Rich, Yet Underexplored, Gold Endowment

The last frontier

Gold, West Africa has in abundance. The Birimian Greenstone belt, a gold-bearing geological structure, stretches across Ivory Coast, Ghana, Burkina Faso, Guinea and the Mali-Senegal border, forming two main parallel trends: the Houndé belt and the Boromo belt, as well as smaller anomalous structures such as the Hire Belt in Ivory Coast, the Sebba belt in Burkina Faso, the Siguiri basin in Guinea and the Sefwi-Bibiani and Ashanti belts in Ghana. In the past 10 years, there have been 79 million oz discovered to date in the region, and US$5 billion spent. Nevertheless, these highly prospective grounds remain broadly underexplored. Besides Ghana, the top gold producer in the continent with over 100 million oz of total discoveries, which holds about 19% of the prolific belt, countries like Burkina Faso and Ivory Coast are vastly untapped. Together, they make up 60% of the Greenstone belt, but only 35% of discoveries have been made in this region. These vast lands spark the imagination of those seeking the next elephant gold discovery. With the market on their side as the gold price reaches up to US$2,000/oz, that multi-million oz deposit may not be too far away.


“Our focus on West Africa is a big part of why we’re able to maintain a diverse and active portfolio with a lot of growth, optionality and exploration. The importance of a diversified portfolio is paramount to our success as one of the world’s largest gold producers. Put simply, operational diversification and sufficient scale in the countries we operate in improves our ability to manage risk and positions us well to capture synergies and growth opportunities.”

Sébastien de Montessus, CEO, Endeavour Mining Corporation

West Africa has been the home of many company-making assets like (former) Randgold’s Morila mine, IAMGOLD’s Sadiola, and B2Gold Fekola, all in Mali. Similarly, in Ghana, AngloGold Ashanti’s Obuasi and Iduapriem mines, Newmont’s Aykem, and Gold Field’s flagship Tarkwa represent tier-one assets that brought success to some of the most profitable gold producers in the world. Their stories have encouraged waves of exploration in the region, juniors following the “nearologies” or so-called “closelogies” formed by the positioning of these world-class discoveries. For instance, in a district believed to host over 15 million oz gold and with seven operating mines within an 80 km radius, TSX-listed Roscan Gold reports some of the best drilling intercepts in West Africa, with 65 m at 5.16 g/t, and 8.68 g/t from 6 m at its Kandiolé property in South-West Mali.

Typical of West Africa is that juniors, developers and majors alike tend to build diverse asset portfolios in different jurisdictions, and sometimes in different minerals too. The region enjoys good levels of regional integration, with regulatory frameworks that often compete against each other, but also copy each other. Through the ECOWAS membership, the adherence to the ODAHA treaty, and the African Continental Free Trade Area Agreement (AfCFTA) which is currently in progress, West African countries subscribe to similar rules, which is something that service providers have long leveraged to grow their business. More and more, developers and producers take advantage of the cross-borders to de-risk their value proposition. The multi-jurisdictional focus is both an optionality that West Africa offers, as well as a necessity in a region where the political situation in one country can rapidly change. The recent coup in Mali, escalating violence in Burkina Faso, together with tensions around the recent elections in Ivory Coast, and even potential regulatory delays caused by 2020 elections in Ghana, are more easily mitigated on a country by country basis, once the strengths and challenges of each are well understood.

Illustrating this principle, Endeavour Mining, for instance, operates three mines in Burkina Faso (Houndé, Mana, Karma and Boungou) and two in Cote d’Ivoire (Ity and Agbaou), together with multiple development and exploration across the Birimian belt. Also, IAMGOLD runs the Essakane mine in Burkina Faso and has an exploration pipeline which combines the Senegalese Boto project with the Malian Diakha Siribaya, but CEO Gordon Stothart speaks of going a step further by integrating assets within three jurisdictions- Senegal, Mali, and Guinea - under the Bambouk complex, now under development. The political and fiscal implications of such a project would be difficult and something to watch in the future.

Moreover, while gold is certainly in the spotlight, West Africa also holds opportunities in other metals: Trevali is operating one of the only zinc-lead assets in Burkina Faso-the Perkoa mine: “Perkoa demonstrates that base metals can be found in the area. I believe more base metal mines will be active in the region in the coming decades, and we hope to be part of creating that opportunity in the country,” said Ricus Grimbeek, president and CEO of Trevali Mining.

