Mining Journal's West Africa Supplement
 

Mining Journal's West Africa Supplement

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Despite a downturn in commodity prices in the last 18 months, companies, funds and institutions are still sweet on West African. This is evidenced by increases in capital raising for West African ...

Despite a downturn in commodity prices in the last 18 months, companies, funds and institutions are still sweet on West African. This is evidenced by increases in capital raising for West African focused explorers and developers.

Read the Mining Journal team's analysis and get their insight into the region's brightest prospects. What do you make of the opportunities in West Africa? Does the region have ‘limitless potential’?



For more access to West African mining investment, or to meet mining companies from the region, see our Mines and Money Access Africa event. Held in Mauritius, the bridge for investment from Asia into Africa, it’s your chance to take advantage of Mauritius’ investment protection and tax treaties while meeting with Asian investors and mining companies in a neutral location.

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    Mining Journal's West Africa Supplement Mining Journal's West Africa Supplement Document Transcript

    • West Africa African Minerals • BIA OverseasAfrican Minerals • BIA OverseasAfrican Minerals • BIA OverseasAfrican Minerals • BIA OverseasAfrican Minerals • BIA OverseasAfrican Minerals • BIA OverseasAfrican Minerals • BIA OverseasAfrican Minerals • BIA OverseasAfrican Minerals • BIA OverseasAfrican Minerals • BIA OverseasAfrican Minerals • BIA OverseasAfrican Minerals • BIA OverseasAfrican Minerals • BIA OverseasAfrican Minerals • BIA OverseasAfrican Minerals • BIA OverseasAfrican Minerals • BIA OverseasAfrican Minerals • BIA OverseasAfrican Minerals • BIA OverseasAfrican Minerals • BIA OverseasAfrican Minerals • BIA OverseasAfrican Minerals • BIA OverseasAfrican Minerals • BIA OverseasAfrican Minerals • BIA OverseasAfrican Minerals • BIA OverseasAfrican Minerals • BIA OverseasAfrican Minerals • BIA OverseasAfrican Minerals • BIA OverseasAfrican Minerals • BIA OverseasAfrican Minerals • BIA OverseasAfrican Minerals • BIA OverseasAfrican Minerals • BIA OverseasAfrican Minerals • BIA OverseasAfrican Minerals • BIA OverseasAfrican Minerals • BIA OverseasAfrican Minerals • BIA OverseasAfrican Minerals • BIA OverseasAfrican Minerals • BIA OverseasAfrican Minerals • BIA OverseasAfrican Minerals • BIA OverseasAfrican Minerals • BIA OverseasAfrican Minerals • BIA OverseasAfrican Minerals • BIA OverseasAfrican Minerals • BIA OverseasAfrican Minerals • BIA OverseasAfrican Minerals • BIA OverseasAfrican Minerals • BIA OverseasAfrican Minerals • BIA OverseasAfrican Minerals • BIA OverseasAfrican Minerals • BIA OverseasAfrican Minerals • BIA OverseasAfrican Minerals • BIA OverseasAfrican Minerals • BIA OverseasAfrican Minerals • BIA OverseasAfrican Minerals • BIA OverseasAfrican Minerals • BIA OverseasAfrican Minerals • BIA OverseasAfrican Minerals • BIA OverseasAfrican Minerals • BIA OverseasAfrican Minerals • BIA Overseas Dem Group • EnergoldDem Group • EnergoldDem Group • EnergoldDem Group • EnergoldDem Group • EnergoldDem Group • EnergoldDem Group • EnergoldDem Group • EnergoldDem Group • EnergoldDem Group • EnergoldDem Group • EnergoldDem Group • EnergoldDem Group • EnergoldDem Group • EnergoldDem Group • EnergoldDem Group • EnergoldDem Group • EnergoldDem Group • EnergoldDem Group • EnergoldDem Group • EnergoldDem Group • EnergoldDem Group • EnergoldDem Group • EnergoldDem Group • EnergoldDem Group • EnergoldDem Group • EnergoldDem Group • EnergoldDem Group • EnergoldDem Group • EnergoldDem Group • EnergoldDem Group • EnergoldDem Group • EnergoldDem Group • EnergoldDem Group • Energold Rand Merchant BankRand Merchant BankRand Merchant BankRand Merchant BankRand Merchant BankRand Merchant BankRand Merchant BankRand Merchant BankRand Merchant BankRand Merchant BankRand Merchant BankRand Merchant BankRand Merchant Bank Randgold Resources • Tawana ResourcesRandgold Resources • Tawana ResourcesRandgold Resources • Tawana ResourcesRandgold Resources • Tawana ResourcesRandgold Resources • Tawana ResourcesRandgold Resources • Tawana ResourcesRandgold 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Resources • Tawana ResourcesRandgold Resources • Tawana ResourcesRandgold Resources • Tawana ResourcesRandgold Resources • Tawana ResourcesRandgold Resources • Tawana ResourcesRandgold Resources • Tawana ResourcesRandgold Resources • Tawana ResourcesRandgold Resources • Tawana ResourcesRandgold Resources • Tawana ResourcesRandgold Resources • Tawana ResourcesRandgold Resources • Tawana ResourcesRandgold Resources • Tawana ResourcesRandgold Resources • Tawana ResourcesRandgold Resources • Tawana ResourcesRandgold Resources • Tawana ResourcesRandgold Resources • Tawana ResourcesRandgold Resources • Tawana ResourcesRandgold Resources • Tawana ResourcesRandgold Resources • Tawana ResourcesRandgold Resources • Tawana ResourcesRandgold Resources • Tawana ResourcesRandgold Resources • Tawana ResourcesRandgold Resources • Tawana ResourcesRandgold Resources • Tawana ResourcesRandgold Resources • Tawana ResourcesRandgold Resources • Tawana Resources mining-journal.com Established 1835 A supplement to Mining Journal COVER_WestAfrica2014.indd 1 02/04/2014 14:40
    • PARTS SUPPLY - TECNOGEN - FINANCE - SECURITY PROJECT MANAGEMENT - CUMMINS - SERVICE CONTRACTS BOMAG - TECHNICAL TRAINING - USED EQUIPMENT - MINES TECHNICAL SUPPORT - INDUSTRIAL HANDLING - QUARRIES REBUILDING OF ENGINES AND COMPONENTS - MICHELIN KOMATSU - FORESTRY - TEREX CRANES - PUBLIC WORKS ENERGY SUPPLY - SANDVIK - QUALITY Looking for robust mining equipments? africa.biagroup.com Mining_Journal_210_297_02APR.indd 1 1/04/2014 10:10:42
