Eritrea – known as Africa's North Korea – is attracting considerable Chinese interest in its vast mineral resources despite the regime's autocratic nature.

Eritrea, situated in the Horn of Africa, has diverse mineral resources, many of which remain underexplored. The Arabian-Nubian Shield, a formation rich in base and precious metals, shapes the country's geology. Comprising crystalline rocks such as granites, gneisses and schists, this structure has given rise to substantial deposits of gold, copper, zinc and potash, positioning Eritrea as a potential regional mining hub.

Among these resources, potash is the most significant. The Colluli potash project, located in the Danakil Depression, stands out as Eritrea’s most commercially promising mining venture. With an estimated 1.08bn tonnes of ore containing 18% potassium chloride, it ranks among the world’s most economically viable potash deposits. The shallowness of the deposit reduces extraction costs, positioning the country as a future key supplier of sulphate of potash (SOP), a fertiliser essential for global agriculture.

Once the mine is fully operational, production at Colluli is expected to reach 944,000 tonnes per year (tpy), placing Eritrea among the world's top ten potash producers. The development will proceed in two phases: an initial $298mn investment will bring production to 472,000 tpy, while a second phase, starting in year six, will double output with an additional $202mn investment. By 2026, Colluli could contribute up to 10% of the country's GDP, generating an estimated $204 million in annual fiscal revenue.

The project's ownership changed in March 2023 when Australia's Danakali sold its stake for $166mn. Colluli is now equally owned by China's Sichuan Road and Bridge Group (SRBG) and Eritrea's National Mining Corporation (ENAMCO).

Alongside potash, Eritrea's gold and copper resources have been a major driver of foreign interest, with the Bisha mine playing a central role. The country's gold reserves are estimated at 2mn ounces. Initially developed by Nevsun Resources, the Bisha mine was acquired by China's Zijin Mining in 2019 and remains the country's largest mining operation. Since its inception, Bisha has produced more than 1mn ounces of gold, alongside 16,000-18,000 tonnes of copper annually and 117,000 tonnes of zinc in 2023. The mine's strategic location within the Arabian-Nubian Shield suggests further potential for high-grade copper and gold discoveries.

Iron ore reserves exist, though they are less developed than the country's potash, gold and copper resources. The Asmara Project is expected to produce iron ore in the future, adding to Eritrea's mineral output. Iron ore could further diversify the country's mining sector due to its importance in steel manufacturing and global infrastructure.

Beyond these key minerals, the country also holds reserves of gypsum, salt and limestone, which are widely used in construction and industrial applications. In 2019, the country produced around 18,000 tonnes of gypsum and 330,000 tonnes of salt.

The varied geology of Eritrea underpins this mineral wealth, with Precambrian rocks in the west, Paleozoic glacial sedimentary formations in the south and Cenozoic sediments and volcanic structures along the Red Sea coastal zone. The volcanic rocks around Bisha are associated with significant gold and copper mineralisation, while the Danakil Depression hosts large potash deposits within its sedimentary salt layers. The country's position within the East African Rift Zone also improves its geothermal and mineral exploration potential.

Eritrea's mining sector is growing rapidly, fuelled by significant projects and discoveries. Alpha Exploration, a Canadian-listed company on the TSX Venture Exchange, is advancing the Kerkasha Project in Eritrea, a 771-sq km licence granted in 2018. The project hosts multiple promising gold and base metal prospects, with Aburna Gold Prospect being a key target. This orogenic gold system spans seven kilometres, with recent drilling results returning high-grade intercepts, including 18 metres at 15.33 grams per tonne (g/t) gold and 16 metres at 14.07 g/t.

Further east, the Anagulu Gold-Copper Prospect has revealed strong mineralisation, with drilling results showing 108 metres grading 1.24 g/t gold and 0.60% copper, indicating a significant porphyry system. Alpha Exploration continues to expand drilling efforts at Kerkasha to delineate these deposits and unlock their full potential.

Established in 1907 by Italian investors, the Massawa Salt Factory near Eritrea’s Red Sea coast is undergoing significant development. Current production stands at 20,000 tpy, with plans to expand capacity to 100,000 tpy within five years. The Red Sea's coastal geography and high salinity provide favourable conditions for large-scale salt production.

Chinese investment dominates Eritrea's mining sector, with state-backed firms leading significant projects. In 2019, Zijin Mining Group acquired a 60% stake in the Bisha copper-zinc mine, Eritrea's largest zinc producer, with a mining capacity of 2.4mn tpy. Initially developed by Nevsun Resources before Zijin's takeover, Bisha remains a pivotal part of Eritrea’s mineral output.

