GSE PAYS NEVSUN 25 MILLION FROM CHINESE LOAN

UNCLAS ASMARA 000187 SIPDIS SIPDIS SENSITIVE LONDON AND PARIS FOR AFRICA WATCHERS DEPT FOR AF/E E.O. 12958: N/A TAGS: EMIN ECON PGOV ER SUBJECT: GSE PAYS NEVSUN 25 MILLION FROM CHINESE LOAN ¶1. (SBU) The Government of the State of Eritrea (GSE) paid Nevsun A $25 million down payment for purchasing a 30% stake in the Bisha mining project, according to Nevsun and Bisha Mining Share Company General Manager Stan Rogers (please protect). Rogers said the GSE paid with a partial distribution from a $100 million loan from the Chinese government. ¶2. (SBU) The GSE is also required to make monthly payments of approximately $3 million to Nevsun until the mine is ready for operations in 2010. The project will then be independently appraised and the balance owed by the GSE recalculated; if the project is valued at $1 billion, the GSE will owe Nevsun $300 million minus the amount paid to date. Rogers said the GSE is already $4 million in arrears, apparently due to unknown Chinese procedural hurdles delaying GSE access to the remaining $75 million. ¶3. (SBU) Rogers also said Nevsun originally offered the GSE an additional free 10% stake in Bisha, in addition to the free 10% required by Eritrean law, if the Eritreans agreed not to purchase 30% of the operation. Rogers said Nevsun made this offer in anticipation of GSE difficulty in securing hard currency necessary to make ongoing payments. MCMULLEN