Gino D’Anna is an experienced Australian mining professional and investor. He is executive director and founder of Askari Metals Limited, an Australian Securities Exchange (ASX) listed company with a strong presence in Africa.
Askari is one half of a joint venture with Hong Kong Xingxu Mining International Investment Co. Ltd undertaking exploration work for a copper and gold project in western Ethiopia. Hong Kong Xingxu, through its parent company Shining Star, was also involved in a USD 300 million copper mining project in Angola.
With their combined technical expertise, capital, and skill leverages, the two companies envisage the rapid realization of the Nejo Gold and Copper Project in the Oromia region, which D’Anna says can serve as an example for Ethiopia’s commercial-scale mining ambitions.
Askari is also interested in lithium, tin, tantalum, rubidium, rare earth metal pegmatites, and D’Anna argues Ethiopia should responsibly exploit its mineral wealth as a pillar of development. He notes that global mining giants are eyeing Ethiopia as the government moves ahead with its liberalization efforts, particularly in banking.
In an interview with The Reporter, D’Anna observes immense potential and argues that Ethiopia’s mining sector is at the beginning of a transition that he says hinges on reconciling gaps between federal and regional governments, nurturing investors, and installing certified refining and smelting plants to grow local employment, skills transition and curb illicit outflow. EXCERPTS:
The Reporter: Could you give us an overview of your projects in Ethiopia and Namibia?
Gino D’Anna: We have been operational in Namibia for three years now. Our project is 400 square kilometers of continuous tenure, adjacent to an operating tin mine. It has prospects for lithium, tin, tantalum, rubidium, and rare metal pegmatites. We have done extensive drilling, trenching, geophysics and soil surveys. We are looking to finalize our next phase of drilling as we seek to declare our maiden JORC (2012) mineral resource in the next 12 months.
In Ethiopia, our focus here is the Nejo project. It is on the same greenstone belt as Kurmuk mine, which is 3.4 million ounces. It surrounds the Tulu Kapi mine, which is 1.7 million ounces. For us, it is a flagship project as it contains high-grade gold and copper. There has been a lot of drilling, trenching and geophysics work done there. But these works are close to three decades old in some cases; there is no modern exploration done for the area. So we’ve deployed modern techniques and expertise for the Nejo project. It is 1,200 square kilometers. We are approaching it with multiple exploration disciplines technically in parallel with each other. We are currently focused on drilling on southern mineralised corridor zones, extensional trenching, as well as magnetic geophysical surveys, particularly on our copper targets. We are utilizing drone technology to map variations in mineralization, and also using spectral satellite imagery to advance target generation. We are also bringing in the expertise of what we have been doing in Namibia to Ethiopia in terms of modern exploration.
When do you expect to finalize exploration and proceed to the mining development stage?
This is the first modern exploration work at Nejo, since the last exploration was done for Nejo over two decades ago. We expect to reach preliminary results within 12 months by declaring our maiden JORC (2012) mineral resource. There will then be technical and economic feasibility works, as well as environmental feasibility assessments. In terms of finalizing the exploration works and beginning mining development works, we estimate anywhere between 12 to 24 months. After finalizing exploration, identifying operational environment constraints and studying the different landscapes, going operational will take three to four years from there.
We will also work on copper reserves in the northern zone of the license area; antimony, platinum, palladium and rare earth mineral potentials in the area also exist which haven’t been followed up. There is also the historical Yubdo platinum, palladium reserve. Askari is investing to uncover and refine all the data and information for these minerals.
Several foreign mining companies, including others from Australia and Canada, have acquired licenses and concessions in Ethiopia. However, none have managed to go operational despite trying for several years and extending their license terms. This can be attributed to a number of factors, but how do you plan to maneuver these challenges?
Fundamentally and historically, Ethiopia has struggled to attract FDI, manage the expectations of western companies, and maintain FDI operations. There has been an extensive period of unrest and political instability in Ethiopia, which has actually now been dealt with under the current government operating with a regime that values the crucial role of mining in Ethiopia’s economic development.
The government is also opening up the economy, including opening up the banking sector. So there is a much easier flow of forex in the economy now. While Ethiopia’s mining industry is in its infancy, the government understands the crucial need for commercial-scale mining in Ethiopia. The government is also balancing the needs of local communities and artisanal operators. As mining areas in Ethiopia have historically undergone extensive artisanal mining, the government is now ensuring employment and financial benefits for them. Artisanal mining is good for locals as a short-term source of finance. But it is also full of danger. It is large-scale commercial mining which will highly benefit the economy.
