Author: TSX Stocks

Kurmuk Gold Mining Plc says its operations in the gold-rich Benishangul-Gumuz Regional State are being hindered by regional authorities, whom it accuses of refusing the company access to mining sites.

“[The company] will be forced to close its exploration camp and send all its employees home until a solution to these problems is achieved,” reads a letter from Kurmuk Gold Mining (KGM) to the Ministry of Mines on February 27, 2024.

The firm holds three gold exploration licenses in Benishangul, located near the border with Sudan.

Kurmuk was formerly under ASCOM, an Egyptian mining company, before it was re-established as KGM following the political changes of 2018. It was awarded a license to look for gold in Dul Ashashire that year, while the Mestefinfine and Abestelo exploration licenses were issued in 2021.

“Local authorities have denied access to the Dul Ashashire exploration area. KGM has repeatedly requested a support letter from Kurmuk Woreda to access the Dul exploration target for core drilling but the requests have not been accepted,” reads the letter to the Ministry. “KGM is not currently conducting any exploration under this license.”

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The firm goes on to accuse the Benishangul-Gumuz Water, Mine, and Energy Resource Development Bureau of refusing to endorse the exploration licenses granted to it by the Ministry

“KGM could not get access to the exploration license areas,” reads the letter signed by Brox Work, general manager at the firm. “Due to the problems created by regional authorities, it is impossible to implement the approved work program under the three exploration licenses as planned.”

Brox responded to inquiries from The Reporter by saying the problems are “currently being resolved” but declined to comment further. Officials from Benishangul-Gumuz declined requests for comment.

“The problem is KGM license areas are occupied by artisanal miners,” Awoke Tesfaye, communications director at the Ministry of Mines, told The Reporter. “The problem is directly linked to the regional government. We are trying to solve it together.”

KGM secured its licenses during Takele Uma’s tenure as minister of Mines.

Sources at the Benishangul Mine Resource Development Bureau told The Reporter there are two major concerns surrounding KGM’s projects.

“The regional government has questions about the legitimacy of the licensing process. The federal authority did not consult the regional government before taking the license from Ascom and awarding it to Kurmuk,” said the source, who spoke anonymously. “The second major issue is that the federal government reserved 100 hectares of gold-rich land for KGM. This land is the livelihood for a large number of people. Because the population of Benishangul has no culture of farming and livestock, their livelihood depends on artisanal mining. It’s difficult for the regional government to displace the artisanal miners from the land earmarked for the investment.”

KGM is a subsidiary of Allied Gold Corp, a mining company based in Canada, according to its website.

Kurmuk’s license to explore for gold in what is thought to be the area holding largest gold reserves in the country previously belonged to ASCOM Mining Ethiopia Plc, which acquired the license during the EPRDF regime.

ASCOM, a leading Egyptian state-owned mining firm, transferred its shares in Kurmuk to Allied Gold following the political transition of 2018. KGM holds a 20-year concession for gold mining in a 100 square kilometer plot covering the Dish Mountain and Ashashire deposits, with gold exploration licenses covering an additional 1,450 square kilometers in Benishangul, according to a prospectus presented to investors in September 2023.

Experts in the field say Ethiopian officials overestimated the company’s capacity when they awarded a concession covering 100 square kilometers of land in September 2021. The Ethiopian government holds a seven percent stake in the Kurmuk project, according to the document from September 2023.

KGM initially planned to start early works in the final quarter of 2023, with its eye on commercial production in 2026, according to company documents. It was looking to produce close to seven tons of gold annually over the first years of production with a total investment capital requirement of half a billion USD, according to the document.

However, Allied Gold’s financial statements reveal that Kurmuk’s total assets stood at less than USD 200,000 as of September 30, 2023.

The disagreements with regional authorities and security issues mean that it will take a longer time before any gold is pulled out of the ground at Kurmuk, according to sources close to the issue.

However, these sources also claim that KGM is intentionally delaying its operations using various issues as pretext because the company lacks the financing to start its work. According to these sources, the company is using the licenses to boost Allied Gold (AAUC) share value on the Toronto Stock Exchange.

Some insiders claim illicit gold mining is already underway in Kurmuk with the full knowledge of KPM management.

Work, the general manager, denied the allegations.

He told The Reporter that the company has been unable to import mining machinery and equipment because federal authorities failed to approve its requests.

However, officials at the Ministry of Mines told The Reporter they have no records of such requests or denials.