Burkina Faso and Mali

High prospectivity shadowed by security risks in the Sahel

On the podium of the top five largest gold producing countries in the region, Mali and Burkina Faso, each producing around 61 mt/y, cannot arouse much investment appetite in the gold space due to security challenges on the ground. While the pandemic has caused around 200 deaths in total, in both countries, intensified armed violence in Burkina Faso and the Malian coup of August are hallmarks of chronic insecurity in the Sahel region. Already experienced in mitigating such challenges, the production sector has been weathering the situation, but the exploration sector is struggling.

Producers learned to manage the risks on the ground, but they need to also tackle the perception of sovereign risks so that their investors do not flee. Gold production jumped to a high of 2.5 million oz/y last year, a volume which reflects the robustness of a sector made up of companies like Barrick, Endeavour, IAMGOLD, B2Gold, AngloGold Ashanti, and Resolute, all operating in either one or both of the countries. Their resilience and credibility in the region became obvious in the aftermath of the Mali coup, when, although incurring losses in the share prices from as little as 2.6% for Barrick Gold to 17% for Resolute Mining, miners did not stop operations, relying on contingency supplies and enacting protocols that have helped them traverse past periods of political instability.

“The security and political issues will make explorers think twice about choosing Burkina Faso, so I do not believe this time the country will be on the top of the list as it was in 2009-2012.”

Simon Meadows Smith, Managing Director, SEMS Exploration Services

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Burkina

Faso

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“The situation in the Sahel has always been serious, but recently it has escalated, having spilled from Mali across borders to Western Niger as well as Burkina Faso, which is becoming the epicentre of this war, and even to the north of Ivory Coast.”

Liam Morrissey, CEO, MS Risk

For Malian explorers who require lesser traffic of goods and capital, the political stalemate did not interrupt drilling, but they were more susceptible to price volatility. Roscan, a junior developer, saw its share price drop from CA$0.47 to CA$0.38 on the day of the coup. The destabilization in share prices reverberated to operators across the border in Burkina Faso: West African Resources share price decreased by 6.9% after the coup.

Worrying in itself, the political void in Mali falls within a broader context of escalating jihadist violence, which has been spilling into Burkina Faso. While the international military operation made of missions from France, the UN, the G5, and the EU are intervening in Mali, there are currently no international troops in Burkina. Porous borders and a lack of governance leaves the country without any defense against extremist organizations. Liam Morrissey, CEO of MS Risk, believes that the international community is not nimble enough to project its assistance across the region yet.

Mali

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“Without belittling or underestimating the seriousness of the situation in Mali, I believe that sovereign risk is overly mediatized in terms of mining, considering that operations have continued uninterruptedly during coups and times of instability.”

Alistair Cowden, Executive Chairman, Firefinch Limited

Security costs add to an already high-cost structure related to logistics within the landlocked countries, and to the shortage of locally based services and equipment supplies. Junior explorers are less prepared to invest in security protocols, so that in Burkina Faso there are no sizeable explorers, and greenfield exploration will die out if the violence does not cease or the government does not intervene. The current producers are the successors of the last wave of greenfield exploration or those who ventured through acquisitions in the country, such as Teranga Gold which came to the possession of Golden Hill project in 2016, contiguous with Endeavour’s Houndé mine.

In Mali, however, the junior space is more diverse, occupied by companies like African Gold Group, Roscan, Cora Gold, Firefinch and Compass Gold. Launched in 2017 by some of the former founders of IAMGOLD, Compass Gold took one of the last parcels of exploration land in Mali, a package of 1,000 km2. “The Senegal-Mali-Shear-Zone has seen a concentration of exploration dollars, but the Sub-parallel corridors did not, so once more money is spent on these corridors, more sizeable discoveries are likely to be found,” said Nana Sangmuah, president and CEO of Roscan Gold.

Image courtesy of B2Gold