Tuesday, May 26, 2009

Gold, mining not Eritrea's magic wand

Reuters, Thursday May 21 2009

Eritrea's incipient mining sector is not a magic solution for its economy and needs to be managed wisely to ensure benefit for its people and future generations, President Isaias Afwerki said.

Analysts are predicting a mining boom in the Horn of Africa nation, where reserves of gold, zinc and copper have been found, 14 foreign firms are exploring, and a flagship first project is forecast to start producing gold by late 2010.

The global credit crunch has dampened enthusiasm a bit, but minerals are sure to play a big part in the future of one of Africa's smallest economies.

"Even without this financial meltdown, we've been saying let's not be misled that this gold is going to change everything," Isaias told Reuters in the capital, Asmara. He has long warned Eritreans to avoid the pattern of the so-called "resource curse", in which oil and minerals have spawned bloodshed and corruption elsewhere on the continent.

"Anticipating to heavily rely on this resource may be crippling," he said in an interview on Wednesday. "The flashy thing may be very attractive ... (But) if you rush, you may be disappointed in a very short time."

Patience and "sober thinking" was needed in developing the sector and apportioning revenues, Isaias warned.

"The Norwegians would like to talk about 150 years from now. The Nigerians may want to exploit all their oil resources in 10 days or 10 hours or maybe 10 years, and that's it, you're finished. This is a resource of generations."

Eritrea this week announced it had awarded eight more licences to foreign explorers -- on top of six already there -- and said its most advanced project, Bisha, should start producing gold by the third quarter of next year.

Run by Canada's Nevsun Resources Ltd with a 40 percent stake for the state, Bisha's 27 million tonnes of ore are believed to contain 1 million ounces of gold, 700-800 million pounds of copper and 1 billion pounds of zinc.

Isaias insisted, however, that proper economic development, and tangible improvements for Eritrea's 4 million people, required more than just striking gold.

"You need to have the environment for growth, and that is the infrastructure. You need to have a plan on how to improve the quality of life of the people, and resources available will have to be used and utilised for achieving those goals."