Soverign Fund's Foray into Gold Mining Sparks Debate Over Risk Appetite, Strategy

Soverign Fund's Foray into Gold Mining Sparks Debate Over Risk Appetite, Strategy

Sep 7 , 2025. By BEZAWIT HULUAGER ( FORTUNE STAFF WRITER )

A sovereign wealth fund's investment in mining aligns with resource-backed diversification, a hallmark of sovereign strategies from Norway to Abu Dhabi. Nonetheless, the timing and scale of the Akobo Mineral deal invited more questions than answers. With less than two percent equity, ballooning debt, negative equity, and a mine still in ramp-up mode, Akobo Mineral’s fundamentals are far from stable. Its survival depends on operational scaling, debt restructuring, and successful resource extraction, all of which require time, capital, and luck.

Brook Taye (PhD), the chief executive of the Ethiopian Investment Holdings (EIH), is steering the sovereign wealth fund into uncharted terrain. EIH’s latest equity injection into Akobo Minerals, a Norwegian-listed gold miner operating in the Gambella Regional State, is being touted as a landmark move to diversify state investments beyond traditional sectors. But the decision has raised eyebrows, given the Miner’s precarious financial footing.

While the symbolism of the investment demonstrated EIH's commitment to unlocking the country's mineral wealth, the numbers on Akobo Mineral’s books paint a far rosier picture.

In 2024, Akobo Minerals moved from an exploration phase into early-stage gold production, selling gold to the National Bank of Ethiopia (NBE) and achieving operational breakeven at around five kilograms of monthly output. However, its financials remain deeply in the red. Based on last week's exchange rate between the Swedish Korona and the US dollar The company posted a net loss of 17.4 million dollars, despite bringing in 1.8 million dollars in revenue and 3.6 million dollars "in other income."

Total liabilities ballooned to 29.5 million dollars, while assets shrank to a meagre one million dollars. The Miner’s accumulated losses of 50.2 million dollars have wiped out its entire 30.6 million dollars equity base, pushing it into negative equity territory.

The key culprit is debt. In November 2024, Akobo Minerals issued 2.5 million dollars in convertible loans with a steep 20pc interest rate, on top of 25 million dollars in secured loans, liabilities that now dwarf its asset base.

“Unless lenders agree to convert their credits into equity, Akobo’s assets alone cannot cover its liabilities,” warned Abdulmenan Mohammed (PhD), the London-based financial analyst.

The interest expense alone hit 14 million dollars, revealing how strained the balance sheet has become. At these levels, debt servicing consumes far more than the company generates, reinforcing investor concerns about liquidity, solvency, and sustainability.

Despite its public posturing, EIH’s stake in Akobo Minerals remains marginal, under 1.9pc, and it does not appear on the Miner’s list of top 10 shareholders. That diminishes the potential for direct influence over corporate governance, especially at a time when Akobo Mineral’s future may depend on decisive board-level decisions.

However, Dagmawi Zeleke, EIH’s head of Communications, defended the investment, calling it a “turning point” for both Akobo Mineral and EIH's broader diversification strategy. The investment, he argued, targets sectors with high foreign currency returns, growth potential, and liquidity, "key pillars of EIH’s asset allocation framework."

“Akobo’s shift into output after 15 years is a rare milestone,” said Dagmawi, pointing to the mine’s high-grade ore, estimated at over 20 grams a tonne, and a 250-strong workforce.

The Segele Mine, inaugurated in October 2024 by Prime Minister Abiy Ahmed (PhD), is now producing between five and 10Kg of gold monthly, with breakeven set at five kilograms. EIH’s investment is reportedly earmarked to finance a new vertical shaft, which could increase monthly output to 50Kg by early 2026, potentially lifting the company out of distress.

Analysts argue that while EIH’s involvement brings regulatory and political legitimacy, its limited financial exposure renders the sovereign fund more of a symbolic partner than a capital backstop. Analysts raise questions about EIH’s role, whether it is a strategic investor or merely a signal sender to foreign and domestic stakeholders.

“Akobo remains a high-risk and high-reward play,” said Mekbib Tesfaye, a London-based analyst. “It’s exposed to dilution risk from convertible debt and asset-backed loans that exceed the value of the underlying collateral.”

Mekbib warned that unless Akobo Mineral restructures its debt, expands reserves, and scales up production, the investment thesis remains speculative. Its 69,000 ounces of identified gold reserves, valued at roughly 230 million dollars, offer tantalising upside. But the path from proven reserves to sustainable cash flow is narrow and fraught with execution risks.

The investment in Akobo Mineral is in sharp contrast to EIH’s buoyant performance elsewhere. The sovereign wealth fund reported 2.05 trillion Br in revenue and 262.7 billion Br in pre-tax profits for the fiscal year 2024/25, a staggering 88pc increase year-on-year (YoY). Its crown jewel, the Ethiopian Airlines Group, accounted for nearly 67pc of profits, followed by the Commercial Bank of Ethiopia (CBE) at 15pc, and Ethio Telecom at over 10pc.

Other assets like the Wonji Sugar Factory showed operational improvements, while private sector lending at CBE surged 104pc, alluding to a more dynamic allocation of capital within the financial system. Brook now aspires for 2.75 trillion Br in revenue and 412 billion Br in pre-tax profits for the next fiscal year, setting an aggressive growth trajectory across its portfolio.

PUBLISHED ON Sep 07,2025 [ VOL 26 , NO 1323]