As tensions rise along the disputed border between Eritrea and Ethiopia, the market continues to punish junior mining companies with projects in the region.
And with the United Nations reporting increased movement of troops and tanks along the border between Ethiopia and Eritrea, the situation could regress into all-out war. About 70,000 troops from both sides lost their lives in fighting between 1998 and December 2000.
Rodney Stevens, an analyst with Vancouver-based Salman Partners, says Nevsun is currently trading at a 66% discount to its calculated net asset value due to its properties in Eritrea. Nevsun has additional operations in Mali and Ghana.
Nevsun — the only company in the region currently in the feasibility stage — has fallen roughly 54% since early October. Its shares closed at $1.62 on the Toronto Stock Exchange on Nov. 7. On the TSX Venture board, Sunridge shares have fallen roughly 37% since early October, and closed on Nov. 7 at 86. Over that same period, Sanu finished down 32% to 40.
Another company exploring in Eritrea is
“Whether we are close or not to the border doesn’t matter,” Bertoni says from company headquarters in Montreal. “It would be difficult to operate during a conflict even if the property was not immediately involved.”
Bertoni says Northern Mining’s Eritrean projects are at the early stage of exploration and have yet to factor into the company’s share price, which remain unaffected by the turmoil in the troubled east African region.
Northern shares closed at 55 on Monday, up from Friday’s close of 53. The company also has properties in Tanzania and Quebec.
Still, Bertoni says the geological potential of Eritrea outweighs the negative impact of political uncertainty.
He’s backed by Sunridge’s vice-president of corporate development, Don Halliday, who says both Sunridge’s and Nevsun’s holdings in Eritrea are some of the best yet. Halliday estimates the market trades Sunridge shares at a “very significant discount” of 50-100%.
“If you put our portfolio in Canada, the stock would be five dollars,” Halliday says. “Even if you put it in Russia or Peru — places with some risk — it would be much higher.”
At the end of a 2-year war that raged between Ethiopia and Eritrea from 1998 to 2000, both countries agreed to allow an independent commission to draw a new border. In 2002, that commission handed down its verdict, but when the town of Badme was deemed to belong to Eritrea, Ethiopia balked, claiming the disputed land had religious and cultural significance.
While Halliday would not comment on the likelihood of the border dispute escalating into a war, he says the Eritrean government is taking a hard line on the issue.
“Their view is quite simply that there is nothing further to discuss,” Halliday says. “The border has been sanctioned by the UN and the UN must uphold it.”
Eritrean President Isaias Afwerki wrote the UN Security Council at the end of October expounding upon that point. Afwerki wrote: “This campaign is apparently designed to cover up the failure of the United Nations to shoulder its legal responsibilities in the border conflict and to wrongly shift the blame to Eritrea.”
No one is taking those words lightly. According to sources, the African Union — based in Ethiopia’s capital Addis Ababa — issued a statement on Friday saying that the border dispute could, “escalate into a military confrontation, with far-reaching implications for the two countries and the region as a whole.”
“The UN could probably be doing more to uphold the decision of 2002,” Halliday says, adding that he doesn’t believe the UN has to use force in the matter.
The UN has 3,300 troops patrolling the border. Eritrea, however, has banned UN helicopters from its airspace.
Ethiopia’s Foreign Minister, Seyoum Mesfin, recently told a senior UN official that his country will not start a conflict with Ethiopia.
–Carlos Bertoni, Northern Mining Explorations’ chief executive
Be the first to comment on "As Eritrean conflict nears, stocks fall (November 14, 2005)"