    • Mining Journal special publication – West AfricaApril 2014 WEST AFRICA 3 This supplement is published with Mining Journal, published weekly, which is available only as part of a subscription with Mining Magazine and Mining, People and the Environment, plus online access. Annual subscription – UK and Europe £360 (€580) Rest of the world US$650 Published by Aspermont Media, 120 Old Broad Street, London EC2N 1AR, UK. Printed by Stephens & George Magazines, Merthyr Tydfil, UK. Registered as a newspaper at the Post Office. Subscription records are maintained at Aspermont Media, PO Box 1045, Bournehall House, Bournehall Road, Bushey WD23 3ZQ Aspermont Media, publisher and owner of Mining Journal (‘the publisher’) and each of its directors, officers, employees, advisers and agents and related entities do not make any warranty whatsoever as to the accuracy or reliability of any information, estimates, opinions, conclusions or recommendations contained in this publication and, to the maximum extent permitted by law, the publisher disclaims all liability and responsibility for any direct or indirect loss or damage which may be suffered by any person or entity through relying on anything contained in, or omitted from, this publication whether as a result of negligence on the part of the publisher or not. Reliance should not be placed on the contents of this magazine in making a commercial or other decision and all persons are advised to seek independent professional advice in this regard. Subscriptions and circulation Stuart Balk T +44 (0)20 7216 6064 E stuart.balk@aspermontmedia.com Subscription enquiries T +44 (0)20 8955 7050 F +44 (0)20 8421 8244 E subscriptions@aspermontmedia.com PO Box 1045, Bournehall House, Bournehall Road, Bushey WD23 3ZQ, UK Chairman Andrew Kent © Aspermont Media 2014 ISSN 0026-5225 Editorial Richard Roberts E richard.roberts@mining-journal.com T +44 (0)20 7216 6089 Head of production / designer Tim Peters Senior sub editor Jim Adlam Sub editor Woody Phillips Editorial enquiries T +44 (0)20 7216 6060 F +44 (0)20 7216 6050 www.mining-journal.com Advertising production Sharon Evans E sharon.evans@aspermontmedia.com Advertising Head of sales – Print and online Contact: Richard Dolan Aspermont Media, 120 Old Broad Street, London EC2N 1AR, UK T +44 (0)20 7216 6060 F +44 (0)20 7216 6050 E richard.dolan@aspermontmedia.com Sales executives Tom Peck Naomi Spence T +44 (0)20 7216 6085 T +44 (0)20 7216 6095 E tom.peck@mining-journal.com E naomi.spence@mining-journal.com CONTENTS Company profile: African Minerals 6 Advertisements: BIA Overseas 2 (inside front cover) Dem Group 15 (inside back cover) Energold 11 Mines and Money Mauritius 8 Rand Merchant Bank 12 Randgold Resources 16 (outside back cover) Tawana Resources 5 Cover design: T Peters. Photos: Randgold Resources; Teranga Gold Media Introduction: ‘Limitless potential’ 3 Technically correct 4 Consultancy invests in region’s future 4 African hot spot 9 Randgold targets output of 1Moz 11 WGC: gold best hedge for emerging markets 13 Gryphon seeks second chance 13 Conflict resolution 14 ‘Limitless potential’ West Africa remains a focus of discussion in mining investment circles, and for exploration dollars I t doesn’t take long for West Africa to come up in any mining-related conversa- tion in London. The investor base has been sold the story of the region many times and knows it only too well. Even with a downturn in commodity prices in the past 18 months, gold especially, com- panies, funds and institutions are still sweet on the region, confirmed by the number of AIM raisings so far this year for West African- focused explorers and developers. Not all of the countries are progressing at the same pace though. Ghana, for example, is a household name in the gold mining space, being the second-biggest producer in the whole continent after starting from just one mine: Obuasi. Also, Sierra Leone has evolved greatly since African Minerals Ltd first started producing iron ore from its ambitious Tonko- lili mine in 2011, with infrastructure and gross domestic product (GDP) risks exponentially. As a whole host of speakers make their way to London for next week’s West African Min- ing Investment Summit, it seems a good time to ask what country will host the next set of success stories and why? Charles Gibson, from Edison Investment Research, who will be speaking at the event, plucked two particular countries out of the air when questioned by Mining Journal earlier this month. “The Ivory Coast has just brought in a new mining code and it still seems to be on that path of encouraging investment. I think that has some way to go,” he told Mining Journal. He’s right; after more than a decade of con- flict that ended in 2011, the few companies that have trickled in have started making a noticeable difference in the country. Randgold Resources Ltd has been produc- ing gold from its Tongon mine since 2010, with output coming in at 233,591oz in 2013. CEO Mark Bristow paid tribute to the govern- ment’s interaction with the mining commu- nity earlier this year, saying: “Randgold engaged with the government in its review of the country’s mining code and we are con- fident that the final draft, which we expect to see soon, will be investor-friendly.” He turned out to be right. After worrying Continues on p7 Daniel Gleeson Assistant Editor The future’s bright… Teranga plans to expand gold output at Sabodala to 400,000-500,000oz/y 03-06,07,09,11,13-14WestAfrica2014.indd 3 02/04/2014 14:45
    • April 2014Mining Journal special publication – West Africa WEST AFRICA 4 D an Betts, the CEO of Hummingbird Resources Ltd, says he is happy with the technical aspects of his compa- ny’s Dugbe 1 gold project in Liberia following the recent release of a resource update. “I am now putting technical risk at the bot- tom of the list, and it has been the top of the list for the entire life of Hummingbird,” he told Mining Journal. He now estimates financing as the top risk in getting the project developed, although he believes numerous options are available. “We’ve taken on Endeavour Financial and they are helping get expressions of interest from all sorts of banks, and there is lots of interest,” he says. The recent update, using a US$1,200/oz pit shell, pushed the overall resource at the Tuzon deposit up to 2.1Moz from 1.5Moz pre- viously with 1.9Moz in the indicated category. Per- haps most important is the higher indicated grade – up from 1.22g/t to 1.56g/t Au. “Now it’s an absolute slam dunk in terms of mine life and longevity and you’ve got everything