Similarly, Sichuan Road and Bridge Mining Investment Development Corporation (SRBM), a Chinese state-owned Sichuan Road & Bridge Group (SRBG) subsidiary, acquired a 60% stake in the Asmara Project for $65mn in 2015.

The project is located near Eritrea's capital, Asmara, and comprises six volcanogenic massive sulphide deposits – Debarwa, Emba Derho, Adi Nefas, Gupo, Adi Rassi and Kodadu. It contains 574,000 tonnes of copper, 930,000 ounces of gold and 1.2mn tonnes of zinc. Mining is progressing in phases, using open-cast and underground methods, with ore processing at a central facility near Emba Derho. The project is operated by Asmara Mining Share Company, a joint venture between SRBM (60%) and Eritrea's state-owned ENAMCO (40%).

The Zara Project is centred on northern Eritrea's high-grade Koka gold deposit. Commercial production began in 2016 and remains ongoing. It is managed by Zara Mining Share Co., a joint venture between China's SFECO Group (60%) and ENAMCO (40%).

Furthermore, Shanghai Shibang Machinery (SBM), a leading Chinese mining equipment manufacturer, entered a partnership in December 2024 for Eritrea's largest mining project. This collaboration will focus on extracting copper and gold ore, with SBM providing state-of-the-art equipment such as its NK Portable Crushing Plant. This technology is expected to improve the efficiency and sustainability of mining operations, reflecting a shift towards more advanced and responsible resource extraction methods in the country.

Despite its mining potential, Eritrea's autocratic rule under President Isaias Afwerki constrains investment and economic freedoms.

Eritrea's economy has shown modest growth in recent years, with projections indicating a steady 2.8% expansion in 2024. With Colluli’s production set to begin soon, Eritrea’s GDP growth is projected to reach 3.3% by 2026. The country’s GDP in 2022 was estimated at around $2.4bn, driven primarily by the mining sector, which accounts for over 90% of exports. According to available data, mining accounted for about 20% of Eritrea's GDP in 2021. Zinc, copper and gold dominate Eritrea’s export profile, making the economy heavily reliant on global commodity prices.

Despite Eritrea's vast mineral wealth, its international isolation restricts financial inflows. Sanctions and human rights concerns have deterred Western investment, leaving China the dominant player. State-backed firms like Zijin Mining and SRBM control key projects, limiting Eritrea's access to diverse capital and better investment terms.

Its strategic location along the Red Sea positions it favourably for trade with Gulf nations and regional and global trade. Given its substantial investment in the country's mining sector, its mineral exports primarily go to China. Other key markets likely include Gulf nations and European buyers, particularly for gold and zinc. Improved port facilities and logistics agreements could help unlock more diversified export routes.

Beyond mining, China's engagement with Eritrea extends into infrastructure and economic partnerships, reinforcing the country's strategic importance in the Horn of Africa. Beijing has supported road construction, power grid expansion and modernisation of port facilities, aligning with its broader regional ambitions.

Inflation subsided to 6.4% in 2023, supported by improved supplies and stability in global supply chains. The country remains vulnerable to economic shocks, especially external market forces and domestic challenges, such as its dependence on mining exports.

Despite these optimistic growth projections, Eritrea's economic indicators remain uncertain due to several factors, including the country's exposure to climate change. Frequent weather shocks continue to impose heavy burdens on the economy and livelihoods, further complicating economic stability and long-term projections.

Its public debt is estimated to be extremely high, with reports suggesting it could exceed 160% of GDP. However, the exact figure remains unclear due to the lack of official government data. This level of indebtedness underlines the government's challenges in managing fiscal sustainability.

Population estimates vary widely due to the absence of recent census data, with figures ranging from 3.5mn to 6.4mn. It is estimated that around 800,000 Eritreans live outside the country. Asmara, the capital city, has an estimated population ranging from 435,000 to over 1mn.

Since independence from Ethiopia in 1993, Eritrea has been under the rule of President Isaias Afwerki and the People's Front for Democracy and Justice (PFDJ). Afwerki led the Eritrean People's Liberation Front (EPLF) to victory in the 30-year war for independence, formally declared on 24 May 1993, after a 1991 military victory over Ethiopian forces. It remains a one-party state, with no elections held since independence. The country has no prime minister, as power is concentrated in the presidency.

Before its incorporation into Ethiopia, Eritrea was an Italian colony from 1890 to 1941. This left a lasting architectural legacy in Asmara, known for its well-preserved modernist and Art Deco buildings. The capital reflects its colonial past with structures such as the Fiat Tagliero service station and Cinema Impero, earning it UNESCO World Heritage status.

While the mining sector is dominated by large-scale projects such as the Bisha Mine and the Colluli Potash Project, artisanal and small-scale mining (ASM) remains an important but vastly underreported part of the industry. Although the government discourages informal mining, thousands of Eritreans still engage in small-scale gold mining, particularly in western and northern regions. Although artisanal and small-scale mining (ASM) is illegal, it directly supports around 400,000 people.

Mining Proclamation No. 68/1995, enacted on 20 March 1995, governs the mining sector. This legislation establishes the legal framework for all mining operations in the country, outlining procedures for obtaining licences, defining the rights and obligations of licence holders, and specifying regulatory oversight mechanisms.

Regarding fiscal policies, the Mining Income Tax Proclamation No. 69/1995, also enacted on 20 March 1995, dictates the taxation regime for mining activities. This proclamation sets a 38% tax rate on taxable income for mining licence holders.

The government retains the legal right to acquire up to a 10% equity stake in mining ventures without cost. Additionally, it can negotiate to purchase an extra equity interest of up to 30%, meaning total state participation in any mining project could reach 40%.

While central to its economic aspirations, the mining industry faces numerous political, environmental, infrastructural and human rights issues. The country's political landscape is dominated by a highly centralised governance structure under the PFDJ. This centralisation has resulted in stringent government controls over mining operations. The pervasive influence of the ruling party and the military in the economy has been identified as a factor that stifles economic diversification.

The underdeveloped infrastructure presents logistical challenges for mining companies. Limited road networks, outdated port facilities and an unreliable power supply can increase operational costs and complicate mineral transport. 

The port of Massawa, a critical hub for mineral exports, requires modernisation to manage increased mining output efficiently. Poor infrastructure creates logistical challenges, raising operational costs for mining companies and potentially deterring foreign investment.

The mining sector faces frequent power outages due to its reliance on imported fossil fuels, mainly diesel. The country has no significant domestic energy production, making operations vulnerable to fuel price fluctuations and supply disruptions. High electricity costs and an unreliable grid increase operational risks for mining companies.

Its natural environment faces significant pressures, including deforestation, desertification, soil erosion and overgrazing. The widespread presence of landmines further exacerbates land degradation. Mining activities, particularly for gold, copper and zinc, have historically provided a significant source of revenue, yet these operations contribute to environmental degradation, affecting both highland and coastal regions.

The national service programme enforces indefinite conscription under harsh conditions. Conscripts are often deployed to state-owned firms like Segen Construction, which are implicated in forced labour within mining projects. Among the most prominent cases, the Bisha mine, operated by Nevsun Resources, faced allegations of benefitting from forced labour through such contractors, drawing legal action and international scrutiny.

In 2013, former Bisha mineworkers sued Nevsun, accusing the company of human rights violations involving conscripted labour. The case reached the Supreme Court of Canada, which ruled in 2020 that it could proceed. A settlement followed later that year, with terms described as "significant". This marked the first time a Canadian company was held accountable for alleged human rights abuses abroad in Canadian courts. 

Furthermore, Eritrea's location in the volatile Horn of Africa presents security risks that could have an impact on its mining sector. The region has experienced periodic conflicts, insurgencies, and political instability. While the nation has remained largely insulated from direct conflict in recent years, tensions with neighbouring Ethiopia and broader instability in the Red Sea region pose potential risks to supply chains and exports.

Its strained relationship with Ethiopia presents a challenge for its mining sector, particularly in trade and export logistics. While its ports, such as Massawa, could serve as key regional trade hubs, their potential remains limited by historical tensions. Ethiopia, landlocked since Eritrea’s independence in 1993, has sought reliable sea access, but political instability and border conflicts have hindered consistent trade.

This uncertainty affects the mining industry's export routes and infrastructure development. While projects like Bisha and Colluli rely on Eritrean ports, diplomatic tensions can disrupt logistics and deter investment. 

Despite its challenges, the nation's vast, untapped mineral wealth is drawing increasing foreign investment. The government has prioritised mining as a key sector for economic growth, with expansion plans in gold, copper, zinc and potash aimed at diversifying the economy. Eritrea's accession as the 24th member state of the Africa Finance Corporation in November 2019 underlines its efforts to attract investment. At the same time, the African Development Bank (AfDB) forecasts that private consumption and mining expansion will drive economic growth.

Eritrea's mineral wealth presents a strong foundation for economic growth, with rising foreign interest and significant projects like Colluli and Bisha driving the sector forward. However, political constraints, infrastructure gaps and investment risks continue to limit its full potential. If the country can address these challenges and create a more stable, investor-friendly environment, its mining sector could become a key engine of economic development.