Sudan Eyes Gold, Copper Windfall to Offset Oil Gap

President Omar al-Bashir at the Merowe Dam in Sudan. This project will provide the largest source of electrical generation on the African continent., a photo by Pan-African News Wire File Photos on Flickr.

Sudan eyes gold, copper windfall to offset oil gap

By Simon Martelli

KHARTOUM, Oct 04, 2011 (AFP) - Sudan will earn $4 billion from mine exports this year, helping to prop up its ailing economy after it lost most of its oil resources to the south, Mining Minister Abdelbaqi al-Jaylani says.

The cash-strapped government in Khartoum lost an estimated 35 percent of its income this year when the south, home to most of Sudan's oil reserves, formally seceded on July 9, splitting Africa's largest country in two.

But in contrast to anxious comments by other Sudanese officials about the state of the economy, which the foreign minister described as "really serious," Jaylani says Sudan's abundant mineral resources can cover the oil deficit.

The soaring price of gold, which hit all-time highs above $1,920 per ounce last month, has sparked a rush for the precious metal in Sudan, with many impoverished people eyeing unimaginable riches.

Jaylani estimates there are more than 200,000 unlicenced artisanal producers who since January have produced more than 60 tonnes of gold, much of which is smuggled across the Egyptian border.

"We expect the licenced companies to produce not more than 10 or 12 tonnes of gold this year. All in all, together with the artisanal producers, we will earn about $3 billion dollars from gold, plus another $1 billion from other minerals," he told AFP.

"The gap in the budget from the loss of oil revenues is about $4 billion. If our gold is not smuggled, it can provide this amount of money ... So our policy now is to concentrate on closing the gate through which the gold is smuggled," he added.

This policy includes persuading artisanal producers to sell their gold to Sudan's central bank, which has stepped into the market, and building a refinery to increase the value of Sudan's exports of the yellow metal.

The refinery, located in northern Khartoum, is due to start operations in January, with an initial processing capacity of 50 tonnes per year, Jaylani said.

As in other industries, Sudan's gold sector urgently requires foreign investors to be able to access the technology and financing for major development projects it has largely been denied because of US sanctions and crippling debt.

The minister said 200 national and international companies own gold concessions across the country, including in the war-torn Nuba Mountains, but lamented the fact that few of them were beyond the prospecting stage.

One notable exception is the Canadian group La Mancha, a subsidiary of France's Areva and the main partner in Ariab, a joint venture with the Sudanese government.

Ariab is Sudan's largest gold producer, owning the 25,000-square-kilometre Hassai concession northeast of Khartoum that has been producing for 20 years but where production levels have fallen from five tonnes per year in 2003 to just 2.3 tonnes this year.

The company's deputy general manager, Jean-Pierre Sierak, says his company is implementing plans to reverse the declining output, although he does not believe Sudan is capable of producing 70 tonnes of gold annually, as the ministry claims.

Ariab is building a new plant, known as CIP or carbon in pulp, at a cost of around $185 million, that will restore production to former levels by raising the rate of recovery at the mines to more than 90 percent, from around 70-75 percent now, Sierak explained.

The plant was originally due to start up in 2013 but some delay is now expected, he said.

"I think the government has to encourage mining. Not just gold but copper and iron ore as well. If we build the CIP, it would be a good example of co-operation between Sudan and a foreign company, which could encourage others," he added.

Another big project on Ariab's concession that is approaching completion is the development of the copper reserves that lie beneath the open pit mines.

Not previously considered profitable, they are now expected to come on stream next year.

The project will mark Sudan's debut as a copper producer and raise hopes about alternative revenue sources for a country facing mounting economic woes.

"Sudan is very rich in natural resources. What we need is good management. We have to formulate policies that help us to channel these resources into our economy," said Jaylani.