Few regions have experienced as much growth in their mining and exploration sectors over the past three decades as West Africa. So, unfortunately, is the risk profile for investors.
West Africa is a large area. Sixteen countries are crammed into more than 5 million km2. This is a large field of prospective exploration to cover – in theory, of course.
Unsurprisingly, several intrepid Australians were among the first modern explorers to sample the region’s mineral potential in the early 2000s, as large parts of West Africa began to open up for business following the end of several long-running civil wars in countries such as Liberia, Sierra Leone and Ivory Coast.
Ampella Mining and Orbis Gold made multi-million ounce discoveries in Burkina Faso before being acquired by larger companies, as did Gryphon Minerals where Steve Parsons of Bellevue Gold (ASX:BGL) and now Firefly Metals (ASX:FFM) fame initially made a name for itself. the same.
Perseus Mining (ASX:PRU) went one better and developed the Edikan discovery in Ghana into a profitable mining operation and is now one of the region’s most formidable gold producers.
Other gold explorers that have successfully transitioned to production in recent years include West African Resources (ASX:WAF) and Tietto Minerals (ASX:TIE), while Leo Lithium (ASX:LLL) and Atlantic Lithium (ASX:A11 ) is looking to emulate these feats in the emerging West African lithium space in the coming years.
Unfortunately for many of those currently exploring or operating in the region, geopolitical issues continue to be the biggest obstacle to landing and sustaining long-term investment.
Investors got an untimely reminder of how quickly things can move in West Africa just two weeks ago when Sierra Rutile Holdings (ASX:SRX) announced it had no choice but to suspend production from long-running operations in Area 1 in Sierra Leone after receiving notice from the host government that the current fiscal arrangements would revert to the original terms signed in 2001, making the mine “uneconomic”.
Last year the Malian government ordered Leo Lithium to cease initial DSO operations from the Goulamina project. The company’s shares have been suspended since September last year while it works on what chief executive Simon Hay recently described as “a constructive decision” with government officials to build West Africa’s first large-scale spud mine.
There are also extreme security concerns hanging over Mali and neighboring Burkina Faso. Since 2012, Islamist insurgents have gradually taken control of the former, and in recent years violent attacks have spread to the latter, where WAF is now virtually the only active company listed on the ASX.
Given West Africa’s ongoing geopolitical issues were once again a key topic of discussion at the annual Investing in African Mining Indaba in Cape Town last week, Stockhead spoke to some of the senior leaders of companies committed to exploring and developing projects in the region.
“Some of the richest resources in the world”
It has been a whirlwind five months for First Lithium (ASX:FL1) since completing the acquisition of the Gouna license in Mali.
Undoubtedly the highlight was a discovery of 111m @ 1.57% Li2O at the Blakala prospect, which was first identified along with Goulamina as one of two Tier-1 lithium targets in Mali by CSA Global in 2008.
However, perhaps in part due to Leo Lithium’s struggles at Goulamina as well as dangerous lithium prices, FL1’s success with the drill has not been reflected in its share price, which peaked as high as 83 points after the discovery in December before retreat. next two months.
Despite this, FL1 director Jason Ferris says interest in the company remains strong, particularly with a virgin source for Blakala expected in the near future.
“We closed the prospectus for our September listing on the oversubscribed ASX and had great support from high net worth investors as well as the brokerage community,” Ferris said Stockhead.
“Project announcements are beginning to give a picture of the size of the potential deposit for FL1, and major shareholders remain enthusiastic and motivated to bring the company’s virgin JORC resource to market.
“Given the background and potential of the project, due to its location and status as a Tier-1 target in Mali, we believe appetite will remain strong in our own investor base, however, as the first resource approaches, we expect the broader investment community will begin to take notice.
“West Africa has some of the richest resources in the world and has been identified as one of the world’s biggest growth areas over the next 20-30 years. Leo Lithium and Kodal Minerals (LON:KOD) have been active in West Africa for many years and have both enjoyed continued investment as and when required over this period.”
