“This is like walking into Kalgoorlie before it was discovered … it’s a relatively stable country with an authoritarian government … No, we don’t expect an uprising.”
That was Tim Goyder, CEO of Australian mining company Chalice Gold Mine. The “stable country with an authoritarian government” he is talking about is Eritrea. And the Kalgoorlie he is referring to is a town in Western Australia, which was made famous during the gold rush of the late 19th century for its golden mile: 1 square mile of gold.
Chalice Gold Mine is one of 14 companies licensed to mine in Eritrea. The others include Sub-Sahara Resources (also Australia); Andiamo Exploration (UK), London Africa (UK); Land and Energy (China); Zhongchang Mining (China); the Eritrean-Libyan Mining Share (Libya); South Boulder (Australia); Gippsland (Australia);Spice Minerals (India); Suridge (Australia) and, perhaps the most famous, Nevsun Resources Ltd (Canada.)
Exploration has already shown that Eritrea is rich in gold, copper, zinc and potash. Bisha, which is licensed to Nevsun, reportedly has 1Moz of gold, 800 Mlb of copper and 1,000 Mlb of zinc. The Zara project, licensed to Sub-Sahara Resources, is claimed to have 1Moz of gold. And the “Asmara belt” is supposed to have 1Moz of gold, 2,000 Mlb of zinc and 800 Mlb of copper.
Because mining is a long-term project with huge capital outlays and deferred cashflow, there is one thing mining companies value above all else: stability. Whether it is South America or Sub Saharan Africa, mining companies have repeatedly demonstrated that their favorite type of government is “authoritarian” because democracies are messy and unpredictable.
It is unclear whether the mining companies know about the totalitarian nature of the Isaias Afwerki regime and don’t care, or that they don’t know. Suffice to say that if Isaias Afwerki was of Caucasian race and he was inflicting the same brutality he is inflicting on black Eritreans, the citizens of Canada, the UK, Australia, India would have been appalled and pressured their governments to divest from Eritrea (Obviously, we don’t hold out much hope for China and Libya.)
What is also unclear is if the people of Eritrea know how rich Eritrea is in resources and what it will mean to them to live under the dictatorship of cash-rich Isaias Afwerki: a dirt-poor Isaias has created havoc; how exponentially higher will his capacity for mischief and evil be once his resources are increased and all that money goes directly to his coffers?
We intend to address both in this editorial.
For mining companies who are used to working in chaotic, lawless, bribe-infested third world countries, Eritrea may appear to be a favorable contrast, a relief. It is “orderly”, there are no “roaming bandits” and there is only one chief to deal with which makes the government appear “business friendly.”
But look under the surface and here’s what you will find.
First of all, you are dealing with a government that has absolutely no legitimacy. True, illegitimate governments can rule for decades and all mining companies need to get a return on their investment is one stable decade, but the lesson that should be learned from the North African and Middle Eastern revolutions is that even the ones that appear the most stable because they are the most “authoritarian” who do not tolerate the nuisance of opposition, are rotten and far from the sturdy image they want to project.
The Eritrean regime exists simply because it is providing adequate bribe to its military commanders to maintain “order.” Like mafia bosses, the commanders (and their lieutenants) have turfs that they run like warlords. (wikileaks story) But the military commanders have acquired an insatiable appetite for wealth accumulation and the mining boom will disrupt the current equilibrium: they will, like mafia bosses, accelerate their tit-for-tat to get a piece of the new riches and the “order” will be no more.
Secondly, the labor that is going to be used for much of the mining is slave labor. There are hundreds of thousands of Eritrean youth who are held against their will, working for pittance, at agro-businesses owned by the ruling party. These youth, who have been in “military service”(indentured servitude) since 1998, are the same ones who find the situation in Eritrea so intolerable, they are risking the brutality, rape, torture of their smugglers and dying in the Mediterranean Sea in dingy boats. Just last week over 300 of them, including CHILDREN(!!!) died close to the island of Lampedusa. These are the youth that will be providing the cheap labor that will be used to enrich the mining companies and their shareholders. There is no way for the mining companies to play Pontius Pilate on this: their hands will be as bloody as the hands of Isaias Afwerki and his henchmen.
Thirdly, the regime has been sanctioned by UN for its destructive role in neighboring Djibouti and Somalia. There is a UN body working, right now, to compile a list of ruling party figures (political and military) who will be forbidden from traveling and whose assets will be frozen. The UN—and particularly the United States, the UK, and therefore Canada and Australia—is not going to look kindly at mining companies who are becoming the lifeline of a government that is suspected of funneling money and arms to extremist armed groups all over the Horn of Africa.
