Mining sector challenges in developing countries, Tigray, Ethiopia and inspirational success stories
(Recently published at the International Journal of Mining and Mineral Engineering)
Biographical notes (Principal author):
Dr. Yohannes Yihdego is a senior scientist at Snowy Mountains Engineering Corporation (SMEC). He received his PhD at the La Trobe University, Melbourne, Australia. Dr Yohannes is also an Honorary Research Fellow/Associate at La Trobe University. He has been working as a consultant & independent certifier / proof engineer at Engineering Geoscience & Environmental industries at multi-national / global Engineering consulting firms- Cardno Lane Piper, GHD, SMEC. He has worked extensively on national and international projects across Australia, Middle East, Asia & Africa, with water resource, mining, infrastructure, transport & energy. Among many other mining projects, Dr Yohannes worked at Bayan Airag Gold Project (Mongolia), Oyu Tologi (Mongolia), Khnaiguiyah Zinc Copper Project (Saudi Arabia), Padcal Copper-Gold Project (Philippines), Silangan Copper-Gold mining project, Mindanao Island (Philippines) & Stockman Copper Mine, Benambra, (Australia). He has been working at multi-billions U.S. dollar infrastructure/engineering projects, including Snowy 2.0 Hydro-Australia’s largest Pumped Hydro-Energy Storage, Melbourne Metro- railway/tunnel (Australia), Brisbane Airport (Australia) & Remediation design (Kuwait). Dr Yohannes is a Registered Professional Geoscientist (R.P.Geo) from Australian Institute of Geoscientists (AIG) and a Certified Environmental Practitioner (CEnvP) from Environment Institute of Australia and New Zealand. Dr Yohannes has Prepared/Produced hundreds of Engineering technical feasibility/ detail design reports. He has published/authored several articles, book & book chapters.
Mining status in Tigray Regional State
Tigray has got rich mineral resources, which include gold, copper, silver, iron, zinc, lead and nickel, as well as oil shale (Yihdego et al., 2018a). Asbestos, silica sand, kaolin, graphite, gypsum, gemstone, marble, granite, slate, limestone, and dolomite are among the non-metallic minerals that also exist in Tigray
There are no large-scale mining companies in Tigray region except:
1. A giant US gold mining company – Newmont – which is developing a large-scale gold mine jointly with Ezana Mining Development (an Ethiopian company) in Shire, North-western zone of Tigray, Ethiopia. Newmont Mining Corporation, based in Colorado, USA, is one of the leading gold mining firms in the world.
2. Cement, marble, gypsum factories.
Indeed, there are many companies doing exploration in the Tigray region, which have got licenses to operate in exploration of gold, base metals, industrial minerals, coal, gemstones, and other ores and minerals. Foreign and local mining firms are involving in different parts of the Tigray region. These include mining companies from Saudi Arabia, China, the USA, Canada, the UK, Egypt, etc.
Also East Africa Metals is actively involved in Adyabo Gold Project, Tigray (Figure 4). East Africa Metals is a Vancouver-based (Canada) mineral exploration company, focusing on exploration and development projects in Africa. The company has received approval for a Mining Licence at Harvest (Figure 4), and is under application for two mining licences at Adyabo (EAM, 2018b).
Recently, East Africa Metals received draft model agreements (DMAs) from the MoMPNG for the company’s Mato Bula and Da Tambuk projects (Figure 4). Their permit was approved for Ethiopian gold projects. The delivery of the DMAs indicates the Ministry (MoMPNG) has approved the permit’s application and advanced the permitting process to the next stage (MRF, 2018).
The Mato Bula project has an average annual metal production of approximately 34,750 ounces (oz) gold, 1.67 million pounds’ copper and 4,780 oz silver. The Da Tambuk project has an average metal production of 24,000 oz gold per year and 6,000 oz silver per year. A processing rate of 1,400 tons and 550 tons per day is estimated for Mato Bula and Da Tambuk, respectively. Also, eight year and four-year mine life is estimated for Mato Bula and Da Tambuk, respectively (MRF, 2018).
