Wed, Nov 14, 2012 - Page 9 News List

Gold fever sweeping across once oil-dependent South Sudan

Investors are lining for permits and licenses to explore for gold and diamonds, although it will be several years before commercial mining produces anything

By Hereward Holland  /  Reuters, NANAKANAK, South Sudan

“There’s a lot of stuff here but people don’t know about it. They’re too focused on oil,” said one international gold trader, who preferred not to be named in connection with the as-yet unregulated trade.

“It’s the best stuff I’ve seen in central Africa,” he said, explaining that the samples he has tested show a purity of over 22 carats (91.6 percent gold), compared with about 18 carats in the Central African Republic.

Locally, artisanal miners like Likuam are making their fortune, investing much of the money in the traditional method of storing wealth — cattle. In the past year alone, Likuam has bought 10 cows, each worth about 1,000 pounds.

In another nearby artisanal mining spot called Napotpot, Julia Lakalay panned the red earth with water she had carried 2km.

“The gold mining has completely changed my life,” she said, swathed in colored beads and spattered with mud. “In my village, I could not even earn 1 pound. Now I’m earning 200 pounds per day.”

Merchants in Kapoeta, a local town of tin-shack pubs, dirt roads and scampering goats, say the price of gold is inflated by the scarcity of dollars, a problem across the country since the oil shutdown.

In the absence of banks or an official exchange rate between the pound and the Kenyan shilling, Kapoeta’s economy relies on gold as a form of cross-border currency.

“The main purpose to buy gold is to change currency. We buy gold, take it to Kenya, sell it to dealers, and buy more stock to bring back,” Kenyan businessman Junius Njeru said, weighing a pile of gold nuggets.

“It’s in your pocket, nobody searches you,” he said, describing the process of taking the gold across the border.

Miners sell the gold for about 200 South Sudanese pounds per gram, leaving traders a narrow profit margin for resale on the international market at US$55.

Officials hope the new mining law will bring this trade out of the black market and, by selling land to prospecting companies, eventually let the national and state governments benefit from the underground treasure.

The mining companies with 42 so-called “grandfather” exploration permits approved by the semi-autonomous southern government before independence will have two weeks to claim their licenses after the bill passes through parliament, which could take as little as a day.

Norway, the US and Botswana helped draft the law that caps large-scale exploration licenses at 2,500km2. To prevent exploration companies from sitting on the land, the law forces them to surrender 50 percent of their concession every time they renew their contracts, which will be variable.

Firms that find enough minerals to start digging can convert their license into a mining permit.

“If you put them in a queue, there’s at least 20 meters of investors waiting to get a license ... Others must know that if they want something, they must come quickly,” said Rainer Hengstmann, a ministry adviser working for consultant firm Adam Smith International.

However, in a landlocked country with just 300km of paved road, Hengstmann cautioned it will take many years to get commercial mining off the ground.

“You need a railway if you want to go large-scale. It will take time. They really need roads and power,” he said, echoing investors’ complaints about the lack of infrastructure.

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