covered for the payback. So I think we will be able to get more debt, which I think is obvi- ously the cheapest way to fund this thing.” The company expects to release a definitive feasibility study in the third quarter of this year, having already released a preliminary economic assessment (PEA) in April 2013. The PEA showed a post-tax net present value of US$337 million (10% discount) for a 3.5Mt/y owner-operated mine giving an internal rate of return of 43%, using a US$1,500/oz gold price. A price of US$1,200/ oz will be used for the DFS. “The best thing about it is it really doesn’t fall apart at all when you stretch it. Of the indi- cated ounces in the pit, you’ve got just over 2Moz, but it goes to 1.89Moz at US$1,200/oz. So we are pretty happy with that.” Power saving He also points out that a key level for savings would be power, which accounts for half of operating costs, and where any change would make a material difference. The company used diesel power at US$0.28/KWh in its PEA last year. Currently it is looking at potentially substituting this with heavy fuel or other sources. “Other than the news of higher grade, which added maybe US$12/t of ore, there is no more important thing to focus our atten- tion on than power.” Having founded the company in 2005 using contacts with his family’s smelting and refining business, Betts, at 38, is a relative novice to the min- ing game. He believes being a generalist sur- rounded by experts is a big strength. “If I ever got to the point where I thought I couldn’t build a business, then I would step aside. For me, the priority is to make share- holder value.” “But I think the value that I bring into it is actually not being a specialist. There are so many pieces of the jigsaw puzzle, if I can sur- round myself by experts in those fields and I’m like the little spider in the web, that is how I think a business should be run.” I t may be said that the Ghanaian mining sector has recently been eclipsed by the country’s fast-emerging oil sector, but the continued growth of the SRK Consulting office in Accra is an indication that gold and other minerals hold much promise for the future. Still the continent’s second-largest pro- ducer of gold, Ghana has substantial mining operations in bauxite, manganese and dia- monds, and has been attracting exploration in industrial minerals like limestone, silica sand and kaolin – currently only exploited on a small scale. Capacity boost In response, SRK has further boosted its capacity with the addition of Eric Owusu Acheampong in its Ghana office. A geological engineer and mineral resource geologist with almost three decades’ experience, Ache- ampong is a graduate of Kwame Nkrumah University of Science and Technology in Kumasi. While most of his career has been spent in Ghana, he has also worked in South Africa and Tanzania, and earned his MSc at the Uni- versity of Wales, Cardiff; he is excited to be back in Ghana, and is upbeat about the pros- pects for further mineral development. “There are many opportunities in our favourable geological environment,” he said. Following the country’s mining sector sup- port programme, opportunities have been discovered in industrial minerals, iron ore, manganese and columbine- tantalite. “There are several targets being identified and this trend is confirmed by the increased number of exploration drilling companies now based in Ghana and neighbouring coun- Technically correct Gareth Tredway Deputy Editor Staff reporter London Drilling has increased the overall resource for the Tuzon deposit, part of Hummingbird Resources’ Dugbe1 gold project in Liberia, to 2.1Moz at an average grade of 1.56g/t Consultancy invests in region’s future “There is no more important thing to focus our attention on than power” “There are several targets being identified and this trend is confirmed by the increased number of exploration drilling companies now based in Ghana” 03-06,07,09,11,13-14WestAfrica2014.indd 4 02/04/2014 10:36
    • Mining Journal special publication – West AfricaApril 2014 5 WEST AFRICA tries,” he said. “There is also a relative improvement in the infrastructure, helping to bring down the cost of exploration and mining.” Acheampong joins country manager and mining engineer John Kwofie in the Accra operation, as well as senior geotechnical engineer Isaac Baidoo, geological engineer Godwin Commey and Franklin Nordzroh, geotechnical engineer. While recent uncertainty about the gov- ernment’s decision on a mining windfall tax has created some ripples in the industry, Kwofie said deferment of the tax was a sign of a tough period being experienced by many gold operations. Feeling the pinch The government is under pressure to reduce its budget deficit, while mining companies were feeling the pinch in profitability and were concerned that jobs may be lost. Implementation of the tax has been post- poned. “There is always a risk that falling commod- ity prices could lead to reduced funding for exploration projects,” said Kwofie. “But we are well positioned for the service providers and mining companies in West Africa, as Ghana is a hub of exploration and mining activity in the region.” He said the inclusion of Acheampong in the Accra team would further broaden SRK’s capacity to deliver a wide range of geological consulting services. “Ghana has always had a strong founda- tion of home-grown mining-related skills, and SRK is proud to employ experts whose training and experience is rooted here,” said Kwofie. “This allows us to offer valuable insights into local conditions, and also inspires young Ghanaians looking for a professional role in our country’s economy.” Eric Owusu Acheampong, geological engineer and mineral resource geologist at SRK Consulting Ghana Low Cost Iron Ore Developer - Liberia • High grade friable itabirite & DSO iron ore • Potential low-cost producer at FOB US$30-35/t • 57-68% weight recovery & 63-68% Fe final product • Excellent infrastructure options (~20km from coast) & deep water port in capital city - Monrovia (80km from Project) • Maiden Resource of 62Mt @ 33% Fe • Market Cap $A36.3m as at 31st March 2014 www.tawana.com.au 03-06,07,09,11,13-14WestAfrica2014.indd 5 02/04/2014 10:36
