The small East African state of Eritrea is looking to develop its mining potential, writes Dr Nicolaas C Steenkamp.
Image by Natanaelignting on Freepik
Following years of conflict with neighbouring Ethiopia, the state of Eritrea gained its independence in 1993, but border conflicts with Ethiopia flared up over the following years. The combination of continuous conflict and general poverty in the region has resulted in very little exploration or development of mining activities post-independence.
The state of Eritrea is bordered by Ethiopia in the south, Sudan in the west and Djibouti in the southeast, with an extensive coastline along the Red Sea and includes the Dahlak Archipelago and several of the Hanish Islands.
Geological setting
Eritrea has an interesting geographical distribution with three distinct regions identified. The east of the highlands are the hot, arid, coastal plains stretching down to the southeast. The cooler, more fertile highlands reach up to 3 000m varying from the sub-tropical rainforest at Filfil Solomona to the cliffs and canyons of the southern highlands. The Afar Triangle or Danakil Depression of Eritrea is the location of a triple junction where three tectonic plates are diverging away from one another.
The country is virtually bisected by a branch of the East African Rift. The geological setting of Eritrea consists of Neoproterozoic terranes and Tertiary to Recent volcanic rocks. Marine sediments of Mesozoic to Recent age are exposed in the coastal area of the country along the Red Sea.
Eritrea is known to host significant VMS (volcanogenic massive sulfide), Orogenic gold and evaporites deposits. There are known occurrences of asbestos, barite, copper, feldspar, iron, kaolin, lead, marble, nickel, potash, sylvite and zinc. The bulk of the geological and mining information was compiled during the Italian rule of the region, with mainly academic studies from European universities in more recent years.
Mining activities
The main mining activities, as with most of the region, have been focused on small scale and artisanal mining of gold. The Eritrean authorities have however been discouraging artisanal mining. The gold mineralisation is hosted quartz veins, associated quartz stock works and shear hosted gold deposits throughout the country, concentrated in the central highlands and southwestern lowlands.
There are two major mineralisation belts that carry potential VMS occurrences and shear hosted gold deposits. The main belt is the central and southern highlands belt, referred to as the Asmara-Nakfa belt, which includes VMS deposits of Debarwa, Adi Nifas, Midrezien and Embaderho. The second belt, known as the Augaro-Adobha belt, is the VMS mineralisation that includes Harena, Bisha, Kerkebet and Harabsuit deposits in the western lowlands.
There has been a significant uptick in the number of international companies which have engaged in exploration and the start of formal mining activities. Gold and silver are mined at the Bisha Mine. There have also been studies to determine the mineralisation potential of Chromite, Nickel and Platinum Group Element (PGE) mineralisation in the Bisha region.
Further investments have been made in Eritrea’s copper, zinc and Colluli potash mining operations by mainly Australian and Chinese mining companies. The potential of Rare Earth Elements (REE) and Ta and Li associated with pegmatite veins in the granitic intrusions. The potential of geothermal energy is also actively being investigated. There are no current oil or gas reserves that are being considered for further exploration or development.
The production of cement from the factory in Massawa has also been able to contribute towards the domestic demand for construction projects. A range of other industrial minerals are also mined, although on a smaller scale, such as limestone, clay, marl and gypsum.
Legislative framework
The legislative framework for the mineral sector in Eritrea has been developed with the aim of attracting investment and recognises the risk associated with mining investments. These legislative changes include the ability of operators to develop any commercial discoveries within their exploration licence areas. Further, it provides the right to sell the product locally or export it, free of all duties and taxes, without requiring authorisation or involvement from other government agencies.
The application process is branded as being a simple “one-stop” licensing system enabling all the formalities for all types of licences for mining operations to be completed by a single government agency – the Ministry of Energy and Mines. The mining and taxation laws make provision for accelerated depreciation (straight line method over 4 years) of all capital and preproduction costs. It also allows for write-offs of exploration expenditure incurred anywhere in the country and carrying forward losses.
The tax system makes provision for no dividend tax and income tax from mining operations is at 38% with a nominal rate of import duty (0.5%) on all inputs necessary for mining operations. The normal royalty rates apply with an option for reduction, suspension or waiver of the royalty in appropriate circumstances. Royalty rates of 3.5% for base metals and 5% for precious metals along with free and unrestricted repatriation of earnings abroad in external accounts.
Infrastructure developments
The government and foreign investors have embarked on a process of rehabilitating the infrastructure of the country. While conflict damaged roads are still in the process of being repaired or upgraded, the construction of new highways to connect major cities along the Red Sea coast have also made significant strides. The railway system is more than a century old and was extensively damaged and closed until recently. Portions of the railway infrastructure have been repaired, but service remains irregular. There is a steam train that runs outside Asmara, which is enjoyed by enthusiasts. The Eritrean airline is however still restricted from providing international routes.
The supply of power, water and telecommunications remains a challenge with a large degree of self-sufficiency required. Mining and agriculture are large contributors to the economy of Eritrea, with shipping also adding a growing portion. The expatriate community is responsible for a significant portion of the economy of Eritrea, with remittances being channelled back to families in the country, but at the same time illustrates the loss of talent from Eritrea.
It would be interesting to observe the development of the Eritrean mining sector and if the country is able to capitalise on the mining boom in the Middle East and North Africa, which is being driven by the opening of the Kingdom of Saudi Arabia and Egypt to foreign mining companies.
 Dr Nicolaas C Steenkamp |
Dr Nicolaas C Steenkamp is an independent consultant, specialisingin geological, geotechnical and geometallurgical projects and mining project management. He has over two decades of industry experience with global exposure. (ncs.contract@gmail.com) |