SHAKA AND SONS PLC (SHASO)

FEASIBILITY STUDY FOR PLACER GOLD

IN

GAMBELLA PEOPLES NATIONAL REGION

STATE, AGNUAK ZONE, ABOBO WOREDA,
DUMBANG, PUWATALAM KEBELE, GOBEY
AND LUNGA LOCALITY

Prepared by: Lithosphere Mineral Consultancy PLC

Approved by: Shaka and Son PLC (SHASO)

February, 2023

Addis Ababa

Ethiopia

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Table of content

ABSTRACT...................................................................................................................5
1. Introduction ..........................................................................................................6
1.1. Back ground of the project ............................................................................................... 6
1.2. Location ............................................................................................................................ 7
1.3. Accessibility ................................................................................................................... 10
1.4. Topography, Drainage and Pedology ............................................................................. 10
1.5. Flora and Fauna .............................................................................................................. 10
1.6. Climate ........................................................................................................................... 11
1.7. Human settlement and Land use .................................................................................... 11
2. Previous works....................................................................................................12
3. Regional Geology .................................................................................................13
4. Local Geology ......................................................................................................21
4.1. Metagranite..................................................................................................................... 21
4.2. Quartz muscovite chlorite schist .................................................................................... 21
4.3. Clay over burden ............................................................................................................ 22
4.4. Washable Gravel ............................................................................................................ 24
5. Methodology .......................................................................................................27
6. Exploration Work Performance ...........................................................................27
7. Morphology and Grain size of the Gold ............................................................... 36
8. Reserve of the Deposit......................................................................................... 36
9. Production Plan ..................................................................................................45
9.1. Life of the Deposit Operation Plan ................................................................................ 45
9.2. Organization of Mine Working ...................................................................................... 45
9.3. Production Plan .............................................................................................................. 45
9.4. Mining Method............................................................................................................... 47
9.5. Volume of Earth Moving ............................................................................................... 47
9.6. PIT DESIGN .................................................................................................................. 47
9.7. MINING EQUIPMENT ................................................................................................. 48
10. Marketing .........................................................................................................49
10.1. Supply of Gold............................................................................................................ 49
10.2. Use (demand) for gold ................................................................................................ 49
10.3. Market Segmentation .................................................................................................. 51
10.4. Pricing ......................................................................................................................... 52
10.5. Sales Strategy and Sales Forecast ............................................................................... 54
11. Resource Required ........................................................................................... 54
11.1. Pre-production cost ..................................................................................................... 54
11.2. Fixed Capital............................................................................................................... 54
11.3. Building and Civil works ............................................................................................ 54
11.4. Machinery and Equipment.......................................................................................... 55
11.5. Office Equipment and Furniture ................................................................................. 56
11.6. Camping Equipment ................................................................................................... 57
11.7. Summary of capital expenditure ................................................................................. 57
11.8. Operating Cost ............................................................................................................ 58
11.9. Project Management, Man power, Salary and benefit................................................ 58
11.10. Fuel, Oil and Lubricant ............................................................................................... 60

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 11.11. Maintenance and Repair Expense............................................................................... 60
11.12. Insurance Expense ...................................................................................................... 61
11.13. Utilities Expense ......................................................................................................... 61
11.14. Spare parts .................................................................................................................. 61
11.15. Other expense cost ...................................................................................................... 62
11.16. Summary of Operating ............................................................................................... 62
11.17. Working capital (WC) Requirement........................................................................... 62
12. Project implementation..................................................................................... 63
13. Financial Evaluation of the Project ...................................................................64
13.1. Basic Assumptions and Conditions ............................................................................ 64
13.2. Projected financial statements .................................................................................... 65
13.3. Cash flow forecast ...................................................................................................... 67
13.4. Final Remarks ............................................................................................................. 68
Conclusion ................................................................................................................71
References .................................................................................................................73
Annex ........................................................................................................................ 74
Professional License ...................................................................................................74

List of Tables

Table 1: Geographic Coordinate Points of Block 1 Gobey stream (1.048 km2) ...............7
Table 2: Geographic Coordinate Points of Block 2 Lunga stream (1.532 km2) ...............8
Table 3: Reserve estimation of target block 1 and block 2 ..........................................39
Table 4: Summery of Gold reserve of the mining blocks .............................................44
Table 5: Production plan ............................................................................................ 46
Table 6: Gold Sales Forecast as per 10 February 2023...............................................52
Table 7 Forecasted revenue........................................................................................ 53
Table 8: Startup Costs and Expenses ........................................................................54
Table 9: Building and Civil Work ...............................................................................55
Table 10: Machinery and Equipment Requirement..................................................... 55
Table 11: Office Furniture and Equipment .................................................................56
Table12: Campingand Kitchen Equipment Requirement ............................................57
Table 13: Summary of capital expenditure (Birr) ....................................................... 57
Table 14: Manpower and Proposed Salary (Birr) ......................................................... 59
Table 15: Fuel, Oil and Lubricants Expense (Birr) ...................................................... 60
Table 16: Annual Repair and maintenance Expense (Birr) .........................................61
Table 17: Annual Utility expense (Birr) ......................................................................61
Table 18: Other cost ..................................................................................................62
Table 19: Summary of Operating Cost (Birr) .............................................................. 62
Table 20: Working capital requirement (Birr) ............................................................. 63
Table 21: Time table for the first project year ............................................................. 64
Table 22: Profit and loss statement ............................................................................66
Table 23: cash flow forecast ....................................................................................... 67
Table 24: Scenario analysis ....................................................................................... 70

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List of Figures

Figure 1: Location map of the two blocks for placer Gold mining ............................................ 9
Figure 2: Lithological map of the target blocks ........................................................................ 26
Figure 3: Pits and profile line location map .............................................................................. 28
Figure 4: Sample Pit log section at Gobey stream channel ...................................................... 29
Figure 5: Sample pit log section at river head at Gobey stream ............................................... 30
Figure 6: Sample pit log section at Gobey stream terrace ........................................................ 31
Figure 7: Sample pit log section at Lunga stream..................................................................... 32
Figure 8: Sample pit log section at Lunga stream terrace ......................................................... 33
Figure 9: Sample pit log section at Lunga stream head ............................................................ 34
Figure 10: Sample pit log section at Lunga upstream............................................................... 35
Figure 11: Profile line and pits with Gold anomaly .................................................................. 37
Figure 12: washing plant show hoper ....................................................................................... 49
Figure 13: Management structure of the project ....................................................................... 58
Figure 14: Breakeven period of the project .............................................................................. 71
Figure 15: The Government’s Benefit from Royalty & Income Tax (Birr) ............................. 72
Figure 16: Professional certificate ............................................................................................ 75
Figure 17: Business registration................................................................................................ 76
Figure 18: Taxpayer Registration certificate ............................................................................ 77

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ABSTRACT

SHAKA and SONS PLC is established in Ethiopia by Ethiopian involving at exploration

of Gold and base metals and at mining project to extract the placer gold in an
economically feasible and environmentally friendly way having a great contribution to
the national economy of the country. The project exploration License is in Gambella
Peoples National Regional State, Agnuak Zone, Abobo wereda, Dumbang and
Puwatalam kebele, Goby and Lunga Locality.

The mining area cover 2.58 km2, with two target blocks the result of the exploration
process showed that the area had about 517.6758 kg of gold at 95% recovery rate. The
exploration is done by manually digging circular pits and re-logging local pits. Totally
111 pits are sunk in 43 profile lines out of this 71 is old pits reclogged and pan the gravel. 40 pits
were digging at the river channel and at river head.

All the data is put in the Microsoft excel for each pit and the average grade and depth
are calculated for gravel and overburden. Final report is written accompanying the
different maps and tables.

Global Mapper21.1, MapInfo pro software and starter 5 soft wares are used to produce
maps, log section, profiles and reserve calculation of the area.

The mining life of the deposit is 10 years, using open cast mining method. The mining
is performed by using different earth moving equipment.

Totally, the company will invest around 92,285,000 birr and creating job for 36
personnel by giving priority for local community. The project is planned to be financed
100% from equity.

Accordingly, based on the projected cash flow the project’s initial investment will be
fully recovered within 2 years. The average profit before tax from the project is
estimated to be Birr 141.9 million; average profit after tax is Birr 106.5 million and
average tax payment to the Government is Birr 35.4 million.

The income statement and the other indicators of profitability show that the project is
viable.

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 1. Introduction

1.1. Back ground of the project

SHAKA AND SONS (SHASO) PLC is a private company established by Ethiopian
investors and registered in Ethiopia was granted Exploration area for Gold and base
metals. The company conduct systematic program of exploration and development
operations for gold and base metals within the exploration permit area of 215.4 km2 in
western Ethiopia, Gambella Peoples National Regional State, Agnuak Zone, Abobo
Woreda, Dumbang and Puwatalam kebele.

The company explores detail work for placer Gold mining within the permitted area of
215.4 km2 at two target blocks with 1.048km2 and 1.532 km2; the detailed exploration
work discovered deposit of placer gold and subject to feasibility study.

The region was first mapped by the Omo Project in 1972-1974. Based on their
metamorphic grades, the basement rocks of the region were classified into 3 domains
(Akobo, Surma and Hamer). The entire low-grade metamorphic belt (Akobo domain)
has been reported as favorable for the occurrence of precious metal mineralization
(Davidson, 1983).

In 2013 a joint cooperative project between Chongqing Geological Bureau of China and
Geological survey of Ethiopia, that include a team of Chinese and Ethiopian geologists
has conducted reconnaissance geological and geochemical survey in western Ethiopia.
The cooperative project identified potential zone for gold and base metal
mineralization, and recommended supplementary exploration work, aiming at
identifying and delineating mineralized block for further detailed assessment. Based
on the recommendations Nankai mining Plc. overtaken the outlined blocks of potential
horizons and acquired an exploration license and initiated the ongoing follow up and
detailed exploration work has conducted detail geological, geochemical, and trenching
and test drilling exploration program in the area during the first and second year
license period and has identified potential primary gold target.

After Nankai mining was return the exploration license the local people make a gold
mining small village. The local people crushed the brecciaed rock and dug pits for
alluvial and diluvia placer gold mining.

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This time SHAKA AND SONS (SHASO) PLC plan to mine the placer and brecciaed rock
host Gold by industrial standard methods and delineate target area for mining.

The present document complies is composed as basis for technical mining project for
detail placer exploration and mining license application.

1.2. Location
The exploration area for placer and breccias host Gold license area is located in
Western Ethiopia, Gambella Peoples Natinal Regional state, Agnua zone, Abobo
wereda, Dumbang and Puatalam kebele, Gobey and Lunga locality is about 830 km
west from Addis Ababa. Geographic Coordinates are in UTM Zone 36 Adidan datum.

Table 1: Geographic Coordinate Points of Block 1 Gobey stream (1.048 km 2)

ID Easting Northing Remark

Degree Minute Second Degree Minute Second
1 34 39 31.56 7 43 9.41
2 34 39 30.11 7 42 59.30
3 34 39 26.76 7 42 59.63
4 34 39 24.92 7 42 49.35
5 34 39 27.60 7 42 49.21
6 34 39 20.35 7 42 21.89
7 34 39 15.23 7 42 14.42
8 34 39 30.45 7 41 28.23
9 34 39 27.26 7 41 12.36
10 34 39 29.70 7 41 1.96
11 34 39 34.78 7 41 0.32
12 34 39 46.35 7 40 39.14
13 34 39 51.80 7 40 40.91
14 34 39 38.45 7 41 5.29
15 34 39 35.36 7 41 37.83
16 34 39 26.95 7 41 58.59
17 34 39 23.85 7 42 15.43
18 34 39 32.20 7 42 33.30
19 34 39 35.87 7 43 9.03

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Table 2: Geographic Coordinate Points of Block 2 Lunga stream (1.532 km 2)

ID Easting Northing Remark

Degree Minute Second Degree Minute Second
A 34 39 42.66 7 43 1.13
B 34 39 56.92 7 42 45.74
C 34 40 14.10 7 42 17.06
D 34 40 18.41 7 41 59.92
E 34 40 14.04 7 41 44.14
F 34 40 8.20 7 41 42.90
G 34 40 5.80 7 41 36.94
H 34 40 7.80 7 41 24.96
I 34 40 14.17 7 41 26.53
J 34 40 27.02 7 40 53.28
K 34 40 31.15 7 40 32.69
L 34 40 33.80 7 40 23.18
M 34 40 43.29 7 40 25.48
N 34 40 35.34 7 40 53.31
O 34 40 26.34 7 41 9.65
P 34 40 20.55 7 41 28.43
Q 34 40 27.47 7 41 41.00
R 34 40 28.86 7 41 52.58
S 34 40 26.90 7 42 10.59
T 34 40 16.27 7 42 36.09
U 34 39 45.11 7 43 3.72

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Figure 1: Location map of the two blocks for placer Gold mining

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 1.3. Accessibility
The exploration area project is accessible west from Addis Ababa- Welkitie-Sokoru-
Jimma-Bedelle-Metu-Gambella-Abobo-Dumbong and Puatalam 830 km asphalt road.