    • Company profile Project name(s): Tonkolili Project location: Sierra Leone Commodity / resources: iron ore AML hits 12.1Mt of iron-ore exports in 2013 Company summary Sierra Leone Iron ore African Minerals Ltd Project history Since discovering the deposit in 2008, AML has carried out over 200,000m of drilling and raised over US$3 billion in debt and equity, including attracting US$1.5 billion in foreign direct investment through a landmark transaction with major Chinese steel producer, SISG. This company now holds a 25% stake in the underlying project companies and a discounted offtake contract. Tonkolili has a JORC-compliant resource of 12,800Mt, extending over a combined strike length of 30km, and includes a substantial ‘direct shipping ore’ (DSO) and saprolitic hematite mineral resource overlying a very large magnetite orebody, giving the project a multi-generational mine-life. The company has moved rapidly from an explorer, through developer, and is now maturing into a major African iron-ore producer. The first DSO phase, now under way, started exports in November 2011 and produced 5Mt in 2012, its start-up year, and subsequently ramped up to its design 20Mt/y production rate during Q2, 2013. Exports in 2013 were 12.1Mt, with a record 1.6Mt exported in December 2013. This makes it the second-largest iron-ore exporter in Africa in this, its first phase of development. Strong partnerships with its Chinese stakeholders and bankers have allowed AML to put in place offtakes covering 100% of its Phase 1 production up to 2017, guaranteeing strong revenues against its low cost base for the foreseeable future. Growth With a strong balance sheet (US$480m group cash at the end of June 2013), and existing undrawn debt facilities, AML plans to start the next phase of development immediately – expanding production facilities at Tonkolili to produce a higher tonnage of a high-grade saprolite hematite concentrate. The company’s key differentiating asset is the dedicated rail and port infrastructure. The company is assessing how much more tonnage this infrastructure can support beyond the current 20Mt/y, and will develop its saprolite processing facilities to suit. The expansion is expected to support a mine-life in this next phase of up to at least 2030, though it will still only exploit 10% of the total deposit at Tonkolili. This phase will provide expanded output, with higher revenue per tonne and expanded margins, with a low incremental capital intensity. More detail on this expansion will be available shortly. London-listed African Minerals Ltd (AMI:AIM) is currently developing and operating the major 20Mt/y Tonkolili iron-ore project in Sierra Leone, together with dedicated railway and port infrastructure. After discovery in March 2008, and an accelerated development programme, AML achieved its first exports in November 2011, just 14 months after receiving its mining permit. Following a US$1.5 billion investment in March 2012, Shandong Iron and Steel Group (SISG) is a 25% stakeholder in the project. > March 2008 – Discovery of major magnetite orebody at Tonkolili > April 2010 – $246m topco investment by China Railway Materials (“CRM”) for 12.5% stake > August 2010 – Award of Mining Licence > Nov 2010 to Feb 2011 – Completion of $770m debt and equity financing to commence phase 1 construction > November 2011 – First Ore On Ship, this was a trial cargo for SISG > March 2012 – Completion of $1.5bn transaction by SISG to acquire 25% of the project companies > June 2013 – Announcement of attaining 20Mt/y run rate > Sept 2013 – Proposed $1bn strategic investment by Tewoo for 10% of project and 10% of company > FY 2013 – achieved exports of 12.1Mt in the year > World-class JORC resource of 12,800Mt, with significant DSO and hematite cap overlying an 11,600Mt magnetite deposit; > Low stripping ratio – DSO phase and Saprolite phases have an insignificant strip, while the final pit shell has a stripping ratio of 0.6:1; > Proximity to coast – Port of Pepel accessed by 200km dedicated exclusive use railway line; > Systemic low cost producer – no stripping, no processing, short transportation route all drive low cash costs > Guaranteed offtakes provided by major stakeholders, including SISG and CRM. Timeline Investment highlights www.african-minerals.com Contact African Minerals Ltd (AIM: AMI) Stratton House, 5 Stratton Street London W1J 8LA Tel: +44 (0)20 3435 7600 1p_AfricanMinerals_profile_MJ2014_Indaba.indd 23 22/01/2014 12:24
    • Mining Journal special publication – West AfricaApril 2014 7 WEST AFRICA that a controversial windfall tax would be included within a new mining code, the gov- ernment established regulations that put it on a par with other jurisdictions, but also offered a competitive edge. The country wanted to narrow the gap between it and other countries in the region, aiming for gold production of 25t in 2015, up from the 12t mined in 2013, so it had to offer incentives such as sliding scale royalties. Broad prospects Neil Woodyer, founder and CEO of Endeav- our Mining Ltd, which has four operating mines spread over Mali, Burkina Faso, Ghana and the Ivory Coast, talked up the latter’s future prospects, in particular. “I think Ivory Coast stands out within West Africa as it has 36% of the gold belt [Birimian Greenstone belt], but only 9% of the reserves, so there is a lot of potential,” he told Mining Journal. “Our present mine only represents 20% of the gold production [in the country] so there is lots of space to go upwards.” The government has been very progressive, as was shown with the introduction of a mining code which is “good to operate under”, according to Woodyer. He said ministers understood what has happened to the industry in the past year or so and have reacted accord- ingly. “They [the government] are very much attuned to what is going on [in the industry] because they are looking for investment dollars and they understand that they have to make sure the mining industry is competitive.” Endeavour is one of the few companies that has brought in a gold mine in the past few years under budget and ahead of time. Its Agbaou gold mine in Ivory Coast started producing gold in January and Endeav- our expects to get 