West Africa has potential for top-five gold spot

West Africa has the potential to become one of the top five gold-producing regions in the world, according to Wood Mackenzie mining industry analyst Jonathan Leng.
Numerous new gold-mining projects are being developed in West Africa, particularly in Ghana, Burkina Faso, Mali, Mauritania, Liberia and Sierra Leone, but none of them are big enough to threaten the top gold producer, China, he adds.

“The recent boom in the industry is the result of two main factors: first, the strong rise in gold prices to their current high levels, which stimulated exploration and development of projects and made the reward for mining in one of the world’s more risky areas appear worthwhile, and, second, the ongoing success of mining projects in established mining countries in the region over the past few decades, which has instilled confidence in miners and explorers in less well-developed, higher-risk countries such as Côte d’Ivoire.”
West Africa has experienced significant growth in gold production over the last two decades to 6.7-million ounces in 2010, accounting for nearly 8% of the global supply. Continued growth is forecast at about 11-million ounces by 2015.

Global senior producers account for more than half of the region’s mine supply and are likely to maintain current levels with significant investments in expansion and development projects. West Africa is viewed as attractive for investment, suggesting potential for corporate activity, states a report from financial services provider BMO Capital Markets.

Gold exploration company ASX-listed Middle Island Resources MD Rick Yeates states that the gold ‘boom’ is not an overnight phenomenon, but rather a result of a combination of factors including extraordinary gold prospectivity, the reform of mining laws in many jurisdictions, improving sovereign risk profiles and the persistence of companies in establishing the region’s credentials.

Further, Australia-based Viking Ashanti MD Peter McMickan notes that there has been heightened interest in gold mining in West Africa for some time.
“A healthy mix of major multinational miners, midsize producers and junior explorers, predominantly from the US, Canada, South Africa and Australia, has been active in the region,” says McMickan.
He states that a significant driver for the renewed interest has been the changed view of risk and reward in the region. Companies have now demonstrated that it is viable to do business in the region and the opportunities for the discovery and development of major gold deposits are considered good.

A report on gold mining in West Africa suggests that gold investors remain focused on opportunities and the prospectivity of untested exploration rights.
Mining Weekly reported that at the Investing in African Mining Indaba, in Cape Town, World Bank operations officer Kristina Svensson said that resource-rich countries in West Africa should use mining to catalyse private-sector investment.

Svensson’s report recommends that governments in the region encourage mining companies to develop local procurement plans, which would assess their current situation and set realistic local procurement targets as well as establish a supplier development fund to reinvest mining revenues back into smaller businesses.

Ghana is one country making progress. Its Mineral Commission CEO, Ben Aryee, stated that they had identified the need to increase local content in the 1980s and, during the past three years, a conscious effort had been made to move the process forward in a more structured manner through legislation.
“The Ghanaian government is working with mining companies to assess their staffing situation in detail and to calculate the number of local employees, as opposed to expatriates,” he added.
Ghana Finance Minister Dr Kwabena Duffuor recently called on foreign investors to invest in the country’s modernised and diversified economic sector.

“Our economy is doing extremely well and has been touted as one of the fastest-growing economies in West Africa. We are focused on developing the oil, gas and minerals industry and plan to bridge the gap that exists in our infrastructure,” he says.

Yeates says the biggest challenge to gold explorers in West Africa is the lack of infrastructure. Historically, this has resulted in a focus on high-value, low-volume commodities such as gold and diamonds, which can be produced on site, transported by air and sold.
“Lack of access to reliable grid power is another challenge and on-site diesel power generation is an expensive alternative,” he adds.
Further, the lack of a skilled workforce in less-developed countries is another challenge for potential miners.

“Companies must be willing to provide training and Australian companies have done well in this regard. Other challenges include language and cultural barriers, which are easily overcome if foreign investors remember that they are guests in the countries,” says Yeates.

