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That's all very well but 33 on the Frazer Institue Investment...

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arsenic

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12/03/18

17:12

Post #: 31694491
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Originally posted by Bützbuster ↑

Research from Arlington Group, 11 October 2017, Site 21

I have bolded the important part of the report for me.

Eritrea – really such a risk?
Eritrea is one of Africa’s poorest nations and has a reputation as a tough place to do business. It has a population of only 3.6m and is sandwiched between Ethiopia and the Red Sea.
The threat from Ethiopia, from whom it won independence in 1991 and fought a border war with in 1998-2000, is fading and investors are starting to bring money to the region. The African Development Bank suggests GDP growth is of the order of 2% pa.
The Eritrean government is now focusing on the mining industry as a key driver of earnings. Currently Nevsun’s Bisha and SFECO’s Zara mines are the only mines in production. The Asmara project is currently under construction and Colluli construction could start in 2018. The projects will be major contributors of foreign currency earnings for the country, and income for the population.
The Bisha mine provides a good guide of what to do and what not to do for mine development in Eritrea. The company did not seem to carry out human rights due diligence at the time of the mine’s development in 2008-11 but, on being made aware of the allegations, conducted thorough human rights audits in 2014 and 2015 and implemented the recommendations.
Danakali has carried out a significant Social and Environmental Impact Assessment on its development and we do not believe that social factors will be such a significant risk.
We do not expect any issues with the Eritrean Government; the Government is incentivised to support the development given its 50% holding in the project and the aforementioned need for foreign currency earnings.

In addition, we note the high standing of Eritrea in the Fraser Institute’s Investment Attractiveness Index; the country is ranked 33 and is sixth among African countries, outperforming major mining countries such as South Africa and Tanzania.
In short, we acknowledge that Eritrea is in Africa, and hence a more risky investment destination than Australia, Europe or Canada, but we do not believe that it is more risky than other African countries.

We have applied a 10% discount rate to the project at this stage to reflect its early degree of development and geographical location. We would expect to lower that to 8-9% as the project progresses into production. For a developed world operation we would tend to use an 8% discount rate.

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That's all very well but 33 on the Frazer Institue Investment Attractiveness Index score is not good and risk tends to be binary. The mine is a Go or No.

DNK Price at posting: 71.5¢ Sentiment: Hold Disclosure: Held
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That's all very well but 33 on the Frazer Institue Investment...

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