Prospectors and miners flock to four countries surrounding Ghana

Ghana might host the region’s oldest mines, the largest proven reserves and the most developed service sector, but explorers and early stage miners are rushing to secure positions in fast emerging neighboring countries. This special report prepared for E&MJ by GBR profiles the mining environment in four West African countries: Burkina Faso, Niger, Liberia and Guinea.

Burkina Faso: Darling of Africa
54Between West African’s premium gold countries, Mali and Ghana, lies the “land of honest people,” as Burkina Faso is sometimes known. Home to 15.2 million people, stretching across 274,200 km2, Burkina Faso hosts some of the richest untapped geological wealth on the African continent. But due to a history of political instability, military coups, extreme drought and unfavorable investment legislation, it is not surprising that, until recently, both majors and juniors alike have steered clear of the country.

Times have changed; today Burkina Faso is perceived by many explorers to be the “Darling of West Africa.” More than 20 years of stability, large investments in infrastructure and the inception of a new mining act in 2003 have succeeded in bringing the nation to the cusp of exponential growth. “In the space of two and a half years, six mines have gone into production and there are several projects like ours with 1.1 million oz,” said Paul Anderson, vice president of exploration, Riverstone Resources, which controls six exploration projects in the country.

“Burkina Faso has been stable for 25 years and the country is very under explored. The mineral endowment is a lot more than you see right now. If you look at what’s been discovered in Mali and Ghana, it is just a matter of time before something similar is discovered in Burkina,” said Colin McAleenan, president and CEO, Channel Resources. “The promise is there, and they certainly need the investment.”

Channel Resources was one of the first Canadian companies to explore in the country. “Between 1993 and 2001 we did a lot of basic grassroots exploration…

Riverstone Resources and Orezone Gold are working on properties that were once part of Channel’s portfolio,” said McAleenan.

After a difficult period, the company regained ownership of the Tanlouka gold project and, although still at a relatively early stage, Channel has identified drill targets with excellent potential for a new discovery. “We’re going in with an RC rig and will drill approximately 2,500 m in five main target areas. Based on this, we believe there is potential here to discover a significant deposit deserving of a Phase II drilling program,” said McAleenan.

One of the newer companies to enter the country is Canada’s leading mid-tier gold company Iamgold. It plans to spend $14 million on exploration during 2010. “A year ago Iamgold made the Essakane deal with Orezone which, without a doubt, has been the best deal done by this company,” said Peter Jones, president and CEO, Iamgold. “It is difficult to say what the lifetime of the mine will be, but at present we have 3.8 million oz of proven and probable reserves and found a resource base of 6 million oz and climbing. The asset has a very large land package attached and there is a lot more exploration potential on the site.”

The mine is ahead of schedule and on budget. “We are looking at production per year in the high 300s (during the initial years of production) with an average life of mine production of 315,000 oz/y.” said Jones.

Ron Little, president and CEO, Orezone, despite losing the Essakane asset to Iamgold, is confident in his plans to expand and develop the company’s other gold assets in Burkina Faso. “Bomboré, Sega and Bondi collectively have 3.7 million oz. We made a very significant discovery with Essakane, but had to make the decision to sell during the economic downturn. Nevertheless, it is very possible we can repeat this finding,” said Little.

Another recent acquisition was Avocet’s purchase of the Inata mine from Wega in 2009. The company was looking for the opportunity to grow its production base. “We like exploration and hold a large amount of exploration land, but we wanted to increase output in the near term and deliver a demonstrable return to our shareholders,” said Mike Norris, executive vice president and financial director, Avocet. “Developing a mine from scratch takes at least two years.”

Avocet’s Inata mine is one of only five gold mines contributing to Burkina’s production, the others include High River Gold’s Taparko-Boroum complex, Semafo’s Mana mine, Etruscan’s Youga mine, and Cluff Gold’s Kalsaka mine.

Cluff Gold, dual-listed on AIM and TSX, saw its first pour at the Kalsaka gold mine in October 2008. Algy Cluff, chairman, Cluff Gold, said, “We will maintain our active growth strategy of developing our assets into increased gold production. Right now Kalsaka has an annualized production of 60,000 oz and has significant potential to increase beyond this.”