1.4. Topography, Drainage and Pedology

The Project area belongs to the western Ethiopia lowlands and can be represented by
two different types of topographic terrains. Most part of the area is characterized by
smoothly undulating low elevated flat lying plains and occasional peaks developed on
Meta granites and gneiss. The low elevated flat lying plains developed on meta-
volcanosedimentary green schist facies rocks. Typical elevations noted are about 500
meters. Elevations range from 470 t0 870m.

Rivers include Alwero, Ukich, Buy, Lunga, and Nyikani; Most of the rivers are seasonal
and contain no water in their courses during the dry season. Alwero is the only
perennial river that traverses the north eastern part of the License area in a north-
west flow direction. Drainage of the seasonal rivers and creeks generally take the form
of dendritic, patterns. Depending on the lithology and topography all soil horizons are
developed either locally or over regions. In most part of the area the earlier soil profiles
are preserved, and strongly organic soil horizons are common in the soil profiles.

1.5. Flora and Fauna

The eastern part of Gambela Peoples Regional State (GRS) is covered with primal
tropical tiered jungle high forests, ranging from a lowland forest with
phytogeographycal affiliations to the Guineo-Congolian plant realm, a mixed broadleaf
montane forest and in between a transitional forest containing both Lowland and
Montane Forest species, (GRS, 2001 and Sebsibe et al, 2001; and reference therein).
Analysis of floristic data on cover/ abundance values revealed seven plant
communities in the vegetative of gambela region. The communities identified are
Commelina zabesica-Hygrophila auriculata, Sorghum purpureo-Pennisetum
thundergii, Loudetia arundinacea-Hyparrrhenia pilgeriana,Combretum adenogonium-
Anogeissus leiocarpa, Tamarindus indicaAnogeissus leiocarpa, Baphia abyssinica-
Tapura fischeri and Manilkara butugi-Cordia Africana(Sebsibe et al, 2001 and
reference therein). The presence of the plant communities and distribution of dense
vegetation cover depends on the prevailing Geological factors, soil, topographic
features, high seasonal rainfall and hot climate in the region. Most trees are 40-80 m
tall. During the main rains a heavy cover of the native grasses grow more than 3
metres in height over much of the forest fringe and lowland areas; Traversing becomes
very difficult in the jungle high forest and forest fringe areas of the Abobo License. This
rich forest heritage is under threat from rapidly expanding small scale agriculture,
GRS, 2001. But this time the local miners cut a lot of tree and excavate pits and build
house at the center of the license area.

In general Gambela is stuffed with a wide variety of wildlife and 41 larger mammals
have been recorded. The wild life noted in the license area includes various smaller

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antelope, Gazelle, Warthog, Pig, various families of monkeys and Baboons, Jackal,
Snakes, birds, amphibians and fishes. Nile Crocodiles and fishes were observed in the
Alwero River.

1.6. Climate
The tropical rainy climate occurs in the western margins of the highlands of western
Ethiopia Gambela region. The escarpments of eastern Gambella receive high rain fall
(greater than 1600mm) compared to the western lowlands of Gambella, ranging
between 1201 and 1600mm, CSA (2006).The area is characterized by high rainfall of
duration 6 to 7 months that runs from February/March to October/November.
Similarly the margins of the highlands receive rainfall from March through to October
particularly heavy rainfall from July through to September. The area is hot and moist
over much of the year. The minimum temperature of the low land area is about 15.5⁰C
where as in the eastern highlands is 10 ⁰C and the extreme maximum temperature in
the low land area is about 44.5 ⁰C where as in the mid altitude is 23 ⁰C, the mean
annual temperature of the low land area is about 27⁰C and the annual temperature in
the high land areas is about 21⁰C. (Hailemariam et. al 2011) In general the mean
monthly temperature exceeds 25°c; mean monthly minimum temperature recorded in
December and January vary between 15 to 20Cº, CSA (2006). The second highest
mean maximum temperature for Ethiopia was recorded in the lowlands of
Gambela(35-40⁰C), next to the Afar depression(40⁰C) (Sebsibe , et al, 2001 and
reference therein).

1.7. Human settlement and Land use

The License area is inhabited by sparsely populated Agnuak and Majangir peoples.
The western forest margin area ( Dumbong and puwedelamp) is occupied primarily by
Agnuak people. Their way of life includes forest hunting and gathering, and
subsistence cultivation of maize and sorghum supplemented with trapping of fish. The
eastern part is occupied by few permanent settlements of the peoples Majangir e.g.
Lumtack village, who practice shifting slash-and-Burn type maize cultivation and bee
keeping and collecting honey from hives to trade honey with other community. Animal
breeding is not practiced because of the tsetse fly that could result in a disease called
Trypanosomiasis. At Lunga village gold panning is practiced throughout the year by
crushing the quartz vein and breccias and at the streams and creeks there is intensive
panning.

The Agnuak and Mejangir people speak their own language, (at Lunga village people
speak Afan Oromo and Amharic).

The nearby town Abobo is the capital of Agnuak Zone and consist governmental Zone
and woreda administration offices, including police station, Bank, secondary High
School and Health station.

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All the necessary items, such as food, lubricants, cars maintenance services, Hotel can
be obtained at Gambella town.

2. Previous works

Very limited geological investigations, intended for different purposes have been
conducted by different institutions and researchers in the south western region of
Ethiopia, particularly Jecha map sheet,(NB36-4,1:250,000 scale map sheet
encompassing the license area). The neighboring Gore and Gimbi sheet to the north
and Akobo area to the south were investigated to some detail due the occurrence of
placer gold and relatively better accessibility. The early geological work in Jecha sheet
involves reconnaissance geological and structural mapping (Davidson, 1983) and
scattered local studies related to mineral prospects (e.g., Jelenc, 1966.). Mineral
exploration in the Western Ethiopian, particularly in the Yubdo area started in the
early 1900. Geological investigations known in publications started in the 1930s,
(Cuisinier (1933), Hess et al., (1937), Desio (1940a, 1940b) in: Alemu, T. and T.Abebe,
2000). Desio (l940a) produced a geological map of the region including the Gimbi area
at a scale of 1: 1, 000 000. Mohr (1962) compiled a map of the Horn of Africa at a scale
of 1: 2,000,000. Kazmin (1972), Kazmin (1975), and Mengesha et al. (1996) produced
updated editions of the geological map of Ethiopia at the scale of 1:2, 000,000.

The Omo River Project (Davidson. 1983), and The Gore-Gambella Geotraverse
(Teklewold and Moore,1989) were a comprehensive cooperative bilateral aid agreement
project between The Ethiopian Institute of Geological Surveys (EIGS) and Canada. has
undertaken a two-year reconnaissance geological and geochemical survey program in
south-western Ethiopia, Named the Omo River Project because the lower Omo River
runs approximately through the middle of this 83,000 square-kilometer area, the
survey is aimed at evaluating mineral resource potential, Adjacent areas, to the east in
Sidamo Province, and to the north in northern Ilubabor and Welega Provinces, have
already been examined under the U.N.D.P. Mineral Survey Program.

The Omo projects (Davidson. 1983) were intended to map the geology carry out
geochemical survey over the inaccessible and formerly little known south western part
of Ethiopia at a reconnaissance scale. Very little and sporadic detail was known about
western Ethiopia, that attempted prospection for economic mineral, Prior to the Omo
Project. the project classified the basement rocks into 3 domains (Akobo, Surma and
Hamer) according to their metamorphic grades. The Abobo license area is
encompassed within this project area.

The Western Ethiopian Shield comprises low-grade, juvenile, metavolcano-sedimentary

rocks bounded to the east, west and south by gneissic rocks. Lithological, structural
and metamorphic similarities between the gneissic rocks and the basement exposed
further south (in Kenya, Uganda and SE Sudan) suggest that the former may be a
northwards continuation of the Mozambique Belt (Kazmin et al.,1978; Seife Michael

12
Berhe, 1990; Bonavia and Chrowicz, 1993; Samuel Gichile and Fyson, 1993). Similar
considerations suggest that the juvenile rocks represent a southwards extension of the
ANS from Sudan, Egypt and Saudi Arabia (Kazmin et al., 1978; Warden et al., 1982;
Seife Michael Berhe, 1990; Teklewold Ayalew et al., 1990). Recent studies of the
Western Ethiopian Shield (e.g., Teklewold Ayalew et al., 1990; Seife Michael Berhe,
1990; Bonavia and Chrowicz, 1993; Samuel Gichile and Fyson, 1993) have alerted the
scientific community to the potential of the region for the investigation of East African
orogenic processes and, consequently, the evolution of Gondwana.

The relationship between the Neoproterozoic rocks of the Arabian–Nubian shield (ANS)
and rocks of the Mozambique belt (MB) has been possible to recognize three types of
lithotectonic assemblages: volcano-sedimentary terrenes, gneissic terrenes and
ophiolitic rocks (Vail 1985; Kroner, 1985; Shackleton, 1986; Seife Michael Berhe,
1990; Kroner et al., 1991; Stern, 1994; Abdelselam and Stern, 1996). Similar terrenes
are recognized in rocks of western Ethiopia (Kazmin et al., 1978; 1979; de Wit and
Senbeto Chewaka, 1981; Teklewold Ayalew et al., 1990).

A joint cooperative project between Chongqing Geological Bureau of China and

Geological survey of Ethiopia has conducted reconnaissance geological and
geochemical survey in western Ethiopia. The cooperative project identified potential
zone for gold and base metal mineralization, and recommended supplementary
exploration work, aiming at identifying and delineating mineralized block for further
detailed assessment.

Nankai Mine Plc has conducted detail geological, geochemical trenching and test
drilling exploration program in the area during the first and second year license period
and has identified potential primary gold target, where more trench excavation and
prospective diamond drilling has been recommended.

3. Regional Geology

The Precambrian of Africa consists of Archean cratonic basements welded together by

the Proterozoic meta-volcano-sedimentary greenstone mobile belt. The Precambrian of
eastern Africa is composed of two Archean Cratons, the Tanzanian and Nile Cratons,
and two genetically related Proterozoic mobile Pan African belts, namely; Mozambique
belt (MB) and Arabian Nubian Shield (ANS), which together form the East African
Orogen (EAO), R J Stern, 1994. To the south through East Africa, the EAO is
represented by High grade gneisses, referred to as Mozambique belt (MB). The MB is a
North-South trending orogenic zone that underlies the eastern margin of the African
Continent and extends from the Zambezi River in the South, through Uganda and
Kenya, to the southern parts of Ethiopia in the north (Holmes, 1951). The belt exhibits
polycyclic records of history of major thermo tectonic events occurred in mid-
Proterozoic and Pan-African times. In Northeast Africa and Arabia, however the EAO
consists predominantly of volcano sedimentary rocks of low metamorphic grade
termed as Arabian Nubian Shield (ANS), bounded by MB to the east and west. The

13
mainly juvenile, low-grade maficultramafic-sedimentary or ophiolitic fold and thrust
belts( Yibas 2000), corresponding to ANS, have been indicated to extend, as
discontinuous lens like bodies, from the Sinai Peninsula through South Ethiopia to
north Kenya, (in Aweke and Hailu, 2007; TMEP,1993; R J Stern, 1994; A. Allen and G.
Tadess, 2003).

