Eritrea's minerals: blessing or curse?

A conveyer belt at Bisha Mine, Eritrea's first major international mine, 150 kilometres west of Asmara is pictured on July 17, 2013. In a vast pit of red earth, white stone and green ponds, excavators unearth precious copper in Eritrea's first large scale commercial mine. (AFP/File)

BISHA, Eritrea (AFP) – In a vast pit of red earth, white stone and green ponds, excavators unearth precious copper in Eritrea's first large scale commercial mine.

In its third year of production, Bisha mine -- endowed with gold, copper and zinc -- is Eritrea's first major international investment, and one that promises enormous profit for the impoverished Red Sea state.

Despite criticism by rights groups -- who say large scale mining props up a hardline regime accused of a raft of abuses -- authorities hope the mine will draw investment in other industries to help boost Eritrea's otherwise struggling economy.

"The miners are the first people to take big risks with big money," said Alasdair Smith, a geologist and exploration expert in Eritrea.

"There will be a honeymoon period for the mining industry when they will lead the way and they will have a significant contribution to GDP, and then that will quickly get overtaken by other industries," added Smith, from New Zealand.

Bisha mine is 60 percent owned by Canada's Nevsun Resources and 40 percent owned by the Eritrean government, which took a loan from China to finance its initial investment.

The project has attracted major interest from foreign mining companies, with three companies -- from Australia, Canada and China -- planning on establishing operations for gold and potash in the next two years.

There are also 17 other exploration companies in the country, searching for gold, copper, zinc and potash.

Eritrea's government insists it is committed to using mining profits to develop other nascent sectors -- namely agriculture, fisheries and tourism -- in order to avoid the resource curse that plagues other mineral-rich resources in Africa.

It needs it: with a gross national income of $430, Eritrea is one of the world's poorest nations, according to the World Bank.

"This is going to be a major sector in the Eritrean economy, but from our policy point of view, we would like to make sure that Eritrea does not become a one-sector economy," said Woldai Futur, Eritrea's Minister for Investment.

Nevsun reported revenues of $71.1 million in the first quarter of 2013, with Bisha's general manager Kevin Moxham shrugging off World Bank reports ranking Eritrea as the third worst country out of 185 nations to do business in.

"If you look at Africa and the risk of doing work, the country risk (in Eritrea) in my opinion is much less than anywhere else," Moxham told AFP, sitting at his office at the mine, 150 kilometres (90 miles) west of Asmara.

"The government is really involved because they want to make it work...they put their money where their mouth is," he said, adding that he is confident the growth of the sector will boost spin-off industries and provide much-needed employment.

Still, infrastructure is limited, foreign exchange reserve are minimal, and United Nations-imposed sanctions imposed for Eritrea's alleged backing of regional rebels make it difficult to import much-needed equipment.

But is not without its critics.

Last January, Human Rights Watch accused Nevsun of using forced labour drafted in from a decades-long conscription programme run by Eritrea, claims rejected by Asmara.

Moxham said employees are all are hired willingly.

"Anybody who is employed here has to be released from the military... we have a whole lot of checks and balances," he said.

But many people in the capital Asmara question how mining revenues are being spent.

"Where?", said one man when asked whether the government was spending profits wisely.

Residents in Asmara routinely complain of chronic water and electricity shortages in the capital, and say jobs are scarce.

But Bisha employees say they are happy for skills they are learning and a regular salary, which is above the national average.

Local salaries range from $400 to $5,000 at Bisha Mine, where over 90 percent of the 1800 employees are Eritrean.

For Asmerom Habte, 47, his job as a lift operator is not only a key source of income, but a source of national pride.

"I wanted to work here, it is the first gold mine ever in Eritrea," said the former soldier, standing before his bright yellow machine in the copper pit, adding that his salary of some $500 a month is around seven times more than when he was a soldier.

While employment is an important benefit of the mining sector, Woldai insists that the industry will spur further broader investment, despite economic stagnation blamed on ongoing tensions with arch-foe Ethiopia following a 1998-2000 border war.

"We are passing though difficult times... but our people are united," he said. "The important thing is that you can see the light at the end of the tunnel. It may be farther than I'd like it to be, but it is there."