85,000- 95,000oz out of the mine this year. “There aren’t many coun- tries that we could have built a mine quicker than we said we would do and cheaper than we said we would do. A lot of that goes back to our project team, but it also goes back to the relationship with the governments and the communities that allowed that to happen,” Woodyer said. When asked where the company would like to find its next mine if he could choose it, Woodyer said: “I would say Ivory Coast would be our number-one choice if we were able to wave a magic wand.” Praise indeed. There are other countries in West Africa though. Gibson ‘s second pick was Nigeria, a coun- try that David Hale of David Hale Global Eco- nomics told delegates at this year’s Mining Indaba would become Africa’s powerhouse, as its GDP surpassed South Africa’s this year with the opening up of more nationalised industries to the private sector. Hale said at Mining Indaba: “Nigeria now represents the future and South Africa the past. Opening the way to private investment is the way forward.” The state’s decision to privatise the energy sector had opened up investment in the country and could lead to a threefold increase in power supply in the next 10 years, he added. “In 2020, GDP could be 50% higher in Nigeria than in South Africa.” Jim O’Neill, creator of the BRICs and MINT acronyms, economist and former chairman of Goldman Sachs Asset Management, added to this: “Nigeria is growing at 7% despite poor access to power; decent power could boost economic growth to 10-12%. There is no rea- son why Nigeria should not become one of the G20,” he said at the Africa Finance Corp’s inaugural summit this month in Lagos. The country is already being explored for gold, tin, bitumen, limestone, iron ore, barites and zinc-lead ore, but much of its economy has, so far, been built on oil and communica- Continues on p9 Continues from p1 “Endeavour is one of the few companies that has brought in a gold mine in the past few years under budget and ahead of time” Morila thriller … this Randgold mine in Mali has produced more than 6Moz of gold since it was commissioned in 2000 Mining ore at Endeavour’s Agbaou gold mine Randgold exploration geologists in the field Photo:RandgoldResources Photo:RandgoldResourcesPhoto:EndeavourMining 03-06,07,09,11,13-14WestAfrica2014.indd 7 02/04/2014 10:36
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    • Mining Journal special publication – West AfricaApril 2014 9 WEST AFRICA tions. Gibson said he expected the country to make a concerted effort to diversify away from these traditional roots. “Nigeria is clearly making an effort in the region, arguably motivated by a desire to diversify away from oil,” he said. There are already green shoots in the coun- try. Australian-listed Kogi Iron Ltd, managed by industry stalwart Iggy Tan, has been exploring for iron ore at its Agbaja project in Kogi state hoping to get a head start in the country as it starts to open up to mining investment. Earlier this year, Kogi came out with a positive prefeasibility study, which showed the potential for a 5Mt/y project with a four-year capital payback at a long-term iron-ore concentrate forecast price of US$73/t. It planned to upgrade this to a definitive feasibility study before the year was out. Long-term investments in countries where mining has only just got off the ground are also good indicators for potential. Royalty and streaming company Franco Nevada Corp backed Senegal through the inking of a US$135 million, 40-year stream transaction with Teranga Gold Corp in December. As part of the deal, it acquired the right to take full ownership of satellite depos- its adjacent to the company’s Sabodala mine and take 22,500oz/y of gold from Sabodala for the first six years and at 20% of the spot gold price and 6% of output thereafter. The proceeds would also help Teranga achieve its goal of 250,000-350,000oz/y of gold output from Senegal in what is the country’s only large-scale operating gold mine. At Mines and Money Hong Kong last month, Franco Nevada president and CEO David Harquail said: “Our company is about exposing ourselves to the long-term optionality on great mining camps and properties, and we believe eastern Senegal can be one of those camps in the future.” “We’re making a very long-term invest- ment here. It’s 1,200km2 and we’re hoping for the best. We’re not in it for a short-term pay- back,” he added. Teranga itself has plans to expand to 400,000-500,000oz/y of output, but the potential for other companies is huge. The region of Senegal in which it operates has only recently opened up for mining and exploration, so there could be more compa- nies following on the heels of Teranga. The huge Faleme iron-ore deposit is also likely to attract admirers after a case with former owner ArcelorMittal SA was concluded earlier this year. Sierra Leone is a good cast study for what can happen to a country where a large-scale iron-ore project turns into a mine. The prospects look good then. The difference with West Africa now when compared with a few years ago, despite money being tight, is that companies are making long-term invest- ments in these jurisdictions, safe in the knowledge of future geological potential and competitive investment climates. As Gibson puts it, “with West Africa, you do feel there is almost limitless upside. It won’t turn out to be limitless in the end, but, for the moment, it seems there is an awful lot out there to be discovered.” W hich is far and away the best gold exploration destination in West Africa? According to one very experienced gold miner, the answer is Ivory Coast. Following a recent lunch meet- ing with Randgold Resources, Investec re- ported the miner as saying the West African country was the most prospective country in African “by a mile”. From a geological perspective, the attract- ion is 35% of the bountiful Birimian green- stone belt being located in the country. And from a strategic point of view: “With the mining code now sorted, Randgold is picking up prospective ground all over, espe- cially now that others – the juniors – are hav- ing to let it go,” Investec said. Those happy to hear of Randgold’s endorsement would include