Making the most of a friendlier investment climate, many juniors have gone to the markets over the summer and autumn of 2020 and found their placements oversubscribed. Although the pandemic has limited juniors’ ability to meet investors and promote themselves, the sector has managed to turn this challenge into an opportunity: juniors can now participate at a large number of digital events, at lower participation fees and with no travelling costs. Digital attendance is more inclusive, especially helping small juniors with reduced budgets.

Completing one of the biggest capital placements, Tietto Minerals managed to raise AU$56 million, which will fund the PFS, DFS and start moving the Abujar project into construction. To a smaller degree, Mako Gold, selected among the five best precious metals companies in Africa to watch in 2020 by the Investing in African Mining Indaba, recently raised US$10 million in a heavily oversubscribed placement to advance its Napié project in Ivory Coast, for which it hopes to have a maiden resource for Q1 2021.

Mako actually completed two financing rounds, one in May, and a second tranche in July, a decision which Peter Ledwidge, managing director, explains: “Some people were surprised by our subsequent AU$10 million raising happening so quickly, but the logic behind this was that it is better to cash up now, not knowing how long the bull market will last.”

This thinking resonates across the junior space, which has learned to act promptly to take advantage of the rare market disposition: TSX-listed Roscan Gold closed a CA$7.5 million financing, topped up by additional investment from Warrants Exercise of another CA$3.3 million in July. Another Canadian junior, Newcore Gold, went to the market with an initial capital raising of US$10 million to fund their exploration campaign at the Enchi gold project in Ghana, but ended up cashing US$15 million after seeing its placement oversubscribed. Besides financing another 50,000 m of drilling, the raise also led to a diversification of Newcore’s investment base, already 32% management owned, to more institutional investors.

Moving to Senegal, Chesser Resources also saw a shift in their register over the past one and a half years to both more geographically dispersed investors and stronger institutional support: “Chesser Resources has traditionally been a majority retail-held company (…) Our latest financing was heavily oversubscribed, and we have been encouraged by the number of mainly Australian institutions supporting us. We are now fully financed to run our next drilling program, which will be a significant one starting in October, after the rainy season,” said Mike Brown, CEO.

This summer, the African Gold Group (AGG) closed an oversubscribed capital raise at US$11.1 million within two weeks, also bringing in institutional investors. However, the company sits at the lower end of valuations in the region, despite its attractive near-term project with a published DFS. Its Kobada gold mine in Mali has an AISC of US$782/oz, which is in the lower cost quartile in the West African space, together with a 100,000 oz per annum production following an increase in reserves from 500,000 oz to 755,000 oz. “African Gold Group remains very undervalued compared to our peers. As a near development operating gold producer, we are running at a market cap probably three to four times lower than our peers who are not even at the same stage as we are. I believe there is a massive opportunity in terms of investment upside,” CEO Danny Callow said to GBR.

A possible explanation could be the high-capital cost of constructing the mine at US$140 million for the entire project, out of which US$80 million is to be spent on the processing plant. James Wallbank, managing partner of closed-end private equity mining fund Ibaera Capital, has noticed a funding gap in the junior market when projects are in their late-stage of development, close to construction, like AGG or Asante Gold: “The public-listed markets will typically fund exploration companies, while the very large institutional investors and the mining companies will tend to invest in projects that are already past the construction phase. (There is) a gap in funding for advanced projects which, as they get closer to construction, they find it more difficult to be financed.”

In answer to this gap, Ibaera participates in projects to help junior explorers transition this critical point. Most recently, Ibaera took over Azumah Resources in Ghana, which, according to Wallbank, had lost the interest of investors despite the very positive fundamentals of the Black Volta (formerly known as Wa) project. Ibaera already invested US$40 million since 2017 in the project, preparing to start construction in early 2021.

West Africa is known as a high-risk, high-opportunity mining destination, and this profile has attracted a particular crowd of unwavering juniors, miners and investors. If producers have declared that they intend to stay cautious through the market upturn, juniors have been higher-risk takers, moving forward aggressively. Noted to be trading at “discounted” rates based on the jurisdictional risk, juniors in West Africa are flirting with shifting investors’ preferences between different countries.

Although the Birimian belt stretches across multiple countries, these countries receive uneven investment attention. An attractive fiscal code, political stability and access to infrastructure play strongly into the choice. Ghana is a good reference in this sense- the region’s most mature market, Ghana has an history of around 200 million oz discoveries to date, even though the country contains only 19% of the Birimian Greenstone belt. By comparison, Ivory Coast holds 35% of this prolific geological structure, yet it has seen little exploration, especially due to political instability prior to 2010.

While the previous cycle favoured Burkina Faso and Mali as the principal exploration destinations, this time around Ivory Coast is the rising star in the region. Security is a key differentiator in turning the tables. The coup to remove Ibrahim Boubacar Keïta in Mali has been the most prominent issue in recent months, but the violence in the Sahel region has spread outside of Mali, and Burkina Faso is now the epicentre of the troubles, according to Liam Morrisey, CEO of London-based risk consultancy MS Risk: “The international community is treating Mali as a country with problems, but it is ignoring its neighbours. In Mali, the war has been contained because of the presence of an international military operation (…) but the international community is not nimble enough to be able to project its assistance across the region yet.”

In the meantime, Ghana, West Africa’s darling for gold production, has been losing its appeal in terms of exploration funding. Simon Meadows Smith, managing director of SEMS Exploration Services, a consultancy and exploration services company based in Ghana, believes this is due to a lack of recent activity on the exploration front: “Ghana has suffered from a perception issue: it is seen as a well-trodden jurisdiction, surrounded by countries with easier and better opportunities. That perception is wrong; there are fabulous opportunities in Ghana, but the lack of a news flow has not encouraged investors.”

With exploration almost stalled in Burkina Faso and more costly in Mali, Senegal becomes, by comparison, an attractive alternative by virtue of its reputation for stability. Nigeria is also promoting itself as the newest postcode for mining in Africa. In the country-by-country section, you can read about the mix of challenge and opportunity each country holds.

Image courtesy of Teranga Gold