Also in early stages of development are Volta Resources and Goldrush Resources. Volta Resources already has a portfolio of 26 properties in Burkina Faso, Ghana and Mali. Kevin Bullock, president and CEO, Volta Resources, has an aggressive development plan for its flagship property Kiaka, which it acquired from Randgold. “We had the intention to buy a project that we could progress fast with, so we acquired Kiaka in November 2010 and within two days we had a drill on site,” said Bullock. “Randgold had identified some 2.65 million oz of reserves. We have drilled 17,000 m of RC and core drilling. What we are finding is that we are able to identify and interpret higher grade zoning within the overall package and this changes the dynamics of a potential mining operation completely.”

The company has secured IFC (part of the World Bank Group) investment. “Their investment is a big rubber stamp for Volta and I think it has helped us with our recent rounds of financing,” said Bullock.

“Mining in Burkina is a new phenomenon, but geology does not respect political borders and I would assume there will be as many mines in Burkina as in Ghana once a similar amount has been spent on exploration. It is very much in the limelight at the moment and when you combine the geology with the recent proof that mines can be built on time, on budget and operate smoothly, then it is only natural the country is becoming very attractive to investors,” said Bullock.

Burkina Faso more than doubled its gold production in 2009. At this rate, with most of the land secured, early entrants into the market are hoping Burkina Faso can become the fourth largest gold producing country in Africa.

Niger: More Than Yellowcake
Niger is a sparsely populated desert country with a well established tradition of mining. The country has suffered a troubled political history and remains desperately poor. In early 2010, a coup deposed President Tandja (democratically elected in 1999, but attempting to extend his term beyond that allowed by the constitution), bringing to power a military junta which has pledged to restore democracy.

Niger has long been known as a major source of uranium, mining of which has been dominated by French state and quasi-state companies since independence in 1960. These have built Niger’s uranium industry to become the world’s fourth largest. The long-term association with uranium and a lack of political willpower can perhaps explain why Niger, twice the size of Texas, has for so long remained under the radar of explorers. Given the country was known to host the Eastern extensions of the great West African Birimian gold belt, it was only a matter of time before explorers started taking an active interest.

In 2004, Canadian juniors Etruscan Resources and Semafo Inc. heralded the start of a new era for Niger by putting into production the Samira Hills gold mine. A review of the mining code in 2006 facilitated wider foreign participation in the industry and has resulted in the licensing of numerous new concessions.

Samira Hills demonstrated Niger is more than just a uranium province and has prompted serious attention from explorers. The mine at Samira Hills is relatively small; initially it had a resource of some 600,000 oz and an anticipated mine life of six years, but the owners have carried on defining resources and the concession currently is estimated to contain more than 1 million oz of reserves and resources.

In 2009, Semafo consolidated control of the asset, bar 20% government interest, and have committed to extending the mine life. Costs are relatively high at $665/oz, but the mine produced 56,000 oz in 2009 and the company is continuing to grow defined resources with a $6 million exploration program on the concession under way.

AMI Resources is another early stage mover in Niger and has found the jurisdiction offers a refreshing change from some more established mining countries in the region. “Niger has been a breath of fresh air. They have a modern mining code and a pragmatic attitude toward exploration,” said Dustin Elford, president, AMI Resources. “Niger, in terms of gold, is many years behind Ghana, and creates a lot of opportunity for early stage juniors like us.”

AMI Resources has done a deal with Golden Star to access two contiguous concessions on the North Eastern extensions of the West African gold belt—prime gold hunting country between the border with Burkina Faso and the Niger river. The concessions, which the company has branded the Sirba gold project, are adjacent to Semafo’s Samira Hill mine and total some 920 km2.

AMI Resources has been able to able to build on previous exploration work undertaken in the area. “Barrick was here in the late 1990s and St. Jude in 2004 and 2005 when gold prices were low,” said William Pettigrw, CFO and director, AMI Resources. “We had airborne surveys and a number of gold targets identified before we arrived.” Building on the inherited data and its new work, the company has been able to identify some significant anomalies. “Our latest drill program included intersections of 24 m at 3.08 grams,” said Pettigrew.

