The privatisation of Ethiopia's only gold producing mine has opened the door for a major boost in income from the country's under-exploited mining sector.
Ethiopia's only producing gold mine, Legadembi, has been privatised in an estimated $172m deal, which is reckoned to be the country's largest privatisation to date.
The deal strengthens the financial muscle of Mr Mohamed Hussein Alamoudi, whose National Mining Corporation (NMC) wrested control of the mine from stiff foreign competition. It is believed about 12 other companies tendered for control of the mine. NMC has the licence to operate it for 20 years and exploration rights for an 85sq km area surrounding the existing mine. The Ethiopian government retains a 2% stake in Legadembi and will enjoy a 35% profit share from the gold produced at the mine.
In an earlier privatisation, an Alamoudi affiliate, Moha, won the Pepsi Cola soft drink franchise in Ethiopia. The Alamoudi conglomerate also owns the Addis Ababa Sheraton, real estate, and private banking and insurance interests.
The Ethiopian Mineral Resources Development Corporation was previously operating the mine which came into full production in 1990, although it has not been running at its designed capacity. Legadembi is estimated to have 1.5m to 2m ounces of proven open pittable reserves, and the government estimate of the total resource is between 60 tonnes and 200 tonnes.
Under government control Legadembi has been producing about 100,000 ounces a year but the government claimed in the run-up to the privatisation sale that under private control the output could be quadrupled.
Another government projection is that if $150m is invested in gold exploration, Ethiopia's annual gold production could approach a 30-tonnes-a-year level. Rift Resources Toronto, a Canada based mineral exploration and development company, is seeking gold targets in the 1.5m to 3.0m ounce range and holds three exploration licence areas in Ethiopia amounting to 104,000ha. A further 85,000ha, comprising four licence areas, remain under application.
With the acquisition of the Moyale project in southern Ethiopia in December 1996, Rift has a significant advanced property with an existing gold resource previously outlined by the Ethiopian Institute for Geological Surveys (EIGS) of about 213,700 tonnes at an average grade of 7.4g/t. of gold. According to Rift Resources, assay values up to 215.0g/t. of gold have been obtained from grab samples in the area.