Dr Doug Jones, managing director and CEO of Chalice Gold Mines Limited, speaks to Jane Bordenave about the company’s work in Eritrea, and the shining opportunities it presents.
Chalice Gold Mines is an Australian listed but East Africa-focused exploration and development company, working in Eritrea on the Arabian-Nubian Shield. The firm recently merged with Sub-Saharan Resources, a business that has been working in Eritrea since 2000, enabling it to further strengthen its position in the area.
Chalice Gold Mines’ current focus is the development of the Koka gold mine, which is part of the 615 square kilometre Zara Project, located 160 kilometres north-west of Asmara, the capital of Eritrea. The company’s managing director and CEO Dr Doug Jones, an exploration geologist with 20 years experience exploring for metals in Africa, explains the importance and uniqueness of the Arabian-Nubian Shield and the Zara Project: “The area we are working in is very rich in deposits and has been home to small mines since ancient times. However, due to historical instability in the region, it’s almost completely undeveloped in modern terms. Now that the political situation has stabilised, the area presents great opportunities for exploration.”
The company has secured six contiguous licences, consisting currently of four exploration licences and two prospecting licences, covering just over 600 square kilometres. Currently there is one pit planned for development—Koka—which is located in the centre of the area. “We have recently completed a feasibility study at the Koka Gold Deposit and plan to begin work on the construction of the mine in mid 2011. It should take approximately 18 months to complete and production will commence in early to mid 2013,” explains Jones.
The mine’s deposit of 760,000 ounces of gold in 4.6 million tonnes of ore is expected to last for seven years, with an extraction rate of 104,000 ounces per annum at a grade of 5.1 grams of gold produced per tonne. The deposit is easily accessible, as most of the ore is located within 150 metres of the surface, meaning there is low technical risk when it comes to extracting the metal. The firm also expects to explore for deposits of base metals such as copper, lead, zinc and possibly tin and nickel that may also be found in the region.
As well as the abundance of undeveloped deposits in the area, low operating costs are another attraction of mining in Eritrea. “Our operating costs are only projected to be US$338 per ounce of gold produced, which is quite low by global standards,” says Jones. But all these benefits combined with the new-found stability in the region bring with it increased competition. “Things are hotting up in the area and there’s a lot of competition for ground; there are a number of junior prospectors now present in the country, as well as larger, more established mines such as the Bisha Project,” he explains. “However, we have a very strong position through the long presence that Sub-Saharan has had in the region.”
The relative underdevelopment of the area brings its own challenges. “Because the history of exploration in Eritrea only goes back around 10 years, there’s an almost complete lack of supporting infrastructure and suppliers,” says Jones. “We are limited when it comes to companies we can use for drilling, assaying, where we buy our equipment such as bulldozers and so on. However, this is not unusual in terms of the early days of mining in Africa—the situation in Tanzania and Mali in the 1990s, for example, was very similar; but now in both countries there is a strong industry supported by strong peripheral networks.”
Chalice Gold Mines is also making its own major investments in the area. “We are very remote—the nearest settlement is a village of 2,000 people eight kilometres away. We have taken some initial steps, but there is more to do—we will be working to develop the area, including improving the access road, installing an airstrip, putting in place electrical generating capacity (there is no grid electricity in the region), establishing a water supply and building an accommodation village for our workers.” Thus the mine will not only supply jobs and boost the local economy, but it will also improve the infrastructure of the local area, benefitting the local community.
Investment in people is an important aspect of the company’s work on the Zara project and the Koka mine in particular. “Providing skills training for the workforce is a core part of what we will be doing, because it is one of the first such projects to begin development in Eritrea—so it is essential to develop workers who are familiar with world best practice,” says Jones. “Once again, due to the lack of a history of mining in the area we will be providing our workers with the full gamut of training: health and safety on site, essential skills and knowledge for the job, and continued training. It’s necessary for us to provide all of these ourselves, as few of the required skills are present in the working population.”
While the development of the Koka mine is in its initial stages and will present the main focus for the next seven years, the scope for expansion along the same strike is significant. The company is applying to transform its two prospecting licences for the Zara Project into exploration licences, and has alsoapproached the government for further licences in the far south-east of the country and to the south-west of the Koka development.
Despite the increased competition in Eritrea from other mining companies, Chalice Gold Mines is in a strong position and, through its merger with Sub-Saharan Resources, has a solid track record in the country. It is these assets and the potential for development of the Arabian-Nubian Shield that ensure an exciting and prosperous future for Chalice Gold Mines. http://chalicegold.com
