Mining’s old guard needs strong medicine
A new report details subpar investor returns in the mining industry over the last decade, particularly big cap diversified companies which have not adapted to new realities.
Ethiopia has revoked 27 idled mining licenses and sent warnings to three companies as the government looks to kick-start development of its vast mineral resources, a key part of its efforts to plug a large trade deficit and generate foreign exchange.
The announcement increases the number of cancelled licenses in the East African nation to 90, following the withdrawal of 63 permits in December.
It also sends a clear message to companies holding permits in the country but not moving forward.
Ethiopia, which has a mostly artisanal mining industry, is on a quest to woo foreign companies to start projects in the country
Ethiopia, which has a mostly artisanal mining industry, is on a quest to woo foreign companies to start projects in the country, which is rich is potash, gold, tantalum, sapphires and construction minerals.
Gold mining has seen record growth in the past year, despite restrictions brought by the global pandemic.
The nation has exported gold worth $504.73 million over the past 10 months, mines minister Takele Uma told Reuters, up from exports worth $90.3 million in the fiscal year to end-June 2020.
While the metal accounts for over 90% of Ethiopia’s mining exports, official figures have been dwindling for the last eight years following the expansion of illegal trade and closure of big plants.
The government approved in December a 10-year economic plan, aimed at boosting the amount of foreign-exchange earned through export and import substitution of minerals from $265 million currently to $17 billion by 2030.
The country has also given incentives to investors engaged in the mining sector. These include a 25% corporate tax rate and permits 10 years’ loss carry-forward, with royalties at 4% for industrial minerals, 5% for metallic minerals and 7% for gold.
Miners are also exempted from customs duties and taxes on equipment, machinery and vehicles considered essential to their operations.
Norwegian fertilizer company Yara, London-listed exploration firm Kefi Gold and Copper, and US gold miner Newmont are among the companies with assets in Ethiopia.
Kefi Gold and Copper, one of the companies with advanced projects in the country, was slated to start production at Tulu Kapi gold project in late 2022. The company, however, flagged last month delays to the finance and production timeline.
3 Comments
BOB HALL
Wow such great incentives. Can you believe it? can you trust it? I can not and will not have an interest (how ever small) an any operator who does believe it!
Alemayehu Giyassa
Do you think revoking licences encourage both domestic and foreign investment? Second what do you think of the motive behind revoking lisenced?
Would one of you give us your know how in the modern way of developing mining minus revoking?
Are you sure that this revoking will accelerate investment as mentioned or does it have draw back?
Please send us your opinion
Cecilia Jamasmie
I don’t think revoking inactive licences will accelerate investment per se. The practice, however, is nothing new. In several mining jurisdictions, from India to South Australia, companies that hold licences for years and fail to do anything with them risk losing their permits. I think the difference is that they are given a known timeframe to move forward, which is typically about three years.