Yemen Looks For Share Of Mining Spotlight

Exploration companies looking for the next big find have seldom thought to look in the Middle Eastern country of Yemen.

But legendary diamond finder Chuck Fipke has, and he hasn’t been disappointed.

He first arrived in the country back in 1996, looking for diamonds but finding something else.

“I went there to investigate whether or not diamonds could be present,” Fipke says. “I went through their library and decided the country had potential for gold and base metals, better than for diamonds.”

Fipke, along with his partner Chad Ulansky, quickly secured the permits to some 55,000 sq. km of prospective land and started soil sampling.

That early work, which they did through their company Cantex Mine Development (CD-V, CTXDF-O), yielded some positive results. Still, operating in Yemen was a hard sell back on the streets of Vancouver and Toronto.

“The main issue we have (with operating in Yemen) is the problem with the perception from a Western perspective,” says Ulansky, who is Cantex’s president and chief financial officer. “People assume that Yemen isn’t a good business environment because on CNN you never hear good things about it. It’s just painted with a black brush and inevitably that taints most people’s perception of the country.”

But Ulansky and Fipke, chief executive of Cantex, are committed to doing their part to help change that perception. And they are getting some traction.

In November, Vale (RIO-N) showed its faith in both a Cantex discovery and Yemen by signing onto a joint venture at the Suwar and Wadi Qutabah nickel, copper, cobalt and platinum group element projects.

Vale agreed to spend US$2 million by the end of August and has the right to earn up to a 60% interest in the projects through a series of payments and activity thresholds.

And while it was Vale that ultimately signed on the dotted line, Ulansky says the process of bringing companies over to view the properties won Yemen no small number of converts.

“Without fail, every time we brought any company over there –and prior to the JV with Vale we had BHP Billiton and all the major companies over to see it — and without fail, everyone said it was the opposite of what they thought. You get treated like family there,” he says.

And while Cantex, which is only in the exploration stage, has felt that family feeling by having things like paved roads laid down from the capital to its projects by the government, the country is in the process of making larger gestures to the industry as a whole.

Representatives from Yemen used the Prospectors and Developers Association of Canada convention in Toronto in March to announce they are in the process of passing a new mining law that will make opening a mine in the country easier.

Currently, any new mining licence must work its way individually through parliament and be put to a vote. The revised law, if signed, would mean that if companies met the laid out requirements, mining licences could be granted without a parliamentary vote.

Such an adjustment not only increases transparency but also efficiency, as companies wouldn’t have to put up with excruciating waiting times or the uncertainty that generally goes with parliamentary processes.

Yemen’s ambassador to Canada, Khalid Bahah, says he expects the new law to be passed within two to three months.

And while there is currently a healthy debate around the proposal, as there should be with any new legislation, he says there is little in the way of real, resolute opposition to it.

That process of winning over parliament has been, no doubt, made easier by the fact that the International Finance Corp. (IFC) — a branch of the World Bank — helped prepare the new law.

The new law will have little impact on Cantex — exploration permits require only the signature of the mines minister, something Cantex has had no difficulties securing — but Ulansky says it is yet another sign of the positive developments under way in the region.

“When we first went, it was the Wild West,” he says. “I mean kids that were ten years old were carrying

AK-47s. We were never threatened. . . but still, it’s not like that anymore. It’s completely changed: now there are no weapons in the capital city at all.”

The prevalence of weapons when Ulansky and Fipke first arrived was an offshoot of the country’s turbulent history.

Until 1990, Yemen was split between the Marxist South Yemen and North Yemen. That partition arose after the north, which was part of the Ottoman Empire, became independent in 1918, leaving the south under British control. South Yemen eventually gained its independence in 1967 and quickly turned to a Marxist ideology.

And when unification came in 1990, it wasn’t without its hiccups. There was a brief secessionist movement in the south in 1994, but by all accounts that was quickly put to bed and the country has held together peacefully for the last 19 years.

“The president has done a great job,” Fipke says of Ali Abdallah Saleh, who has served as president since 1990. “After the war in 1990 between the north and south, he amalgamated things and brought a lot of the losers into the government.”

Yemen has a population of 23 million people and its economy has been largely based on agriculture and oil. It turned out 320,660 barrels of oil per day in 2007, and familiar names like Nexen (NXY-T, NXY-N) have long operated within its borders without major incident.

Despite its oil reserves, Yemen has remained one of the poorest countries in the Arab world and the government has set out to diversify its economy in an effort to improve things.

“They realize their oil reserves, one day, are going to dry up,” Ulansky says. “They see their future being in the mineral sector and they are putting a considerable amount of their energy into making sure they’ll have the mineral sector to rely on.”

In 2006, the government began its official economic reform to bolster non-oil sectors of the economy. The international community got behind the move by pledging roughly US$5 billion for development projects — a significant amount considering the country’s gross domestic product is currently US$60 billion.

As for the development of mining, there is activity beyond Cantex. On March 1, the foundation stone for the country’s first mine was laid by Prime Minister Ali Mujawar.

The Jabali zinc project is a joint venture between British firm ZincOx Resources (ZOX-L), which holds a 52% stake and Ansan Wikfs Investments, which holds the remaining 48%.

The mine, on the Sulb Mountain in Nehm area, 110 km northeast of the capital of Sanaa, will be built for roughly US$200 million.

Targeted production is 80,000 tonnes annually with zinc ready for export in mid-2010. Jabali hosts reserves of 8.7 million tonnes at an average grade of 9.2% zinc.