Wheaton Precious Metals Corp (TSE: WPM) (NYSE: WPM) has secured a valuable streaming deal at what will soon be Ethiopia’s top gold-producing asset.
The multinational mining company will pay Allied Gold Corp (TSE: AAUC) (OTCMKTS: AAUCF) US$175 million for rights to purchase 6.7 per cent of the Kurmuk operation’s gold at 15 per cent of the current spot price. Once Wheaton has bought 220,000 ounces that number will decrease to 4.8 per cent.
Kurmuk is a well-advanced open pit operation in the African country’s Benishangul-Gumuz region. The Ethiopian government will retain a 7 per cent stake in the project during its lifespan. Once production begins during the second quarter of 2026, it will produce about 245,000 ounces per annum for 15 years.
Wheaton will get about 16,000 ounces annually, boosting its proven and probable gold reserves by 180,000 ounces.
“It will be generating some very very significant cashflow,” Allied’s Chairman and CEO, Peter Marrone, said in an interview with Kitco Mining recently. Its two-phase development will require an investment of approximately half a billion.
Ethiopia has been seeing an increasing rate of mining activity. In November, President Abiy Ahmed said he expects the country to generate US$2 billion from gold revenue alone this year for the first time.
He recently inaugurated a large-scale gold processing facility held by the Akobo Minerals AB (publ) (FRA: 643) subsidiary ETNO Mining.
#Ethiopia’s mining sector is on the rise, with gold at the forefront. The launch of ETNO Mining plant, a public-private JV in Gambla, showcases vast untapped potential. Investor-friendly policies & recent discoveries promise growth, boosting exports & economic progress. VC: PMO pic.twitter.com/iuQj8g0p9n
— Fitsum Arega (@fitsumaregaa) November 20, 2024
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Kurmuk will produce nearly twice as much as Lega Dembi
Lega Dembi, a gold asset that has been in production since 1998, will soon be losing its status as the nation’s top producer of the yellow metal. It only generates about 145,000 ounces per year.
Ethiopia is known for having a large amount of artisanal and illegal gold mining operations that employ well over 1 million people. In recent years, the nation’s government has made significant strides to curb illicit activity while providing incentives for regulated projects.
These include duty-free equipment imports, tax breaks, and a low government free equity share requirement of 5 per cent. Other African countries like Guinea, Senegal and Mali require a higher percentage, thereby generating more profit from the activities of mining companies.
Ethiopia also produces significant quantities of lithium, iron ore, tantalum, platinum, copper, nickel, manganese, coal and rare earths. Mining is the nation’s fastest-growing economic sector.
rowan@mugglehead.com