The East African Orogen (EAO) is one of Earth’s great deformation belts, stretching
∼6000 km N-S along the eastern flank of Africa. Evolution of the EAO reflects a
NeoproterozoicCambrian Wilson Cycle that began with the breakup of Rodinia (870–
800 Ma: Kusky et al., 2003; Li et al., 2008) and led to the final amalgamation of
Gondwana in Cambrian time. The EAO was even longer before rifting truncated it in
the north and opening of the Southern Ocean removed ∼2000 km of the orogen in
Antarctica (thus reconstructed, the orogen is sometimes called the East African-
Antarctic Orogen or EAAO; Jacobs and Thomas, 2004). The northern EAO consists of
the Arabian-Nubian Shield (ANS), composed largely of juvenile Neoproterozoic crust
flanking the Red Sea. Whereas the southern part comprises the Mozambique Belt (MB)
with predominantly reworked older crust. The ANS contains abundant ophiolite
fragments, in contrast to the MB, where ophiolites are not found. The MB is where
Ediacaran collision between large continental blocks of East and West Gondwana was
most intense, where deep erosion has exposed medium- to high-grade gneisses and
granulites, and where great mountains rose and were eroded in Late Ediacaran and
Early Paleozoic time (Squire et al., 2006).

A two-fold division of the pre-Cambrian in the Horn of Africa seems possible, on the
basis of the original classification of Gregory for eastern Africa (Mhor 1970)

(i) An older (Archaean) group, consisting predominantly of gneisses with some

orthoschists, all of the rocks having been intensely metamorphosed, cleaved,
folded and injected. Intrusions of granite and granodiorite are common, often
themselves cut by aplites, pegmatites and mineralised quartz veins, and all
these intrusives are frequently found gneissose.
(ii) A younger pre-Cambrian (extending possibly into the earliest Palaeozoic) group,
consisting of lightly metamorphosed rocks derived predominantly from marine
geosynclinal sediments of great thickness. These paraschists include
conglomeratic and quartz schists, phyllites, calcareous schists and marble,
graphite schists and .iron-ores. They are intruded by fresh granites and
granodiorites, and occasionally even less silicic intrusives.

The upper Proterozoic contains a very thick succession of north-south trending

volcano-sedimentary successions of Pan-African age enclosed by high grade gneisses
(Kazmin, 1972 & 1978; Kazmin et aI., 1987; Davidson, 1983; Mengesha 1990;
Teklewolde et aI., 1989; Kozyrev et aI., 1985; Garland, 1980). They contain rock
assemblages of typical of ophiolitic association (Kazmin, 1978; Kazmin et aI., 1979; de
Wit and Senbeto, 1979; Vail, 1983; Berhe, 1989). Narrow discontinuous belts of

14
ultramafIc rocks, gabbros, serpentinites, rare sheeted dykes, pillowed tholeiitic basalts
and associated turbidites, chert and marble have been described.

Mengesh Tfera, Tadlwos Chernet and Worklneh Haro (1996) The first 1:2,000,000
scale Geological Map of Ethiopia with an explanatory note was compiled by V. Kazmin
and published in 1972 by the Ethiopian Institute of Geological Surveys. The map
together with 'other regional compilation works (e.g. Danelll, 1943; Mohr, 1963; Merla
el.aI., 1973) has served its purpose by providing a broad overview of the country's
geology.

Ethiopia can be divided into four major physiographic regions widely known as the
western plateau, southeastern plateau, the Main Ethiopian Rift and Afar Depression.
The Ethiopian plateau is underlain at depth by Precambrian rocks of the Afro-Arabian
Shield. The Precambrian basement is covered for the most part by glacial and marine
sediments of Permian to Paleogene period and Tertiary volcanic rocks with related
sediments. The Cenozoic volcanic succession is split apart by parts of the Great East
African Rift System in Ethiopia (The Afar Depression, Main Ethiopian Rift and related
rifts).

Two major Iithotectonic assemblages have been recognized in the Precambrian

basement in Ethiopia similar to those recognized in the neighboring countries of
northeast Africa and Arabian Peninsula. These are blocks of gneissic terranes and
metamorphosed volcanosedimentary belts associated with minor ultramafic bodies
and intrusive ranging from mafic to granitic in composition

The Precambrian shield in Ethiopia occupies a unique position in this part of the
African continent situated between the predominantly gneissic rocks of the
Mozambique Belt, to the south in eastern and southern Africa, and the
volcanosedimentary-plutonic complexes along a strike to the north bordering the Red
Sea (Eritrea and Sudan).

The Precambrian contains a wide variety of sedimentary, volcanic and intrusive rocks
which have been metamorphosed to varying degrees. The tract of land along the
Ethiopia-Sudan border in the west is underlain by gneisses and migmatites known as
Baro Group. It is flanked on the east by a large tract of land underlain by the relatively
low grade volcano-sedimentary succession known as Birbir (PR2b), Tulu Dimtu ,
Tsaliet , Tambien Groups and Didikama and Shiraro Formations and associated
plutonic rocks.

Following the Proterozoic to Early Paleozoic tectonic and magmatic activity

peneplanation of the metamorphic basement took place until Carboniferous and
Permian (Kazmin 1972). Late Paleozoic to Early Mesozoic sediments such as Enticho
Sandstone, Edaga Arbi Glacials in northern Ethiopia (Dow et aI., 1971), Permian
Sandstones in western and southern Ethiopia (Davidson, 1983), Waju Sandstone in
eastern Ethiopia (Kazmin, 1972 & 1975) and Gura Sandstone in southern Ethiopia

15
(Belay, 1978) accumulated- in shallow basins and narrow channels cut in the
Precambrian basement. Paleozoic continental sediments are also wide spread in
Tigray, Harar regions and in the Abay River Gorge (Kazmin,1972 &1975)

A threefold lithotectonic sequence has ken suggested for the Precambrian basement
rocks of Ethiopia by Kamin (1 975) and Kazmin et al. (19781, consisting of a Lower,
Middle and Upper Complex. However, recent geochronogical and isotopic studies
suggest that this Precambrian basement (granite-gneiss, volcanosedimentary and
ophiolitic suite;) is dominantly Neoproterozoic in age (Aydew et d, 1990; Ghichile,
1992; Telclay et al., 1998; Gerra, 20001, and that the rocks previously attributed to
the Archaean or pre-Neoproterozoic could be part of preNeoproterozoic continental
crustal fragments e.g. Tulu Dimtu orogenic belt, western Ethiopia, (Tadesse G. ad
Allen A., 2002), including possibly reworked and remobilized components, as indicated
by Archaean zircon xenocrysts found by Teklay el .al.,(1 998).

The Paleozoic Era in Ethiopia is marked by a regional unconformity due to long period
of peneplanation. Late PaleozoicTriasic sediments are widespread in Ethiopia as a
result of the transgression regression the sea cover the Northern, Central, eastern and
southeastern of the country (Kazmin 1999).

The main rock types recording the geological history of Ethiopia illustrated on the
general and schematic framework of the geology of Ethiopia. The Precambrian
metamorphic rocks with associated syn-to post-tectonic intrusions which form the
Basement Complex; - The Late-Palaeozoic to Mesozoic marine and continentale
sediments; - The Cenozoic 'basic and felsic volcanics and a volcano-sedimentary and
volcano-clastic rocks Early Tertiary, Late Tertiary and Quaternary volcanic. These
rocks assemblages represent 23%, 25%, 34% and 18% of the total surface area
respectively. Such a diverse geological set up makes the country wealthy in mineral
resources of various types.

The Precambrian rocks and associated Intrusions cover a quarter of the country is
underlain by Precambrian metamorphic terrains. The Precambrian rocks of Ethiopia
contain a wide variety of sedimentary, volcanic and intrusive rocks which have been
subjected to varying degrees of metamorphism and deformation. They occupy a
position of particular interest, lying at the interface, between the predominantly
gneissic terrenes of the Mozambique Belt to the south in East Africa and the Arabian-
Nubian Shield complexes of Sudan, Egypt and Saudi Arabia to the north. The
basement in the south and west of the country where granitic rocks and gneisses
predominate has been more strongly metamorphosed than the Precambrian sequences
in the north. The highest metamorphic grade (granulite facies) has been recorded in
gneisses of the southern and south-western part of the country. Though in many
cases strongly folded and foliated the rocks in the north, which include the youngest
formations (known in the basement), have generally undergone only very low to low

16
grade metamorphism. The low-grade Upper Proterozoic rocks are exposed in the
south, west, southwest and north forming the southern, western, the southwestern
Akobo and the northern Tigray Greenstone Regions, respectively. Most of the known
metallic mineralization hosted in these low grade metamorphic rocks are known over a
little area in the east exhibiting lead and copper anomalies.

Mengesha Tefera and Seife Michael Berhe (1987) and Moore et al. (1987) subdivided
the Western Ethiopian Shield into three discrete lithotectonic domains. The Birbir
domain, having a low-grade (ANS) metavolcano-sedimentary affinity, is tectonically
bounded (Teklewold Ayalew, 1997) to the east and west, respectively, by the
dominantly gneissic Geba and Baro domains. Geochronological constraints (e.g.,
Teklewold Ayalew et al., 1990) suggest that the terrains have evolved in
tectonothermal continuity during the Pan African orogeny (c. 650–550 Ma), although
their precise relationship prior to this is less clear. N-S striking structures dominate
Pan-African tectonics, although some gneisses preserve relics of granulite-facies
metamorphism and contain E-W trending structures (e.g., Kazmin et al., 1978;
Teklewold Ayalew and Moore, 1989; Mengesha Tefera and Seife Michael Berhe, 1987;
Samuel Gichile, 1992) suggesting that they were affected by a pre-PanAfrican
tectonothermal event.

The geotectonic evolution of the Western Ethiopia Shield has been interpreted in terms
of early rifting and associated sedimentation, followed by subduction and islandarc
formation, arc-accretion and, finally, continent-continent collision (e.g., Kazmin et al.,
1978). The latter stages, the Pan African orogeny, resulted from the collision of east
and west Gondwana (e.g., Stern, 1994) and caused severe E-W crustal shortening.
Linear belts of highly deformed maficultramafic bodies within low-grade (ANS) terrains
have been interpreted as dismembered ophiolitic rocks (e.g., Kazmin et al., 1978;
Warden et al., 1982; Seife Michael Berhe, 1990; Teklewold Ayalew et al., 1990;
Abdelsalam and Stern, 1996) although incontrovertible evidence for this is often
lacking. There is a growing body of evidence to suggest that bodies within the Western
Ethiopia Shield have an intrusive nature (Grenne et al., 1998; Aberra Mogessie et al.,
1999) and were emplaced into an extensional back-arc rift setting (e.g., Braathen et
al., 2001).

Detailed estimates of peak metamorphic conditions within the Ethiopian shield are
largely lacking. Characteristic metabasite parageneses generally imply green schist to
lower-amphibolite facies within the juvenile (ANS) domains and mid- to upper-
amphibolite facies in the gneissic domains. Based on metapelitic assemblages within
the Western Ethiopia Shield, Teklewold Ayalew (1997) deduced conditions of around
520° C and 4 kbar and 700° C and 7 kbar for the Birbir and Baro domains,
respectively, and implied a steep metamorphic gradient at the domain transition.
Johnson et al. (in press) showed that the rocks encountered two major metamorphic
events and followed an anticlockwise P-T-t path.

17
Two episodes of metamorphism affected rocks of the Western Ethiopia Shield. The
first, relatively high-temperature event, M1, resulted in the development of anatectic
migmatites within felsic orthogneisses. Upper amphibolite facies assemblages within
lower variance rocks, particularly the paragneissic units within the Baro, allow peak
conditions to be constrained to around 600-800° C and 5–8 kbar here. The second
event, M2, is most clearly evident in garnet-bearing gneissic rocks. Many garnets are
surrounded by reaction coronas dominated by epidote (± calcite). In places,
replacement is complete. Epidotisation of garnet is also evident within the calc-
silicates of the Geba where, in addition, hornblende is common as a replacement
product after diopside. Such features imply that M2 was both a lower temperature
event and that aqueous fluids were available at or around the peak of M2
metamorphism. Within the Birbir domain, metamorphic conditions are less easy to
accurately quantify owing to the lack of suitable assemblages. However, the
overwhelming abundance of chlorite-rich (± talc, muscovite) rocks within the Birbir
imply that green schist-facies P-T conditions were the maximum attained within the
majority of this domain. The thick clastic sequence exposed around Ayra constrains
peak P-T conditions to 570 ± 11° C and 8.6 ± 2.2 kbar. M1 peak metamorphic
conditions within the gneissic Geba and Baro domains were clearly higher than those
recorded by the Birbir and a steep metamorphic transition is implied at domain
boundaries. Such a conclusion is supported by the highly sheared (tectonic) nature of
these contacts (Teklewold Ayalew, 1997). The implication is that the Birbir is unlikely
to have been in stratigraphical continuity with the gneissic domains and that domains
were tectonically transported to their current positions prior to, or synchronous with,
M2. Johnson et al. (2002 - in press) provide a detailed treatment of the metamorphic
evolution of the area.

