Identifier
Created
Classification
Origin
08ASMARA385
2008-08-06 12:42:00
CONFIDENTIAL//NOFORN
Embassy Asmara
Cable title:  

CHINESE MOVE INTO ERITREA'S MINING SECTOR

Tags:  EMIN ECON PREL ER CH 
pdf how-to read a cable
VZCZCXRO4752
RR RUEHROV
DE RUEHAE #0385 2191242
ZNY CCCCC ZZH
R 061242Z AUG 08
FM AMEMBASSY ASMARA
TO RUEHC/SECSTATE WASHDC 9824
INFO RUCNIAD/IGAD COLLECTIVE
RUEHBJ/AMEMBASSY BEIJING 0040
RUEHBY/AMEMBASSY CANBERRA 0044
RUEHOT/AMEMBASSY OTTAWA 0196
RUEHSM/AMEMBASSY STOCKHOLM 0021
RUEHBAD/AMCONSUL PERTH 0003
RUEHVC/AMCONSUL VANCOUVER 0013
C O N F I D E N T I A L ASMARA 000385 

SENSITIVE
SIPDIS

DEPARTMENT FOR AF/E
LONDON AND PARIS FOR AFRICA WATCHERS

E.O. 12958: DECL: 08/05/2018
TAGS: EMIN ECON PREL ER CH
SUBJECT: CHINESE MOVE INTO ERITREA'S MINING SECTOR

C O N F I D E N T I A L ASMARA 000385

SENSITIVE
SIPDIS

DEPARTMENT FOR AF/E
LONDON AND PARIS FOR AFRICA WATCHERS

E.O. 12958: DECL: 08/05/2018
TAGS: EMIN ECON PREL ER CH
SUBJECT: CHINESE MOVE INTO ERITREA'S MINING SECTOR


1. SUMMARY: Two Chinese mining companies have received
exploration licenses from the government of Eritrea in the
past eight months. One of these license areas is situated in
the former Temporary Security Zone from which Eritrea forced
UNMEE peacekeepers in February. Three Chinese companies are
reportedly seeking to buy out Vancouver-based Nevsun's
interests in the huge Bisha gold, copper, and zinc deposit,
which is forecast to produce around $1 billion worth of gold,
in addition to copper and zinc, starting in 2010. End
Summary.

Beijing Donia Resources Company, LTD (Eritrea)
-------------- -


2. (SBU) Donia, a Beijing-based enterprise launched in 2004,
has exploration activities in Tibet, Yunnan, Laos, Angola,
the Philippines, and Eritrea. It registered as a company in
Asmara in January 2008 and has acquired two exploration
licenses. Donia has located a large iron ore deposit 20
miles north of Asmara. Its other, larger exploration license
area is called Kenatib, which is located some 60 miles SW of
Asmara. Kenatib is thought to hold substantial amounts of
gold and copper and is situated almost entirely in the
Temporary Security Zone, vacated by UNMEE peacekeepers and
reoccupied by Eritrean security forces in February. This
potentially mineral-rich area is only 15 miles from Ethiopia.

Eritrea-China Exploration and Mining Company (ECEM)
-------------- --------------


3. (SBU) ECEM, which received its exploration license in late
2007, has taken over two old gold mines in SW Eritrea dating
back to the Egyptian colonial era of the 1870s. During the
early 1900s an Italian mining venture developed the site with
an extensive shaft and tunnel complex running over a mile in
length. The mines were abandoned in the late 1930s. The two
old mines are located near the village of Awgaro, about 30
miles straight west of Badme, the flashpoint of the 1998-2000
war. ECEM is currently engaged in refurbishing the old
tunnels, drilling rock cores, and constructing new tunnels.

NEVSUN SELLING BISHA TO THE CHINESE?
--------------


4. (C) Employees of an Australian mining company and
technical consultants in the mineral sector have told us
Vancouver-based Nevsun is looking to sell its stake in Bisha,
a combined gold, copper, and zinc deposit located 35 miles
WSW of Agordat in Eritrea's western lowlands. Bisha is
likely to be the first major mine to begin substantial gold
production in Eritrea, with a target starting date of late

2010. Bisha is estimated to contain over a million ounces of
extractable gold, valued at just under $1 billion, in
addition to sizeable copper and zinc deposits. However, Post
has been told that Nevsun is unable to find a partner willing
to invest in an above-ground ore processing and refining
plant. Given its reputed under-capitalization, Nevsun doubts
it can raise the cash to build the top-side processing
infrastructure itself, and is thus reportedly looking to sell
its majority stake in Bisha. Three Chinese mining companies
and one Swedish firm are interested, according to
knowledgeable local sources.


5. (C) COMMENT: The mining sector, particularly gold mining,
is abgoQQ"!Q@=91eQQ=hQ9Q%Q1QQI%Q!QQQ`=QQJ9Q*QQQQ .YXR$YZ.[X6
economic outlook. Many Eritreans see the mining sector as a
life preserver that will save the sinking economy (and
regime?). Australian and Canadian mining companies are
clearly Eritrea's partners of choice, given their reliability
and proven track record around the world. Chinese companies
are partners of second or third resort, although they
apparently have a high risk-taking threshold as demonstrated
by their willingness to invest in Eritrea's volatile border
area. Should Nevsun sell Bisha to a Chinese mining company,
it could delay the start of production and would result in
substantial profits accruing to Beijing or Shanghai, as
opposed to British Columbia. End Comment.
MCMULLEN