Burkina Faso is posited as a top mining investment destination for the coming year.
Though international perceptions of the country have wavered, Burkina Faso has consistently remained one of the top five gold producers in Africa since 2012. With a currently calm political environment post-transitional government, over 300 prospective licenses still available, and companies such as Roxgold intersecting 52 grams per tonne (g/t), Burkina Faso is posited as a top mining investment destination for the coming year. Having a less diversified economy, Burkina Faso has dedicated itself to mining over the course of its recent history. Over the past decade, more than nine new mines have come online, and mining entities were largely unaffected by the uncharacteristic violence that occurred in 2014. “The higher gold price in 2016 means renewed investor confidence, and exploration and project development has really picked up,” stated Mark Benning, divisional director of AEL Northwest Africa.
Burkina Faso is landlocked, surrounded by Mali to the north, Niger to the east, Benin to the southeast, Togo and Ghana to the south and Cote d’Ivoire to the southwest. Sharing a similar geology to the second and third top gold producing countries Ghana and Mali, Burkina Faso has a flatter terrain with an amiable climate, making it easily accessible and less expensive for achieving production. “Burkina Faso is a perfectly benign place to operate in; it is friendly, safe, relatively low cost to explore, and very amendable to our West Australian exploration style,” stated Paul Roberts, managing director of Predictive Discovery, which holds 13 exploration permits within the country.
Movement from the Majors
The environment is also one of mergers and acquisitions, as purchases and partnerships seemingly change the market dynamic monthly. Endeavor Mining recently bought True Gold, Perseus Mining has acquired Amara Mining, Teranga Gold purchased Gryphon Minerals, and Centamin gained Ampella. Gold producers are taking advantage of healthy balance sheets and stronger cash flow via diversification of their portfolios, and notably, expansion in Burkina Faso.
MNG recently entered the country through the purchases of the Youga mine from Endeavor and the Balogo project from Golden Rim Resources. Upon acceptance of their permit, the Balogo project is expected to reach production before the close of 2016, adding yet another producing mine to the country’s export capacity.
Meanwhile, Vital Metals are busy exploring and are upbeat about their prospects. Mark Strizek, managing director, said: “Vital Metals views Burkina Faso as a key asset within our exploration portfolio. When considering the exposure of Birimian greenstone, although a number of mines have come online in the last ten years or so, it still remains a very unexplored province. The excitement is in trying to find an “elephant” deposit, of which Burkina Faso has thrown up many, with still more to come. Our target is to grow and add value to the company by discovering a multimillion-ounce resource”.
Vital Metals has already drilled its Kollo gold project with encouraging results.
After its first gold pour in May, Roxgold formally inaugurated its Yaramoko mine on 7th July 2016, bringing Burkina Faso’s only underground gold mine into fruition. “We have been producing more than anticipated. We are presently pouring over 10,000 ounces (oz) of gold per month. Our feasibility study had assumed a gold recovery of 96.9% but our processing team have been able to exceed this figure, even attaining 99% recovery in August,” noted André Baya, general manager of Roxgold Sanu. “When we requested our mining permit, we had conservatively calculated for 10 years, but with our present performance and ongoing exploration, it is highly probable that we shall extend production to 20 years or more.”
As of August 31, 2016, the mill feed grade remains a rarely impressive 15.44 g/t of gold.
The Inata mine remains in the hands of Avocet, and Taparko and Bissa with Nordgold. The Bissa mine is undergoing expansion by means of a heap leach operation at the nearby Bouly project. CEO Nikolai Zelenski stated: “This will confirm Nordgold’s position as the second largest gold producer in the country, with total production of approximately 400,000 ounces per year. West Africa, and Burkina Faso in particular, is one of the few places in the world where it is still possible to find high quality gold deposits, often at reasonable valuations.”
Vincent Morel, exploration manager of West African Resources, would agree, as their Tanlouka gold exploration project has intersected “extremely high grades over the last few months,” and they have increased their resource statements to nearly 850,000 ounces, more than double what was announced in 2015.
With an exploration budget of $20 million, SEMAFO is intent on expanding while managing its current five projects within Burkina Faso, which exist at a range of stages, from their producing Mana mine, to the new Natougou project that has commenced construction. “SEMAFO has been quite aggressive in exploration over the last year,” said David Lalonde, exploration deputy manager of SEMAFO. “We do not have any projects in the northern part of the country close to the border of Mali, and we do not wish to explore in that area. Our Natougou project is near the border of Togo, Benin and Niger, and fortunately the most problematic issue is small banditry and roadblocks.”
Security tensions are concentrated in the north, predictably alongside turbulent borders. Travel warnings and security restrictions have kept some expatriate management from entering contracted work zones in this area, and skilled, local employees are left with the tasks at hand. “The business climate here is favorable thanks to the government; however, the continuing threat of terrorist attacks does make business difficult for us in certain areas of Burkina Faso, especially near the borders of Niger and Mali. There are many mines in these areas but they are within a red zone for foreign nationals, meaning that we can only operate in these potentially very profitable areas in a limited capacity,” explained Pierre Fonkenell, director of Burkina Equipment. “I don’t see any improvement to this situation in the coming years, meaning a dependably increased operational cost.”
