Yemen seeks to gain its share of the 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 did, and he hasn’t been disappointed.

He first arrived in the country back in 1996, looking for one thing, and finding another.

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

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 (CD-V), yielded some positive results. But even still, operating in Yemen was a hard sell back on the streets of Vancouver and Toronto.

“The main issues 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 are out to change that perception. And they are getting some traction.

In November of last year Vale (RIO-N) showed its faith both in a Cantex discovery and in the country of Yemen by signing on to a joint venture at its 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 move up to a 60% interest through a series of progressive expenditure 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 property won Yemen no small amount of converts.

“Without fail, every time we brought any company over there — and
prior to the JV with Vale we had BHP Billiton (BHP-N, BLT-L) 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 & Developers Association of Canada convention in Toronto (PDAC) to announce that they were in the process of passing a new mining law that would make opening a mine in the country more streamlined.

Currently any new mining licence must work its way through the halls of parliament and be put to an individual vote. The revised law, if signed, would mean that if companies met the laid out requirements the mining licence could be passed without being put before parliament.

Such an adjustment not only increases transparency, but also efficiency as companies wouldn’t have to put up with excruciating waiting times nor 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 he says there is currently a healthy debate around the proposal, as there should be with any new legislation, he says there was 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 Corporation (IFC) – a branch of the World Bank – helped prepare the new law.

And while the new law will have little impact on Cantex – exploration permits do not need parliamentary approval but only the signature of the Minister of Mines, something Cantex has had no difficulties securing – Ulansky says it is yet another sign of the positive development process underway in the region.

“When we first went it was the wild west,” he says. “I mean kids that were 10 years old were carrying AK-47s. We were never threatened….but still it’s not like that any more. It’s completely changed, now there are no weapons in the capital city at all.”

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

Until 1990 the Yemen was split between the Marxist South and the North. That partition arose after the North left the Ottoman Empire in 1918, leaving the South under British control. It eventually gained its independence in 1967 and quickly turned to a ruling Marxist ideology.

And while 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 in peace for the last nineteen 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) has long operated without major incident within its borders.

But being one of the poorest countries in the Arab world the government is set on diversifying its economy.

“They realize their oil reserves, one day, ore 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 considerable amount considering the country’s GDP is currently US$60 billion.

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

The project is a joint venture between British firm ZincOx (ZOX-L), which holds a 52% stake and the ANSAN Company which holds the remaining 48%.

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

Targeted production is 80,000 tonnes annually with zinc ready for export in mid of 2010. The project has a reserve of 8.7 million tonnes of ore at an average grade of 9.2% zinc.