Eritrea will decide thisyear on five more applications for mining exploration licences from companiesin South Africa, Canada and China, the energy and mines minister said onFriday.

The interest is verygood, from many quarters, Tesfai Ghebreselassie told Reuters of thegold-rich Horn of African nation's fledgling minerals' industry.

Decisions will betaken soon, during this year.

He did not name the fivenew companies. But if their licences are approved, they will join six othercompanies from Canada, China and Australia already exploring for gold andindustrial metals in Eritrea.

Tesfai also reassuredinvestors there would be no repeat of a temporary freeze on mining work in 2004that hurt some firms' stock prices.

That was a one-off,exceptional situation, he said, explaining the halt was to allow Eritrea develop regulations to buy an extra10 percent government stake in all projects.

Current mining laws give Eritrea the right to a 10 percent freestake, and a further 30 percent purchased at market prices, in mining ventures.

It was damaging to anextent, Tesfai said of the 2004 freeze, which was lifted in early 2005.But it's a problem behind us, and nothing of that sort will happenagain.

In charge of the ministrysince its start in 1993, Tesfai previously studied physical sciences in Poland and was a member of thepro-independence rebel movement that brought the government to power in 1991after a 30-year war.

That conflict, followed bya 1998-2000 border war with Ethiopia, has kept big mining companies waryover Eritrea.

The country's most advancedproject, run by Canada's Nevsun Resources Ltd, shouldstart producing by the end of 2009, the minister said. Nevsun expects its Bishaproject to produce around 1 million ounces of gold, 750 million pounds ofcopper, and 1.1 billion pounds of zinc over a 10-year life.

Tesfai said Eritrea had made a $20 million advancepayment for a 40 percent stake in Bisha, and was working out what participationit would have in other projects.

We want the firstcontract with Nevsun to be a model. Both parties have to be comfortable,he said.


Production at the Zaraproject, run by Australia's Sub-Sahara Resources, and the Asmara belt, headed by Canada's Sunridge, should start soon afterBisha, he added.

Zara is mainly a golddeposit, while the Asmara area has metals like zinc andcopper, as well as some gold.

There are veryexciting discoveries made so far, Tesfai said.

Apart from somesmall-scale, artisan gold-mining -- which the minister estimated at about halfa tonne a year -- and minor extraction by Italians during the colonial era, Eritrea's mineral potential is virtuallyunexploited.

Tesfai did not give overallreserve estimates, but said the sector, if managed carefully, could play a bigrole in alleviating poverty and helping development in the nation of 4.5million people that is one of the world's poorest.

We have to wisely usewhat we have, he said, adding that as well as direct revenues, Eritrea would benefit from employmentpossibilities on projects and in the service sector as the industry developed.

Investors should not worryabout political risk in Eritrea given the legal resolution -- orvirtual demarcation -- of its border dispute with Ethiopia, and the government's commitment toequitable partnership with foreign firms, he said.

Eritrea is a law-abiding country. There isnothing bad or illegal we have done, he said. The important thingis making the rules of the game fair and transparent, which is just what we aredoing.

Tesfai also noted Eritrea's offshore hydrocarbon potentialunder its Red Seawaters. There is justification to anticipate potential, he said,even though past drilling had come up dry. This is one of the leastexploited regions.

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(Editing by PeterBlackburn)

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