Violence in Africa's Sahel region attacks the mining food chain

Global Atomic

10/02/2020 09:18

* Mining companies, employees have been targeted by
militants
    * Mining contributes 15% of Burkina Faso government's budget
    * Slowing exploration could hurt future production
    * Security costs rising
    * Low production costs remain a draw for gold miners

    By Helen Reid
    CAPE TOWN, Feb 10 (Reuters) - Violence in Africa's Sahel
region has driven mining exploration companies to put projects
on hold, with knock-on effects for an industry struggling to
expand and for fragile local economies.
    At least 37 people died and 60 were wounded last November
when militants attacked a convoy of Semafo Inc  SMF.TO 
employees, the deadliest attack yet on a mining company in the
region.  urn:newsml:reuters.com:*:nL8N27M7HY
    Islamist groups have been pushing south from strongholds in
northern Mali and carried out attacks across much of Burkina
Faso and parts of western Niger. urn:newsml:reuters.com:*:nL8N29I5YA
    As security costs have risen, mining companies that explore
for mineral deposits have shut down projects in the most
dangerous areas.
    Resolute Mining  RSG.AX , a gold miner, has minority stakes
in five exploration companies, one of which - Mako Gold  MKG.AX 
- it advised late last year to halt exploration at a project in
Burkino Faso.     
    "If Resolute isn't willing to go into a jurisdiction to
build and operate a mine, then the explorers aren't going to get
the reward for investing and discovering something," John
Welborn, Resolute's chief executive officer, said on the
sidelines of the Mining Indaba conference in Cape Town last
week.
    "The ecosystem works because the little fish get eaten by
the slightly bigger fish."
    Resolute's flagship asset is the Syama mine in Mali.
    Welborn estimates the company spends $20 per ounce of gold
on security at Syama - or around $5.2 million this year, when he
expects the mine to produce 260,000 ounces.
    Gold explorer Predictive Discovery  PDI.AX  put its Burkina
Faso projects on hold after an attack killed a geologist
employed by one of the company's joint ventures.  urn:newsml:reuters.com:*:nL1N1ZH1A9
    "You couldn't get anybody to go there," Paul Roberts,
managing director at Predictive Discovery, said.
    Other projects have already been frozen for years. Golden
Rim Resources  GMR.AX  put its Babonga project on hold three
years ago because of its proximity to the Niger border.
    Unless the security situation improves, the company will
abandon the project, managing director Craig MacKay said. The
company pays around $10,000 a month to Burkina's ministry of
security for protection.
    In Niger, the army has stationed a 20-strong platoon at
Global Atomic Corporation's  GLO.TO  Dasa uranium project,
chairman Stephen Roman said, declining to disclose the cost.
    Companies also say they hire local labour when possible, to
keep a low profile.
    "Your acceptance in the community is your biggest
protection," Mark Bristow, CEO of Barrick Gold Corp  ABX.TO ,
which manages Mali's biggest mine, said.
    Despite the security risk, low production costs make the
region attractive. For established miners, the costs of shutting
down and pulling out are higher.
    West African Resources  WAF.AX , whose Sanbrado mine is in
central Burkina Faso, aims to pour the first gold by mid-2020.
    Semafo - whose Boungou mine has been shut since the attack
in November - aims to restart the mine in the fourth quarter.
 urn:newsml:reuters.com:*:nL4N2A642N
    Mining also powers economies in the Sahel, the area of
Africa beneath the Sahara.
    In Burkina Faso, mining represents 70% of export receipts
and contributes 15% of the government's budget, mines minister
Oumarou Idani said. Insecurity has already hit its gold
production. https://tmsnrt.rs/31nobxG
    "It's during these times that it's important to stand by
these countries and be able to continue to operate and invest,"
said Sebastien de Montessus, CEO of Endeavour  EDV.TO , which
aims to be Burkina's biggest gold producer in 2020. 
       

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Burkina Faso gold production     https://tmsnrt.rs/31nobxG
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 (Reporting by Helen Reid; Editing by Ernest Scheyder and
Barbara Lewis)
 ((Helen.Reid@thomsonreuters.com; +27 11 595 2852;))