| KHARTOUM, July 18
KHARTOUM, July 18 In his office in Khartoum's
gold market, central bank sales agent Mohamed Adam sips tea and
watches while his staff load bundles of cash worth tens of
thousands of dollars from the safe into four boxes.
The government will use these piles of Sudanese pounds to
purchase gold, which it plans to sell for the dollars needed to
pay for imports of food and other essentials.
"We buy all gold from local traders and people who search
for gold," Adam said. Outside his office, gold traders make
deals in the busy market in a rundown downtown building, where
paint is peeling from the walls.
Sudan is looking to expand gold mines and boost production
of the metal to help keep the economy afloat.
Oil had been the main source of state revenues as well as
the dollars needed to pay for imports, but Sudan lost
three-quarters of its oil production when South Sudan split off
A scarcity of dollars has driven the annual inflation rate
to 37.2 percent in June, double the level of June 2011, and
officials warn prices will rise further.
The country sits on what could be Africa's largest gold
reserves, and the government has handed out exploration
contracts to more than 600 mining firms to search for gold and
Khartoum hopes to make up to $3 billion from gold exports
this year, double the amount from last year. It made $603
million by the start of April, according to the latest official
Much of that output currently comes from small, individual
miners, lured by high gold prices to seek gold in remote corners
of the country. The central bank is now buying up their gold,
which in the past was often smuggled abroad.
The government estimates that about 250,000 Sudanese search
for gold, mostly in the north of the vast Arab African country,
where the Nubian desert has been a source of gold since the
"I always go and buy up gold from local people and sell it
to the central bank," said gold trader Jumaa Mohamed Said, who
travels every month to a desert area 300 kilometer (190 miles)
north of Khartoum.
"Sometimes I buy a few grams, sometimes 500 grams, a kilo.
I'm always busy," the 25-year old Said said. He brings the gold
to Khartoum, where he does business with the central bank.
Experts verify its grade before it ends up on Adam's desk.
The central bank has appointed three sales agents at the
gold market, who buy gold for a little less than the global
price, Adam said.
But a senior official at an international organisation said
the agents sometimes pay above the global price to stop other
traders from snapping it up for smuggling to Dubai, a large gold
"The central bank sometimes pays well above market prices,"
he said, declining to be identified. "It fuels inflation, but
they need the dollars from gold exports."
BIG POTENTIAL, BIG CHALLENGES
The targeted $3 billion in gold revenue for this year is
still well below Sudan's 2010 oil revenue of at least $5
billion. But the government hopes it will keep the economy
afloat while it seeks a negotiated solution over oil export fees
from South Sudan.
Khartoum faces a budget deficit of 6.5 billion pounds ($1.4
billion) following South Sudan's independence a year ago under a
2005 peace deal.
The finance ministry had counted on export fees paid in
dollars by the landlocked new nation, which needs to ship its
crude through northern pipelines and the Red Sea port of Port
Sudan to get to international markets.
But Juba shut off all oil wells in January after talks over
export fees failed, and Khartoum started taking some oil to
cover what it said were unpaid pipeline dues.
Meanwhile, the government is trying to attract more
investment as it hopes to boost gold production, which amounted
to 33.7 tonnes last year.
The mining industry is one of the few areas growing in the
economy, in crisis due to the shortage of foreign exchange.
Out of the 600 licenses granted for mineral exploration, 88
have gone to large companies. New fields will be opened for
investment, the state-linked Sudanese Media Center said last
"Sudan is right up near the top in Africa in terms of
mineral potential," Tucker Barrie, a Canada-based mining
consultant knowledgeable about Sudan, said.
"Northeast Sudan is very high on the list in Africa to look
for gold," he said. "There are going to be discoveries."
Companies had long neglected the country amid its civil war
and ethnical conflicts, but they are now turning to it as one of
the last large unexplored areas in Africa.
Last week, Canadian mining firm La Mancha Resources
, the biggest player in Sudan, said it had agreed to be
bought by a firm owned by Egyptian tycoon Naguib Sawiris.
La Mancha said the deal would help it develop the Hassai
mine, Sudan's biggest gold mine which is run by the Ariab Mining
Co, majority-owned by the Sudanese government and 40 percent by
the Canadian firm.
"With the influx of cash from a wealthy Egyptian, the
company should fair well and keep exploring and developing,"
Foreign firms face a number of obstacles, however, in
dealing with a government desperate for cash.
The royalties they have to pay are higher than those of
other African countries such as Ghana or Eritrea, which have
issued more investor-friendly laws, industry insiders say.
"Under pressure they are now reviewing the laws," said
Abulrahim Hamdi, a former finance minister.
Mining projects in Sudan tend to be expensive because
equipment must be trucked in over long distances. Few qualified
miners graduate from local universities, and firms tend to rely
on large expatriate workforces.
A U.S. trade embargo, in place since 1997 over Khartoum's
role in hosting prominent Islamists in the past including Osama
bin Laden, deters most Western firms and makes life difficult
for those that come. Western banks routinely reject project
funding in Sudan.
While the government hopes for quick cash, Hamdi said many
projects would take three to five years to start producing.
La Mancha, for example, expects its attributable gold output
to fall by some 16 percent this year because the top layer at
the main Hassai mine is being depleted after being mined for 20
years. It needs to invest in new technology to drill deeper.
Jumaa Mohamed Said, the gold trader doing business with the
central bank, said amateur diggers at the field he visits every
month face the same problem.
"First they just were walking around with metal detectors
and discovering gold on the surface. Now people need to drill
deeper. It gets more expensive," he said.