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Sudan Targets Gold to Soften Loss of Oil Money

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By Zak Rose* | IDN-InDepth NewsAnalysis

DETROIT (IDN) - The gold output of Sudan was 41 tonnes in 2012 – compared with 220 tonnes from the continent's largest exporter, South Africa – and export levels will likely experience modest growth over the immediate short term. However, owing to recent government promotion and foreign investment from major mineral companies, some official estimates have predicted a spike in Sudan's gold exports within the next five years.

Government interest in the gold industry stems from a desire to balance against decreasing oil revenues. When South Sudan seceded in 2011, it took roughly 75% of Sudan's oil wealth with it. And while informal gold mining has long been a part of the Sudanese economy – between 500,000 and 750,000 artisanal gold prospectors are active in Sudan – it has only been since the separation of South Sudan that the government has begun to focus on a capital-intensive expansion of the gold sector.

Sudan opened its first gold refinery in 2012 with the aim of increasing the quality and trade-capacity of domestically-mined gold. Should the refinery meet the international standard of three uninterrupted years of production, Sudan's gold will be designated as “conflict-free” and thus will become eligible to trade on certain international commodity exchanges, expanding the potential market opportunities for Sudanese gold.

It appears as though the government's early efforts to bolster gold production and exports are proving effective. Gold is now Sudan's largest export commodity. At least two major production projects are currently in the planning stages, and several other exploration projects are on the horizon.

In early 2013, the Sudanese government announced the discovery of reserves estimated at 260 tonnes near the Abu Hamad Township in River Nile state (Nahr Al-Neil). Furthermore, vast areas of the country have been designated for mineral exploration, including areas north of the capital Khartoum, and near the border with South Sudan. Rich deposits are anticipated in many of these regions.

Nearly 100 companies have obtained licenses from the Sudanese government to begin prospecting. In light of these discoveries and those that are still expected, Mining Minister Kamal Abdel-Latif predicts that a total of 20 firms will be actively producing gold by the end of this year.

The most productive gold mine in Sudan at present is the Hassaï mine. In operation since 1992, Hassaï consists of 18 open pits producing high-grade oxide ore. It is located approximately 50km from Khartoum. The mine has produced over 2.3 million ounces of gold to date, and it is operated by Sudan’s Ariab Mining Company in partnership with Canada’s La Mancha Resources.

The surface pits of Hassaï are nearing exhaustion, which will make it a challenge for overall gold exports to exceed the 50 tonne mark in 2013. However, La Mancha has revealed that there are substantial volcanogenic massive sulfide (VMS) deposits below the surface, potentially up to 3 million ounces according to February 2012 estimates. Though these additional resources have proven considerable enough to warrant new capital investments amounting to $191.2 million, it will be a few years before large scale extraction can commence.

A world-class asset

Last year, Dominique Delorme, the former President and CEO of La Mancha, which holds 40% ownership of the mine, told the media:

This significant resource expansion is a milestone of greatest importance for La Mancha since it confirms that our Hassaï property is a world-class asset. Moreover, this new resource, most of which is from two pits out of a potential 12, already ranks amongst the largest and richest VMS deposits in the world.

The considerable potential of the Hassaï VMS project has already attracted major international attention. Several months after the initial estimates were announced by La Mancha, the company was purchased by Weather Investments (later renamed WIND Telecom), a multinational corporation owned by Egyptian mogul and politician, Naguib Sawiris.

Diamond Fields International Ltd is another notable firm that has joined in on the gold prospecting rush in Sudan. Along with its agreement to search for and assess specific mineral deposits, it is also a partner in the Atlantis II Project. In cooperation with Manafa International, Diamond Fields is in the latter stages of feasibility studies on mining the Red Sea basin between Sudan and Saudi Arabia.

Preliminary results show rich mineral deposits that could generate significant wealth for both countries. The project was born out of samples taken from the Red Sea Basin in 1970, samples that initially came to nothing because the global ore market at the time rendered the project overly expensive.

However, the Kiel Institute for World Economy published a paper based on current market conditions in 2011, which pegged the value of the seabed minerals at $8 billion. According to some of the latest reports, deep-water mining in the basin could begin as early as 2014.

Wayne Malouf, Chairman and Director of Diamond Fields, was emphatic about the benefits that Atlantis II will bring to Sudan. He believes it will reap substantial revenue from extracted minerals, as well as jobs and training opportunities for local miners and scientists.

Gold production is a clear priority for Sudan going forward, and given the speed with which new deposits are being discovered, the plan might just pay off.

Sudanese perspective

For an additional perspective on where the Sudanese gold industry is headed, the Geopolitical Monitor interviewed Mohamed Ali, an industry expert and editor of Sudan Mining. Ali is currently based in Khartoum.

Question: Where do you see the gold industry in Sudan being ten years from now?

Ali: The gold industry has injected a huge amount of liquidity (hard currency) into the Sudanese economy in the last two years, and more than half a million people are involved in activities linked to the mining industry. Last year, Sudan produced more than 40 tonnes of gold and Sudan has been ranked third in the African gold industry, behind South Africa & Ghana. So our predication for the upcoming ten years is that Sudan can become the second-biggest minerals producer in Africa.

Q: What are some of the advantages that Sudan offers for international gold mining companies?

Ali: The Sudanese mining industry is still virginal with huge potential: large tracts of undiscovered territory, a highly flexible mining investment regulatory regime, and lots of professional manpower in the form of mining engineers, senior geologists, etc. Moreover, the mineral potential of Sudan is estimated to include over 150 locations for gold mining. Copper reserves of 150 million tonnes, zinc reserves of 50 million tonnes, iron reserves of 2000 billion tonnes, chrome reserves of 3 million tonnes; all of this is just waiting for international foreign investors.

Q: What area of Sudan is currently experiencing the most activity in terms of prospecting and high-potential discoveries?

Ali: North Sudan has been the area of highest potential in Sudan since the old Sudanese civilization used gold and iron to build up their empires. The second most promising area is in the eastern part of the country, in the Red Sea State where the Arabian Nubian Shield crosses Sudan.

Q: What is the most promising gold mining project in Sudan at present?

Ali: The Hassai mining project, which is a private-public partnership between the Ariab Mining Company representing Sudan Minerals Authority and La Mancha, in the eastern part of Sudan, at the heart of the Arabian Nubian Shield. That is where you will find Block 12, the highest potential area in Sudan with huge reserves of various minerals, including copper, black sand, iron ore, etc.

Q: What are some of the challenges that the Sudanese government faces in promoting and developing the domestic gold industry?

Ali: Regarding the promotion side, there is still a lack of skilled professional & marketing agency expertise in the mining business. In terms of development, the Minerals Authority is trying to attract foreign mining companies with advanced technology and strong balance sheets, and collaborate with China, Russia, and South Africa to ensure the healthy development of the gold industry in Sudan.

*Zak Rose is a contributor to Geopoliticalmonitor.com. A version of this article appeared on Geopoliticalmonitor.com on April 29, 2013, and is being published by arrangement with them. [IDN-InDepthNews - May 4, 2013]

Image Credit: Geopoliticalmonitor.com

2013 IDN-InDepthNews | Analysis That Matters

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