Ethiopia’s first new gold mine of the century nears start of production

By David Whitehouse
Posted on Wednesday, 2 November 2022 11:32

An artisanal gold miner at Segele, southwest Ethiopia. Photo supplied.

Norway-based gold explorer Akobo Minerals is closing in on a start to production at Ethiopia’s first new gold mine since 1994, CEO Jørgen Evjen tells The Africa Report.

Production at Segele in the country’s southwest near the border with South Sudan will begin in the first quarter of 2023, says Evjen, who calls the development “a major milestone for the Ethiopian mining industry.” A team from Akobo’s South African mining contractor, IW Mining, arrived on site in September.

The company has been exploring in Ethiopia since 2010 and has an exploration license which covers 182 square kilometres. It says that no modern mining has ever been carried out in the region. Cashflow from production will be used for further exploration in the country, with a focus on targets near Segele.

Ethiopia’s mining potential is “untouched,” Evjen says. Akobo’s focus is on gold, but it is willing to consider other minerals in the country. “We are a pure play Ethiopian company. We can go on for decades here.”

  • Segele has an indicated mineral resources estimate of 41,000 ounces of gold at 40.6 grams per tonne, with an inferred and indicated estimate of 68,811 ounces at 22.7 grams. That makes it a “boutique” mine, Evjen says.
  • The company has built its own local airstrip which it will use to fly gold out.
  • The company, which is listed on the Euronext Growth exchange in Oslo and is previously debt-free, is currently seeking to raise $8m in debt.

‘Win-Win’

Ethiopia, which has a largely artisanal gold-mining industry, wants to attract foreign companies to start exploration projects for resources such as gold, potash, and tantalum.

Gold dominates the mining industry. The country earned $560m from gold exports in the fiscal year to 7 July, but official receipts are reduced by illegal smuggling.

The government has offered tax incentives as it seeks to raise the mining industry’s contribution to GDP from a pre-Covid 3% to 10% by 2030.

  • There is a 25% corporate tax rate and the right to carry losses forward for 10 years, with royalty rates at 4% for industrial minerals, 5% for metallic minerals and 7% for gold.
  • There are also exemptions from customs duties and taxes on equipment, machinery and vehicles for mining operations.
  • The government in 2020 introduced an online mining cadaster portal to encourage exploration. It’s now possible to submit license applications from anywhere without needing to visit the ministry.

The mining industry can benefit Ethiopia as it can help bring in US dollars which the country lacks, Evjen says. Investments will be made in dollars, and exports will also earn foreign currency, meaning a “win-win” situation, he says.

Mining in the country’s southwest also serves to reduce the concentration of the economy on Addis Ababa, Evjen says. There is a road from the capital to South Sudan, and the building of more roads can benefit the producers of crops such as wheat and coffee, he adds. “Logistics is key to developing these areas.”

Bottom line

Better infrastructure to support mining could benefit other sectors of the Ethiopian economy – if a national path to peace can be found.

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