Major and trace element data from magmatic rocks from the WES have been used to
infer their petrogenetic history and the tectonic environment in which the magmas
were emplaced (Teklewold Ayalew et al., 1987; Teklewold Ayalew and Peccerillo 1998;
Grenne et al., 1998; Tadesse Kebede et al., 1999; Aberra Mogessie et al., 1999;
Braathen et al., 2001; Tadesse Kebede et al., 2001; Tadesse Kebede and Koeberl,
2002). In the Gore-Gambella transect, pre- to syn-kinematic intrusions consist of calc-
alkaline and arc-tholeiitic rocks that were generated by multistage, probably polybaric,
fractional crystallization of mantle-derived parental magmas. Some of the syntectonic
granites are interpreted as melts derived by anatexis of crustal rocks during the peak
of metamorphism in the Baro domain. the meta-igneous rocks of the Birbir domain
are dominantly subalkaline and show the chemical characteristics of magmatic arc
products such as those associated with present-day subduction zones. The most
“primitive” plutonic rocks have a chemistry suggesting oceanic affinity. Both the
intermediate plutons and the volcanics they intrude are calc-alkaline and similar to
rocks found in island arcs. The intercalation of turbiditic sediments with lavas
indicates that the latter were deposited subaqueously.

18
Baro Group, originally referred to as the Baro Domain (Mengesha and Berhe, 1980;
TekleWolde and Moore, 1989) consists primarily of ortho and paragneisses
metamorphosed to upper amphibolite facies. The group underlies a large tract of land
at the extreme western part of the country (Mengesha et aI., 1990; Teklewolde et aI.,
1989; Davidson, 1983). The southern end of the group has been cut by northwesterly
trending sinistral shear zone (Davidson, 1983). The Baro Group consists of
predominantly uniform and layered quartzofeldspathic gneisses. Most of the area west
of Bonga village consists of layered and relatively uniform, lenticular gneisses. The
predominant rock types are strongly foliated, light gray to pink, medium grained
biotite and hornblende-biotite gneisses. Minor ferruginous quartzite and amphibolite
layers occur within hornblende-biotite gneisses. The gneisses typically consist of sodic
plagioclase, microcline, quartz, biotite and hornblende, locally with trace of muscovite
and garnet. A uniform granitoid composition with a lenticular structure over hundreds
of square meters of outcrop area suggests that the majority of these gneisses are
tonalitic or granodioritic orthogneisses. The well layered, garnet-bearing varieties are,
however, most probably paragneisses. Although biotite and hornblende-biotite
gneisses are the dominant rock types in the Baro Group, the group also contains
layers of garnet-amphibole, garnetsillimanite, and calc-silicate vaieties. A narrow belt
of muscovite-bearing gneiss and schist also occurs along the eastern border of the
Baro Group biotite gneiss. This probably represents a retrograde metamorphism due
to shearing and may be equivalent to the biotite gneiss.

The Konso Group, formerly named as the Konso Gneiss (Kazmin, 1972 & 1975), is
comprised of dark gneisses rich in hornblende and poor or lacking quartz. These rocks
occur in southern part of the country in the Konso and Hamar regions (Kazmin, 1975;
Davidson, 1983). They underlie a large area starting from the Segen River north to the
southern side of the Gidole highlands and reappear from beneath the Tertiary volcanic
cover west of Lake Chamo. Similar gneisses occupy several strips in the area between
Omo and Segen rivers, in particular close to Lake Turkana.

Rocks of possibly Early or Middle Proterozoic age, Wadera Group and Mormora Group
have been identified in Sidamo and Hararghe regions and possibly occur in the
western part of the country (Kazmin,1972; Berhe, 1987). The unit is represented by
psammitic and pelitic metasediments with a characteristics northeasterly, northerly or
northwesterly opening sometimes asymmetric folds.

The Late Proterozoic Birbir and Tulu Dimtu Group crop out in Wollega and extend
through Gojam into northern Ethiopia. They form the youngest Precambrian basement
units in northern Ethiopia, where they are referred to as Tsaliet Group, Tambien
Group (Beyth, 1971), Didikama Formation and Shiraro Formation (Kazmin, 1975,
Garland, 1980).

The Birbir domain comprises metasedimentary rocks (mss), metavolcanics (mvs),

altered subvolcanic sills and dykes and mylonitic quartz diorite (mqd). The

19
metasediments are weakly to strongly schistose metagreywacke and pelite, with
subordinate coarse volcaniclastic and carbonate rocks.

The Birbir Group tract of land stretching from around Surma area due north up to
Chanka village is underlain by a conspicuous group of lowgrade, predominantly green
schist facies rocks in contrast to the adjacent high-grade gneisses of Baro Group and
Alghe Group. These volcano-sedimentary assemblages reappear in the area north of
Asosa (UN, 1972; Metal Mining Agency of Japan, 1972; Davidson, 1983; Mengesha
and Seife Michael, 1990; Mengesha, 1990; TekleWolde.etaI., 1989). The group is
named after the Birbir River, major tributary of Baro River in western Ethiopia.
Further north, the group merges with similar rocks in Sudan, Uffat Group (Vail et aI.,
1986). The Birbir Group includes rocks of the Akobo (Davidson, 1983) and Birbir
Domains (Teklewold et aI., 1989; Mengesha et aI., 1990). The Birbir Group lies
between the high grade gneissic terrene of Baro Group in the West and Alghe Group
in the East. In the north, the group is separated from the high grade terrene of Alghe
Group by the Tulu Dimtu-Dalati-Yubdo ophiolitic suture zone (Kazmin 1973; Kazmin
et aI., 1979). The belt narrows towards south and finally around Surma area rocks of
Baro and Alghe Groups merge, where they are all truncated by the northwest trending
Surma shear zone (Davidson, 1983). The contact between the Birbir Group and the
high grade gneisses is of a tectonic nature and marked by mylonites and the change in
metamorphic grade is also abrupt (Mengesha, 1990; TekleWo:de et aI., 1989; Vail et
aI., 1986; Davidson, 1983). The succession is faulted and folded into a series of tight
to isoclinal folds. All these rocks have undergone intense mylonitization (Vail et aI.,
1986; Tekle Wolde et aI., 1989; Davidson, 1983).

The Pre-Cambrian basement structures constitute the oldest structures which also
controlled later structural patterns. Two major Precmbrian (Neoproterozoic) tectono-
stratigraphic units are recognized in Ethiopia: high-grade gneiss and low-grade
metasediments. The gneissic rock consists of polydeformed and metamorphosed schist
and gneisses (biotite-hornblende gneiss and amphibolites). These rocks are
comparable to the predominantly gneissic terraines of the Mozambique Belt described
by Vail(1987, 1988). The low-grade metamorphic volcano-sedimentary units consist of
amphibolite, carbonaceous quartz-mica schist, chlorite actinolite schist, quartz-
feldspar-biotite schist, meta-conglomerate and graphitic quartzite and mafic to
ultramafic bodies. The ultrabasic rocks associated with the metavolcano-sedimentary;
sequence form a N-S trending linear zone and occur as structurally modified and
boudined lenses, extensively altered into serpentinite, talc-schist and talc-tremolite
schist. These ophiolitic maficultramafic belts could be interpreted, in accordance with
the models developed in the Arabian-Nubian Shield, as Neoproterozoic suture zones,
along which different terranes were accreted during the Gondwana collision
(Shackleton, 1994 and 1996; Stern, 1994; Abdeisalarn and Stern, 1997, Tadesse G.
and Allen A., 2002).

20
 4. Local Geology

4.1. Metagranite
This rock unit is exposed east of the target area. It is pink to light gray color, medium
to coarse grain, slightly weathered, well foliated at river and exploration pit exposure.

Metagranite at river and panning place

exposure

4.2. Quartz muscovite chlorite schist

This rock is exposed at the eastern and western part of the main road crossing the
license area. This unit is light color when the chlorite is les and deep green when the

21
chlorite is dominant. It is exposed at the river cut and local pits it is crenulated,
foliated. It is foliated, fine grained and slightly weathered.

Quartz chlorite mica schist at river

exposure with magnetite and limonite
mineralization and alteration

4.3. Clay over burden

The weathering thickness of the study area is thick. The color is mostly red and
hard to dig. The area of exploration is tropical and there is latterit at the surface.

22
The thickness is varying from place to place. It ranges from 2m at seasonal river, 5
to 8m at river head and 10 to 15m at terrace.

Pit at river channels, river head and

at terrace show clay thickness

23
 4.4. Washable Gravel

Gravel is sedimentary rock which is deposited when the energy of transporting

agents becomes less. The gravel layer is found mixed with sand and clay depends on
the maturity of it. Gravel is the main host of gold other base metals since it has high
specific gravity than. Maximum thickness is around 2.2m and minimum is 0.6m.
The thickness of the gravel unit increases near to the river (river bank). The
grain size of gravel ranges from boulder to pebbles. In all sites gravel unit is
moderately to well sort in texture and angular to sub-angular in morphology.
The washable gravel consist variegated dominantly quartz.

24
The gravel with sand and clay is from
river pits and the other is after wash
it is from terrace

25
Figure 2: Lithological map of the target blocks

26
 5. Methodology

The exploration area is located at Gambella Peoples National Regional state, Agnua
zone, Abobo wereda, Dumbang and Puatalm kebele, Gobey and Lunga locality.
systematic exploration techniques were employed to delineate the placer gold deposit
and evaluate the reserve of gold in the area. Geological maps preparation, resource
map delineation and pit excavation were the main task carried out in the exploration.

The profile lines are made perpendicular to the river. The profile lines are made with 200m
profile spacing and pits are located along the profile with 40m intervals. Garmin 30 GPS,
compass and meter tape are used to locate and map the pits.

The exploration is done by manually digging circular pits and re-logging local pits.
Totally 111 pits are sunk in 43 profile lines out of this 71 is old pits reclogged and pan the gravel
by the agreement with the owner of the pit, we pan the gravel from their pit and after we weight
the gold we give to them , 40 pit was digging at the river channel and at river head.

The gravel material is panned using a wooden pan or “batya”. Samples are put in a
plastic bag and labeled. After the sample is dried the morphology, color and size of the
gold grains were studied using a hand held lens and recorded. Gold grains are
weighed and used to calculate the grade for each pit in gm/m3. All the data are put in
the Microsoft office excel for each pit and the average grade and depth are calculated
for gravel and overburden. After delineating the resource and calculating the area in
MapInfo software, the total placer gold reserve of the area is calculated and gold
prediction map is made.

All the data is put in the Microsoft excel for each pit and the average grade and depth
are calculated for gravel and overburden. Final report is written accompanying the
different maps and tables and the raw data is attached in the annex.

Global Mapper21.1, MapInfo pro software and starter 5.4 soft wares are used to
produce maps, log section, profiles and reserve calculation of the area.

6. Exploration Work Performance

The study areas is done at two blocks, block 1 Gobey stream with 1.0448 km2 and block 2 Lunga
stream with 1.532 km2 tributary to Alwero river.

A total of 111 pits were sunk along 43 profile lines at 40 meters interval and average 200m
profile line spacing (200X40) at two blocks. Pits are dug manually, re-log old pits and reach up
to the bed rock. Circular pits were dug manually.

27
Figure 3: Pits and profile line location map

28
Figure 4: Sample Pit log section at Gobey stream channel

29
Figure 5: Sample pit log section at river head at Gobey stream

30
Figure 6: Sample pit log section at Gobey stream terrace

31
Figure 7: Sample pit log section at Lunga stream

32
Figure 8: Sample pit log section at Lunga stream terrace

33
Figure 9: Sample pit log section at Lunga stream head

34
Figure 10: Sample pit log section at Lunga upstream

35
 7. Morphology and Grain size of the Gold

The morphology of the gold is generally is flaky, sub angular. The size of the gold is
medium to dominantly very fine grain and yellowish color however serrated texture
and sub rounded grains are also seen in some samples.