Over the past weeks, Askari management has been discussing with high-ranking officials from federal and regional governments. Large-scale commercial mining has multi-generational benefits, and has potential to transform the economy, create more jobs, and generate revenue streams for government and community. Even after the mining is over, the company will redevelop the land and make it productive for the society.
Exploration takes capital and needs patience. It needs government protection. For Ethiopia, mining is not about gold and precious metals. Take GERD, which is a huge source of renewable energy power, but you need significant copper inventories to ensure the transmissions of the power. Ethiopia needs to explore more of its minerals that is necessitated by its developing economic sectors. That is why we are also working on copper production, to feed into the great economic initiatives of Ethiopia’s green initiatives.
Of course, there is a lot of work to be done to realize the fruits of the economic reforms underway at macro, structural, and sectoral levels. Especially once investment bankers start coming to Ethiopia following the banking sector open-up, that will be a powerful turning point in terms of unlocking huge finance for development. Once that powerful pillar trenches to Ethiopia’s economic standard, we will see a lot more western companies coming in. Government protection of FDI and mining investments is also crucial.
What are the terms of Askari’s joint venture with Hong Kong Xingxu, and what is the size of the investment?
We benefit from the partnership with Hong Kong. Askari brings modern technical skill, financial feasibility and expertise to the table. The parent company of Hong Kong, which is Shining Star, commissioned Angola’s only commercial-scale copper mine. They have been producing copper for about two months now. That is a USD 300 million dollar investment on their part. That is substantial.
On top of the strong relationship between Hong Kong and Shining Star, Askari has strong skills and expertise in gold exploration. Once Askari finalizes the technical exploration works, that is when Shining Star brings in the capital required for the gold and copper production stage, to construct, commission and start mining. That is where the importance of the partnership is. For the exploration work, we will spend around five million dollars on Nejo over the next twelve months. This initial exploration is crucial for the next stages of investment. Then tens of millions of dollars will be invested.
How do you view regulatory frameworks in Ethiopia and what kind of support does your company enjoy?
Our Nejo project is located in the Oromia Regional State. So you need a strong relationship with the Oromia Mineral Development Authority as well as the Oromia Mining Group. We have been developing this relationship for sometime now. We have also got support from the federal government in terms of the licensing process.
Part of a successful mining development in any country is cooperation among relevant stakeholders and discharging social responsibilities so as to manage the expectations of the community.
In Ethiopia, we are seeing there is a lot of crossover between the federal and regional, although there is a need for the establishment of a clear line between. Directors at the federal level, including the prime minister’s office, promote commercial-scale mining. This also needs to be reconciled with regions’ tendency to promote small-scale and artisanal mining. The boundaries can be strengthened through cooperation. But at the end of the day, as a foreign company operating in another jurisdiction, my view is that you have to seamlessly align and operate with federal and regional officials, and local communities. So you have to earn a high level of respect and collaboration across all stakeholders at federal, regional, and local. The project must benefit the government and also local communities.
Askari recently acquired all of Hong Kong Xingxu’s issued capital for the Nejo project. How do you compare Ethiopian legal frameworks with other countries, in terms of the legal procedures surrounding share swapping agreements?
The structure of the agreement is called a share-swapping joint venture. Askari enjoys the benefits of the operational, technical, and financial leverages it brings to the Nejo project. At the same time, we get the exposure to what Hong Kong did successfully in Angola through Shining Star. In turn, Hong Kong and Shining Star get the skills and expertise of what we have done in Namibia and Tanzania. So it is pretty much a symbiotic relationship where each party relies on each other for different skills and leverages.
As far as corporate legal issues are concerned, there was a misunderstanding of the relationship. This joint venture means a lot for the realization of the Nejo project. I have been here for weeks, meeting with high-level officials at federal and regional levels, and different department heads from different areas.
It enabled all stakeholders to be on the same page on how the Askari-Hong Kong joint venture has elevated the leverage to realize the exploration and mining potential of the Nejo project. As a CEO and founder of the company, I have also connected well with the officials and stakeholders across the board. I have briefed everyone on the leverages Askari brings, our aspirations and the kind of collaborations we are looking for—not only for this project but in a broader sense for future strategies.