The National Mining Corporation (NMiC) announced the discovery of the largest gold and base metal reserves in the Tigray Regional State. The gold reserves discovered at Werri (Figure 4), central Tigray, have estimated gold reserves of 18,000 kg expected to be worth US$792 million. The new discoveries in Werri of Tigray would make NMiC earn over US$4 billion in 20 years. The mining company has also discovered other
minerals, including zinc, silver, and lead. The projects are expected to be technically and economically feasible (Mining, 2012).
Earlier on, ASCOM (an Egyptian company), announced the acquisition of gold concessions in Tigray near Eritrea. The concessions, located on four different plots of land, are owned by a newly established company called Nubia Mining Development plc. Avion Resources Corporation (Canadian) exploration asset covers approximately 2,674 km in the Regional State of Tigray, where massive sulphide zones, including Bisha deposit, Eritrea (immediate north of Tigray), and several gold deposits have been discovered in these greenstone belts.
Huge deposit of most precious gemstone Sapphire was found in the Tigray Regional State. The deposit is found in central, western, and north western of Tigray. Newly discovered (late 2016), the precious gemstones (sapphire) in Tigray, is generating many millions of dollars. Blue sapphire is the most desirable gemstone next to diamond, due to its excellent blue colour, hardness, durability, and luster (TOL, 2017). In the world market, the polished blue sapphire is sold at a price of up to US$15,000 a carat, depending on the quality and grade of the gemstone.
The exported sapphire is blue, and it is extracted from two districts/Weredas namely in Mereb Leke (at Awet, Tila and Hadush Simehden locality), and Lailay Maichew (at Medego locality). It has created job opportunity for 10,000 people living in the area, involved in the extraction of the mineral in the region. The gemstone is currently extracted by artisanal miners who are structured in unions and cooperatives. However, the extraction has not yet entered into a well-organised system, as farmers from the area are currently extracting it (C2D Services Inc., 2013).
This article highlights the Ethiopian mining industry status, strategy, and challenges. The Ethiopian major natural resources are gold, platinum, copper, potash, gemstone, natural gas, oil, and oil shale. The external perception is that some aspects of doing business in the country are too difficult, and they increase investment’s risk and undermine the potential benefits to all stakeholders. The Ethiopian Government is exerting efforts to regulate the mining legislation to favour investment in the sector. Changes allow for business incentives that include security of tenure, the right to sell minerals, preferential duty and tax provisions on equipment and machinery, a 2%–8% production royalty, a 25% mining corporate tax (future plan of reducing from 35%, with breaks and holidays), custom/duties exemptions, carry forward of losses up to 10 years, and a structuring to allow for repatriation of profits.
The article explicitly touches topics such as:
Ø sovereign risk,
Ø regulatory framework,
Ø mining license/permit requirements, and
Ø mining taxation
Practical issues facing the Ethiopian mining industry includes:
Ø Terrorism and violence
Ø Workers’ human and labour rights violations
Ø Infrastructure and access to reliable energy and power supply
Ø Lack of skilled professionals
Ø ‘wirehousing’ (& hotelling), i.e. in relation to withdrawal of international companies without completing the mining (minerals, oil, and gas) projects, exiting during the initial stages of mining industry (i.e., exploration/finding the ore-body), without proceeding to the next stages (mining/extraction and transformation/concentration of minerals). Given that, the mining companies have an up-to-date resource reserve estimate before they withdraw, they will be able to come back or indirectly associate with other international companies who will take over the projects.
Ø Transformation capabilities in Ethiopia awfully limited
The Ethiopian Government has not been successful to comprehend the problems and address the issues of concern for the last two decades, even-though the resources sector is recently considered in the list of priorities in the coming five years’ term. The sector is expected to gain revenue and back up development and employment opportunities, etc., but they all look nowhere except into the ‘black hole’. The Ethiopian Government needs
to introduce new methods that will be able to rip-up a contract with the mining companies if the government is deemed to have unconscionable terms.