8. Reserve of the Deposit

The method used for calculating reserve, volumes and grade of the deposit is the block
and average method. The gold-bearing gravel horizons are outlined using about
0.050g/m3 content as a lower-class limit or cut-off grade.

The reserve calculation of the block method is done using the information provided in
deposit parameters. These are

 Area of each block is measured by MapInfo pro method from the blocking
out plans

 The average wash thickness of the block is taken as the arithmetic mean of
each pit.

 Volume of the block is found by multiplying area and average wash

thickness of all pits.

 The average grade of the target area is the total value divided the by total
volume of blocks.

 The gold reserves for each block are calculated using the following formula:

 The volume of gold bearing alluvium in the block is calculated using the
following formula:

The surface area of the block is determined from the plan map using MapInfo pro
software. The arithmetic mean of the thickness of the gold bearing gravel layer at
various opening within the block is taken to be the average thickness.

The sum of gold reserves in each block is taken to be the total gold reserve estimate of
the valley under consideration.

36
Figure 11: Profile line and pits with Gold anomaly

37
Accordingly, based on the outlined criteria’s mentioned above the minable placer
deposit is divided in to Two blocks.

Block 1 Gobey stream

Block 2 Lunga stream

The Two blocks covering an area of 2.58 km2, the reserve estimate for each block is
described in tables below.

Block 1 Gobey stream

After the average grade of the area is calculated the total gold reserve is estimated as
follows:

 The total resource area computed from the arc map is found to be 1,043,675 m2

 Average payable gravel thickness is found to be 0.942 m

 Average overburden thickness is 5.406 m

 The average gold grade of the area is 0.172 gm/m3

 The stripping ratio is calculated

Average overburden thickness divided by average thickness of the pay

gravel

5.406/0.942 = 5.739, 1 m: 5.739 m

 The total volume of the overburden is computed by multiplying average over

burden thickness by the total area of the block

5.406 m X 1,043,675 m2= 5,642,107 m3

 The total volume of the pay gravel is computed by multiplying average gravel
thickness by the total area of the gravel (resource area)

0.942 m X 1,043,675 m2 = 983,141 m3

 The total gold reserve of the area is calculated by multiplying the gold grade by
the total volume of the area

0.172 gm/m3 X 983,141 m3 = 169,228.083 gm

 Therefore, the total gold reserve of the area is found to be 169.228 kg

38
Block 2 Lunga stream

After the average grade of the area is calculated the total gold reserve is estimated as
follows:

 The total resource area computed from the arc map is found to be 1,525,207 m2

 Average payable gravel thickness is found to be 1.198 m

 Average overburden thickness is 6.477 m

 The average gold grade of the area is 0.191 gm/m3

 The stripping ratio is calculated

Average overburden thickness divided by average thickness of the pay

gravel

6.477/1.198 = 5.40, 1 m: 5.40 m

 The total volume of the overburden is computed by multiplying average over

burden thickness by the total area of the block

6.477 m X 1,525,207 m2= 9,878,841 m3

 The total volume of the pay gravel is computed by multiplying average gravel
thickness by the total area of the gravel (resource area)

1.198 m X 1,525,207 m2 = 1,827,748 m3

 The total gold reserve of the area is calculated by multiplying the gold grade by
the total volume of the area

0.191 gm/m3 X 1,827748 m3 = 348,447.6837 gm

 Therefore, the total gold reserve of the area is found to be 348.447 kg

Table 3: Reserve estimation of target block 1 and block 2

39
Block 1 Gobey stream

Voluem
Thickness (m) (m3)
Profile Pit Voluem Gold weight Wash Gold resource Gold resource
S.no Line Name OB Wash thickness pits (m3) (gm/m3) Area (m2) OB thickness (gm) (Kg)
PL1-01 1.8 1 0.38 0.039473684
1 PL1 PL1-02 5 0.8 0.3 0.066666667
PL2-01 1.8 1 0.38 0.026315789
2 PL2 PL2-02 7 1 0.38 0.044736842
PL3-01 1.9 0.6 0.23 0.434782609
PL3-02 8 1 0.38 0.055263158
3 PL3 PL3-03 10 1.2 0.45 0.037777778
PL4-01 2 0.8 0.3 0.05
PL4-02 9 1 0.38 0.05
4 PL4 PL4-03 12 1.5 0.57 0.022807018
PL5-01 1.6 1 0.38 0.263157895
5 PL5 PL5-02 8 0.8 0.3 0.066666667
PL6-01 2 0.6 0.23 0.060869565 1,043,675 5642107 983141.85 169228.0825 169.2280825
PL6-02 6 0.8 0.3 0.036666667
6 PL6 PL6-03 9 1 0.38 0.031578947
PL7-01 1.9 0.6 0.23 0.347826087
PL7-02 7 1 0.38 0.026315789
7 PL7 PL7-03 10 0.8 0.3 0.066666667
PL8-01 1.9 0.7 0.26 0.384615385
PL8-02 7 1 0.38 0.039473684
8 PL8 PL8-03 13 1.5 0.57 0.035087719
PL9-01 1.5 1 0.38 0.263157895
PL9-02 6 1.2 0.45 0.026666667
9 PL9 PL9-03 12 1 0.38 0.042105263
10 PL10 PL10-01 1.7 0.8 0.3 0.333333333

40
 PL10-02 9 1.4 0.53 0.032075472
11 PL11 PL11-01 2 0.6 0.23 0.869565217
PL12-01 1.6 0.8 0.3 0.333333333
12 PL12 PL12-02 8 1 0.38 0.026315789
PL13-01 1.5 0.8 0.3 0.366666667
13 PL13 PL13-02 7 1 0.38 0.034210526
PL14-01 1.7 0.6 0.23 0.434782609
14 PL14 PL14-02 6 1 0.38 0.031578947
PL15-01 1.7 0.8 0.3 0.333333333
15 PL15 PL15-02 8 1 0.38 0.031578947
PL16-01 1.9 0.7 0.26 0.384615385
16 PL16 PL16-02 9 1.5 0.56 0.026785714
PL17-01 2 0.8 0.3 0.433333333
17 PL17 PL17-02 7 1 0.38 0.031578947
PL18-01 2 0.8 0.3 0.333333333
PL18-02 8 1 0.38 0.031578947
18 PL18 PL18-03 15 2 0.75 0.014666667
PL19-01 2 0.6 0.23 0.434782609
19 PL19 PL19-02 7 1 0.38 0.028947368
20 PL20 PL20-01 1.5 0.8 0.3 0.333333333
21 PL21 PL21-01 2 0.6 0.23 0.47826087
PL22-01 1.7 0.8 0.3 0.333333333
22 PL22 PL22-02 9 1 0.38 0.034210526
PL23-01 1.6 0.8 0.3 0.333333333
23 PL23 PL23-02 7 1 0.38 0.028947368
Average 5.41 0.942 0.172129874
Stripping ratio 5.74m : 1m 5.738854

41
Block 2 Lunga stream

Voluem
Thickness (m) (m3)
Profile Pit Wash Voluem Gold weight Wash Gold resource Gold resource
S.no Line Name OB thickness pits (m3) (gm/m3) Area (m2) OB thickness (gm) (Kg)
24 PL24 PL24-01 2 0.8 0.3 0.033333333
PL25-01 1.7 1 0.38 0.289473684
25 PL25 PL25-02 7 0.8 0.3 0.366666667
PL26-01 2 0.6 0.23 0.434782609
26 PL26 PL26-02 6 1 0.38 0.034210526
PL27-01 2 0.8 0.3 0.033333333
PL27-02 7 1 0.38 0.289473684
27 PL27 PL27-03 10 1.5 0.56 0.021428571
PL28-01 2 0.8 0.3 0.333333333
PL28-02 6 1 0.38 0.289473684
28 PL28 PL28-03 9 1.5 0.56 0.023214286
PL29-01 1.7 0.6 0.23 0.434782609
PL29-02 8 1 0.38 0.289473684 1,525,207 9878841 1827748.061 348447.6837 348.4476837
29 PL29 PL29-03 13 2 0.75 0.02
PL30-01 1.7 0.8 0.3 0.333333333
PL30-02 7 1 0.38 0.315789474
30 PL30 PL30-03 10 1.5 0.56 0.019642857
PL31-01 1.6 0.8 0.3 0.333333333
PL31-02 9 1.2 0.45 0.288888889
31 PL31 PL31-03 12 2 0.75 0.021333333
PL32-01 1.8 0.8 0.3 0.333333333
PL32-02 6 1 0.38 0.289473684
32 PL32 PL32-03 11 2 0.75 0.02
PL33-01 2 0.8 0.3 0.333333333
33 PL33 PL33-02 9 1.5 0.56 0.232142857

42
 PL33-03 13 2 0.75 0.022666667
PL34-01 2 0.8 0.3 0.333333333
PL34-02 8 1 0.38 0.289473684
34 PL34 PL34-03 10 2 0.75 0.02
PL35-01 1.7 0.8 0.3 0.333333333
PL35-02 8 1.2 0.45 0.244444444
35 PL35 PL35-03 11 2.2 0.83 0.01686747
PL36-01 1.7 0.8 0.3 0.333333333
PL36-02 7 1.1 0.41 0.292682927
PL36-03 11 1.5 0.56 0.019642857
PL36-04 14 2 0.75 0.017333333
36 PL36 PL36-05 13 1.7 0.64 0.171875
PL37-01 1.7 0.8 0.3 0.333333333
PL37-02 7 1 0.38 0.315789474
PL37-03 11 1.5 0.56 0.023214286
37 PL37 PL37-04 14 2 0.75 0.014666667
PL38-01 1.9 0.8 0.3 0.333333333
PL38-02 8 1.4 0.53 0.188679245
38 PL38 PL38-03 12 2 0.75 0.017333333
PL39-01 1.7 0.8 0.3 0.333333333
39 PL39 PL39-02 9 1.6 0.6 0.183333333
PL40-01 2 0.8 0.3 0.333333333
40 PL40 PL40-02 8 1 0.38 0.289473684
PL41-01 2 0.8 0.3 0.333333333
41 PL41 PL41-02 12 2 0.75 0.16
PL42-01 1.7 0.8 0.3 0.033333333
42 PL42 PL42-02 9 1.2 0.45 0.024444444
PL43-01 1.7 0.8 0.3 0.333333333
43 PL43 PL43-02 7 1.5 0.56 0.196428571
44 PL44 PL44-01 1.8 0.8 0.3 0.033333333

43
 PL44-02 8 1.5 0.56 0.196428571
PL45-01 1.7 0.8 0.3 0.033333333
45 PL45 PL45-02 6 1 0.38 0.031578947
PL46-01 2 0.8 0.3 0.333333333
PL46-02 9 1.5 0.56 0.019642857
46 PL46 PL46-03 8 1 0.38 0.026315789
Average 6.477 1.198360656 0.19064317
Stripping ratio 5.40m :1 m 5.4049248

Table 4: Summery of Gold reserve of the mining blocks

Average Thickness (m) Average Volume (m3) Average Gold

Block Wash grade Block Gold
Block Name Area (m2) OB Wash thickness OB thickness over all (gm/m3) Reserve in kg
Block 1 Gobey
Stream 1,043,675 5.406 0.942 5,642,107 983,141.85 6,625,248.85 0.172129874 169.2280825
Block 2 Lunga
Stream 1,525,207 6.477 1.198 9,878,841 1,827,748.06 11,706,589.061 0.19064317 348.4476838
Sum 2,568,882 15,520,948 2,810,890 18,331,838 517.6758
Average 5.9415 1.07 0.181386522

44
 9. Production Plan

9.1. Life of the Deposit Operation Plan

Considering the total minable gravel ore reserve within the mining blocks after 5%
reduction which equals 2,670,345.5 m3 and the volume of gravel ore to be mined
annually at full capacity to be 288,000 m3, the deposit sustains for 10 years’ time
frame.

