ETHIOPIA & PRESIDENTIAL ADVISOR
0361 RTZ Meeting
[This letter reports on one of
the key stages of the discussions with RTZ]
STRICTLY CONFIDENTIAL
Seeye Abraha
Minister of Defencefillin "Type in address"
Addis Abeba
Dear Minister,
RTZ - MEETING WITH KEN HADDOW AND ROB TAYLOR
Thank you for the advice which was fed back via Assefa Abraha. This was well timed, since I had a meeting the following day (last Thursday) with Ken Haddow, who is handling the commercial negotiations and Dr Rob Taylor, who is the exploration division director responsible for Africa.
I was able to discuss your comments with them, and they seemed very happy with these; and willing (and keen) to work within the framework you described. Their own detailed comments, in response, were:
1) 'Integrated Operation' - at this stage, in a high risk country, they would probably limit their initial commitment to one large (albeit very large) development. Even then, it is possible they might not find any deposits on a scale large enough to justify their participation (where they look for very large scale mining); though they thought it would be likely that at least one such deposit would be found. In any case, they would look across the spectrum - not just for one mineral such as gold. My own interpretation of this is that (given favourable terms) they are likely to rapidly commit to developing one site worth a number of tens (or hundreds) of millions of dollars or more - but will not commit further until they are happy with the stability of the country and their relationship with it (though by the time they have found and started to develop the first site I would have expected, in reality, that they would by then be happy with these factors and would go further). In a general context, they stressed that their policy is to develop locally, and - especially - to use local management with very few expatriates involved.
2) 'Rate of Development' - whilst they are clearly attracted by the potential, there is a limit to the speed at which they can explore and develop. Thus, they would probably have only a handful of personnel in the country during year 1 and the first 'vehicle' (presumably a mobile drilling rig) would not arrive until year 2. Major profits would not be earned much before year 10 (though foreign currency earnings and infra-structure investments would occur much sooner).
3) 'Refining' - they will ask for protection against the possible requirement (in the general mining legislation) to refine locally. They say that refining is, in any case, unprofitable - but are attracted by the potential for cheap energy which might well swing the balance for such major investment in Ethiopia's favour.
The next stage is that Rob Taylor (who is based at Rio Tinto House, 122 Pybus Road, Sandton 2199, Republic of South Africa - phone 011 883 3860 fax 011 883 4483) will investigate what specific projects (from their own knowledge) might be given highest priority. He will then contact the Minister of Mines (Ezedin Ali) to arrange a meeting; and will tell me of the arrangements, so that I can advise you. I have given him your direct phone number so he can contact you direct if needed.
It is too early to judge the outcome, but it seems to me that there is a reasonable chance that RTZ will in fact be able to work with your government - and to ultimately deliver most of the benefits (in foreign currency and infra-structure, as well as taxes) you are looking for. This is a great advance on the rather gloomy prospects when we started the search a few months ago!
As usual, I will try to phone you later this week or early next week to explain the matter further, but if you want to contact me before then please fax me on the above number at any time or phone me at home (as above - 0044 908 679759).
(David Mercer)
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