A number of other aspects, in addition to those that have been discussed, can be included in a critical assessment of a licensing regime for mining. The Ethiopian Legislation fairly meets all these requirements and there is no reason to go further into a review of the exact modalities of all the provisions. The rights to explore and to mine are at the centre of the mining policy and it is the way that the government chooses to design the appropriate systems for allocating and defining rights that account largely for how a country is viewed by potential investors (Cimoli et al., 2009; Shimada, 2009).
The stakeholders need to consider that there will be lots of leading works and at-most efforts to connecting critical raw materials with future societal demands. The role of technology in enhancing sustainable outcome is indispensable through active engagement of home-grown Tigray (Ethiopia) cultural collaboration. The Tigray Regional Government needs to prepare a current status of the mining industry detail and make publicly available as part of how to improve mining investment opportunities.
This hinders the overall progress of the country’s development without realizing the development of the natural resources. Classic contribution of Australia’s mining industry to regional development via innovation, advancement, new discovery, capacity, and economy is presented to formulate, scale up/replicate, and appreciate the gap with the defies facing at regional state level (Tigray) and federal level (Ethiopia), and draw a lesson to other developing nations across the planet, as well from one of the world’s leading countries in relation to what a robust sustainable mining sector can bring to nation’s economy through different themes. These themes include community, operational challenges and opportunities, environment, finance, and framework case studies aimed to explore the relationships between these themes and their potential conflicts. This is due to the different perspectives of multiple stakeholders, while retaining a fundamental view on the effective implementation of sustainability in mining and minerals industry. Mining operations within the regional state 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, the Regional Government has set a plan to bring the minerals’ sector to a significant Gross Domestic Product’s (GDP) contribution. This article has got heaps of takeaway messages and has brought up untold embedded issues, which can be an inordinate input to diverse background of miners, mining companies, financiers, stakeholders, and governments’ decision makers, and will be well received by global readers.
Mining operations within the regional state are expected to be an important economic catalyst for the government’s export-orientated development strategy. Given the level of Ethiopia’s economic development per capita resources demand is still at nascent stage.
New discovery, innovation, and advancement
There has been no new discovery for exploration prospect, and this will question the sustainability of mining. The Ethiopian Government has to inject money and support innovation together with the stakeholders (industry academia, etc.). It should be remembered that the easy mineral targets have already been found. This makes the new advances discussed here hugely significant, if they are coupled with advanced exploration and data processing methods (Yihdego, 2016a). In fact, some of the historical statistical methods used need to be ‘re-discovered’.
There are a number of reasons why Ethiopia (and Africa in general) still has extensive exploration potential. These include the thick cover from deep weathering during the Mesozoic, with relatively minor denudation since then. Also, there is extensive cover formed by Cenozoic sediments, and the relatively hostile environments in the equatorial forest of central Africa and the desert areas of the continent have impeded exploration efforts (Theart et al., 2018). There are modern hyperspectral methods that may be used in the indicator mineral identification and quantification in airborne (including drone), soil, and core and chip sample applications. Exploration geochemistry is at a new dawn, and the role of the well-qualified, experienced geochemist is becoming ever more important (Theart et al., 2018).
The Tigray Regional Government (represented in the Mining and Energy Bureau) has not yet made adequate assessment to discover and locate the reserve of the precious gemstone, sapphire, but there will be plans to commission studies to large-scale miners for the discovery of the regions’ deposits of this gemstone. Before promoting these minerals and going to the global market, The Tigray Regional Government should conduct a geological survey to discover the state reserve of the mineral, and should also conduct laboratory tests to demonstrate the nature of the mineral, including grades and quality (North Miner, 2012). So far, the Tigray Regional Government has no transparency concerning figures and facts over gemstone (C2D Services Inc., 2013).