Perseus Mining Ltd, albeit last year that company deferred development of its Sissingue project pend- ing a number of issues including finalisation of the mining code and the government approving an extension of the required first gold production beyond August 2014. Gold major Newcrest Mining is also a pro- ducer in Ivory Coast, albeit a struggling one at present. Australian and Canadian-listed Endeavour Mining Corp recorded commercial product- ion at its Agbaou project earlier this year, while junior explorer Taruga Gold was apply- ing for ground in the country last year. Another showing interest in the country in recent times has been Nick Poll, who was one of the key players behind the very successful, and then very unsuccessful, Mirabela Nickel. Poll’s privately held Delacroix is in the busi- ness of “acquiring gold exploration licences in Francophone Africa”, with Ivory Coast (or Côte d’Ivoire) understood to be a key focus. Many others are also keen on Ivory Coast, and no doubt there’ll be some new entrants on the back of Randgold’s comments. The only question, then, is why Randgold would bother highlighting the country’s potential to the rest of the world? What’s in it for an established producer to do so? A bit odd! African hot spot Michael Quinn Perth, Western Australia “No doubt there’ll be some new entrants on the back of Randgold’s comments” Continues from p7 “Teranga has plans to expand to 400,000-500,000oz/ y of output, but the potential for other companies is huge” Geologists reviewing core at Tongon Loading ore at Teranga’s Sabodala mine Photo:TerangaGoldCorp Photo:RandgoldResources 03-06,07,09,11,13-14WestAfrica2014.indd 9 02/04/2014 10:36
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    • Mining Journal special publication – West AfricaApril 2014 11 WEST AFRICA · Socially and Environmentally Responsible, Global Drilling Services Europe, Africa, Asia, Middle East, Central and South America. · Offering light weight and portable rig fleet, constructed from a fully modular component design, allowing for rig mobilisation throughout the world, the portable fleet is supplemented by conventional diamond and reverse circulation rigs. email info@energoldgroup.com www.energold.com +44 1926 338 469 Europe, Middle East and Africa + 1 604 681 9501 North / South America, Asia ENERGOLD DRILLING GROUP Energold Group has experience of drilling in diverse terrains throughout the globe. From remote grassroots projects to exploration, infill and mine extension programs, Energold provides a robust service, well supported operations, highly experienced project managers and drill crews. Please see contact details below for further service information, budgets or outline proposals for your drill programs. Low impact frontier exploration drilling EDG:TSX-V R andgold Resources Ltd intends to produce in excess of 1Moz gold this year, as its annual report revealed a 5% rise in attributable resources to 28.6Moz and an 8% decrease in reserves to 15Moz. Last year the Africa-focused miner increased production by 15% to 910,374oz at a total cash cost of US$715/oz. It is targeting a 24-30% production increase this year at total cash cost, after royalties, of US$650-700/ oz. It hopes to produce 1.2Moz in 2015. Chief executive Mark Bristow said that “unlike most of the gold mining industry”, Randgold had not needed to write down its reserves and resources as the gold price dropped, because it had calculated its reserves at US$1,000/oz and its resources at US$1,500/oz for the past three years. The company believes its focus in the cur- rent market should be on profitability and not on maximising reserves. It says the prior- ity is to replenish profitable ounces “because we are increasing production as we access higher-grade ores”. Growth in production is expected to come from rising grades at the company’s flagship Loulo-Gounkoto complex in Mali, improved throughput at Tongon in Ivory Coast, and the first full-year contribution from the recently commissioned Kibali in the Democratic Republic of Congo (DRC), Bristow said. The Morila gold mine in Mali has produced more than 6Moz of gold since it was commis- sioned in 2000, but, at current gold prices, is going to become “more and more challeng- ing” as it runs out of ore from the pushback and has to process tailings, Randgold said in its annual report. Nearby Loulo-Gounkoto will “more than make up for Morila’s diminishing contribu- tion and eventual closure,” as grades improve and costs fall, it predicted. The complex, which is 80%-owned by Randgold and 20%- owned by the Malian government through subsidiary Société des Mines de Loulo SA, beat revised production guidance by 20,000oz to 580,364oz at total cash cost of US$704/oz in 2014. Gounkoto’s gold production was reduced “as planned” in order to increase production from Loulo, which has larger orebodies, Randgold said. Loulo’s standalone results showed a 30% increase in ore tonnes mined for the year at its Yalea and Gara under- ground mines, largely due to implementa- tion of the cemented aggregate fill project at both operations. Tongon targets In neighbouring Ivory Coast, Randgold is forecasting increased gold production of 260,000oz for the 4Moz Tongon deposit, although this is slightly behind the previous internal target. Tongon’s performance improved “signifi- cantly” in 2013 on the back of efficiency- enhancement projects, Randgold said, with increased throughput resulting in a fourth- quarter production improvement and 11% year-on-year rise in gold production. However, it warned that the mine is still struggling to get above the 80% recovery rate, “and as a lower-grade, high-volume mine, this rate is critical to its success”. Exhaustive testwork has now identified the problem, Randgold’s annual report said, explaining that the current circuit is not recovering the gold associated with arseno- pyrite, which is bypassing the flash flotation cells. Its solution is expansion of the flotation circuit, a project which will cost around US$12 million and should be completed by the end of this year. Foothold on feasibility On the exploration and development front, Randgold expects to complete an advance feasibility study for Massawa, located