Australian explorer to start mining Eritrea gold

Jun 3, 2007 (ASMARA) — Australian explorer Sub-Sahara Resources will begin mining operations in Eritrea after test drilling revealed 760,000 ounces of high grade gold, the company said on Sunday.

“Now our intent is to make this into a mine,” Chief Executive Officer Michael Griffiths told Reuters in an interview. “Zara has high grade gold,” he said, referring to one of two projects the company is running in the Red Sea state.

He said it might take “a few years” before mining began while permits, financing and shareholder approval were secured.

Industry players say a new gold rush is happening in Eritrea, where analysts forecast mining revenues covering nearly 40 percent of government expenditures — once mining starts.

There is currently only one project, a gold and base metals mine run by Canada’s Nevsun Resources Ltd, that is close to operation. It plans to start work in 2008.

Some investors remain suspicious of Eritrea after the Horn of Africa nation unexpectedly ordered a halt to foreign mining work in September 2004, saying it needed to review its mining laws.

The ban was lifted in April 2005 but Griffiths said the move had caused consternation.

“However, once you start releasing very good drill results, people’s memories get shorter and shorter,” he said.

Eritrea waged a brutal 30-year independence struggle against neighboring Ethiopia and the outbreak of a two-year border war in 1998 wreaked havoc on its infrastructure.

Griffiths said the same deposits his company had found would have twice their value if they were unearthed in Australia.

“People would value a project in Australia to have less political risk and greater infrastructure potential,” he said. “We probably need to find double what we would in a developed country.”

(Reuters)