Despite the long-term depression of uranium prices, commitments to large scale nuclear power station programs in China, India, the United States and Europe have triggered a renaissance in Niger’s uranium exploration sector. Early movers include Orezone Gold and North Atlantic Resources, who recently formed joint venture Brighton Energy to hold their Niger uranium assets. “We have combined our Niger concessions in the North West of Niger with North Atlantic’s,” said Ronald Little, CEO, Orezone. “This has created a really significant and highly prospective land package of 5,000 km2.”

“Assembling a team to actively explore is crucial and you need a large holding to justify,” said Scott Waldie, CEO, North Atlantic Resources. “That is what we created in Niger.”

For much of its post independence history, the Niger minerals industry has remained under the control of a select few uranium companies. The early part of the millennium has witnessed the start of a new era for Niger as the market has opened up to new participants. The search for uranium, back in fashion after years in the doldrums, is being pursued full tilt by a range of companies, not just the usual suspects. The last decade has witnesses the diversification of the mining sector in Niger and gold production can only be expected to grow substantially in the coming years.

Well-Endowed, Liberia Looks to Rebuild Mining Sector
Liberia was once a major iron ore exporter. Iron ore exports accounted for more than half of the country’s total export income and it was a major source of local employment. The iron industry was abruptly interrupted by civil war and continual fighting between 1989 and 2003. Violence left the war-torn nation crippled and poor, even by West African standards.

However, a stable democratically elected government took power in 2005 which allowed the first female African president, Ellen Johnson-Sirleaf, to start piecing the country back together. One of her top priorities is to reduce the unemployment rate (which skyrocketed to 85%) by resuscitating the nation’s mining sector, which is well-endowed in gold, diamonds and iron ore.

Today a politically stable government, a new Mineral Development Policy and Mining Code, and a decision in 2007 by the U.N. Security Council to lift the ban on Liberian diamond exports has resulted in an influx of majors and juniors into the country.

ArcelorMittal, the world’s leading steel company, and BHP Billiton, the Australian mining giant, are investing $1.5 billion and $3 billion respectively in iron ore projects. Iron ore projects are long-life assets and require significant investment in infrastructure. ArcelorMittal is expected to generate about 3,500 direct jobs and about 15,000 to 20,000 indirect jobs. The company is also committed to the Mining Development Agreement, which obliges them to provide $75 million over the next 25 years to support socio-economic development in Liberia.

Unmatched in the nation’s industrial history, this will lead to significant improvements in communities where the company is operating. BHP’s Liberian deal covers four mining leases, which are within striking distance of the existing 250-km rail corridor that runs from the Guinean border to the Liberian coast.

The Chinese are also involved in developing Liberia’s iron ore industry, with China Union securing an iron ore concession at the beginning of 2009 and promising to invest $2.6 billion, one of the largest investments China has ever made in Africa.

Also poised for growth, African Aura is on track to be producing by 2012. African Aura Mining originated from the merger of Mono River Resources, which has a long history of mining activity in the country, and African Aura Resources. Dual-listed on the TSXV and AIM, the company’s main Liberian assets are the New Liberty gold deposit (1.4 million oz, awaiting results of a new scoping study). “Because of the nature of the deposit [it is deeply dipping] it is going to be a trade off between open pit and underground,” said Luis Da Silva, president and CEO, African Aura.

The company’s second Liberian asset is the Putu iron-ore project. Putu will be the main economic driving force for three counties in eastern Liberia. There is no other active greenfield project in Africa as close to a port as Putu. “This year [2010] will be a very different year for us,” said De Silva. “The political risk in West Africa is much more acceptable to investors and the assets are at a more advanced stage.”

Another active explorer is Canadian company Liberty International Mining Corp., which currently holds 9,050 km2 of delineated territory within the Archæan and Birimian greenstone regions, which contain 18 potential gold exploration projects identified to date.

Also to be found on the Birimian is Hummingbird Resources, a privately-owned company which holds the largest number of licenses in eastern Liberia. Daniel Betts, managing director, Hummingbird Resources, acknowledged Liberia is not without its challenges. In the remote eastern part of the country, the company has had to overcome considerable difficulties in terms of terrain and logistics. “In this area the infrastructure has been virtually destroyed and the interior remains almost impenetrable for long periods of the rainy season,” Betts said. “It is testimony to the hard work and dedication of the field teams that these challenges have been overcome and so much data has been collected so quickly. The company’s strategy is to list on the most appropriate stock exchange in the final quarter of 2010 to realize shareholder value.”

