THE GLOBAL SEARCH FOR GOLD SPECIAL — Ethiopia’s Legadembi mine does it the hard way

At first glance, the Legadembi gold project in southern Ethiopia would seem to suggest the stuff of legend. Surrounded by jungle and perched at an elevation of 2,000 metres above sea level, the open-pit operation could easily have inspired King Solomon’s Mines.

Legadembi, however, remains a modern mine with problems endemic to this day and age.

Ethiopia’s previous (Marxist) government had difficulty operating the mine, which is now aiming for profitability under a new regime.

As a first step, the current government — the country’s first-ever to have won power in a free election — commissioned the American consulting firm of Behre Dolbear to aid in the privatization of its largest gold mining operation.

Situated in the Adola greenstone belt in the country’s Eastern Plateau, the mine was discovered in the late 1970s, but it did not begin operating until 1990. Reserves are estimated at 1.3 million oz. gold, and mill head-grades average 3.7 grams per tonne. As much as 50% of the gold is classified as free-milling.

In 1991, a processing plant with a capacity of 3,000 tonnes per day through a gravity and carbon-in-pulp circuit was installed at a cost of US$100 million. Production during the first year, however, amounted to less than 100,000 oz., and output has been sliding ever since. Frequent breakdowns have compounded the problem, as has the lack of spare parts needed to repair equipment. As a result, the deposit has been mined only intermittently.

To make matters worse, the rate of ore extraction has exceeded the stripping of waste material, hampering attempts to gain access to deeper mineralization.

Excellent potential

On a brighter note, Bernard Guarnera, president of Behre Dolbear, says there is excellent potential for outlining sulphide mineralization with similar grades below 100 metres. There is also potential along strike, to the north, for proving up additional open-pit deposits.

To capitalize on the mine’s potential, the government decided that a significant infusion of cash was necessary to get the operation back on an even keel, and that this could be achieved by privatizing the property.

Thus, throughout 1995, the Ethiopian government solicited bids for Legadembi from companies the world over. In all, 10 mining groups from the U.S., Canada, Australia, South Africa and Saudi Arabia nibbled at the bait. Among those in the North American contingent were Echo Bay Mines (ECO-X) and Rift Resources (RIF-V), as well as Canyon Resources (CAU-X) which already controls two exploration licences in the Adola gold belt.

The Ethiopian government now faces the daunting task of sorting through the proposals. Behre Dolbear will assist by carrying out a technical and financial review of each of the bids.