Ethiopia, Saudi firm sign gold extraction deal

ADDIS ABABA (Reuters) - Ethiopia signed a deal on Tuesday for a Saudi firm to extract an estimated 20 tonnes of recoverable gold found in the Horn of African country last month, the mines and energy minister said.

Two firms -- Saudi Arabia's Midroc Gold Co. and Britain's Golden Prospecting Mining Co. -- discovered deposits estimated to contain more than 40 tonnes of gold last month and applied for extraction licences.

"We will sign an extraction agreement with the Saudi company today," Minister for Mines and Energy, Alemayehu Tegenu, told Reuters in an interview, adding it would be mined over 11 years.

"We hope to sign an agreement with the British company next year," he said.

The minister said Sakaro, a mining company wholly-owned by Midroc Gold Co., discovered an estimated 20 tonnes in the Lege-Dembi gold belt. Midroc is owned by Ethiopian-born Saudi business tycoon Sheik Mohammed Hussein Al Amoudi.

Golden Prospecting Mining's find of about 23 tonnes is in western Ethiopia.

Under the terms of the deal, Ethiopia gets 5 percent of royalties, takes 2 percent equity and will charge 35 percent tax. The extraction licence expires once 20 tonnes of gold has been extracted.

The Ethiopian government says it has identified possible reserves of up to 500 tonnes in different regions.

The country now makes $105 million a year from gold exports and that could double when Midroc starts its extraction, Alemayehu said.

The Horn of Africa nation has made $450.5 million from about 48 tonnes of gold exports in the last 10 years, according to the National Bank of Ethiopia.