Mining has the potential to be the key economic driver in the country, with Liberia’s untapped mineral wealth providing significant exploration potential for world class mineral discoveries. The magnitude of new investment in the past five years is positioning Liberia for a brighter future.

Prospectors Realize Guinea’s Diverse Mineral Wealth
Guinea, also known as Guinea-Conakry, is a country long associated with bauxite, which has traditionally been perceived as the exclusive domain of the majors. Guinea gained independence from France in 1958 and plunged straight into authoritarian rule. The elections in June 2010 were touted as the first democratic elections in the country’s history (though at the time of writing in July 2010, quite how democratic an election remained undetermined). Guinea is believed to host at least 30% of the world’s bauxite reserves and majors such as Rusal, Rio Tinto Alcan and Alcoa have substantial operations in the country.

Over recent years, however, the diverse mineral wealth of the country has begun to be recognized. Iron ore deposits have been identified and majors Rio Tinto, Vale and Aluminum Corp. of China (Chalco) are involved in developing assets. The western extreme of the hard rock Birimian belt, which hosts all of West Africa’s largest gold mines, terminates in the eastern region of Guinea and is the location of AngloGold Ashanti’s +300,000 oz/y Siguiri gold mine. The country borders well-known diamond jurisdictions of Liberia and Sierra Leone, and Guinea’s potential to become a significant producer of the precious gem has been long recognized. A number of Canadian and British companies, such as Stellar Diamonds, are now trying to build on that potential.

Coups, political unrest and violence are regular occurrences in Guinea, but successive governments have tended to ensure the miners are left free to mine, perhaps recognizing as the sector is the main source of tax income, the country can ill afford mine shutdowns. However, a recent series of incidents has damaged the country’s reputation in regard to property rights.

Rio Tinto experienced significant setbacks at its Simandou iron ore project. In 2008, the government awarded blocks one and two of the concession to maverick entrepreneur Benny Steinmetz’s BSG Resources, which subsequently sold a 51% stake to Vale for $2.5 billion. Rio Tinto maintained the blocks belonged to them according to the country’s mining code and specific contracts. The dispute has become increasingly acrimonious and in June 2010 Rio Tinto experienced a further set back when the government declared its intention to exercise a right to purchase a 20% stake in the remaining blocks.

There is no doubt Guinea remains one of the most challenging jurisdictions in West Africa; however the phenomenal exploration potential is drawing a band of hardened juniors to the country. “There really is tremendous exploration potential in Guinea, but the political situation has hindered serious work for the last few years in particular,” said James Gillis, a veteran explorer who is president of Guinea-focused juniors, Cassidy Gold Corp. and Anglo Aluminium Corp.

“Cassidy Gold has spent about $26 million so far on a 1 million oz resource, but then about three years ago we ran into some horrible circumstances,” said Gillis. “Workers called a general strike and shut down a lot of the country, pretty much forcing the Prime Minster to accept a consensus government. There was a lot of brutality associated with this period and we had to evacuate.”

The company has returned to the country and it is looking to develop its Kouroussa discovery. Gillis intends to develop a small mine centered around a simple gravity processing system to generate cash flow while further exploring the concession.

Gillis’ second project is Anglo Aluminium, situated on the Boke Belt. “The Boke Belt hosts the world’s highest grade bauxite, consisting of 40% to as much as 60% alumina, and we control 536 km2 of it,” said Gillis. The company has so far established a resource with 343 million mt, averaging 42.78%, and a further 63 million mt inferred at 43.81%.

While Guinea remains one of Africa’s poorest and most troubled countries, it hosts a diverse wealth of minerals. Exploration and mining companies are weighing political risk against the upside and are seeing great potential. Of comfort to the junior is the fact that some of the world’s largest mining companies have been operating unhindered, by and large, in Guinea for decades. Many believe times will be less troubled ahead, and mining can play a major role in enriching Guinea’s impoverished population.

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