TDB and AFC to finance the USD 300 mln project
The Tulu Kapi Gold Mines Share Company (TKGM) is providing over one billion birr for the resettlement of close to 360 households from the project site in western Oromia. The amount goes to building new homes for the households, direct cash transfers to compensate for the loss of harvest and community support.
Relocating the households and constructing the 15 billion birr project will be finalized in the next two years, after which gold production will commence, Harry Anagnostaras Adams, chairman of KEFI Gold and Copper, told The Reporter.
KEFI’s management reached a consensus after a three-day workshop with community representatives, the Ministry of Finance, Oromia regional government president’s office, west Wellega zone administration, zonal land administration office, rehabilitation and restoration agencies, Ethiopian Roads Authority (ERA), Ethiopian Electric Power (EEP) administrators, and security officials of Genji, Gimbi, and Lalo Assabi woredas.
After the discussions over the week, the stakeholders agreed to the implementation of the first phase of the community resettlement, increasing employment opportunities for local personnel for the site preparations, and up-scaling the security protection deployment.
They reached an agreement to launch the project in the next few months.
Once the community is relocated, KEFI will secure the title deed to the land, and proceed to the engineering works and construction of the gold mining and refinery plant. The plant will employ around 1,000 people in the process.
“This is the first higher industrial level gold mining investment in Ethiopia in decades. There have been many procedures and deliberations with the government to allow certain issues,” Anagnostaras said. “We need two years for the resettlement and construction. This is a very large project, costing over USD 300 million. The construction itself is a 15 billion birr project.”
The Ethiopian government approved the Tulu Kapi mining agreement for KEFI in April 2015. The terms include a 20-year mining license, a five percent government free-carried interest, and all necessary permits for the mines development and operation.
Tulu Kapi has an estimated gold ore reserve of 1.05 million ounces and mineral resources totaling 1.72 ounces of gold.
However, the project has been delayed due to two major obstacles.
“We had two major challenges. One is financing policies. The government has now allowed the internationalization of the banking sector and we have been working on all those policy reforms for the last 10 years. We have also pressed the government to reform many policies,” Anagnostaras said.
He believes it will be a lot easier for the next investor coming afterwards, whoever it is.
“So one of the major reasons we were unable to begin the project earlier was policy reform since we needed financing for the project from the presence of foreign banks,” Anagnostaras says.
Lately, KEFI has deliberated with officials of the Trade and Development Bank (TDB) and Africa Finance Corporation (AFC), who have been in Ethiopia over the week.
“TDB and AFC are our major financiers. We will announce how much they will finance soon, but they remain the principal financiers. We are relying on African development banks because local banks in Ethiopia lack the financial muscle and also the expertise in financing such large and long-term projects. That is why we have been pressing the government to open up the banking sector. It is a big responsibility to be the first major industrial investor in 30 years in Ethiopia,” Anagnostaras said.
The second reason for the delay of the project is the insecurity plaguing the country for the past few years.
For Anagnostaras, the security deterioration has now subsided.
“The security in the mining area is okay now. It is quiet. We do our work every day in the area. The only challenge currently is the transport route. The highway, the main road, and the roads to the project site are closed now and then. So we provide security protection for the transport routes. We have security deployed in the project area and have now agreed with the government to increase the security of the transport route. Security is deployed by the government,” said Anagnostaras.
Tulu Kapi is a mining and refinery plant. The project will mine 20 million tons annually or about 400,000 tons weekly. Much of this is rock, ore, and dirt. KEFI will export six or seven small bricks weekly, sending them to markets like Switzerland, to make gold coins, sovereigns, jewelry, and others.
KEFI already has a bigger project in Saudi Arabia. Once production starts at Tulu Kapi, it plans more opportunities and projects in Ethiopia.
“It is fortunate that the community at Tulu Kapi is very supportive of the project. It is also fortunate that there are no artisanal miners in the project area. Because the gold is deep underground, it can only be mined with industrial-level investment. So it is a good project. Now that the security issue has improved and foreign banks are allowed, we can proceed,” Anagnostaras said.
Anagnostaras says the Ministry of Mines has been pressuring the company to proceed.
“We wanted to go quickly, but obviously we could not until the issues are resolved. Time is money. We have been spending money. It is what it is. We are determined to make the project world-class,” he concluded.
Contributed by Ashenafi Endale and Selamawit Mengesha