Ethiopia: Stella Trade Secures Large Scale Gold Mining License
Posted on :Thursday , 14th April 2016
The extraction license is a first for Stella, as well as the host region, Gambella
Stella Trade and Industry PLC has joined the league of four gold extractors operating in Ethiopia, after securing a large-scale gold mining license. This is a first for the company, as well as the host region of Gambella.
While more than 80 companies are in the process of exploration, only four have obtained extraction licenses, according to this year's publication by Ethiopia Extractive Industries Transparency Initiative (EEITI).
Established a decade ago with a 50.2 million Br capital from its Ethiopian and Kenyan founders, Stella secured a gold extraction license in late March, two years after commencing exploration.
A total area of 255sqkm is Stella's to explore, comprising of two exploration blocks in Akobo - an area in the furthest West part of Ethiopia. The blocks, named Sali and Dembella, are located in the Bench-Maji Zone, Bero Woreda, in the Sali and Gabisa Kebeles, and in the Agnuwak Zone's Dima Woreda, in the Dembella and Awaya Kebeles.
The extraction will take place on 1.26sqkm of land in the same regional state. A place called Nama Mota in Agnuwak zone, Dima Woreda, will host the extraction. The woreda is known for traditional gold mining.
The report by the Transparency Initiative indicates that Ethiopia has a reserve potential close to 200,000 tonnes of gold minerals. Gambella is among the highest contributors of gold, standing third with 14pc, while Oromia and Tigray take 40pc and 27pc of the supply portion, respectively.
The Ministry of Mines has seven types of licensing, out of which large-scale mining licenses take precedence over those with up to a 10-year validity period, plus the renewal potential for another five.
Stella's exploration license is categorised as large-scale mining license and has up to 20 years of validity, with a renewal potential of ten years. Its extraction license, while also categorised under large-scale mining, is valid for just 10 years.
Before the 2013/14 fiscal year, the Ministry had given an exploration license for 187,810sqkm of land throughout Ethiopia.
Stella aspires to extract a little over 400kg of gold in just the first six years, dedicating 7pc as a royalty fee to the state. Based on the World Bank's gold price forecast for 2022, Stella would pay close to one million dollar to the Ministry of Mines by the end of the first six years. This is before accounting for income tax - 25pc charge on income, 10pc dividend tax, and five per cent in equity tax.
Gold production takes the biggest chunk of revenue generated from the extractive industries at 40.7pc, closely followed by cement manufacturing at 39.9pc.
As of April 7, 2016, the purchasing price of gold at the National Bank of Ethiopia, from 14 Karat to 23 Karat, is within the range of 516.1Br to 847.8Br a gram.
When Stella came on to the scene in 2014, the supply of gold to the NBE saw a decrease of 16pc in volume to 8,331 kilogram. That year showed a parallel decrease in earnings from the 6.5 billion Birr recorded the previous year.
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