News Ezana Mining, Canadian firm at impasse over gold mines in Tigray
November 16, 2024
Ezana forfeits 30 percent stake in Adiabo projects
A Canada-based firm and Ezana Mining Development, a subsidiary of the Endowment Fund for the Rehabilitation of Tigray (EFFORT), are involved in a row over two gold mining projects in the Tigray region.
East Africa Metals Inc has absorbed a 30 percent stake in the Adiabo gold project, which comprises the Matu Bula and Da Tambuk sites, after Ezana failed to contribute its share of equity based on the joint venture agreement.
However, according to East Africa’s latest reports and other sources, Ezana has refused to transfer the projects to the foreign firm.
The reports indicate that East Africa Metals is preparing to resume its operations in Tigray following a force majeure stalemate triggered by the two-year war.
East Africa Metals was formed by Canaco Resources (Barbados) Inc, another Canadian company which later changed its name to Ocra.
East Africa Metals was initially formed by Canaco itself, but later, East Africa swallowed Canaco.
As per acquisition agreement in 2013, Canaco “transferred all of its assets other than certain included assets and USD 60 million in cash, and all of its liabilities, other than certain termination payments, the transaction costs related to the acquisition and certain agreements, to East Africa Metals Inc.”
East Africa initially took on a 70 percent stake in the projects under Tigray Resources Inc (TRI) and Harvest Mining Plc. Harvest owns six exploration concessions covering approximately 468 square kilometers in Tigray. These include the Terakimti and Adiabo gold projects.
East Africa entered into joint ventures with Ezana through these companies, with the latter controlling a 30 percent stake in either.
The joint venture agreement stipulated that East Africa would cover costs for exploration and these expenses would later be turned into shares. The agreement also stated that once exploration is finalized and a mining license acquired, Ezana would contribute the 30 percent stake in capital equity, which would be used to cover operational expenses.
The agreement compelled Ezana to contribute its share of equity within 90 days of obtaining a license.
Mining activity at the Mato Bula and Da Tambuk sites was delayed by the two-year war, but East Africa stated it had managed to secure a force majeure license extension from the Ministry of Mines. It is currently preparing to begin operations on both sites, according to company reports.
However, Ezana failed to fulfill the terms of the agreements and contribute the 30 percent in capital equity within the timeframe, prompting East Africa to take up its stake, according to the reports.
Although the shares have been transferred to East Africa on paper, the company has been unable to access the mining sites, according to sources close to the matter.
Simultaneously, East Africa sold its 70 percent stake in the Adiabo projects to Tibet Huayu, a Chinese company. On paper, the Chinese firm owns majority stakes in the ventures while East Africa retains 30 percent ownership.
Nonetheless, the sites remain under the control of Ezana Mining, Tigray’s security forces, and the Tigray Interim Administration (TIA), which is currently in charge of EFFORT.
“Ezana does not want any of its pre-war foreign JV partners to come back and claim their pre-war agreements. This is because the Interim Administration and the TPLF do not want the foreign companies licensed by the Ministry of Mines to come back and operate in Tigray. The regional officials cannot transfer those mining sites to the foreign companies because the sites are already under control of the locals, ex-combatants and the military officials of the region,” said a source close to the matter.
Last year, the TIA submitted a letter to the Ministry of Mines, requesting it to revoke the license of close to 30 foreign mining companies that were operating in Tigray before the war.
The firms mentioned in the letter to the Ministry include Sekota Mining, Sun Peak, Axum Metals, Newmont Ventures, National Mining Corporation, TRI, and Tigray Resources Inc, among others.
However, the Ministry instead pressed Tigray’s officials to welcome the foreign companies.
According to East Africa Metals’ latest report, the Ministry has approved the extension of its concessions for the Adiabo and Terakimti projects until 2028.
The Ministry offered four years as recompense for the two years of disruption posed by the war. Nonetheless, officials in Tigray do not recognize the force majeure, according to the sources.
East Africa’s latest report also states the board of Tibet Huayu Mining has approved the initiation of operations in Mato Bula and Da Tumbuk through its subsidiary, Silk Road Investments Co.
Silk Road is currently staffing key management positions, reviewing detailed design parameters and has established a base of operations and staff in the nearby town of Shire, according to the report.
“The Shire staff are currently working with local authorities and regional governments to prepare the sites for construction activity,” it reads.
The company indicates that its staff and personnel from Tibet Huayu have access to the project sites, but sources in Tigray say no foreign companies enjoy access.
These sources indicate that foreign investors are attempting to visit the sites by traveling to Tigray under the guise of expats granted entry by the Ministry of Labor and Social Affairs.
As Ezana and officials in Tigray move to close the door on foreign mining firms with pre-war licensing, East Africa is negotiating with the Ministry of Mines to gain access to the project sites, sources disclose.
They observe that Ezana does not have the resources to go ahead with the pre-war agreements.
“Ezana signed the initial agreement with East Africa. But Ezana currently doesn’t have the forex to contribute its 30 percent stake. But even if Ezana contributes the money and decides to go along with the agreement, Ezana and the regional government cannot transfer the project sites to the foreign companies, since the sites are under control of the military and locals who do not want the foreign firms to return,” said one source. “East Africa cannot do anything.”
Sources and analysts keeping a close eye on the issue indicate that Ezana has entered into a web of JV agreements with a slew of shadowy foreign firms, and even with subsidiaries it formed itself.
“All this was done to scrub any trace of ownership structure for mining projects in Tigray, and to evade taxes in Ethiopia. Now, Ezana is caught up in a mess it created. In the meantime, the foreign companies are producing fabricated reports as if they are on track with their operations in Ethiopia, just to persuade their funders abroad and remain on stock exchanges in countries including Canada. But in reality, they have no access to the project sites in Ethiopia, though they keep raising funds in the name of investment,” said one analyst.
Representatives of Ezana Mining Development and East Africa Metals declined to respond to The Reporter’s requests for comment.