Within the central and southern regions of the country foreign nationals continue to conduct business as usual. The terrorist attack in the capital city of Ouagadougou in January of 2016 shows that Burkina Faso is a risk prone destination, similar to most other capital cities around the world given terrorism’s sporadic presence in developed and underdeveloped nations alike. Preventative solutions include greater reliance on technological integration. Sahara Mining Services was the first to bring drones (UAVs) to West Africa, as well as develop an alert system called De-Risk which consolidates data from multiple parties for intelligence mapping. “This system allows you to go onto Google Maps and see if anyone has been robbed on the road you are about to take,” explained Beau Nicholls, CEO of Sahara Mining Services.
Sahara has the largest fleet of auger drills in West Africa, but diversified its operations during the exploration lull of the past few years.
Driving Local Content
Though IAMGOLD’s Essakane project lies in the more dangerous north, it continues to push production levels to new heights. “In terms of production, we developed last year a new zone called Falagountou, which has helped us in securing more saprolite material,” explained Bruno Lemelin, general manager of IAMGOLD Essakane. “This material is softer in nature than hard rock mining and has increased our numbers in terms of tonnage and grades.”
In 2016, IAMGOLD is set to produce above 405,500 oz, but their true impact is that of their contribution to Burkina Faso’s economy. IAMGOLD’s initial task upon creating the Essakane mine was relocating over 13 villages. Presently, IAMGOLD is the largest private sector employer of the country, excluding its employing many locally owned suppliers and service providers. L’Alliance des Fournisseurs burkinabè de biens et Services Miniers (ABSM) was created in 2009 by IAMGOLD, the Canadian Institute of Mining, Metallurgy and Petroleum (CIM) and the Canadian embassy in conjunction with the Burkina Faso government as a means of organizing and better integrating local supporting businesses.
Within the long list of established Burkinabe ABSM companies, the story of Lochim Logistics is exemplary of successful cohesion between private, public and native entities in the assurance of locally experienced ROI. A former logistics coordinator of the Essakane mine, Loze Traore, took advantage of both his experience with IAMGOLD and keen insights on the impending mining legislation changes. “I attended the meeting at the Chamber of Commerce where officials discussed prohibiting multinationals from ordering directly from manufactures,” said Traore, “Thus, I picked niche products, which are lubricants and greases for mining machines, and sought out the manufacturers one by one to establish partnerships.”
Positioning himself as the only means of entry to the Burkina Faso mining market, Lochim Logistics was created. The company has since evolved to include chemical products, aerosols, activator carbons, and more, and is opening offices in South Africa and Canada.
Mineral Resources Services, a Burkinabe geo-services company, is also profiting from the increase in demand for local content. “We are currently conducting a power drilling campaign for SEMAFO as they prepare to bring a new mine online in 2018,” stated Amadou Maman, geologist and general manager of Mineral Resources Services.
With three power auger drilling machines, Maman plans to increase their capacity to 20 auger drills and diamond drilling rigs in the short term. “The dark clouds of the past few years have cleared, and we are optimistic about how the mining sector, and our business, will develop,” Maman said, in reference to the increase in gold prices and investor confidence in his country.
The Challenge of Change
While the new mining code placed greater regulatory emphasis on maximizing local content, bureaucratic idiosyncrasies still hamper fluidity. “Burkina Faso is struggling to provide an efficient mineral tenure system. This is mostly due to the political transitions of the last two years that have resulted in several changes to the mineral tenure administration systems and personnel,” explained Simon Meadows Smith, managing director of SEMS.
The changes in government and legislation resulted in some systematic errors and disagreements that are still in the process of being resolved: “For example, one of our mining clients is struggling with tax regulations in relation to their use of water,” said Emmanuel Yonli, partner at SCPA KAM & SOME law. “This particular company had a water usage tax exemption from the previous government, but the current government wants to repeal the exemption considering the fact that, legally, all entities should be taxed based on water consumption.”
SCPA is not fighting the repeal of the exemption, but rather that the company not be liable for past taxes under the previous administration. SCPA has evolved its practice in accordance with the mining code changes over the years, and are optimistic about how the changes will evolve once the initial kinks have been smoothed. The code’s newly enacted anti-corruption law aims to bring greater transparency and clarity to the governance of the industry, enacted in collaboration with a firm increase in state revenues and a non-wavering obligation for mining companies to protect human rights.
Mining as a Means of Moving Forward
In the grander picture, Burkina Faso is following the trend of other African nations to improve upon both mining regulation and implementation in hopes of sustainable economic growth. During the West African gold mining boom of the early 2000s, Burkina Faso did not take part due to its less attractive fiscal policy, but the government has properly realigned its priorities to ensure this mistake is not repeated during the next gold price hike. “As we come out of the global financial crisis, investors everywhere are gazing at Africa. I think this is our time, and it is our chance to bring Africa out of poverty,” stated Bassole Boubacar, director general of Sorexmines.
Burkina Faso is one of the world’s poorest countries, ranking 183rd out of 188 countries in the Human Development Index. Approximately 45 percent of the population lives on less than $1.25 per day, which is why integrated training, education, and knowledge transfer are offers more valuable than gold for the Burkinabe people. “If a company invests in corporate and social responsibility, they can be assured that conflicts will be avoided. The local people in Burkina Faso are very honest and hardworking,” said Grant Palmer, country manager of Geotech Drilling.
Steadfastly and unwaveringly, Burkina Faso is vamping up its stature as a mining destination investors cannot ignore.