in a third west African country: Senegal. Explora- tion work to date has delineated inferred resources of 0.92Moz at 1.64g/t from four of the six satellite deposits around Massawa: Sofia, Bambaraya, Delya and Tina. Recoveries at three of the deposits ranged from 75% to 97%, while Delya returned 40%. Randgold has groundholdings of 12,995km2 in Mali, Ivory Coast, Senegal and the DRC, consisting of 81 satellite targets and 79 potential standalone operations. In addi- tion to Massawa, it hopes to make new stand- alone discoveries in western Mali, advance standalone targets within its Ivory Coast per- mit portfolio, expand its exploration foot- print along the Senegal-Mali shear zone, and identify new joint-venture projects. Randgold targets output of 1Moz Nadav Shemer Assistant editor Left: Loulo geologists trench mapping. Below left: file photo of Mark Bristow showing Tongon core to Guillaume Soro, then-prime minister of the Ivory Coast Photos: Randgold Resources 03-06,07,09,11,13-14WestAfrica2014.indd 11 02/04/2014 10:36
    • Mining Journal special publication – West AfricaApril 2014 13 WEST AFRICA I nvestors can use gold to mitigate sys- temic risks, as a cost-effective currency hedge and to reduce ‘tail risks’ in emerg- ing markets, according to a World Gold Coun- cil paper published this week. Emerging markets have delivered hand- some returns over the past decade as strong economic growth and favourable demo- graphics have com- bined with industry deregulation to form the perfect storm for investors. However, recent volatility across Asia, Latin America and Eastern Europe – including develop- ments in Russia and Ukraine – has signifi- cantly affected invest- ment portfolios, directly and indirectly, according to the WGC. The WGC postulates that gold can act as a hedge against this shift in global economic fortunes in three key ways. First, gold provides a cost-effective alternative to foreign-exchange hedging for investors seeking to reduce their risk from emerging-market currency movements. Second, gold has a reputation as a safe haven against systemic crises, be they eco- nomic or political. And third, gold provides a useful hedge for investors not directly invested in emerging markets but none- theless indirectly exposed given the “inter- connectedness of these economies to the global financial system”. The paper suggests 2-10% of individual portfolios should be dedicated to gold assets depending on risk appetites. WGC investment research director, Juan Carlos Artigas, said long-term prospects for emerging market economies may still justify including them in a portfolio but recent mar- ket volatility made hedging a necessity. In this role, gold was “critical”. He said gold had exceptional market liquidity, which pro- vided a cost-effective alternative to manag- ing emerging-market currency risk. The daily trading volume of gold – US$240 billion in the London over-the- counter market alone – far exceeds major currency pairs and surpasses all spot emerg- ing-markets currency transactions combined. “Our research shows that even investors with little or no direct exposure to emerging markets would benefit from a gold-based hedging strategy,” Artigas said. “The world is much more intertwined and the risk of emerging-market contagion has the poten- tial to impact portfolios that invest solely in developed economies.” H aving lost the attention of investors in the current market, former mar- ket darling Gryphon Minerals is hoping the increasingly prolific Hounde belt in Burkina Faso will yield it some exploration success, generating fizz in the company’s share price, and ultimately project number two in the West African country. Gryphon’s deal earlier this month with Boss Resources sees it getting access to ground in a geological region where Cana- dian-listed companies such as Semafo, Rox- gold and Endeavour have enjoyed excellent success. Semafo’s Siou deposit, for example, cur- rently has reserves of 770,000oz at a grade of just under 5g/t, while Roxgold has 790,000oz to its name at an extremely impressive 17.15g/t. Gryphon managing director Steve Parsons told Mining Journal the company had looked at a property in the region several years ago, but “unfortunately missed out”. Meanwhile, he expects to be able to report progress on financing Gryphon’s mainstay Banfora proj- ect in five or so weeks. Parsons is adamant development at Ban- fora will begin later this year. “Without doubt,” is how he phrased it, “unless the mar- ket absolutely tanks”. Having recently attended the BMO Confer- ence and undertaken various business meet- ings with investors elsewhere in North America, he maintains there’s “plenty of interest” in Gryphon’s story. Unfortunately for shareholders, that reported interest is currently not translating into positive market performance, with que- ries on whether equity funds Gryphon might be required for Banfora likely to be one of the dampening factors. Clarification on that will likely assist with marketing. Though nothing will beat a big hit up Hounde way! WGC: gold best hedge for emerging markets Chris Cann Contributing editor ‘The world is much more intertwined and the risk of emerging-market contagion has the potential to impact portfolios that invest solely in developed economies’ Gryphon seeks second chance Michael Quinn Perth, Western Australia “Recent volatility across Asia, Latin America and Eastern Europe – including developments in Russia and Ukraine – has significantly affected investment portfolios, directly and indirectly, according to the WGC” “Gryphon managing director Steve Parsons expects to be able to report progress on financing Gryphon’s mainstay Banfora project in five or so weeks” 03-06,07,09,11,13-14WestAfrica2014.indd 13 02/04/2014 10:53
