Reports Indicate Egyptian Gov’t Has Indirect Stake In Ethiopia’s Kurmuk Gold

Allied Gold Corp, the firm behind the Kurmuk Gold project in the Benishangul-Gumuz Regional State, is preparing to address nearly USD 66 million in deferred payments to an Egyptian company in its bid to acquire higher stakes in the mining venture. The buyout is slated to take place over three payment installments to be made starting September 2024 to September 2027.

The move would grow Allied Gold’s shares in Kurmuk Gold to 93 percent, according to a company report released this week. The remaining nine percent is held by the Ethiopian government.

However, Asec Company for Mining (ASCOM), a conglomerate with strong ties to the Egyptian government, and its parent company Qalaa Holdings will retain stakes in Kurmuk through base erosion and base shifting in the Allied Gold venture. Qalaa Holdings’ ongoing inclusion of Kurmuk Gold in its annual reports indicates the retained Egyptian interest in the firm despite the complicated and opaque ownership structure.

After transferring the additional shares to Allied, Qalaa will retain no less than 11.5 million shares in Kurmuk Gold, according to a company report released in May 2024.

ASCOM had initially acquired an exploration license for a potential gold mining site in Kurmuk, Benishangul-Gumuz, near the Sudanese border. Following the political transition in 2018, the firm abruptly transferred 64 percent of its stake in Kurmuk Gold to Allied Gold Corp, a Canada-based firm. Inside sources say the presence of an Egyptian company near the Grand Ethiopian Renaissance Dam (GERD) was considered a threat to national security at the time.

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However, ASCOM retained considerable shares in Kurmuk Gold through ASCOM Precious Metals (APM), a fully-owned subsidiary. The firm is now preparing to transfer its ownership in the gold mining venture to Allied at the price of USD 65.6 million.

Sources confirmed to The Reporter that Allied Gold is preparing to settle the payments, but the venture’s complicated ownership structure and cloudy ties to Egypt remain intact.

APM and its parent company ASCOM are at the forefront of the ownership structure, all under Qalaa Holdings, which is a mammoth enterprise with a large number of subsidiaries under its wing. These include Taqa Arabia, Tawazon, Egyptian Refining Company, Asec Holding, Gozour, Nile Logistics, African Railways, and ASCOM. The conglomerate has a strong presence in East Africa, particularly in Sudan, and the Middle East.

Egypt’s National Service Projects Organization (NSPO) bought a 20 percent stake in Taqa Arabia last year, equivalent to 27.5 million shares for nearly USD 53 million. Formed in 1979, NSPO is engaged in manufacturing military and civilian products, including in petrochemicals and agriculture, for the Egyptian government. It now has an indirect link to Ethiopia’s Kurmuk Gold via its acquisition of a stake in the Qalaa Holdings subsidiary.

Despite sharing the same name, Allied Gold Corp is not the same as the Allied mining conglomerate based in Australia. The Allied Gold Corp (AGC) present in Ethiopia is incorporated in the Seychelles and, through a reverse listing process involving Mondavi Ventures Ltd, operates as a Canada-based company. Its shareholder structure is also fluid and opaque.

Reports from the International Consortium of Investigative Journalists reveal that AGC and its affiliates are cited in the Panama Papers and the Paradise Papers. AGC’s Ethiopian shareholders, Brox Worku and Hailemariam Mulugheta, are also mentioned in the papers.

Even though Allied Gold acquired a majority stake in Kurmuk from ASCOM in 2018 and secured a mining license in 2021, it has been unable to acquire full ownership due to financial constraints. Mondavi Ventures Ltd has reportedly agreed to raise USD 263 million from the Canadian stock exchange to help Allied pay for its latest acquisition from APM.

Mondavi is also expected to raise additional capital for Allied, which requires up to half a billion dollars to finalize the Kurmuk gold processing plant, according to its reports.

In May 2023, Allied Gold, Allied Merger Corp (AMC) and Mondavi Ventures Ltd, entered a binding agreement for financing of minimum proceeds of USD 300 million.

“Mondavi, an unlisted reporting issuer in Canada, will enter into a business combination with Allied and AMC pursuant to which the current shareholders of each of Allied and AMC will receive common shares of Mondavi, resulting in a reverse take-over of Mondavi,” states the document.

Although Allied Gold has secured an extraction license for a nearly 100 square kilometer plot of land stretching from Kurmuk to the vicinity of Assosa, the company has downsized its operations to cover only Dish Mountain for now, which is reported to hold significant gold deposits.

In the meantime, Allied plans to continue exploration activities in Tsenge, Mestefinfin, and Setota, all near the original site in Kurmuk.

Allied also operates projects in Mali and Cote d’Ivoire, according to its website.

“Given the competitive cost of capital realized via the Côte d’Ivoire stream and strong market feedback, Allied is arranging a minimum USD 250 million Kurmuk funding package comprising a gold stream and a gold prepay facility for the Kurmuk development project. This comprehensive funding solution is expected to close by the end of September 2024. The prospective stream validates the opportunities at Kurmuk, including its strong geological upside potential, and has attracted significant interest at an attractive cost of capital,” reads a report released this week.

The managers of Kurmuk Gold had written a letter to the Ministry of Mines a few months ago, stating the company could not access its sites in Benishangul due to security issues and illegal artisanal mining settlement. However, a company report released this week indicates civil works at the site are making good progress.

Brox Worku, an Allied Gold shareholder and manager of Kurmuk Gold, spoke to The Reporter about the company’s work process but requested that none of his comments be incorporated into this article. He failed to respond to written queries from The Reporter or provide valid business reports and documents.

Exploration works have confirmed more than 60,000 tonnes of gold reserves in Kurmuk, according to company reports. Kurmuk Gold plans to spend USD 155 million on its operations in 2024, with the first gold pour expected in mid-2026, according to the reports.