KEFI Minerals becomes the second company that secured gold production license from the Ministry of Mines (MoM) after it concluded a deal on 13 April.
The company and the ministry have signed the agreement on Monday at the ministry office. The agreement allows KEFI Minerals to develop gold and silver deposits at the mine in the north-west of Ethiopia.
Even though the government had approved several gold exploration licenses for local and foreign companies, MIDROC Ethiopia, a local company owned by the business tycoon Sheikh Mohammed Hussein Ali Al Amoudi, is the only company that has gold production license for the past almost two decades.
The deal gives exclusive rights to KEFI Minerals to develop gold and silver at Tulu Kapi for the coming two decades. The company has disclosed at the agreement signing ceremony that it will commence production in the near future after the necessary construction works are in place.
KEFI plans to mine for both gold and silver over an area of seven square kilometers. The company said it aims to produce 28.6 tons of gold over the next 11 years.
“Production will start in 2017, and 2016 will be the year of construction,” Harry Anagnostaras-Adams, KEFI Chairman, said at the signing ceremony.
The deal was signed by Tolosa Shagi, Minister of Mines, KEFI chairman.
Experts said that the deal has to be considered as a step forward for the mining sector as KEFI is the first foreign-based company that got a green light for mine extraction. “It will be a good sign for other big mining companies to engage in the mining sector and to invest confidently,” experts commented.
In the past years, several international companies have shown interest to invest in the mining sector and other natural resources extraction; however, they spent years on explorations only.
MIDROC Ethiopia, the sole gold extraction company operating in the country, entered into the mining venture after it bought the state owned Lege Dembi gold mine about 20 years ago. The company has now expanded its business opening new mine sites.
The value of shares in KEFI Minerals rose by 7 percent after it confirmed the mining agreement for its flagship Tulu Kapi gold project, the company had declared on Monday.
KEFI said that the mine which will produce 86,000 ounces (28.34 gram) of gold in its first year is scheduled to be up and running by the end of 2016 at a cost of around US 120 million out of which US 100 million will be project debt.
The balance will be found from “a number of possible sources” including financing from contractors and equity firms at the project or parent company level. Tulu Kapi is a 1.7 million-ounce deposit at 2.65 gram per ton with a 1 million-ounce reserve at 2.4 grams, a company web news reads. “Tulu Kapi is arguably the highest profile mining venture in Ethiopia at present and KEFI has broken new grounds which sets a precedent and prepares the way for broader mining investment into the under-explored country,” the company said.
Tulu Kapi gold deposit, which is located in Western Oromia region of Wellega town, was discovered and mined on a small scale by an Italian consortium in the 1930’s. The British Nyota Minerals Limited acquired the exploration and development licenses in 2009 to the Tulu Kapi ore and then undertook extensive exploration and drilling which culminated in an initial definitive feasibility study (DFS) in December 2012. KEFI revised the DFS for a 1.2Mtpa operation, which could consume more than halve the initial capital expenditure. KEFI also plans to introduce selective mining to increase the mined gold grade.
In December 2013, KEFI Minerals acquired 75 percent of Tulu Kapi for £4.5 million. This acquisition cost equates to only $10 per reserve ounce and provides the information collected from historical expenditure of more than $50 million. In September 2014, KEFI acquired the remaining 25 percent of Tulu Kapi for £750,000 and all the 50 million shares.
Currently, other local and foreign companies are exploring gold deposits throughout the country and some of them have already submitted their proposals to get license for production. Gold mining has become the major hard currency source for Ethiopia in recent years. Artisans, who supply their product for the National Bank of Ethiopia, and MIDROC Ethiopia are the producers of the precious product.
Bacha Fuji, Public Relation Head of MoM, told Capital that an Egyptian company ASCOM Precious Metals Mining has asked the ministry to issue it gold development license to commence gold mining in the north western part of Ethiopia.
Bacha said that the government is evaluating the proposal. “We have to see the details from different directions before we give the green light,” he added.
About a year ago, ASCOM Precious Metals Mining disclosed that it has discovered the largest gold ore in the Benishangul Gumuz Regional State. Ascom has been exploring for gold and base metals in the Benishangul region since 2010.