Potash a key focus for Ethiopia's mining push - draft document

ADDIS ABABA, Nov 25 (Reuters) - Ethiopia will prioritise potash and construction minerals in a push to attract investment from large-scale miners, according to a draft policy document reviewed by Reuters ahead of an expected government announcement on Monday.

Ethiopia is looking to woo foreign mining companies to kick-start development of its vast mineral resources to plug a large trade deficit. Most existing mineral extraction is artisanal.

The government will support and incentivise investors who aim to develop minerals that are key inputs for agriculture, such as potash, which is used to make fertilizer, the draft policy document said.

However, it did not give any specifics about potential tax cuts or other sweeteners to attract additional investment.

Minerals minister Samuel Urkato was expected to announce the new policies during a keynote address opening a mining conference in Addis Ababa later on Monday.

Norwegian fertilizer company Yara is among those planning to develop potash, found in the remote Danakil depression in the northern Afar region of the country, through its Yara Dallol project.

Ethiopia aims to increase the mining sector’s contribution to GDP to 10% by 2030 from 3% today.

However analysts say it will be hard for the government to achieve that goal solely by attracting foreign investors into the mining sector, given the timeline for developing major projects.

The government is also enlisting the help of organisations such as the Canadian International Resources and Governance Institute (CIRDI) to develop the artisanal mining sector and increase government proceeds from these activities.

Of the high-value minerals Ethiopia produces, 60%-80% are mined artisanally, while that figure rises to 80%-95% for construction minerals such as basalt, pumice, and limestone, according to Rahel Getachew, senior programme officer at CIRDI’s project supporting the ministry of mines.

Ethiopia has been expected to announce changes to its mining policies since February this year.

The government reduced the corporate income tax rate for miners to 25% two years ago, from 35%, and has also lowered the precious metals royalty rate to 7%, from 8%.

The current law guarantees the government a 5% minimum equity stake in projects - a lower share than many other African countries.

Representatives from Yara Dallol, Kefi Minerals, and Newmont GoldCorp were set to attend the two-day conference, as well as the CEO of Midroc Gold, Ethiopia’s only industrial-scale mine, whose licence the government suspended in May 2018 over protests about pollution.

Kefi Minerals’ Tulu Kapi site in the west of the country is expected to produce its first gold in 2021, executive chairman Harry Anagnostaras-Adams said.

U.S. gold miner Newmont GoldCorp is exploring in Ethiopia’s Tigray region. (Reporting by Helen Reid; editing by Richard Pullin)