    • April 2014Mining Journal special publication – West Africa WEST AFRICA 14 C ontrary to expectations, the Europe- an Commission (EC) has proposed a voluntary self-certification scheme for EU importers of tin, tungsten, tantalum, gold and their ores. After months of consulta- tion the draft legislative proposal was pub- lished on March 5, 2014. It was widely expect- ed to follow the US Dodd-Frank Act and impose compulsory supply chain due dili- gence requirements for conflict minerals. Conflict-minerals laws are aimed at the immense hardship caused when mining rev- enues captured by armed gangs are used to fund violence in conflict-affected areas, such as the Great Lakes region of Africa. Tin, tung- sten, tantalum and gold – and their ores – are generally targeted by such laws because they are often sourced from conflict-affected countries. These minerals have many applica- tions, including in the automotive, electron- ics, jewellery, aerospace, packaging, construction, lighting, and industrial machin- ery and tooling sectors. EU proposal The EU proposal would establish a voluntary self-certification system for importers into the EU of the relevant metals and their ores, but not for entities importing finished prod- ucts or goods potentially containing these materials. This contrasts with the compulsory Dodd- Frank rules, which require US-listed compa- nies to conduct due diligence of their entire supply chains and disclose the use of conflict minerals in certain filings on the US Securities and Exchange Commission. As with the US approach, the ECs proposal covers tin, tungsten, tantalum and gold, and the ores of these metals. The EU approach differs, however, in that it would cover miner- als sourced from all “conflict-affected and high-risk areas”, whereas Dodd-Frank only covers minerals sourced from the Democratic Republic of the Congo (DRC) and neighbour- ing countries. EU importers intending to self-certify will need to determine themselves which regions are “conflict affected” or “high risk”. This is not a static or straight-forward assessment, but templates, such as the World Gold Coun- cil’s Conflict-Free Gold Standard, are available to help businesses assess their operations. The voluntary scheme incorporates the Organisation for Economic Co-operation and Development’s conflict minerals due diligence framework. Also, importers wishing to self- certify will need to track the origin of minerals purchased, implement risk-management pro- cedures, self-audit through independent third parties, and disclose information to EU mem- ber state regulators, who will then conduct appropriate checks to determine whether self- certified importers are compliant. The EC proposes to publish an annual global list of responsible smelters and refin- ers and identify those that source responsibly from conflict-affected areas. This is intended to encour- age responsible sourcing and to enable downstream purchasers to easily iden- tify responsible suppliers. Alongside the legisla- tive proposal for voluntary due diligence, the EC has published a communica- tion setting out additional support measures. These include introducing into the EC’s own public procurement contracts requirements that products supplied to it are “conflict free”, and the provision of financial support for small and medium enterprises that partici- pate in the certification scheme. Rationale By encouraging smelters and refiners to obtain minerals from responsible sources in conflict-affected areas the commission is try- ing to avoid the criticisms levelled at Dodd- Frank, particularly the accusation that the US approach has created a de-facto embargo of minerals sourced from the DRC and sur- rounding areas. This unintended consequence arises because companies find it easier to ban miner- als originating in the region from their supply chain, leading to a decline in legal mining, a sharp fall in mineral prices and increased min- eral smuggling. The voluntary nature of the EC’s proposal and its limited application to importers of the relevant minerals appears also to reflect business concerns that mandatory due dili- gence requirements with a broader reach would be too onerous and too costly, imposing on them an obligation to search supply chains for informa- tion on mineral sources that may be impossible to obtain. Despite the justifica- tions for the EC’s approach, the limited scope and vol- untary nature of the proposal are likely to be debated heavily by the European Parliament and European Council. Although the EC is seeking to encourage take-up of the voluntary initiative via the measures outlined in the accompanying communication, the main driver for change is likely to be the negative reputational and commercial consequences of not self-certifying, to the extent that those pressures continue to increase. As such, the critical question for both the parliament and the council is whether a vol- untary approach goes far enough to promote supply chain due diligence among EU com- panies and to break the link between miner- als extraction, minerals trading and the financing of armed conflicts. Conflict resolution “The limited scope and voluntary nature of the proposal are likely to be debated heavily by the EU Parliament and European Council” The EU proposes a voluntary path for conflict minerals, but does it go far enough? Graham Stuart is a partner and Rachel Barlow an associate with London-based business law firm Baker & McKenzie LLP Importers wishing to self-certify will need to track the origin of minerals purchased, implement risk management procedures, self-audit through independent third parties, and disclose information to EU member state regulators Graham Stuart and Rachel Barlow London, UK 03-06,07,09,11,13-14WestAfrica2014.indd 14 02/04/2014 10:53
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    • Randgold Resources’ far-sighted strategy of growing through discovery and development enables it to deliver value consistently to its stakeholders while building platforms for further expansion. The company continues to increase gold production off a growing resource base and to ramp up its existing operations. At Kibali in the Democratic Republic of Congo, it is developing what will be one of Africa’s largest gold mines. Meanwhile, its exploration teams press on with the hunt for more multi-million ounce gold deposits, feeding a constant stream of potentially profitable opportunities into the company’s pipeline and enlarging its footprints in Africa’s most prospective gold regions. www.randgoldresources.com LSE: RRS • Nasdaq: GOLD dPA5802 Planning for tomorrow. Delivering value today.