The sheep were at sea for almost three months
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Some 50,000 Australian sheep stuck for 70 days in cramped conditions aboard a ship after being rejected for being diseased, will be cooked and eaten.
Eritrean Agriculture Minister Arefaine Berhe said vets had inspected the sheep and they were in good health despite their ordeal on the "ship of death".
"We are a very proud people. We would never have accepted unhealthy sheep," he said.
"But we are also realistic and pragmatic. If there is nothing wrong with them and we are getting them for free, that's good."
"We will slaughter the sheep and they will be used for consumption in Eritrea," he told AFP news agency.
After the Saudi authorities rejected the cargo, a number of other countries refused to accept them before Eritrea stepped in.
Australia is also providing 3,000 tonnes of feed and $700,00 to help with the cost of taking the animals.
Animal rights activists had called for the animals to be slaughtered at sea. More than 5,000 died during the voyage.
Eritrea has been facing serious food shortages caused by drought and is heavily dependent on international aid.
The news is likely to be especially welcome for Muslims in Eritrea, as sheep are traditionally slaughtered during the month of Ramadan which began on Monday.