The northern and western regions of Ethiopia exploration licenses lie within the southern extension of the metal-rich Nubian-Arabian Greenstone belt. Over 60 massive sulphide zones, including Bisha deposit (copper, zinc, gold, and silver), and Emba Derho and Debarwa projects (copper, zinc, and gold), Eritrea located north of the Tigray Regional State and several gold deposits have been discovered in these greenstone belts. Ethiopia’s current proven hydrocarbon reserves are minimal, but the potential to increase reserves to commercial viability is seen as promising. The country’s geology is similar to that of its oil-producing and precious metals neighbouring countries to the east (on the Arabian Peninsula) and the north (Eritrea). Ethiopia’s sedimentary basins are located between old and recent discovery areas in the Middle East, the Eastern African Rift System, and the Sudan and South Sudan basins. Sedimentary basins cover more than 30% of Ethiopia (Figure 2) and the known basins include: the Ogaden Basin, Abay/Blue Nile Basin, Gambela Basin, Mekelle Basin (Tigray, Figure 4), Southern Ethiopia Basin, and Metema Basin. The Ogaden Basin has proved petroleum potential. Reservoir rocks are mainly Permian to Lower Jurassic sandstones (the Calub and Adigrat Formations), and Callovian limestones. Recently a new petroleum system has been identified at the Bokh Shale-Gumburo sandstone. Detail exploration in relation to petroleum geology of the Mekelle Basin is expected in view of the recent discovery and besides to the oil shale deposit (Yihdego et al., 2018a).
A massive deposit of sapphire has been found in the Tigray State, northern Ethiopia. According to the Tigray Regional State official of mining and energy sector, the sapphire is sold at 2,500 to 3,500 Ethiopia local currency (Birr) per gram in local markets, which is equivalent to approximately US$90–125 (as for October 2018). In the world market a finished product of a blue sapphire will be sold at price of up to US$15,000.00 per carat (TOL, 2017). However, the government should exert effort for the gemstone to be sold as an Ethiopian sapphire in the world market, because some companies are marketing it as a Madagascar’s sapphire in the world and the Ethiopian Government wants to stop that (TOL, 2017).
The assessment presented in this study will greatly benefit to evaluate relevant topics, including:
Ø Where the mining and mineral industry stands in relation to the national and regional strategies?
Ø What are the key challenges in developing mining projects, with respect to the investor’s viewpoint?
Ø What are the mineral resources potential and benefits for economic growth (best international practices)?
Ø What are the responsibilities of the mining industry and the best research practices?
Ø How to improve the mining industry through financing projects and enabling legal and taxation framework?
Ø Regarding the mining and sustainable development, can Tigray, in particular, and Ethiopia, in general, make a step further?
Ø Can the mining industry in Ethiopia address important issues, such as workers’ safety and human rights, people’s well-being, and protection of the environment and ecosystems?
Further research to case studies (models and frameworks) from world class mining projects such as Australia, Canada, etc. is worthy to look at. These include real life case studies, methodological or technical advancements and sustainable development approaches, including processing and recycling/value adding, sustainable mining methods, models, and frameworks
Role of mineral resource in development: success story from one of leading resource-based nation’s economy: Australia is presented in the article in an eloquent way, which includes sustainable development in mining industry: Australia’s perspective and technological advances.
Improving the Ethiopian (Tigray) mining industry, including based on lessons from Australia is highlighted with
Ø Strengthen the human capital in Ethiopia through technical training and collaboration engagement
Ø Technological advances- New discovery, innovation, and advancement
Ø Underpin the evidence and transparency-regulation
Ø Support the institutional capacity
Ø Regulation improvement
Ø Mining/exploration License renewal requirement from the perspective of regulatory body
Classic contribution of Australia’s mining industry to regional development via innovation, advancement, new discovery, capacity, and economy is presented to formulate, scale up/replicate, and appreciate the gap with the defies facing at regional state level (Tigray) and federal level (Ethiopia) and draw a lesson to other developing nations in relation to what a robust sustainable mining sector can bring to nation’s economy through different themes.