In the battery space, Iron Ridge Resources made the first lithium discovery in Ghana, defining a maiden resource of 14.5 million mt, running at 1.3 lithium oxide. The company has a lithium-gold combined portfolio and has recently been leaning more towards the latter commodity through the development of its flagship Zaranou gold project in Ivory Coast, expected to hold in excess of 10 million oz. Vincent Mascolo, the CEO of Iron Ridge, explained the principle behind its different jurisdictions/different metals strategy: “The rationale behind it is quite simple: we seek to immunize our business against commodity cycles and external forces beyond our control. For instance, two years ago we were primarily valued on our lithium project, but this market later declined. So strategically, we also geared ourselves towards gold, which is prospering. Today, gold is booming and the lithium market is resurging.”

Fertile ground for M&A activity

The proximity to operating mines both validates an area’s rich endowment and opens opportunities for synergies and consolidations. An obvious example is the recently finalized Sabodala-Massawa integration project by Teranga Gold, which combines existing infrastructure within trucking distance from both mines into an optimized, tier-one complex with a production guideline of 348,000 oz/year.

“Over the past few years, we have witnessed a huge shift in the West African gold space, with companies like Barrick looking at projects of 750,000 to one million oz, while the traditional mid-tiers like Teranga, Endeavour and Resolute seek out projects of 200,000 oz plus. I expect a divestment of smaller assets from those mid-tiers (between 50,000 to 150,000 oz), projects which are ripe for picking by companies like ours.”

Danny Callow, CEO, African Gold Group (AGG)

Under normal circumstances, a big rise in commodity prices would drive M&A transactions and a stronger appetite for consolidations, yet travel restrictions have slowed these from concretizing. The first transactions, however, are signalling a trend towards asset-optimization. As Danny Callow, the CEO of African Gold Group explained, large and mid-tier producers prefer to focus on bigger assets, leaving room for smaller developers to grab projects in the range of 50-75,000 oz. Mark Bristow defends this view: “Barrick’s strategy is focused on tier one assets – those mines capable of producing more than 500,000 ounces of gold annually for at least 10 years, at the lower end of the industry’s cost profile. It already operates six of these mines.”

Demonstrating this divestment strategy, Barrick Gold announced selling its 80% interest in Morila mine to Firefinch (former Mali Lithium), a West-Australian developer. Morila was once one of the best mines in the world, with head grades of 10 g/mt in the pit, but since the mine ran out of ore, the team decided to process the stockpile of tailings, which still held grades between 1 g/mt and 2 g/mt. Firefinch aims to bring in a fresh approach, having already identified over 1.3 million oz underneath the main pit and preparing to feed in satellite pits to extend the life of mine by another 10 years. The acquisition will cost Firefinch around US$27 million, and the on-site infrastructure is probably worth around US$300 million.

In July, mid-tier Golden Star also made news with the sale of its majority stake in Bogoso-Prestea underground mine to Future Global Resources, parented by Blue International Holdings. Following the US$55 million transaction, Golden Star will be focusing on the underground Wassa mine on the Ashanti belt in south-west Ghana. Moreover, ASX-listed West African Resources acquired B2Gold’s Toega gold deposit in Burkina Faso for US$45 million.

Over the summer, more mid-tier producers extended their portfolios through acquisitions; notably, Perseus completed the acquisition of Exore Resources, taking over a land package of 2,000 km2 together with the low-cost Sissingue mine in Ivory Coast. Mako Gold also divested its greenfield Niou discovery in Burkina Faso to Russian producer Nordgold-who, separately, also made an offer to acquire Cardinal Resources, the Ghanaian success story around the tier-one Namdini Gold discovery.

On the back of returning investor confidence and growing demand, juniors have seen major re-ratings and their capital placements heavily oversubscribed. With an injection of both capital and enthusiasm, West Africa is perfectly suited to deliver the asset pipeline to respond to the newfound demand in gold in time to make the most out of the current market. Besides low discovery costs, the turnaround times from discovery to production are very short, allowing companies to grow rapidly. In only five years, Roxgold went from the first drill hole to the first pour of gold at its Yaramoko mine in Burkina Faso. “Roxgold is a very different company to the one we were 12-18 months ago, having branched out from a single asset miner into multiple jurisdictions. We are well on the path to becoming a multi-asset producer, as we expect to more than double our production and cash flow within the next two years without the need to issue any shares,” commented Roxgold CEO John Dorward.

Moreover, easy metallurgy, with mostly open-pit, shallow mineralization broadly characteristic to the region, offers an attractive development proposition at low CAPEX, with average grades of 1.64 g/mt specific to African operations. Mining companies also tend to enjoy strong community relations and ESG initiatives have been particularly focused on improving local livelihoods. Local governments are cooperating more closely with the industry to regulate artisanal mining; Ghana launching a program of “Community Mining,” and Burkina creating a cooperatives structure through its “Aneemas” program.

Prospective grounds, reactive governments, quick turnarounds, cheap operations and great mining acceptability align well with the needs of a global gold industry that has been slow to replace its depleting reserves.

Image courtesy of Asante Gold