Mine Magazine has published an excellent feature article concerning gold mining in Ethiopia – along with input from our CEO Jørgen Evjen.
Follow this link to read the full article in Mine Magazine. We have also included a text version of the article below.
For more news about the comany, please visit our website www.akobominerals.com
With considerable gold reserves, and a rapidly-developing governance structure in place, Ethiopia could be one of the most attractive investment destinations for the global mining industry, especially for foreign firms looking for a stake in the gold sector. According to the Extractive Industries Transparency Initiative (EITI), Ethiopia boasts around 200 tons of gold, and with a further 366 million tonnes of coal and 70 million tonnes of iron, there is every reason to be optimistic about the country’s mineral future.
This is not to say, of course, that Ethiopian mining is not already a productive enterprise. According to the latest EITI report on Ethiopian mining, between 2018 and 2019 gold production hit 3.23 tonnes, generating a value of around ETB6.3bn ($126.3m), and operating as the driving force behind a mining industry whose products were valued at close to $150m by the end of the period.
Yet that same EITI report noted that gold mining accounted for 93% of the value generated by Ethiopian mining, highlighting a dramatically imbalanced sector heavily reliant on a single commodity. Alongside challenges often seen around the world, including the role of artisanal mining and the awkward balance between foreign investment and local empowerment, there is no shortage of challenges ahead of Ethiopia realising its lofty mining potential.
The majority of Ethiopian mining potential is tied to its gold industry, with an established history of production providing a stable base for new investments in the commodity. The continued expansion and exploration of Akobo Minerals, a mining company headquartered in Sweden, is a testament to this potential, as it looks to develop mining operations at the Segele and Joru gold deposits.
“Exploration drilling activity at Segele, which hit some bonanza grades in 2020, has so far shown outstanding high-grade gold results, achieving an inferred mineral resource of 78 kilotons at 20.9g/t gold, equal to 52.410 oz of gold,” explains Akobo CEO Jørgen Evjen. “Further drilling has intersected excellent mineralisation below this area, while we also expect more to be found when we explore deeper still.”
Evjen also notes that the two projects offer different types of benefits, with the Segele deposit boasting a much higher grade of gold, while the total ore reserves of the Joru deposit are believed to be larger, high-potential deposits that can be approached in different manners.
“Following positive initial findings based on trenching and RC drilling results, we have been concentrating our Joru efforts on the central – and, so far known, highest – grade part of the mineralisation, with a program of core drilling,” Evjen continues. “We hope to be able to establish a resource base of more than one million ounces of gold in Joru.”
We hope to be able to establish a resource base of more than one million ounces of gold in Joru.
Deposits such as these are made even more attractive by the relatively supportive nature of Ethiopian mining law. The royalty rate for various commodities sits between 2% and 7%, with precious minerals such as gold at the higher end of the spectrum, a balanced range that aims to both encourage new mining investment, and provide a source of income for governments on both the local and national scale.
Evjen notes that Akobo’s success has come down to a combination of “hard work, happenstance, and timing”, but that a supportive regulatory framework has been essential in realising this potential.
“In addition to seeing encouraging gold deposits in the area, the right management and local personnel were available; a positive business environment was being developed by the Ethiopian government; annually renewed licenses for the area were forthcoming; and funding became available to quickly build on initial work over the previous decade,” he explains.
“Add in the desire by all parties to take a measured risk on building a professional exploration operation and all the elements were in place to begin extensive exploration work in 2010.”
Of course, this power dynamic, where a company based in a wealthy foreign country invests in local mineral deposits, occurs frequently in the mining industry, especially in regions such as Africa. Such a dynamic brings a range of challenges for both company and community, and Evjen is keenly aware of the need to deliver benefits for local workers, not just for his own company.
“As a Western company with operations in a developing country, we recognise the responsibility we have as a good corporate citizen,” he says. “That is why we put corporate social responsibility (CSR) and environmental, social, and governance (ESG) – incorporating our good business manners and actions – at the heart of our business.
“For companies wishing to operate in Ethiopia, CSR and ESG should be guiding principles and measures that both enhance the business and provide tangible advantages to the societies in which we operate. The business benefits and the substantial social differences we can make with such practices will be a positive for both us and the local community.”
These considerations are all the more important when taking into account Ethiopia’s already well-established artisanal mining sector. Mining is not a concept that has been imported wholesale from overseas companies, with small-scale operations existing beyond local and national regulation for some time. Ensuring that artisanal miners can maintain a stake in their projects, while being able to benefit from regulatory oversight and support, remains a priority for stakeholders of all levels.
Speaking for ourselves, we have worked hard to establish strong relationships with national and regional governments and use local workforce to leverage their historic competence.
The importance of artisanal mining is reflected in the latest EIRI report, which found that the volume of gold produced by small-scale operations jumped from 0.82 million grams between 2017 and 2018 to 3.18 million grams between 2018 and 2019.
This has increased the value of the artisanal mining sector by almost 10 times over this period, and the National Bank of Ethiopia offers a 5% premium to small-scale miners when selling gold to the bank, helping to further incentivise artisanal mining.