Mining experience from Australia is presented to show the role of mining industry as a driving force for economic development and lessons to draw and is suggestions to bridge the gap. In other words, classic contribution of Australia’s mining industry to regional development via innovation, advancement, new discovery, capacity, and economy is presented to formulate, scale up/replicate, and appreciate the gap with the defies facing at Regional state level (Tigray) and Federal level (Ethiopia), and draw a lesson to other developing nations as well from one of the world’s leading countries in relation to what a robust sustainable mining sector can bring to nation’s economy through different themes.
These themes include
Ø operational challenges and opportunities,
Ø finance, and
Ø framework case studies aimed to explore the relationships between these themes and their potential conflicts.
This is due to the different perspectives of multiple stakeholders, while retaining a fundamental view on the effective implementation of sustainability in mining and minerals industry. Big issues and ideas in geosciences to be drawn from Australian experience, which includes:
Ø Smoothing the impact of boom and bust commodity cycles.
Ø Energy trilemma options: security, accessibility, and sustainability.
Ø Resource-driven development of regional Australia.
Ø Geosciences’ education and new modes of communication.
This paper emphasises challenges on large-scale mining of minerals and oil and gas, namely precious metals (such as gold, silver and platinum), base metals (such as iron and nickel) and highly priced minerals.
Developments in Tigray will continue to unfold, provided the government is committed to issue a standardised integrity pledge as part of its attempt to rationalise the local content provisions within the country. This will help to reduce a little uncertainty. The need to learn more about new export markets is becoming more imperative as competition for business opportunities in local markets grows tougher.
Recognising the need to promote market-oriented modern mineral production, a regional government is expected to come up with a plan to bring the minerals’ sector to a significant GDP’s contribution, before trapped in a situation in which a desired solution is impossible to attain because of a set of inherently illogical rules or condition (i.e., Catch-22 situation).
Bright future is ahead for the Tigray Regional State because of its proximity to portal access due to recent peace deal agreement reached with Eritrea and, hence, the security and investment risk gets at ease. Moreover, the existing success story from the Eritrea mining projects which share the same geology and resources with Tigray will benefit to scale up and apply the already gathered information as a big advantage. The government (federal and regional) should prioritise societal demand and project commodity market.
To wrap up, this article has heaps of takeaway messages and has brought up untold embedded issues, which can
be an inordinate input to diverse background of miners, mining companies, financiers, stakeholders, and governments’ decision makers.
The reader is referred to read the published article for more details (reference and weblinks provided below), which has gained superb attention since published and has been shared virally.
Figure 1: Ernst Young (EY) Africa Investment Attractiveness Matrix. Size of the bubbles indicates Foreign Direct Investment (FDI) capital investments, US$ billion (2007–2015) (data source: FDI Markets and EY's Africa Attractiveness Index; ).
Figure 2: Map of Ethiopia (Courtesy of Google Earth – Right). Regional State of Tigray located at the north most, shown with highlighted with approximate pink line /red text. Precambrian exposures of the Arabian-Nubian shield. Inset shows the East African orogen consisting of the Arabian–Nubian Shield: north, western and southern Ethiopian Shield (modified after Yeshanew 2017 – Left Figure).
Figure 3: Geology of Ethiopia with key mining projects (modified after Persits et al. 2002).
Figure 4: Tigray and neighbouring country (Eritrea) key mining projects (see Figures 2 and 3 for the Basement and geology of Tigray, Ethiopia).
Reference (Sources and weblinks):
Yihdego, Y., Salem, H.S., Ayongaba, B. and Veljkovic, Z. (2018). Mining sector challenges in developing countries, Tigray, Ethiopia and inspirational success stories from Australia. International Journal of Mining and Mineral Engineering, 9(4): 321–367.
URL or weblinks: