An overseas firm exploring gold in Western Wellega Zone has suspended the erection of a production facility in Tulu Kepi due to security concerns. The second suspension comes weeks before a government-enforced deadline to begin operations takes hold.

The hiccup jeopardises hundreds of millions of dollars in financing Kefi Gold Plc has secured recently. The value of its shares at the London Stock Exchange slumped down 22pc to 1.25 pence days after the suspension was announced by its executives.

The exploration in Tulu Kepi, 350Km from Addis Abeba, began over a decade ago after Kefi acquired an Australian firm, Nyota Minerals Limited, for 5.2 million pounds sterling (7.2 million dollars at current exchange rates). Close to 70 million dollars had already been spent on the venture before Kefi took over. The 2,000hct exploration area is estimated to hold deposits of close to 50,000Kg of gold. Federal officials expect to boost shipments of gold, which is now the second-most exported item next to coffee. The export of gold brought proceeds of over 650 million dollars last year, more than double the amount it earned in 2019.

The suspension is the latest in a series of delays the company has faced since 2016. Its executives attribute the setbacks to security concerns in the area and state of emergency declarations. Two years ago, the company halted operations in the wake of an attack on its exploration site by an unidentified armed group. Uncertainties in the area disrupted transport and office activities in Gimbi town, 315Km west of Addis Abeba, according to Harry Adams, executive chairman at Kefi Gold.

West Wellega has been a hotbed for instability over the past few years, with frequent reports of attacks on civilians and military engagements between the Ethiopian army and a growing insurgency. According to authorities in the area, the security situation is "risky", and the local administration takes measures to respond to the concerns.

"I believe they took the right measure considering the armed conflict in the area," said a senior official of the Oromia Investment Commission, who requested anonymity.

However, officials at the Ministry of Mines find the claims put forth by Kefi Gold executives unconvincing. They suspect the security concern is used as a pretext to push the deadline set by the government to begin production.

"Although security issues are prevalent, the company uses it as an excuse to extend the deadline," Takele Uma, minister of Mines, told Fortune.

An expert with close to 15 years of experience in the mining industry suggests the company follow in the footsteps of firms conducting explorations in Congo.

"The security situation there is not ideal but large exploration projects are taking place," says the expert. He advises Kefi to arrange its own security team in collaboration with the government.