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Ethiopia develops major potash reserves for Asian markets

Published: Thursday, 17 January 2013

18 potash projects underway; Overseas investment key to continuing expansion

Jonathan Dyson, in Addis Ababa


source: A Davey

Ethiopia's potential as a source of industrial minerals is beginning to be realised, with a growing number of exploration and mining projects underway amid rapidly increasing foreign investment.


The Ministry of Mines has granted 72 industrial minerals exploration licences, with 61 going to foreign companies, eight to Ethiopian/foreign joint ventures and three to local companies. Some 52 mining licences have also been approved, with 28 to foreign companies, 17 to Ethiopian/foreign joint ventures and seven to local companies.


The licences are for minerals including potash, limestone, marble, pumice, clay, gypsum, basalt, silica sand and gemstone, salt and soda ash. Other industrial minerals have also been identified (see table for quantities). 


Potash has become the focus of much of the attention in Ethiopia's industrial minerals sector, with 18 exploration projects currently underway. The most significant is at the Dallol potash site in the Danakil depression in the north of the country, which is being explored by Canadian potash specialist, Allana Potash.


The site has potash resources of approximately 1.3bn tonnes measured and indicated, at an average grade of 19% KCl (potassium chloride), with an inferred resource of 588m tonnes, also at 19% KCl, the company told IM.


The site includes sylvinite resources of 171m tonnes measured and indicated, at 31% KCl, with an inferred resource of 47m tonnes, Allana added. The company is now in the final phases of a feasibility study, and plans to begin production in late 2014 or early 2015, ramping up to 1m tpa in several years.


Allana Potash doubled the size of its site last year following a buyout of Nova-Ethio Potash Corp, increasing the size of its land acquisition in the Danakil depression to 312 km2 from 154 km2.


There are several advantages in mining potash in Ethiopia.


"Ethiopia has one of the shallowest deposits in the world. The reserves are consistent at 100 metres, compared with up to two kilometres elsewhere, so production costs are very low," Farhad Abasov, Allana Potash president and CEO, told IM.


"Also, the weather is very hot and dry, with temperatures at between 45-60°C [in the Danakil depression], so it's a great place for solar evaporation, which also means very low energy costs," he added.


Due to these factors, the Dallol potash project will "potentially be one of the lowest-cost potash operations in the world", Abasov said.


Ethiopia also benefits from its prime location.


"It will be the closest potash producer to India, most of south east Asia, and most of China," Abasov said.

Asia, including China, India, Indonesia, Malaysia and Vietnam, will be the major markets for the potash produced at Dallol, with Africa also being an important market. 


"Whatever the needs for potash are in Africa, we will supply them," Abasov said, adding that the company expects to supply between 50,000 and 100,000 tpa to Africa.


Overseas investment needs to continue to increase to power the expansion of Ethiopia's industrial minerals sector, Tolesa Shagi, state minister of mines, told IM.


"We have to work with foreign companies as they have the kinds of technology and skills that we don't have here in Ethiopia," he said. "As our economy has become more and more open over the last few years, many different companies from around the world have invested here. We need this to continue and for us to work together."


Companies from China, India, Pakistan, Canada, the US, Australia, France, the UK, Saudi Arabia, Nigeria, Kenya and Sudan are currently undertaking industrial minerals projects in Ethiopia.


In addition to Ethiopia's increasingly open economy, foreign investors have been attracted by the relative political stability and competitive investment and taxation codes, the minister said, adding that improvements in infrastructure is a key factor.


As part of the country's Growth and Transformation Plan for 2011-15, 72,000 km of new roads are to be constructed by the end of 2015, while the power availability is targeted to increase to 8,000 MW by 2015.


Two roads have been specifically built by the government for the Dallol potash project, linking the site to the port in neighbouring Djibouti, which land-locked Ethiopia uses to ship export goods, Abasov said. Another road is planned to link the site with Mek'ele, the major city in the north of Ethiopia.


"The Ethiopian government has taken on very significant costs for our project through the development of the infrastructure,"Abasov said. "It has taken a lot of weight off our shoulders. The combination of geology, climate, location and government support in Ethiopia is very unique."


As well as export markets, demand is also growing for Ethiopia's industrial minerals within the country itself, Tolesa added. While still one of the world's poorest countries, Ethiopia's economy is now expanding rapidly, with GDP growth at around 7% during recent years.

"Ethiopia is shifting towards a more industrialised economy," he said. "There are several sectors that need industrial minerals here now." 


Ethiopia will be an important market for the potash it plans to produce in the country, Abasov added.


"Ethiopia is trying to develop its agriculture, so there is huge potential for potash here," he said. "We are working with the government to help show people the benefits of potash, especially as a fertiliser."