In northeastern Somalia, the remote town of Milxo has transformed over the past decade from a small cluster of buildings into a booming gold mining hub, attracting both local and international actors.

Milxo, a remote town in northeastern Somalia, has grown into a major unregulated gold mining hub over the past decade, attracting local and international interests.

The lack of effective regulation and overlapping territorial claims have created a 'free zone' where gold extraction happens without licenses or state oversight.

Most gold mining operations in Milxo are informal or illegal, with only two out of 35 entities holding federal licenses, and hazardous practices posing health and environmental risks.

Armed groups and political elites have become involved, complicating governance and enabling elite capture, while revenues bypass local communities.

A remote settlement in northeastern Somalia, Milxo, has become the center of a rapidly expanding, largely unregulated gold boom, according to a recent report by the Global Initiative against Transnational Organized Crime (GI-TOC).

Over the past decade, Milxo has grown from a small cluster of buildings with a few hundred residents in 2016 to a sprawling settlement of between 10,000 and 15,000 people, now supplying international markets with minimal oversight.

The town sits in a region claimed at different times by Puntland, Somaliland, the Federal Government of Somalia (FGS), and more recently the SSC-Khatumo administration, which received formal recognition from the federal government in 2023.

· Puntland – an autonomous region in northeastern Somalia. Established in 1998, it governs itself internally but remains officially part of Somalia and does not seek full independence.

· Somaliland – a self-declared state in northwestern Somalia. It declared independence from Somalia in 1991 but is not internationally recognized as a sovereign country.

· Federal Government of Somalia (FGS) – the internationally recognized central government of Somalia, based in Mogadishu, responsible for federal affairs but with limited control over remote regions.

· SSC-Khatumo administration – a recently recognized regional authority claiming parts of northern and northeastern Somalia. In 2023, it received formal recognition from the federal government, giving it partial legitimacy, but its governance overlaps with that of Puntland and Somaliland.

Despite these overlapping claims, no authority effectively regulates mining activity, creating a “free zone” for gold extraction without licenses, taxation, or state oversight.

The GI-TOC report found 20 active mining sites in Milxo, run by at least 18 commercial operators. Many employ foreign technical staff and rely on hazardous, rudimentary extraction methods, including widespread mercury use and cyanide leaching.

Few of these operators appear to hold licenses from Puntland, which currently has no binding mining legislation. State revenue from the gold trade is limited to a nominal customs levy at Bosaso airport, representing only a fraction of potential earnings and often missing from official records.

Attempts to regulate the sector have largely failed. Puntland has drafted mining acts and revenue frameworks since 2014, but none have been passed. In the absence of a formal legal framework, mining operations are governed by informal arrangements and ad hoc payments.

"The absence of regulation has created conditions conducive to elite capture and armed-group exploitation. Evidence collected by the GI-TOC indicates that at least one major operator is linked to Puntland’s president. Al-Shabaab, which maintains a presence in the nearby Golis Mountains, has repeatedly attempted to tax or infiltrate mining operations.

While the extent of revenue derived from gold is contested, phone records and eyewitness accounts indicate ongoing extortion activity, often framed as zakat," the report noted.

Connections to political elites further complicate regulation. The report notes links between at least one major operator and the family of Puntland President Said Abdullahi Deni, highlighting elite capture in a region where governance structures remain fragmented.

Milxo’s unregulated boom mirrors wider challenges in Africa’s gold market, where informal and illegal mining often fuels exports without benefiting local communities.

Nationalization or formal state control is often proposed as a solution, but in a disputed town like Milxo, implementing such a policy is fraught with difficulty. With Puntland, Somaliland, and the SSC-Khatumo administration yet to agree on leadership, any attempt to nationalize mining risks being undermined. Local populations may also struggle to claim benefits even if a regulatory framework is eventually imposed.

Meanwhile, gold from Milxo continues to enter the global supply chain with minimal scrutiny. It is typically transported to Dubai via commercial flights, taking advantage of lax regulatory oversight and strategic policies that favor rapid import.

Imports of Somali gold into the United Arab Emirates (UAE) have almost doubled since 2017, climbing from 2.8 tonnes to more than five tonnes by 2023, according to GI-TOC.

Although regulations around gold imports have been updated in recent years, enforcement is patchy, and couriers report that proof of origin or compliance is rarely checked.

The report by GI-TOC traces the rise of the Milxo gold boom, detailing mining practices, mapping the flow of gold from extraction sites to international markets, and examining how the unregulated sector intersects with powerful elites, armed groups, and Somalia’s fragmented federal authorities. It provides the first in-depth account of how an ungoverned goldfield in northern Somalia has become a significant part of the global gold trade.

Until governance is clarified and regulation implemented, Milxo’s gold boom will likely continue fueling economic opportunity, environmental risks, and elite exploitation simultaneously.