Historically, the Nejo project has been overshadowed because of the absence of personal efforts, and also due to the disconnection between federal and regional governments and the original Hong Kong. Now, under the share swap joint venture agreement, Askari has been able to step into the shoes. So, the government at all levels now knows who is responsible for the work at each step to realize the Nejo project. So now everybody is comfortable to finalize the works to realize the project.
Initially, it was challenging because some stakeholders did not well understand the type of joint venture between Hong Kong and Askari. Now everyone is on the same page. The level of knowledge sharing, understanding and commitment between the companies and government is encouraging.
Australia is a global leader in mining in terms of output, skill, and technology. What can developing economies like Ethiopia learn from the likes of Australia and Canada?
I don’t think there is anything differently done in those countries. In countries like Australia and Canada, the role of mining in economic development is high on the agenda, and these countries have been practicing professional mining for decades. Mining in these countries offers huge opportunities, generates huge revenues, and contributes hugely to the general industry. That is where African countries can also look and extract lessons. African countries also need to look at each other, to learn what does not work. Ethiopia is pretty much at the beginning of transitioning to harvesting or strengthening its utilization of its mineral endowments. It has to look at the experiences of Australia. Look at Tanzania, Namibia, Botswana, Angola, and understand what worked in their jurisdictions and what did not, and what needs to be avoided.
My recommendation for developing countries is: learn from the experiences of neighboring countries. Learn what works and what does not, and balance between immediate benefits and multi-generational benefits. Also learn how the government protects investments at all levels.
The Ethiopian government also needs to make sure investors are getting the support required to succeed. There is huge untapped mineral wealth in Ethiopia. It is not just gold; it is copper, platinum, silver, lithium, tantalum, antimony, palladium, and rare earth. Ethiopia has got everything. It just needs a safe way, and what works for everybody to come and invest. And ensure their investments are secure. For any investor to invest in foreign jurisdiction, securing the administrative support at all levels is crucial, not only operational support but also protection from losing your opportunities. Any failure is going to be very pronounced.
As Ethiopia continues to develop with an economy under reform, there are more opportunities and investment opportunities attracting western companies, and Ethiopia is open to these investments and opportunities.
Much of the minerals extracted from Ethiopia and its neighboring countries are smuggled out informally. The region also remains embroiled in conflict. How does illicit mining affect formally licensed investors, and how do you view the intertwined relationship between mining and protracted conflict?
Infrastructure is key here. The reason gold is smuggled often is because it is a high price environment. Smuggling is also visible in copper. This is because these minerals are also easily identifiable. The market is instant. Gold or copper smugglers get instant payment. The smugglers don’t pay tax. So illicit mining remains lucrative for many.
But if there are infrastructures like smelting plants, and proper incentives for all, all miners will be encouraged to do mining through the proper legal channels. If there are gold refining infrastructures, provision of technology and working capital; then everyone would be willing to sell their minerals though the proper channels. So, having certified and legal gold processing plants is crucial for countries like Ethiopia, Sudan and others, to curb gold smuggling. Then the certified gold from documented legal miners can be sold in the global market. Only having certified, documented gold can enable countries in conflict to export gold legally. Otherwise, it is labeled as conflict gold, which cannot enter the global market legally. Due to the absence of certified and internationally recognized gold smelting and other minerals processing plants in countries like Ethiopia, illicit mining has risen as an alternative venue. If Ethiopia manages to have its own gold and other mineral processing facilities, that will change the whole thing. That will take some time now, but that is where the real challenge lies.
There will always be a black market. That is because there is always opportunity and somebody is taking advantage of it. But if the government manages to reduce the flow of the black market, by putting in place infrastructures, more investors, and more initiatives, then the curve of the black market will decline.
Do you think more mining investors will come to Ethiopia as the banking sector opens?
Definitely. More capable foreign investment banks will come to Ethiopia, followed by big mining companies. If Askari succeeds in Ethiopia, then other companies will be encouraged—this is how investment works. Success stories matter to attract more FDI, which will hugely benefit the economy. That is sort of the thing the Ethiopian government is actively looking at the moment. Success stories matter for the global market, to showcase Ethiopia is open for business.