Mine life of the ore deposit = Volume of Mineable reserve in m3

Volume of Annual Production in m3

= 2,810,890 m3

288,000m3

= 10

9.2. Organization of Mine Working

 Mine Working days/annum : 300 days

 Working days per week : 6 days
 No of operating shifts : One shifts each of
 Effective working hours/ shift : 8 hours

9.3. Production Plan

Shaka and Sons PLC have carried out geological exploration work by pit excavation
and secured 517.6758 Kg of placer gold from 2,810,890 m3 of gravel ore at
0.181386522 gm/m3 gold content by removing a total overburden volume of
15,520,948 m3 within a total mineable area of 2,568,882 m2. The proponent planned
to mine the placer deposit within 10 year time frame.

Then, the total minable reserve gravel ore after 5% reduction is 2,670,345.5 m3 gravel
containing 492.04201 kg of gold at 0.181386522 gm/m3 gold content. Planning the
mine to run at efficiencies of 85% on year one, and full capacities from year two on
ward. Accordingly, the annual production at full capacity will be will be 52.239 kg. The
detail of the production plan is presented in the following table.

45
 Table 5: Production plan

Production Plan (years)

0. Description unit Total 1 2 3 4 5 6 7 8 9 10

1 Volume of m3 2,810,890 244,800 285,121 285,121 285,121 285,121 285,121 285,121 285,121 285,121 285,121
gravel ore
production plan

2 Production m3 2,670,346 244,800 269,505 269,505 269,505 269,505 269,505 269,505 269,505 269,505 269,505
after 5%
allowance
3 Efficiency % 85 100 100 100 100 100 100 100 100 100

4
final production
of gravel m3

5 Gold contained 517,676 44,404 52,586 52,586 52,586 52,586 52,586 52,586 52,586 52,586 52,586
@
0.18139gm/m3 gm
6 Gold produced kg 517.6758 44.404 52.586 52.586 52.586 52.586 52.586 52.586 52.586 52.586 52.586

7 Overburden 15,520,948 1,319,281 1,577,963 1,577,963 1,577,963 1,577,963 1,577,963 1,577,963 1,577,963 1,577,963 1,577,963
removal m3
8 Stripping Ratio 5.52172 5.3892 5.5344 5.5344 5.5344 5.5344 5.5344 5.5344 5.5344 5.5344 5.5344
5.52m:1m

46
 9.4. Mining Method
The proposed mining method for Shaka and Sons PLC placer gold deposit will consists
of clearing the site from trees, grass and strip the overburden of 5.52m: 1m meters
using dozer supported excavator and dump trucks. Finally extract gravel ore by one
bench operated by back hoe excavator. The ore is pilled and/or directly loaded on
dump trucks and transported to the washing plant.

9.5. Volume of Earth Moving

The volume of earth moving specifically gravel ore and waste during the project life of
10 years is 2,820,890 m3 and 15,520,948 m3 respectively that is a total of 18,331,838
m3. Also 5% of the total volume is considered as auxiliary works and then the total
volume of earth moving is estimated according to the following formula.

Vt = Vob + Vgr+ Vau

Were,

Vt - total volume of earth moving (m3)

Vob - Volume of overburden = 15,520,948 m3

Vgr – Volume gravel ore = 2,810,890 m3

Vau – Volume of auxiliary work = 5% (Vob + Vgr)

= 0.05 (15,520,948+ 2,810,890)

= 0.05 (18,331,838)

= 916,591.9 m3

Vt = 15,520,948+2,810,890+ 916,591.9 = 19,248,429.9 m3

So, total volume of earth moving works (Vt) will be 19,248,429.9 m3

9.6. PIT DESIGN

This placer deposit will be operated by third benches of 5.52 m of overburden and
1.00m thickness of gold contained gravel ore. The first activity will be clearing the site
and removing the overburden of 5.52 m. The third bench is extracting gravel ore which
will be undertaken throughout the bench height of 6.52 m using excavator in
combination of dozer.

47
Working and ultimate slope angle of the overburden bench wall is not significant.
However, this slope will be managed by excavator or dozer as appropriate. The slope
on the gravel ore extraction is also insignificant.

For this placer mining plan the major factors to be considered are

1. Clearing face in advance of stripping

2. Stripping overburden face in advance of gravel extraction face

3. Finally, gravel extraction, all these activities are carried out independently.

Therefore, the appropriate bench height that manages and enables to achieve the
required gravel ore for placer gold production shall be 1m and overburden is 5.52 m.
Also the use of equipment particularly excavator, loader and dozer are the main
machinery that will take part in earth moving works.

9.7. MINING EQUIPMENT

The gravel ore mining and processing will be carried out by two main phases. The
mining phase is consisting of site clearing, overburden stripping, and gravel ore
extraction, pilling and hauling to the washing plant. The processing phase will be
carried out by a complete gold washing plant.

In order to undertake mining and processing activities several equipment and

machinery are required. The main activities to be carried out are preparatory work,
main works and gold processing; for the implementation of these activities the
following short-listed machinery and equipment are required to meet the production
plan.

 Washing plant (1)

 Bulldozer (1)
 Excavator (1)
 Dump trucks (2)
 Generator (2)
 Diesel submersible pump (2)
 Pickup 4WD (2)

48
Figure 12: washing plant show hoper Washing plant show mat

10. Marketing

10.1. Supply of Gold

Gold mine production increased significantly over the 1980s and 1990s from less
than 1,300 t in 1980 to over 2,500 t by 1998. The increase has been fuelled by
incremented production from the majority of gold producing nations, offsetting
decreasing production from South Africa. From an industry perspective, gold is
predominantly driven by global jewelry demand. The 2006 consumption was 3,400 t,
1,100 t more than the mine supply. The difference was made up of scrap supply
(1,100 t) and official sector sales (300 t), offset by producer de-hedging (400 t). Gold
touched an all-time high of $1496/oz in April 2011. Today, China is the world's
largest gold producer followed by Australia, USA and South Africa and Russia.

The total volume of gold ever mined in history is estimated at some 155,000 t which
compares to an annual production of approx. 2500 tons. The average grade of the
mined one is also declining globally. The higher average mines have been depleted and
the market has been forced to turn to mines that deliver a lower grade of one, which
means that the gold exploration expenditure have risen sharply in recent years and
today the gold market rise up in on international market.

10.2. Use (demand) for gold

Demand for gold increases through time. The fundamental reasons for the increase of
demand for gold include:

49
  It is used to make jewelry.
 It is used to enhance risk management and capital preservation for
institutional and private investors across the globe.
 It is used as reserve asset in central banks.
 It is used for technical application
Jewelry has always been a key area of demand for gold with India and China being
the two largest markets for gold jeweler. Part of the large appetite for jewellery in
these countries is driven by the cultural role gold plays; it is considered auspicious to
buy gold at key festivals and events. In both India and China, gold jewellery is a
desirable possession as well as an investment to be passed down through generations.

This demand currently shows no signs of abating, driven by growing wealth and
demographic shifts: by 2020 India and China combined will have one billion new
urban consumers. These inspirational populations in Asia are also experiencing a rise
in disposable income, which is driving gold demand.

These diverse uses for gold, in jewelry and technology and by central banks and
investors, mean that across the decade’s different sectors in the gold market have
risen in prominence at different points in the global economic cycle. This self-
balancing nature of the gold market means that, typically, there is a sustained base
level of demand.

Investment: Gold has unique qualities that enhance risk management and capital
preservation for institutional and private investors across the globe. Research has
shown that even a modest allocation to gold makes a valuable contribution to the
performance of a portfolio by protecting against downside risk without reducing long
term returns.

These qualities are considered to be particularly important during periods of financial

stress. However, gold's effectiveness in stabilizing returns and protecting capital is just
as relevant regardless of economic environment.

Today, investment in gold accounts for over one third of global demand. This
demand is made up of direct ownership of bars and coins, or indirect ownership
via exchange-traded funds (ETFs) and similar products

Central Banks: Central banks’ behavior with respect to gold has fundamentally
shifted over the past few years. This reflects a combination of slowing sales from
European central banks and large purchases from emerging market countries in Latin
America, the Middle East and Asia. Since 2010, central banks have been net buyers of
gold, and their demand has expanded rapidly, growing from less than two per cent of
total world demand in 2010 to over nine per cent in 2012.

50
This change in behavior is a clear acknowledgement of the benefits that gold can bring
to a reserve portfolio. Some banks have bought gold to diversify their portfolios,
especially from US$-denominated assets, with which gold has a strong negative
correlation. Others have bought gold as a hedge against tail risks or because of its
inflation-hedging characteristics (gold has a long history of maintaining its purchasing
power).

Gold plays a prominent role in reserve asset management, as it is one of the few assets
that is universally permitted by the investment guidelines of the world’s central
banks. This is in part due to the gold market being deep and liquid, which is a key
characteristic required by reserve asset managers.

Technology: Around seven per cent of the world demand for gold is for technical
applications. The electronics industry accounts for the majority of this, where gold’s
conductivity and resistance to corrosion make it the material of choice for
manufacturers of high-specification components.

In addition, the metal’s excellent biocompatibility means that it continues to be used

in dentistry. Beyond electronics and dentistry, gold is used across a variety of high-
technology industries, in complex and difficult environments, including the space
industry and in fuel cells. Gold’s catalytic properties are also beginning to create
demand both within the automotive sector, as the metal has now been proven to be a
commercially viable alternative to other materials in catalytic converters, and within
the chemical industry.

A range of healthcare and catalytic applications for gold is currently being developed
as the field of nanotechnology expands. While this demand is still small in tonnage
terms, the growing number of patents being published relating to gold
nanotechnology suggests many new applications will be developed in the coming
years.

10.3. Market Segmentation

As discussed earlier one of the main reasons for the increase in demand of the gold
was its usage by countries central banks’ as a reserve. The central banks behavior
with respect to gold has fundamentally shifted over the past few years. Since 2010,
central banks have been net buyers of gold, and their demand has expanded rapidly,
growing from less than two per cent of total world demand in 2010 to over nine per
cent in 2012.

Gold plays a prominent role in reserve asset management, as it is one of the few assets
that is universally permitted by the investment guidelines of the world’s central
banks. This is in part due to the gold market being deep and liquid, which is a key
characteristic required by reserve asset managers.

51
 Therefore, to keep the sustainable development of the country, the National Bank of
Ethiopia similar to the other countries central banks developed keen interest to
purchase gold to build its reserve portfolio. In relation to that, the government
encourages investors to involve in gold mining in the country. As a result, the
target market to sell the gold is well known i.e. the National Bank of Ethiopia.
There is no marketing problem because all products will be sold to the Bank.

10.4. Pricing

According to the ministry of mines (mom), Ethiopia has earned 560 million US dollars
from export of minerals, 2014 E.C. Plagued by a fall in the global price of gold, the
revenue obtained is just about half of the ministry’s projection for the period. The
lion’s share of the revenue is obtained from export of gold extracted by both traditional
miners and companies. Of the over 8343 kg of gold supplied to the international
market, over 60% came from traditional miners, according to data from MoM. Export
of minerals has become Ethiopia’s second biggest foreign currency earner
contributing to over 23 percent of the overall export earnings of the country.

However, global price fluctuations have put a dent on the flow of foreign
currency to the country. The price of gold, the major export mineral of Ethiopia
dropped nearly 17.88 percent at the end of 2013. With its revised export revenue
target, the ministry expects to fetch one billion dollars from mineral exports by the
end of the current fiscal year.

To counter the impact of a fall in global price, the report says, the ministry would
work to ensure an increase in supply of gold by artisanal miners and export value
added minerals.

Table 6: Gold Sales Forecast as per 10 February 2023

Gold Price per Gram [ETB]

Gold Rates Ethiopia High Low Change
in Ethiopian birr
Gold Rate per Gram 24k 3,230.55 3,231.00 3,227.07 2.20
Gold Rate per Gram 22k 2,965.65 2,966.06 2,962.45 2.02
Gold Rate per Gram 21k 2,826.73 2,827.13 2,823.69 1.92
Gold Rate per Gram 18k 2,422.91 2,423.25 2,420.30 1.65
Gold Rate per Gram 14k 1,889.87 1,890.14 1,887.84 1.29
Gold Rate per Gram 10k 1,347.14 1,347.33 1,345.69 0.92
Gold Rate per Gram 6k 807.64 807.75 806.77 0.55

52
 Table 7 Forecasted revenue

Year Unit 1 2 3 4 5 6 7 8 9 10

G old
gm 44,404 52,586 52,586 52,586 52,586 52,586 52,586 52,586 52,586 52,586
Production
Price/gm
as of
Birr/g
February 2,966 3,055 3,146 3,241 3,338 3,438 3,541 3,647 3,757 3,870
m
10/2023
in ETB
sale (gross
Birr 131,686,723 160,630,221 165,449,128 170,412,601 175,524,980 180,790,729 186,214,451 191,800,884 197,554,911 203,481,558
revenue)

53
 10.5. Sales Strategy and Sales Forecast

The whole product will be sold to the National Bank of Ethiopia. The expected minable
gold reserve will be around 517.67 kg. The laboratory test shows that the gold purity
level was around 22 Karat. Therefore taking the price of gold for 22 Karat
1,763,546,185 Birr.

