Ethiopia's Mining Sector Has Seen Record Growth Despite Restrictions Brought By Global Pandemic

Mining Geological surveys prove that Ethiopia has abundant mineral resources of metals and precious metals; like gold, coal as well as industrial minerals. These make the mining sector to be one of the priority sectors in the nation's development program. According to Ministry of Minerals and Petroleum of Ethiopia, the Ministry is working to revamp production both in quantity and quality to tap the natural resources for common good of the citizens through developing in conventional agreements with various local and international companies.

"The main strategic directions of attracting sizable Foreign Direct Investment (FDI) for exploration and extraction of minerals are to increase (tenfold) foreign exchange earnings of the sector and focus on production of mineral inputs for the manufacturing sector that promote import substitution," the ministry underscores. The effort is bearing fruits and the mining operations within the country are expected to be an important economic catalyst for the Government's export-orientated development strategy.

Recognizing the need to promote market-oriented modern mineral production, processing, and marketing, the Ministry of Minerals and petroleum established Mineral Market and Value Chain Development Directorate in 2014 bestowed with diverse responsibilities. The goal is to bring the minerals sector to a level of larger than 10 percent GDP contribution within 10 years. The government approved last December a 10-year economic plan, aimed at boosting the amount of foreign-exchange earned through export and import substitution of minerals from 265 million USD currently to 17 billion USD by 2030.

However, of late, after a thorough evaluation of performance, the Ministry of Minerals and Petroleum has revoked 27 idled mining licenses and sent warnings to three companies as the government looks to kick-start development of its vast mineral resources, a key part of its efforts to plug a large trade deficit and generate foreign exchange. The Ministry said in a statement that following a re-investigation, 27 mining companies that had been licensed to operate in the mining sector but failed to enter into operation have had their licenses revoked and three miners have been immediately warned to correct their mistakes.

The announcement increases the number of cancelled licenses in the East African nation to 90, following the withdrawal of 63 permits in December. It also sends a clear message to companies holding permits in the country but not moving forward. According to Takele Uma, Minister of Minerals and Petroleum, the licenses will be opened up to international tender.

Ethiopia has been pushing to develop its mineral and metal resources, citing mining as a key sector in its economic reform agenda. Ethiopia, which has a mostly artisanal mining industry, is on a quest to woo foreign companies to start projects in the country, which is rich, in potash, gold, tantalum, sapphires and construction minerals. The country has also given incentives to investors engaged in the mining sector. These include a 25 percent corporate tax rate and permits 10 years' loss carry-forward, with royalties at 4 percent for industrial minerals, 5ercent for metallic minerals and 7 percent for gold.

Gold mining has seen record growth in the past year, despite restrictions brought by the global pandemic. The nation has exported gold worth 504.73 million USD over the past 10 months, Mines Minister Takele Uma told Reuters, up from exports worth 90.3 million USD in the fiscal year to end-June 2020. Documents confirm that Ethiopia has extensive artisanal mining of placer gold from alluvial deposits for centuries while significant large scale mining is almost absent. Artisanal miners, which are estimated to be close to 1 million in number, produce and export up to 9 tons of gold per year.

Currently, there is only one large scale gold mining company, Midroc Legedembi Gold Mine, which is privatized from government ownership in 1997 operates an open pit mining in Ethiopia. Midroc Gold Mine produces 3.5 -4 tons per annum and exports in Dore form. Midroc Gold is also licensed with two gold exploration projects located near the mine (Adola-Legadembi Exploration License -ALEL), and in another area some 600km northwest of the capital Addis Ababa (Metekel Exploration License -MEL). The company is to enter into the extraction phase in Metekel in the near future.

New large-scale gold and silver mining and processing companies such as KEFI Minerals have been granted licenses for exploration, development, and production plant. KEFI acquired concession in the western region of Ethiopia in April 2015 and planned to install a gold processing plant with a capacity of 1.5-1.7 million tons of gold ore and produce up to 115,000 ounces (3,565kg) of gold per year. Additional four companies have been engaged in primary gold exploration and at least two of them are expected to start production in the near future.

The Ethiopian government is also engaging with more FDIs in gold exploration and extraction, such as mining giant Newmont Mining Corporation that has shown interest in gold exploration and extraction projects in the Tigray Regional State. The U.S. Geological Survey, in its January 2016 updated Minerals Yearbook, showed that Ethiopia's role in the world's production of tantalum has increased and the country's share of global tantalum production amounted to about 1 percent in 2013.

In 2014/2015 small scale tantalum mining operation dominated and Ethiopia's export revenue from raw tantalite has been limited to 9.6 million USD only. Significant deposit of tantalum and niobium is found in southern Ethiopia. Elenilto Minerals and Mining plc of the United Kingdom held concession of the Kenticha tantalum mine with resources of more than 17,000 metric tons of world-class ore reserve.

The Ethiopian Geological Survey investigation also showed that in addition to tantalite, the Kenticha deposit has niobium, lithium, beryllium bearing minerals in addition to high-quality ceramic grade quartz-feldspar and other industrial minerals. Elenilto was planned to produce 600 metric tons per year of columbite-tantalite starting in the fourth quarter of 2015 and tantalum metal powder starting in 2017.

Gemstones, including amethyst, aquamarine, emerald, garnet, opal, peridot, sapphire, and tourmaline occur in many parts of Ethiopia, mainly in Amhara and Oromia Regions. In 2013, gemstone exports were 25,078 kg and Opal accounted for 98 percent of gemstone exports by value. Almost all gemstone mines are dominated by artisanal, low-tech mining systems. Miners collect and sell rough gems to the local market. Currently, nearly all gemstones are exported as rough. The challenges are mainly lack of knowledge in sorting and grading, shortage of finance, absence of continuous supply of rough material as well as very few numbers of established lapidary shops.

BY MENGISTEAB TESHOME

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