"Let my voice be heard by all of you, my people. I am going in quest of Wisdom and Learning. My spirit impels me to go and find them out where they are to be had, for I am smitten with the love of Wisdom and I feel myself drawn as though by a leash toward Learning. Learning is better than treasures of silver and gold, better than all that has been created upon earth. And afterward what can be compared to Learning here below?"
So said the Queen of Sheba, as she set out upon a journey to Jerusalem to see what Wisdom and Learning was to be had from the court of Solomon. It seems that the king of Israel may have had a different sort of education in mind, because the Queen returned home bearing his son David, who became the first king of Ethiopia. That was about three thousand years ago, and Ethiopia has not made a huge amount of economic progress since. Why invest in a country this poor? Here’s why...
Still one of the poorest countries on earth, it depends largely on agriculture and exports of coffee. It is torn by internal strife, and only recently Britain suspended aid to Ethiopia after state police shot dead students protesting against the country's most recent heavily rigged election. This does not sound like the most promising place to do business, so when Terry Ward, the managing director Minerva Resources described to me his company’s ‘first-mover advantage’ in Ethiopia, I had to wonder what deterred others from getting in earlier?
This year there have been reports that BHP is in negotiations over the development of a potash deposit in the north-east of Ethiopia, while the Chinese have also been building economic ties with the country. But still this is hardly mainstream, even by the standards of the African continent, so investment into Minerva Resources raises the question - how should investors evaluate and price political risk? You need to be an expert in politics and in local mining regulation to weigh up the attractions of one country versus another. But still junior mining companies do not have the ability to spread risk across several countries, and quite understandably they go to places where they believe they might make a real strike, and trust that the political side of things will take care of itself.
Terry Ward believes that Minerva has made not just one but two significant finds in Ethiopia. The first of these is the Tulu Kappi gold play in the west of Ethiopia, on a geological feature known as the Arabian-Nubian shield. There was mining here in the 1930s when the Italians occupied the region, and more work was done by the United Nations in the 1970s and the Canadian explorer Tan Range in the 1990s, the latter brought to an end by the war between Ethiopia and Eritrea. Now Minerva has been drilling the area and has been getting exciting results. Progress has been delayed as Minerva has had to wait for assay results, but Ward told me that he was ‘elated’ by results so far, and is hoping to have completed sufficient drilling by the end of this year to be able to publish an inferred JORC resource.
Minerva has three other gold projects in the license area where again it has found promising samples of gold. In addition to the gold interests Minerva also has a joint venture with a local entrepreneur to improve production from the country’s only platinum mine.
This is definitely a resource stock to watch... but I’ve a better idea...
Again Minerva is not the first foreign operator to have looked at this. The Russians, the Italians, and the Japanese have all prospected in the area before but Minerva believes that they underestimated the potential for platinum recovery. It has invested in a pilot gravity recovery plant which should boost annual production from 100 ounces to 400 ounces, while it is busy defining the extent of the resource with the objective of a large scale open pit. As with the gold projects the potential here is large and Minerva, which is capitalized at just £5m is seeking the finance to take the projects forward.
I expect the City will come up with the money to take Minerva forward, but should private investors get involved? Operating conditions in Ethiopia in terms of climate, road access and power supply appear to be satisfactory, but the political risk is surely at the higher end of the scale. Private investors either need to spread risk by investing in a number of junior exploration companies, each involved in a different country. Or else they can simply find exploration and mining companies that operate in countries where there is no political risk.
As it happens I have come up with just such a share for the July edition of my newsletter, Red Hot Penny Shares. It is a company that is very much in the right place at the right time and the shares are heading upwards...
Meantime, keep an eye out for a special report I’ve just written on a cracking little oil share I’ve found. You can’t have missed that oil is THE place to invest right now - and this share is a great way to play it. Check it out tomorrow...
Regards,
Tom Bulford
for The Penny Sleuth
