by artisanal minerals for many years in different parts of the country. Mainly gold is traditionally produced by artisanal miners in Gambella, Benishangul, Tigrai, Oromia and Southern Nations Nationalities and Peoples Regional States.

The National Bank of Ethiopia is the sole buyer of gold from artisanal miners. More than one million people are engaged in artisanal mining. Last year artisanal miners sold 8.3 million tons of placer gold valued at 420 million dollars to the National Bank of Ethiopia.

According to Tamrat Modjo, artisanal mining transaction coordinator with the Ministry of Mines, artisanal mining is contributing 20-25 percent to the country's export earnings. In addition to gold, artisanal miners produce tantalum and gemstones. More than 70,000 artisanal mining cooperatives have been established.

According to Tamrat the ministry provides technical assistance to the cooperatives in improving the mode of productions. Microfinance institutions are also extending loans to the cooperatives for the procurement of equipment. "Artisanal mining is addressing food insecurity issues.

Even beyond that communities are making enough money to invest in other businesses like agriculture," Tamrat said. There are also challenges facing the sector. Experts say when the youth raise enough money from the sale of gold they go out to towns consume alcohol and have unprotected sex making themselves prone to HIV infection. "This is one area of concern that needs to be addressed," experts warn.

The malaria pandemic is another area of concern. Artisanal miners dig deep holes and leave them open. Rainwater stored in these wells are ideal locations for mosquitoes to breed. Environment degradation is another major challenge.

Trees are cut down, and wells are dug rampantly in search of alluvial (placer) gold. This poses a threat to the environment. "If we do not handle artisanal mining properly it infringes serious harm on the environment," Tamrat says.

However, he said the ministry is trying to create awareness on these issues in collaboration with the pertinent bodies. The tantalum ore traditionally mined in the Borena Guji zone has radioactive elements.

This has posed threats to the wellbeing of the local people engaged in traditional tantalum ore production. The tantalum in the Kenticha locality has more than five percent uranium particles. "You can't sell this in the international market as there is an embargo on radioactive materials.

They keep the product in their houses even under their beds. And it poses serious threats to the public health," Tamrat said. Now the ministry in consultation with considered authorities delineated these areas which have tantalum ore more than five percent and prevented the artisanal miners from producing tantalum ore in those areas.

When asked if there has been reported health anomalies in the area Tamrat said there is no study conducted on the impact of radiation in the region. Petroleum

The history of petroleum exploration in Ethiopia dates back to the 1940s when foreign companies started exploring the Ogaden basin. Oil and gas exploration activities are undertaken in sedimentary basins where oil-bearing rocks are accumulated.

Ketsela Tadesse (Ph.D.), petroleum licensing and administration directorate director with the Ministry of Mines, said that Ethiopia has six sedimentary basins-Ogaden, Mekelle, Gambella, Metema, Omo Valley and Chew Bahir, and Abay. According to Ketsela, oil seeps have been reported in various parts of the country.

The oil seeps in Gelemsso and Wereilu localities are well known by the ministry. Dr. Ketsela said that oil and gas shows have been noted in many exploration wells. "Encouraging results have been registered in the history of oil exploration in Ethiopia," Ketsela said. A natural gas reserve estimated at 4 TCF has been discovered in the Calub and Hilala localities in the Ogaden basin. In the 766 billion cu. feet of gas was also discovered in the Genale locality.

Ethiopia also has a huge reserve of oil shell in different localities. The reserve is estimated at one billion tons. Ketsela said that North America and European countries are producing gas and oil from oil shells by applying modern technology.

"There is no reason why we can't produce petroleum products from the oil shell." Africa Oil, Tullow Oil, Falcon Petroleum, South West Energy, New Age and Ploy GCL are engaged in petroleum exploration activities in different parts of the country. Ketsela said New Age recently discovered oil and gas flows in the Elkuran locality.

However, it will take time to analyze the data obtained from the exploration well and determine the amount of the oil and gas reserve. He also mentioned the exploration activity being undertaken by Tullow Oil in South Omo basin in the East Africa rift system.

He said that Tullow discovered oil in neighboring Kenya after other oil giants like EXXON Mobil, AMOCO and BP pulled out of Kenya concluding that there was no oil in that country. Some of the participants said that the public is confused with the results of the ongoing exploration projects. "Some said that oil has been discovered but the government kept the news confidential. Are you holing information? Why don't you tell us the truth?" participants demanded.

Ads by Google

Copyright © 2014 The Reporter. All rights reserved. Distributed by AllAfrica Global Media (allAfrica.com). To contact the copyright holder directly for corrections — or for permission to republish or make other authorized use of this material, click here.

AllAfrica publishes around 2,000 reports a day from more than 130 news organizations and over 200 other institutions and individuals, representing a diversity of positions on every topic. We publish news and views ranging from vigorous opponents of governments to government publications and spokespersons. Publishers named above each report are responsible for their own content, which AllAfrica does not have the legal right to edit or correct.

Articles and commentaries that identify allAfrica.com as the publisher are produced or commissioned by AllAfrica. To address comments or complaints, please Contact us.