11. Resource Required

The resource requirements for the project includes pre operational cost, land
acquisition, building and civil works, machinery and equipment, man power, office
equipment, utilities and others are presented in details in the following sections .

11.1. Pre-production cost

Pre-production cost is expenditure prior to the mining operation like Establishment,
Registration, Licensing, and Legal Fees, Exploration cost and Feasibility Studies and
ESIA Study Fee. The details are given in the following table.

Table 8: Startup Costs and Expenses

Total Price,
S.№ Item Remark
Birr
Establishment, Registration, Licensing, and
1 80,000
Legal Fees
2 Exploration cost 1,500,000
3 Feasibility Studies and ESIA Study Fee 400,000
4 Property right compensation 2,500,000
5 Other cost 850,000
Total Pre-production cost 5,330,000

11.2. Fixed Capital

Investment for fixed assets like equipment and machineries is considered as capital
investment. The listed equipment and machinery required for placer gold ore
operation is given in the following table.

11.3. Building and Civil works

The company will build camp, office, store, houses, workshop, tailing disposal, and
other facilities in the project site. The estimated cost is shown in Table below.

54
Table 9: Building and Civil Work

S.№ Item Quantity Unit price Total

price, Birr
Building and civil works for camp 250 m2 10,000 2,500,000
site (office, store, bedrooms,
1 workshop, etc.
Access road and site preparation 1 LS 1,500,000
(overburden clearing, camp site
2 clearing and establishment
Pipeline installation, tailing 1 Ls 2,000,000
disposal, pond, water reservoir and
3 foundation civil works
Total Building and Civil Work cost 6,000,000

11.4. Machinery and Equipment

The placer gold Mining Plant requires the use of machineries for, excavating,
earthmoving, transporting, and processing. The type and estimated price of the
machineries and equipment is presented in Table below.

Table 10: Machinery and Equipment Requirement

No. Type of machinery/ vehicle Number Unit cost Total cost (Birr)
required (Birr)
1 Washing plant with 1 12,000,000 12,000,000
accessories
2 Excavator 2 13,000,000 26,000,000
3 Dum Truck (Sino truck) 2 7,500,000 15,000,000
4 Diesel pump and generator 2 1,500,000 3,000,000
5 Pickup D4D 2 5,000,000 10,000,000
6 Water pump (350hp) 2 750,000 1,500,000
7 Bulldozer ( D8L ) 1 24,000,000 24,000,000
8 Safety Equipment’s " - 100,000
9 Camping equipment 585,000
10 Other equipment (Hand Set - 100,000
tools)
Total Machinery and Equipment cost 92,285,000

55
 11.5. Office Equipment and Furniture
The project requires different office equipment and furniture for successful
implementation. The list with the corresponding cost appears in the table below.

Table 11: Office Furniture and Equipment

No. Item Quantity Unit Price Total Price Remark

(Each) (Birr) (Birr)

1 Medium back swivel 2 4000 8,000

chair

2 Office Table 2 5,000 10,000

3 Guest chair with 4 3,000 12,000

armrest

4 Safe box 1 50,000 50,000

5 File cabinet 1 3,000 3,000

6 Desktop Computer 2 30,000 60,000

7 Printer 1 40,000 40,000

8 Laptop computer 1 100,000 100,000

9 Miscellaneous 1 50,000 50,000

Sub Total Office Furniture and Equipment’s cost 333,000

56
 11.6. Camping Equipment

The camping and kitchen equipment required at the campsite is shown on the
following table.

Table12: Campingand Kitchen Equipment Requirement

Unit Total
S/n Item Quantity Price (birr) Price (birr)
1 Cooking oven 1 30,000 30,000
2 Dishes and cookware set 1 75,000 75,000
3 Refrigerator 2 40,000 80,000
4 Kitchen cabinet set 1 50,000 50,000
5 Washing machine 2 50,000 100,000
6 Dining table 2 15,000 30,000
7 Chairs 20 1,000 20,000
8 Beds 20 5,000 100,000
9 Bed set (blanket, linen and pillow 20 5,000 100,000
10 Generator for camp /50kv 1 400,000 400,000
Sub total 985,000

11.7. Summary of capital expenditure

Accordingly, the total initial fixed investment cost of the placer gold mining project is
summarized in the following table.

Table 13: Summary of capital expenditure (Birr)

No Description Estimated cost (Birr)

1 Building construction 6,000,000

2 Machinery and vehicle 92,285,000

3 Office equipment and furniture 333,000

4 Camping and Kitchen Equipment 985,000

Total Summary of capital cost 99,603,000

Working capital 7,508,900.00

Total fixed cost 107,111,900

57
 11.8. Operating Cost

Operating cost of the mining feasibility includes salary and benefit, fuel and
lubricants, utilities, etc. and the detail is indicated in table below .

11.9. Project Management, Man power, Salary and benefit

The projects Management will consist of individuals who have extensive experience in
the mining industry. We will also work toward a better quality of community relation.
The organizational chart of the company is presented in figure below.

Organizational Structure

Project Manager

Adminstration and Finance Sit Manager

Finance HR social workers production Head

Work shop operatores

Figure 13: Management structure of the project

The project requires a number of skilled and semiskilled manpower with indirect labor
as administrative workers and direct labors to work as production personnel. Table
below shows the labor requirement and expected salary for both direct and indirect
labors.

58
Table 14: Manpower and Proposed Salary (Birr)

No Description Number Monthly Gross Annual salary (Birr)

Required Salary (Birr)

1 General manager 1 60,000 720,000

2 Secretary 1 5,000 60,000

3 Admin. & finance head 1 10,000 120,000

4 Social worker 1 8,000 96,000

5 Excavator operator 2 10,000 360,000

6 Process plant Operator 2 7000 168,000

7 Diesel generator & pump 1 4,000 48,000

operator

8 Auto mechanic 1 12,000 144,000

9 Electrician 1 12000 144,000

11 Truck driver 4 8,000 384,000

12 Accountant 1 6,000 72,000

13 Store keeper 1 5,000 60,000

14 Casher 1 4,000 48,000

15 cooker 4 4,000 192,000

16 security 4 4,000 192,000

17 Daily labor 10 6000 720,000

Total Annual salary cost 36 3,528,000

59
 11.10. Fuel, Oil and Lubricant
Fuel consumption is computed considering the consumption per hour by each
machinery and time of working and calculated as follows. Lubricant is taken as 10% of
fuel cost.

Table 15: Fuel, Oil and Lubricants Expense (Birr)

Working Annual
Machine Consumption Price Total Price
No Qty hours consumption
Description (lit/hour Birr/lit (Birr)
Per year (liter)

1 Excavator 2 15 2400 72,000 75 5,400,000

2 Bulldozer 1 16 2400 38,400 75 2,880,000

Dump
3 2 10 2400 48,000 75 3,600,000
trucks,

Water
4 2 5 2400 24,000 75 1,800,000
pump

Diesel
5 pump and 2 6 2400 28,800 75 2,160,000
generator

Pickup
6 2 2 3600 14,400 75 1,080,000
D4D

TOTAL 16,920,000
Lubricant 10% of fuel 1,692,000
Grand Total Fuel Consumption Cost 18,612,000

11.11. Maintenance and Repair Expense

Machinery, building and office equipment maintenance and repair expense is

estimated at 2% of estimated cost machinery, building and office equipment and
furniture per annum and the result is presented in following Table.

60
Table 16: Annual Repair and maintenance Expense (Birr)

2%, Annual repair and

No Description Estimated cost (Birr)
maintenance
1 Building construction 6,000,000 120,000.00
2 Machinery and vehicle 92,285,000 1,845,700.00
Office equipment and
3 333,000
furniture 6,660.00
Camping and Kitchen
4 985,000
Equipment 19,700.00
Total 99,603,000 1,992,060

11.12. Insurance Expense

Insurance expense is necessary to avoid risks in operation of the mining activities.

Accordingly, issuance expense is estimated at 3% of Fixed Capital cost per annum that
is. Calculated to be birr 2,768,550.

11.13. Utilities Expense

Utility expense such for water, communication and electricity is necessary for the day-
to-day operation of the mining activities. Accordingly, the following amount of annual
expense is considered.

Table 17: Annual Utility expense (Birr)

Description Annual expense (Birr)

Water 60,000
communication 250,000
Electricity 100,000
Total 410,000

11.14. Spare parts

Spare parts are the most fast moving items and should be well planned in order to
avoid down time. The cost of spare parts is estimated as 1% Fixed Capital cost. The
cost for placer gold mining equipment and machinery is Birr 99,603,000 and 1% of
this cost Birr 996,030 will be allocated for spare parts.

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 11.15. Other expense cost

Table 18: Other cost

S.n Description Cost Remark

1 Training 100,000.00
Item Remark
2 Environmental Reclamation 200,000.00
3 Occupational Safety equipment 100,000.00
4 Food allowance 432,000 1000 birr/month/person
5 Communication &Stationery 90,000.00
6 Legal and professional charges 100,000.00
7 Entertainment 210,000.00
8 Clothing and Uniform 100,000.00
9 Medical Expense 176,400 5%of Salaries
10 Travel Expense 70,560 2%of Salaries
11 Miscellaneous Expense 150,000
Sub Total 1,728,960

11.16. Summary of Operating

Table 19: Summary of Operating Cost (Birr)

S/No Description Amount (Birr) Remark

1 Salary and benefit 3,528,000
2 Fuel and Lubricant 18,612,000
Annual Repair and maintenance 1,992,060
3 Expense
4 Insurance 2,768,550.
5 Utilities 410,000
6 Spare parts 996,030
7 Other expense cost 1,728,960
Total Summary of Operating Cost 30,035,600

11.17. Working capital (WC) Requirement

Working capital is a component of initial investment. It is the amount of money

required to fund the operating expenses until sales revenue from gold will be available.
Working capital requirements have been computed keeping in mind the average
storage requirements, the lead time and purchase volume. Based on this the working

62
capital requirement is calculated for three month’s expense of fuel and lubricants,
salary and wages, utility, Insurance, maintenance, spare parts and other cost.

Table 20: Working capital requirement (Birr)

S/No Description Amount (Birr) Three month’s (Birr)

1 Salary and benefit 3,528,000 882,000.00
2 Fuel and Lubricant 18,612,000 4,653,000.00
Annual Repair and maintenance
1,992,060
3 Expense 498,015.00
4 Insurance 2,768,550.00 692,137.50
5 Utilities 410,000 102,500.00
6 Spare parts 996,030 249,007.50
7 Other expense cost 1,728,960 432,240.00
Total Summary of Operating Cost 30,035,600 7,508,900.00

12. Project implementation

Listed the major project implementation it includes

 Fulfilling required man power, machinery and equipment purchase

 Site preparation and construction
 Mobilization and installation of machineries and equipment
 Trial production
 Full scale production
 Mine closure and site rehabilitation, and
 Demobilization

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Table 21: Time table for the first project year

Months
S/N Activities
1 2 3 4 5 6 7 8 9 10 11 12

1
Fulfilling required man power

2 Site preparation and

construction

3 Mobilization and installation of

machineries and equipment

4 Trial production

5 Full scale Production

13. Financial Evaluation of the Project

13.1. Basic Assumptions and Conditions

Detail estimates of operating and fixed capital investment costs are worked out on the
basis of other companies of similar nature and experiences and from price quotations
given from suppliers/ dealers. The estimated costs are then projected with the
understanding that they will be subjected to updating if the need arises from time to
time. Hence, the financial analysis of the project is worked out under the following
assumptions: -

64
 The exploration activity of gold has been come up with commercial reserve from
the license area. This has been confirmed by the geological study.
 Production period assumes to be 10 years.
 Inflation index 3% increasing per year
 The financing of the project is 100% from equity.
 The tax, royalty and other similar points considered in the analysis are based
on the Mining Laws and Regulations of Ethiopia.
 Royalty is taken at 7% of gross revenue while income tax is calculated at 25% of
Net profit before tax, 5% equity participation on after tax profit and community
development 2%.