“Speaking for ourselves, we have worked hard to establish strong relationships with national and regional governments and use local workforce to leverage their historic competence,” Evjen explains, noting that small-scale miners do not pose a direct challenge to companies such as his, but can benefit from a shared investment in mining practice and process. “This has been fundamental to our success since 2010 and the accelerated growth over the last two-to-three years.
“As well as building local knowledge and relationships, as long as foreign companies recognise their responsibility to the country’s nascent mining industry, to improve and develop activities such as health and safety and environmentalism, we believe the opportunities in the coming decade and beyond are limitless. And we look forward to welcoming other operators to the country.”
Yet obstacles remain for Ethiopian mining, on both small and large scales. Perhaps the greatest challenge facing the sector is its over-reliance on the gold industry, which has led to problems for the entire mining supply chain as the value of gold exports has fallen in recent years.
The EITI reports that the percentage of Ethiopia’s total export value accounted for by gold has fallen dramatically from 7% between 2016 and 2017 to just 1% between 2018 and 2019, and with no sign of interest waning in gold, actors across the sector will need to find a way to ensure the profitability of mining.
This also creates an issue for employment, too, with 30.1% of the country’s miners employed in mining, by far the largest workforce by commodity, and second only to cement manufacturing. Indeed, 34.9% of the country’s miners work in all non-gold commodities, creating a significantly imbalanced sector where there are almost as many gold miners as any other kind of miner.
The EITI also encountered administrative sluggishness in their collection of data, describing “considerable delays” and an absence of reported figures from some of the miners active in the country.
While these concerns will not single-handedly make or break the country’s mining industry, improving the quality and speed of reporting and record-keeping will be essential as Ethiopia looks to transition its mining industry away from a myriad of small-scale gold-mining operations and towards a more robust sector that can attract international investment.
The greatest challenge we face is to get the speed of development right.
Yet, as Evjen points out, making sweeping changes to Ethiopian mining, either on the scale of individual projects or the sector as a whole, could ultimately do more harm than good.
“The greatest challenge we face is to get the speed of development right,” he explains. “To begin with, we want to keep things small-scale, using our mining revenues to develop resources, rather than overburden the business with large amounts of debt to finance operations.
“Our latest move from exploration to mining has not been a great leap as we have taken on the right personnel and equipment as it has been needed; plus the excellent results from our exploration prove that mining will not be as great a risk as might have been thought.”
There is also a geopolitical tension in Ethiopian mining. The sector has benefitted from Canada’s Supporting Ministry of Mines in Ethiopia (SUMM) project, a multi-year, $15m Canadian Government scheme to reform Ethiopian mining to make it a more attractive investment destination.
Ethiopian mining – alongside a positive business environment, in general – are making the country a great opportunity for overseas investment.
While the SUMM project has delivered tangible benefits, such as the discovery of new mineral deposits and assisting in the creation of government policies, Canada’s investment in Ethiopia has caused it to look the other way as civil war engulfs Ethiopia’s Tigray region.
While this is not an indictment of Ethiopian mining in particular, the inaction of the Canadian Government highlights the complexities that can arise when multiple national governments converge to make laws covering a particular mineral resource. As Ethiopia looks to develop its mining industry further, and the sector grows to encompass more international firms, tensions such as these will need to be resolved to avoid conflicts in the future, and realise the potential that Evjen still considers significant.
“Ethiopian mining – alongside a positive business environment, in general – are making the country a great opportunity for overseas investment,” he says. “Large-scale mining is a sector where the government has a stated desire to transform the Ethiopian mining sector into a competitive, proactive, and attractive sector for international investments.”
/ Main image: Danakil, Ethiopia – March 15 2019: Early morning view of a camel caravan in Hamed Ela, Afar tribe settlement in the Danakil depression, Ethiopia. Credit: Matyas Rehak / Shutterstock.com
For more information, please contact,
CEO Akobo Minerals AB and Etno Mining P.l.c
Mob NO: +47 92 80 40 14
Mob ET: +251 944 76 2428
Akobo Minerals, is a Norway-based gold exploration company, currently with ongoing exploration and small-scale mine development in the Gambela region and Dima Woreda, southwest Ethiopia. The operations were established in 2009 by people with long experience from the public mining sector in Ethiopia and from the Norwegian oil service industry. Akobo Minerals holds a mining licence and an exploration license over key targets in the area. Economic mineralisation was discovered and the company is engaged in mining studies to advance the project to production, alongside exploration core drilling. Akobo Minerals is transforming its organisation to support an increased pace of core drilling. At both the key targets Segele and Joru the company has so far released exceptionally high-grade gold results including the Segele deposit with an Inferred Mineral Resource of 78ktons at 20.9g/t. A scoping study for Segele includes an up-front capital expenditure of USD $8m and all-in sustaining cost of USD $243 per ounce of gold produced. Core-drilling and trenching at Joru have intersected both high-grade gold zones and large wide zones near surface. The company has an excellent partnership with national authorities and places ESG at the heart of its activities – a ground-breaking community program is being planned.