Fourthly, the mining companies—specially the Western companies—will be working against the interest of their countries as they will feed the perception that the West speaks, with one mouth, about the importance of democracy and human rights (just as the UK did just last month), while, with another mouth, advances its financial interest irrespective of its impact on democracy and human rights. The Eritrean regime is no ordinary dictatorship. It is an extremely brutal dictatorship even by Third World standards: it has no constitution (the only one in the Third World); it has no private press (the only one in the Third World); it has no space for any form of organization—political or non-political–(even Syria has a human rights organization); it has no court of law (it makes people disappear and refuses to bring them to a court of law to face their accusers); it tortures people (by keeping them in metal shipping containers in the desert; by building prisons underground; by inventing punishments like “Jesus Christ” and “helicopter” designed to inflict maximum physical damage.) It arrests the elderly including religious leaders. These are all documented by reputable human rights organizations like Amnesty International and Human Rights Watch.
Lastly, because the Eritrean regime denies all political space to its opponents; because it has engaged in brutal campaigns that equate to ethnic cleansing of minority groups like the Kunama (whose land, incidentally, has been expropriated to give “license” to the mining companies) and the Afar (whose fishing industry was destroyed by the PFDJ0; and because it wages proxy wars and direct wars on its neighbors—it is not inconceivable that the Eritrean opposition will partner with neighboring countries, particularly Ethiopia, to wage counter-offensives that go beyond the original battleground and deep into territories that may well include the mining areas. That is what happened in 2000.
Ultimately, the decision for the mining companies to continue on mining is a risk-benefit calculation that they and their shareholders have to make. But they should not make it in complete ignorance of the facts—when the facts are readily available. And, in the 2st century, it is unforgivable for people like Tim Goyder of Chalice Gold Mine to adopt such a cavalier attitude that it is desirable to work in countries with “authoritarian” governments. Lenin had a perfect phrase for people like him: “useful idiots.”
The Inactivity Of The Eritrean Opposition
Eritrea’s ruling regime, the PFDJ, is so impulsive and its decision so arbitrary that it appears that most opposition members are banking on one thing: the PFDJ will, at some point, get in a quarrel with the mining companies and the process will be halted, just as it was in 2004, and there is nothing to worry about.
While there certainly is enough in the history of the PFDJ to make this assessment—one of the Canadian companies never returned after the PFDJ made one of its many irrational decisions—one can’t use the incompetence of his opponent as his sole strategy.
The PFDJ simply has no source for hard currency—something it needs badly—other than mining. For years, it had relied on remittances from the Diaspora—either in the form of money sent to family members in Eritrea, or money swindled by the PFDJ for various ponzi schemes and “investments.” But that has slowed down now and only the hard-core party supporters would “invest” in Eritrea—many of the loudmouths who speak about their loyalty to Eritrea (they mean the regime) have their money and their children stashed safely in the West. There is no tourism industry to speak of, no fisheries, no exports: so mining is the only source.
How badly does the PFDJ want to mining money? Most African countries with gold—including Sudan and Egypt—insist that they have to have, at minimum, a 50%-60% stake in the mining project. The Eritrean regime offered a 10% stake with an option to buy a further 30%. This is what accounts for the gold rush: the regime is simply undercutting the neighboring countries, much like its parastatal (and parasitical) corporations undercut Eritrean businessmen and, once they were out of business, increased the price.
So the PFDJ is serious about getting hard currency from mining.
And what is the potential? The one project that is nearest to generating hard currency for the regime, as soon as 2010, is the Bisha project managed by Canada’s Nevsun. Refer to its announcement just from today here:
In Harenna, a few miles from Bisha, Nevsun has drilled 15 holes and has published the result of its assays (mineral composition analysis.) According to the table it provided after digging 442 meters in 15 holes, it has found, on average, the following:
Gold Au (g/t): 0.48.
Silver: Ag (g/t): 29.70
Zinc: Zn (%): 3.73
g/t means grams per tonne. Example: 0.48 grams per tonne explored.
According to Nevsun, this is an “open pit” exploration, which means no deep digging required. Nevsun considers the Harenna assays as an extra ( a “moqshish,” in our parlance): Harenna is, according to Nevsun, a “potential source of supplemental feed for the processing plant at Bisha. Supplemental feed can provide valuable cash flow as an extension to mine life without having to absorb start-up capital costs.”
The point is that the PFDJ and the mining companies are, for different reasons, highly incentivized to explore, exploit, and export Eritrea’s minerals. And the thing of it is that there is no single record anywhere of any debate, any discussion, that was ever held in Eritrea on whether this is being done in the interest of Eritreans or what will become of the hard currency generated from the mines.
Eritreans are enduring so much assault to their person, to their loved ones, to their religion, to their culture, and to everything they treasure that they may have, understandably, placed Eritrea’s exploitation low on their priority list. But since the mineral exploitation will only exacerbate their exploitation, it is high time that we got up and resisted. After all, this land is your land; and the mineral is your mineral.