Mining in Eritrea: could a new potash project spur sustainable growth?

Molly Lempriere 22 May 2019 (Last Updated June 11th, 2020 10:28)

A report prepared by independent consultants and initiated and funded by the United Nations Development Programme has concluded that the Colluli potash project in Eritrea has significant potential to boost the local economy whilst meaningfully contributing to the country’s sustainability agenda. We caught up with Danakali, the company behind the project, to find out more about mining in Eritrea.

Mining in Eritrea: could a new potash project spur sustainable growth?
By producing potash the Colluli mine will be able to contribute to the agricultural industry as well. This is hugely important for Eritrea, where agriculture is provides 11% of the GDP and employs 80% of the population.

The United Nations launched its 17 Sustainable Development Goals (SDGs) in 2015, with 193 countries agreeing to pursue the goals that form part of the wider 2030 Agenda for Sustainable Development. Many mining companies have embraced these goals, to a varying degree of success, in their efforts to prove the benefits of mining to economic and community development amongst others.

A new report titled ‘Analysis of The Potential Contributions of Colluli Potash Project to Sustainable Development Goals in Eritrea’, prepared by independent consultants and initiated and funded by the United Nations Development Programme, evaluates how the Colluli potash project in Eritrea could affect SDGs in the country. The project, 50/50 owned by Australian mining company Danakali and the Eritrean Government, is rapidly progressing towards construction.

“The analysis of direct impacts of Colluli potash project and its potential contributions to the sustainable development agenda in Eritrea is focused on five main areas,” the report states. “Economic value generated, people & society, the environment, fiscal effects and effects linked to production of potash and other mineral fertilisers.”

So how exactly will the Colluli mine contribute to the SDGs in the country?

A unique potash project

There are a number of aspects to the Colluli project which makes it incredibly attractive. Firstly, the deposit of sulphate of potash (SOP) is high-grade. Since exploration work began at the site in 2010, a billion tonnes of high-grade potassium bearing salts suitable for the production of potash have been identified.

“The special thing about Colluli is that it’s a very shallow deposit, it’s only 16m below the surface,” says Danakali executive chairman and Colluli Mining Share company director Seamus Cornelius. “That is by far the shallowest and easiest to mine potash deposit in the world. It will be the only open-cut potash mine in the world, and obviously being open-cut at the surface gives us tremendous advantages in CAPEX and OPEX.”

Not only is the deposit very easily accessible, it is also the largest known deposit of potash in the world.

“I mean the size of the deposit alone makes it completely unique,” continues Cornelius. “We can always talk about over 200 years of mine life and a million tonnes a year. If I put it this way, the total annual consumption at the moment of SOP is about seven million tonnes a year, so we can supply the entire world, every single tonne, for 30 years.”

There are also benefits associated with its location, sitting in the Danakil Depression just a six-hour drive from Eritrea’s main port, Massawa, located 230km from the site. “That also makes us the closest potash mine to any port in the world,” says Cornelius.

Additionally, Eritrea is located on the Horn of Africa, putting it within reach of several major markets including the Middle East, Africa, India, and the Mediterranean. Currently this area relies predominantly on imports from Germany and Belgium, where SOP is synthetically created at a higher cost and with greater environmental impact.  Synthetic potash is created using the Mannheim Process, which needs significant heat and energy provided by carbon intensive technologies. The process also creates hydrochloric acid as a by-product, but as Danakali will be primary production it can use ambient temperatures and create no hazardous chemical by-products.

The ease of access to the deposit and the location of the mine site ensure a greatly compressed production period. “From the time we mine the ore until the time that the product that we export is on the ship is one week,” says Cornelius. “To put that into context, someone who is extracting SOP from a lake or a brine under the surface, it can take them 18 months from the time they extract their ore until they get product out to market.”

Operating in Eritrea

Eritrea remains one of the least developed nations in the world. In 1993, after decades of war, the country voted for independence from Ethiopia. But its twenty years of independence have been marred by continued fighting with its neighbour states, and resultant UN sanctions.

Despite having varied mineral resources available within the nation, there has been little development so far. There are currently only two mines in operation in Eritrea: gold, copper and zinc mine Bisha, which is 60% owned by Nevsun Resources, and gold mine Zara, which is 60% owned by Shanghai Sfeco Group of China.

In 2018 however, the UN arms embargo was lifted from Eritrea. This had been brought in in 2009 because of due to the continued conflicts with neighbours Ethiopia and Djibouti and due to, along with the countries support of militant group Al-Shabab.

“Danakali is delighted with the UN’s decision to lift the arms embargo and associated sanctions on Eritrea,” said Cornelius in a statement. “This significant step should have a positive impact on foreign investment and enhance international trade opportunities, leading to improved economic outcomes for the people of Eritrea. I offer my congratulations to the Eritrean people on this achievement and for their exceptional resilience and determination over many years.”

Cornelius believes that the UN sanctions had a much greater effect on people’s perceptions of operating in the area than was fair.

“I think anyone who looks at it objectively will see that the negative perception is totally unjustified. We’ve seen in the last four months, since the sanctions were lifted, what I would say is a 180-degree of reversal in the attitude to Eritrea. The speed of the reversal and the magnitude of the interest now being shown by enterprises and governments across the world in Eritrea gives me comfort that my view, that the previous environment was completely artificial and unjustified is actually true.

“The simple lifting of an arms embargo should not be the reason why a country that was considered to be high-risk and unpopular is now suddenly attracting investment and interest from all over the world.”

In particular, Cornelius highlights the positive experience the company has had in its dealings with the government. Eritrea’s mining rules are based on the Western Australian mining code, and as such easily understood.

“My overall learning from Eritrea, which might benefit some people who are looking to go there, is that in many respects it’s not like many other countries in Africa,” says Cornelius. “In the sense that it’s very transparent, the rules do not change, there’s no variation, and there are no side doors or back doors in Eritrea.”

SDG’s and the Colluli mine

The UN’s report highlights five ways in which the Colluli mine will be able to positively impact Eritrea’s development.

The analysis shows the main impacts of Colluli are: exports of $537m that could represent 50% of Eritrean exports by 2030; direct capex and other investment of $614m (2018-2030); 3% of Eritrean GDP by 2021; local procurement of $189m a year by 2026; impact on agriculture productivity; indirect employment linked to Colluli of +/-10,000 people and fiscal effects of: $204m a year by 2026.”

Some of the mine’s more unique qualities help with its ability to meet the SDGs, in particular the environmental demands. The Danakil Depression is a salt basin that has no inhabitants, no animals and no plants. As such, there is little threat of disturbing communities or damage wildlife with mining operations. The mine will be backfilled, and with time the site will return to its previous state.

Furthermore, by producing potash the Colluli mine will be able to contribute to the agricultural industry as well. This is hugely important for Eritrea, where agriculture is provides 11% of the GDP and employs 80% of the population.

“Use of some of the SOP to Eritrean farmers can transform Eritrean agriculture especially of high value vegetables, fruits and cash crops,” the report explains. “Fertiliser can also be a tool of diplomacy to promote food security in Africa.”

Beyond such benefits, there will likely be a large economic benefit for the country, creating a new income stream which it can direct towards improving numerous aspects of life in Eritrea such as healthcare or schools. The mine will also be able to provide solid employment for many people, who will be transported to and from the site daily when production begins.

“I think that without doubt, one thing that we can do as Danakali and Colluli, is try to develop the mine as quickly and as efficiently as we can, try to expand it at the optimal rate, make sure that we’re giving people good employment and a good future through training, development and the opportunity for advancement in the project,” says Cornelius. “If we manage to do that, that’s already a massive contribution to the country.”