McMickan points out that companies are always wary of political, social, regulatory and commercial factors when investing risk funds in exploration and mining projects in West Africa.
He adds that once these challenges have been dealt with, countries in the region can look forward to their communities benefiting from opportunities for employment, skills development, improved infrastructure and community facilities, local business oppor- tunities and payment by companies of government taxes and royalties.

Yeates says there is no better form of social development than providing someone with a job and training. Many companies implement community development projects and these may include building schools and clinics and providing potable water supplies, as well as health and vocational education, supporting local agriculture and aquiculture ventures and projects that involve establishing local industries to supply consumables directly to an exploration or mine site.

The gold mining industry is already a significant economic contributor to several countries in West Africa, states McMickan.
Provided that a reasonable level of political and regulatory certainty continues, foreign investment will continue.

“The immediate future of gold mining in West Africa looks bright, with a high level of exploration activity and new mines coming on stream,” he says, emphasising that, in addition, in recent times, there has been a strong inflow of China-backed resource investment dollars going into the African continent, which opens up opportunities for explorers and miners to tap into capital for project develop- ment.

Exploration Projects
Most of West Africa’s gold comes from the Birimian greenstone belt on the West African shield, home to the Ashanti gold belt.
Randgold Resources is a prominent mining company currently exploring the region for gold. The company has four drilling sites in West Africa: Gounkoto and Loulo, in Mali; Massawa, in Senegal; and Tongon, in Côte d’Ivoire.
Another prominent gold miner and explorer in the region is Gold Fields, which is focused on creating growth opportunities through its greenfield exploration programme.
The company states that its efforts are spearheaded by four resource development and feasibility projects, all of which are expected to reach construction decisions within two years.
Gold Fields’ near-mine exploration, at Damang, in Ghana, shows increasing growth potential as a result of a successful drilling programme.

The company states that it intends to maintain its rate of discovery to deliver additional mineable reserves and to increase the life of the mine.
In Senegal, Oromin Explorations has discovered ten additional high-priority gold targets. Exploration activities and drilling were done on many of the targets and some of them remain in the early stages, while others are advanced and allow preparation for an initial resource estimate.
Viking Ashanti is currently exploring gold prospects in Ghana and has completed 7 000 m of reverse-calculation (RC) drilling. Another project in southern Ghana has completed soil geochemistry and drilling programmes and identified a prime exploration target.

Middle Island Resources has found a significant new gold target in Liberia and an initial 5 000 m of RC percussion drilling is to start soon.
Further, Middle Island has drilling programmes in progress in Burkina Faso and Niger.

Major Operations
Randgold Resources’ Luolo gold mine, in Mali, sold 209 631 oz of gold in 2011. Tongon gold mine, in Côte d’Ivoire, in which Randgold has a 89% interest, sold 271 922 oz of gold in 2011 and Mali’s Morila gold mine, in which AngloGold Ashanti has a joint venture interest, sold 248 635 oz of gold in 2011.
The Morila deposit was found and develop- ment by Randgold and commissioned in late 2000. The mine produced 5.8-million ounces of gold to December 2010.

The Tongon gold mine is an opencut mining operation and employs four standard mining practices of drill, blast, load and haul. Mining started in April 2010 and has a ten-year life span.
AngloGold Ashanti’s Sadiola mine is jointly owned by Iamgold and is an openpit gold mine, which has been operating since 1996 in Mali. The deposit is spread over an area of 302 km2, with limited infrastructure.
Advisory firm Ernst & Young says West Africa is emerging as the new hot spot for mining investment in its Africa Mining Investment survey.

The 2011 top three producing mining countries in West Africa were Ghana, Guinea, Mali and Mauritania, with Ghana being the second-largest gold producer in Africa, following South Africa and ahead of Mali, which holds the number three spot.
Yeates concludes that there are a number of ASX-listed companies that have made discoveries in West Africa and developed these into highly profitable gold operations.

“Gold mining companies such as Perseus, Adamus, Gryphon and Ampella have proved excellent investments for shareholders and have been great pathfinders for junior ASX companies seeking to emulate their success in the region.”


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