Eritrea’s minerals: a blessing or curse?

PUBLISHED : Monday, 26 August, 2013, 9:49am
UPDATED : Monday, 26 August, 2013, 9:49am

In a vast pit of red earth, white stone and green ponds, excavators unearth precious copper in Eritrea’s first large scale commercial mine.

In its third year of production, Bisha mine -- endowed with gold, copper and zinc -- is Eritrea’s first major international investment, and one that promises enormous profit for the impoverished Red Sea state.

Despite criticism by rights groups -- who say large scale mining props up a hardline regime accused of a raft of abuses -- authorities hope the mine will draw investment in other industries to help boost Eritrea’s otherwise struggling economy.

“The miners are the first people to take big risks with big money,” said Alasdair Smith, a geologist and exploration expert in Eritrea.

“There will be a honeymoon period for the mining industry when they will lead the way and they will have a significant contribution to GDP, and then that will quickly get overtaken by other industries,” added Smith, from New Zealand.

Bisha mine is 60 per cent owned by Canada’s Nevsun Resources and 40 per cent owned by the Eritrean government, which took a loan from China to finance its initial investment.

The project has attracted major interest from foreign mining companies, with three companies -- from Australia, Canada and China -- planning on establishing operations for gold and potash in the next two years.

There are also 17 other exploration companies in the country, searching for gold, copper, zinc and potash.

Eritrea’s government insists it is committed to using mining profits to develop other nascent sectors -- namely agriculture, fisheries and tourism -- in order to avoid the resource curse that plagues other mineral-rich resources in Africa.

It needs it: with a gross national income of US$430, Eritrea is one of the world’s poorest nations, according to the World Bank.

“This is going to be a major sector in the Eritrean economy, but from our policy point of view, we would like to make sure that Eritrea does not become a one-sector economy,” said Woldai Futur, Eritrea’s Minister for Investment.

Nevsun reported revenues of US$71.1 million in the first quarter of this year, with Bisha’s general manager Kevin Moxham shrugging off World Bank reports ranking Eritrea as the third worst country out of 185 nations to do business in.

“If you look at Africa and the risk of doing work, the country risk (in Eritrea) in my opinion is much less than anywhere else,” Moxham told AFP, sitting at his office at the mine, 150 kilometres (90 miles) west of Asmara.

“The government is really involved because they want to make it work...they put their money where their mouth is,” he said, adding that he is confident the growth of the sector will boost spin-off industries and provide much-needed employment.

Still, infrastructure is limited, foreign exchange reserve are minimal, and United Nations-imposed sanctions imposed for Eritrea’s alleged backing of regional rebels make it difficult to import much-needed equipment.