Chalice Gold Sees Sale of Eritrea Stake to China SFECO by August
By William Davison on April 27, 2012
Chalice Gold Mines Ltd. (CHN), an Australian explorer for the metal, expects
China SFECO Group to complete an $80 million purchase of its stake in
Eritrea's Zara mine by August, Chief Executive Officer Doug Jones said.
China SFECO, a unit of Shanghai Construction Co. (600170), agreed to buy the
60 percent stake after Chalice faced difficulties raising finance for the
project because of United Nations sanctions against the Horn of Africa
country, Jones said in an e-mailed response to questions on April 23.
"The main reason for the sale is the difficulty in raising development funds
in the current market," he said. It's "a problem exacerbated by the UN
sanctions against Eritrea."
Eritrea, which has been ruled by President Isaias Afwerki since winning
independence from Ethiopia in 1993, is under sanctions for its alleged
support of al-Qaeda- linked militants seeking to topple the UN-backed
government of Somalia. The government denies the accusations. In December,
the UN Security Council asked mining companies to "undertake appropriate
measures to promote the exercise of vigilance" in dealings with Eritrea's
mining industry.
The state-owned Eritrean National Mining Corp. bought a 30 percent interest
in Zara, which includes the 840,000-ounce Koka gold deposit, for $32 million
in July, taking its holdings to 40 percent, according to Chalice's website.
China SFECO plans to begin production from the mine in 2014, said Jones.
"The transaction will help the group further expand the business scope in
Eritrea," Shanghai-based SFECO said in a March 22 statement on its website.
UN Sanctions
In 2009, the Security Council voted 13-1 to impose an arms embargo on
Eritrea and asked a sanctions committee to ban the travel and freeze the
foreign assets of designated individuals. Libya voted against the
resolution, while China abstained. No Eritrean officials have been
identified by the committee, according to a Feb. 17 statement on the
Security Council's website.
The UN expanded sanctions in December because of the "potential use of the
Eritrean mining sector as a financial source to destabilize the Horn of
Africa region," according to the resolution. Investment in Eritrea's mining
industry would have been banned if an initial draft of the resolution had
been adopted.
Other companies with operations in Eritrea include South Boulder Mines Ltd.
(STB), a West Perth, Australia-based company developing a potash mine, and
Canada's Nevsun Resources Ltd. (NSU)
Chalice plans to continue exploring for precious metals in Eritrea at the
Mogoraib North VMS Project, it said in a statement on its website.
To contact the reporter on this story: William Davison in Addis Ababa via
Nairobi at pmrichardson_at_bloomberg.net.
To contact the editor responsible for this story: Paul Richardson in Nairobi
at pmrichardson_at_bloomberg.net.
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Received on Fri Apr 27 2012 - 10:35:08 EDT