Location, location, location
According to Ferris, FL1 often fields questions from investors about where its licenses stand in relation to the ongoing conflict in Mali, as well as what the company is doing to keep key personnel safe in such a high-risk jurisdiction.
Gouna is about 200 kilometers southeast of Mali’s capital Bamako, with most terrorist activity confined to the north of the country.
“As with any foreign country, we advise all our workers to remain vigilant and act with caution, and where possible our teams are backed by security at all times,” says Ferris.
“This sounds excessive in any developed Western culture, however, it is considered standard and best practice in many African regions, not just West Africa.”
Ferris added that the company had received nothing but support from the Malian government since it first set foot in the country last year and also remains tight-lipped about the challenges that have stalled Leo Lithium’s progress at the nearby Goulamina project the past year or so.
“The Government of Mali is a progressive and motivated government that wants to develop Mali as a business and investment destination and expand its untapped resources,” he says.
“Although Leo Lithium has had some adverse experience, we believe this has arisen from some miscommunications and misunderstandings, however, these should be resolved in due course,” he says.
“We remain very confident in the Government of Mali and together we look forward to delivering further positive news for the country.”
Attract capital despite high risk profile
Gold developer Toubani Resources (ASX:TRE) is also closely monitoring Leo Lithium’s negotiations with the Malian government, given the potential implications it could have for its flagship Kobada project.
Like Ferris, TRE chief executive Phil Russo is not worried about Mali’s commitment to developing new mines, nor its ability to support existing producers such as Resolute Mining (ASX:RSG) to continue operating without geopolitical disruption .
“I’m really bullish on West Africa, specifically Mali, in terms of their ability to support their mining industry,” Russo says. Stockhead.
“Discussions around geopolitical risk and the other factors at play in the region are going to happen, but for us, it’s about delivering a project that will attract capital across all types of risk profiles.
“I think we will see some positive signs with the recent implementation of the mining code in Mali, I think the industry will get back on its feet there this year. It’s a high profile right now, but we all know that for good projects, capital still finds a way through.”
Russo’s main pitch to investors at this week’s Indaba focused on TRE being the leader of a small group of developers of one asset remaining in West Africa.
While overcoming the geopolitical hurdles in Mali is only part of the almighty challenge Russo and his team will face in trying to develop Kobada, it’s worth noting that WAF not only completed the construction phase but exceeded all of their production benchmarks first 12 months at Sanbrado’s gold mine in Burkina Faso during the height of the COVID pandemic and amid growing security concerns in the country.
TIE also brought the +3.8Moz Abujar gold project to commercial production within 18 months of starting production in Cote d’Ivoire.
A coup here and a coup there, but should we be worried?
Burkina Faso was no stranger to a military coup and in 2022 experienced two in just nine months.
The violence in the country has now reached the point where almost all ASX-listed companies that ban WAF have either indefinitely halted work on their projects or pulled out altogether.
Mako Gold (ASX:MKG) originally went public in 2018 on the back of early-stage exploration assets in Ivory Coast and Burkina Faso, but is now solely focused on the former after company directors admitted it was no longer safe for geologists to continue working on the latter.
A veteran of the West African resources industry, MKG chief executive Peter Ledwidge worked for Orbis Gold in Burkina Faso at the time of the 2014 uprising. He says many investors make the mistake of lumping one African country’s problems with the next .
“It’s amazing how many of them don’t realize how diverse Africa is, there are over 50 countries that make up Africa,” Ledwidge said. Stockhead.
“Just because you have a coup in one country, they often assume it will happen in the next.
“And speaking of coups, look at Guinea, Niger, Burkina and Mali – they’ve all had coups recently with no casualties, not one.
“It’s really no different than a few years ago when our prime ministers were being backstabbed here in Australia and suddenly you had a new person leading the country.”
At Stockhead, we tell it like it is. While First Lithium, Toubani Resources and Mako Gold are Stockhead advertisers, they did not endorse this article.