13.2. Projected financial statements

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 Table 22: Profit and loss statement

Year Unit 1 2 3 4 5 6 7 8 9 10
Gold Production gm 44,404 52,586 52,586 52,586 52,586 52,586 52,586 52,586 52,586 52,586
Selling price Birr/gm 2,966 3,055 3,146 3,241 3,338 3,438 3,541 3,647 3,757 3,870
Value (gross revenue) Birr 131,686,723 160,630,221 165,449,128 170,412,601 175,524,980 180,790,729 186,214,451 191,800,884 197,554,911 203,481,558
Royalty 7% 9,218,071 11,244,115 11,581,439 11,928,882 12,286,749 12,655,351 13,035,012 13,426,062 13,828,844 14,243,709
Net revenue Birr 122,468,652 149,386,106 153,867,689 158,483,719
Operating cost Birr 25,530,260 30,035,600 30,035,600 30,035,600
Salary and benefit Birr 2,998,800.00 3,528,000.00 3,528,000.00 3,528,000.00 3,528,000.00 3,528,000.00 3,528,000.00 3,528,000.00 3,528,000.00 3,528,000.00
Fuel and Lubricant Birr 15,820,200 18,612,000 18,612,000 18,612,000 18,612,000 18,612,000 18,612,000 18,612,000 18,612,000 18,612,000
Annual Repair and
Birr 1,693,251.00 1,992,060.00 1,992,060.00 1,992,060.00 1,992,060.00 1,992,060.00 1,992,060.00 1,992,060.00 1,992,060.00 1,992,060.00
maintenance Expense
Insurance Birr 2,353,267.50 2,768,550.00 2,768,550.00 2,768,550.00 2,768,550.00 2,768,550.00 2,768,550.00 2,768,550.00 2,768,550.00 2,768,550.00
Utilities Birr 348,500 410,000 410,000 410,000 410,000 410,000 410,000 410,000 410,000 410,000
Spare parts Birr 846,625.50 996,030.00 996,030.00 996,030.00 996,030.00 996,030.00 996,030.00 996,030.00 996,030.00 996,030.00
Other expense cost Birr 1,469,616 1,728,960 1,728,960 1,728,960 1,728,960 1,728,960 1,728,960 1,728,960 1,728,960 1,728,960
Depreciation Birr 26,233,250 26,233,250 26,233,250 26,233,250
Building and civil work Birr 1,500,000 1,500,000 1,500,000 1,500,000
Machinery and
equipment Birr 23,071,250 23,071,250 23,071,250 23,071,250
requirement
Camping, professional,
and kitchen equipment Birr 246,250.00 246,250.00 246,250.00 246,250.00
requirement
Office furniture and
Birr 83,250 83,250 83,250 83,250
equipment’s
Preproduction Cost Birr 1,332,500 1,332,500 1,332,500 1,332,500
Profit before tax Birr 70,705,142 93,117,256 97,598,839 102,214,869 163,238,231 168,135,378 173,179,439 178,374,822 183,726,067 189,237,849
Income Tax 25% 17,676,286 23,279,314 24,399,710 25,553,717 40,809,558 42,033,844 43,294,860 44,593,706 45,931,517 47,309,462
Profit After Tax Birr 53,028,857 69,837,942 73,199,129 76,661,152 122,428,673 126,101,533 129,884,579 133,781,117 137,794,550 141,928,387
Community
2% 10,606 13,968 14,640 15,332 24,486 25,220 25,977 26,756 27,559 28,386
development
Gov’t free equity (Birr) 5% 2,651,443 3,491,897 3,659,956 3,833,058 6,121,434 6,305,077 6,494,229 6,689,056 6,889,728 7,096,419
Retained earning Birr 50,366,808 66,332,077 69,524,533 72,812,762 116,282,754 119,771,236 123,364,374 127,065,305 130,877,264 134,803,582

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 13.3. Cash flow forecast

Table 23: cash flow forecast

Year 0 1 2 3 4 5 6 7 8 9 10
Initial
-99,603,000
Investment
working
-7,508,900
capital

earning 50,366,807.9 66,332,077.0 69,524,532.8 72,812,762 116,282,754 119,771,236 123,364,374 127,065,305 130,877,264 134,803,582

Add back
26,233,250 26,233,250 26,233,250 26,233,250
dep.
working
capital 7,508,900
recovery
Net cash
-107,111,900 76,600,058 92,565,327 95,757,783 99,046,012 116,282,754 119,771,236 123,364,374 127,065,305 130,877,264 142,312,482
flow
Discount
1.00000 0.86207 0.74316 0.64066 0.55229 0.47611 0.41044 0.35383 0.30503 0.26295 0.22668
Factor (16%)

DCF -107,111,900 66,034,532.7 68,791,117 61,347,958.3 54,702,230.8 55,363,732.6 49,159,176.3 43,649,958.3 38,758,152.6 34,414,566.6 32,259,906.2

Cumulative -
-107,111,900 27,713,749.7 89,061,708.0 143,763,938.8 199,127,671.4 248,286,847.7 291,936,806.0 330,694,958.6 365,109,525.2 397,369,431.4
DCF 41,077,367.3

NPV@16% 397,369,431.36

IRR 83%
Payback
period 2
analysis

67
 13.4. Final Remarks

The main results from the financial analysis of the project are presented in tabular
forms in profit and lose statement. The financial implication of the project and its
viability is evaluated and tested based on the investment plan and the assumptions
detailed out in various sections of this report.

13.4.1. Internal Rate of Return

The internal rate of return (IRR) is an indicator of the efficiency or quality of an

investment. A project is a good investment proposition if its IRR is greater than the
rate of return that could be earned by alternate investments or putting the money in a
bank account. The decision rule is a project should only be accepted if its IRR is not
less than the market rate of return (which is mostly the discount rate). Accordingly,
the IRR of the project is computed to be 83% which is greater than the discount rate
(16%), indicating the viability and acceptance of the proposed Placer gold project.

13.4.2. Net Present Value

Net present value is the present value of net cash inflows generated by a project less
the initial investment on the project. It is one of the most reliable measures used in
capital budgeting because it accounts for time value of money by using discounted
cash inflows. The decision rule is accepting the project only if it’s NPV is positive or
zero. Reject the project having negative NPV. Accordingly, the net present value of the
project at 16% discount rate is found to be Birr 397.37 million indicating that the
proposed Placer gold project is viable and acceptable.

13.4.3. PAYBACK PERIOD

Payback period is the time in which the initial cash outflow of an investment is
expected to be recovered from the cash inflows generated by the investment. It can be
a measure of risk inherent in a project. Since cash flows that occur later in a project's
life are considered more uncertain, payback period provides an indication of how
certain the project cash inflows are. Project owners should set the acceptable payback
period. The normal acceptable payback period by the investors for such project is
considered to be about 10 years. The decision rule is to accept the project only if it’s
payback period is less than the target payback period.

Accordingly, based on the projected cash flow the project’s initial investment will be
fully recovered within 2 years, which is a short period than the maximum acceptable
period by the investor (10 years). Therefore, the project is viable as the payback period
is less than the target payback time limit.

13.4.4. Profit and Loss Statement

The profit and loss statement of the project has been conducted and the results are
presented with the help of profit and loss statement. Based on the Table, and given the

68
generic assumptions of the project, the project would be profitable and paying tax to
the Government commencing the initial year of production.

Accordingly, the average profit before tax from the project is estimated to be Birr 141.9
million; average profit after tax is Birr 106.5 million and average tax payment to the
Government is Birr 35.4 million.

13.4.5. ECONOMIC VIABILITY

The economic impact of the project can be viewed in a number of ways. It can be
viewed through its specific impact such as employment and government revenue in
the form of tax Birr 354.8 million over the 10 years.

Moreover, other benefits such as the creation of conducive environment for the
development of the country in general and the region in particular can also be taken
into account.

The project creates permanent employment opportunities for 36 persons and many
contract and temporary workers. Due to the large size of the workforce, the project will
create a conducive environment for the rapid growth of service and trade sectors
around the project site which in turn create employment opportunity for a substantial
number of persons;

Therefore, from the above discussion it can be concluded that the project creates a
tremendous socio economic benefit directly and indirectly and will substantially
contribute to the development of the country which is in line with the growth and
transformation plan of the government.

13.4.6. RISK ANALYSIS

The objective of investment decision making from an economic point of view is to

invest available capital in wealth creating projects that have the highest probability. If
an economic analysis method does not reflect risk/ uncertainty, then every
assumption built into the economic analysis is a “best guess”. These best guesses are
point estimates and suggest either accepting or rejecting the project. Hence, making
decisions based on such “best guess” calculations alone can be hazardous. Therefore,
it is necessary to incorporate risk and uncertainty into the analyses. Risk analysis
helps to added flexibility and show the confidence level or accuracy of the profitability
indicators by providing a range of possible outcome. The approach considered here for
risk analysis are sensitivity and scenario analysis.

13.4.7. SCENARIO ANALYSIS

Scenario Analysis is a process to ascertain and analyse possible events that can take
place in the future. It is used extensively to make forecasting and projections for the
future for analysing possible future events. Scenario analysis involves constructing or
developing scenarios and integrating the content of scenarios into decision-making.

69
It is also a what-if analysis in which a model's output (NPV, IRR and PBP) is calculated
for a number of scenarios. It is most commonly used to estimate the expected value of
an investment in a number of situations (such as best case scenario, base case
scenario and worst case scenario).

Scenario analysis is carried to determine how much risk is taken before an investment
is made. Therefore, many scenario analyses account for worst-case scenarios, along
with more positive and optimistic scenarios.

For the proposed project the base case interest rate is 16%, NPV is Birr 397.3 million,
IRR is 83% and PBP is 2 years.

Table 24: Scenario analysis

Worst case scenario base case Best case scenario

Price decrease by 15% Price increase by 15%
Opex increase by 25% Opex decrease by 25%
Result
NPV 238.38 million 397.3 million 556.22 million
IRR 48.6% 83% 112%
PBP 3 years 2 years 1 years

The best case scenario shows that a decline in capital investment and operating cost,
while increase in price from the base case significantly enhances the viability of the
proposed project – NPV and IRR increased while PBP reduced to a small number of
years. This scenario showed the project reduces the risk by generating a high return
and recovering the initial investment in a short period of time. The reverse is true for
the worst case scenario.

For the best case scenario, the net present value is 556.22 million while for the worst
case scenario; the net present value is 238.38 million. The scenario analysis shows
that the projected economic indicators are estimated with a reasonable level of
accuracy and justify the profitability and acceptance of the proposed project.

13.4.8. Breakeven Period

Breakeven period of the project (as it is depicted in the following figure) is 2 years.

70
Figure 14: Breakeven period of the project

Conclusion

Exploration activity from the license area is come up with a commercial discovery of
marble reserve which could be utilized for local consumption demand and export
market.

The financial analysis (taking in to account all the decision making criteria) of the
project has been indicated as the project is viable for investment with a NPV at 16%
discount rate is Birr 397.4 million and IRR 83%. The Government will be benefited
from royalty and income tax. Average income tax of the government is computed to be
Birr 35.4 million and average royalty is computed to be Birr 12.3 million. Besides, a
number of employment opportunities will be created for skilled and unskilled labour
assisting the Government’s strategy of alleviating unemployment problem of the
country.

71
 Chart Title
50,000,000

40,000,000

30,000,000

20,000,000

10,000,000

0
1 2 3 4 5 6 7 8 9 10

Royalty Income Tax Community development Gov’t free equity (Birr)

Figure15: The Government’s Benefit from Royalty & Income Tax (Birr)

72
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NANKAI MINING PLC Abobo Exploration License First and Second Year Annual Report

2015/2016

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Annex
Professional License

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Figure 16: Professional certificate

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Figure 17: Business registration

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Figure 18: Taxpayer Registration certificate

77