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Dominated by Ghana, Senegal, Guinea, Niger, Mali, Burkina Faso and Ivory Coast, the West African Mining industry is fast gaining recognition in the resources world. Home to well-known deposits and an impressive history of producing mines, the region now is a preferred mining destination. In a series of articles we will discuss the growing importance of the region, some salient statistics and important aspects of the regulatory environment in different countries in the region. We will also highlight few interesting companies with attractive assets that warrant investor attention.
Industry sources such as Natural Resources Canada (NRC) estimate mining investments in Africa to reach $14 billion by 2010 from $7 billion in 2006. Much of the investments are expected to be in West Africa, Southern Africa and Central Africa. Amongst West African nations, Ghana, Mali, Guinea and Burkina Faso are expected to be at the fore front. In addition to majors such as Newmont and AngloGoldAshanti, relatively new entrants such as Rangold Resources, Keagan Resources, Red Back Mining, Golden Star Resources, and African Gold Group are expected to help script the future of West African mining sector with their projects and investments. Successful discoveries or advanced stage projects by these companies may well become acquisition or joint venture targets by larger companies leading to capital gain opportunities.
Apart from geology, West Africa’s stable politics and the mining friendly regulatory environment has played an important role in attracting investments. From a governance perspective, some West African nations have made considerable progress and rank alongside South Africa, which has a developed mining environment. Mali, Ghana and Burkina Faso rank high on contract enforceability and property registration. The Fraser Institute ranks Ghana and Mali higher than South Africa and the mining friendly Peru on its policy potential index. The glut of investments to the region should therefore cause little surprise.
West African governments have shown considerable commitment to the development of their respective mining industries and have introduced several incentives. Investments however are more linked to the political stability and high ranked countries such Ghana, Mali and Benin have enjoyed the lion share.
West Africa owes its gold riches to the Birimian greenstone belt, which hosts some of the largest gold deposits in the world, including Sadiola, Yatela, Morila and Syama in Mali, Siguiri in Guinea, and Obuasi, Bogosu, Prestea, Bibiani in Ghana. It is also the home for many prominent projects such as Newmont’s 18.0 million ounce discovery (Akyem and Ahafo) and AngloGoldAshanti’s 66 million oz discovery (Obuasi, Bibiani and Iduapriem-Teberebie). According to industry sources, there is ample potential for more deposits on the Sefwi belt where Newmont has the Ahafo mine and in the Asankrangwa belt. Ghana in other words remains under explored.
The Birimian belt is a massive geological formation spanning from the Central to West Africa. It is shared between Cote d’Ivoire (35%), Ghana (19%), Burkina Faso (21%) and Mali (10%). For the relatively less familiar reader, the famous Ashanti gold belt is on the Birimian. The area has been a major gold producing district and the home to several gold projects. In addition to majors such as AngloGoldAshanti and Newmont there are several junior exploration companies with operations in the area.
Ghana – Leader in the pack…..
Amongst West African countries Ghana is the largest gold producer with much of the mining observed around the Ashanti gold belt. Unlike many other African nations, Ghana has an established democracy (after some hiccups of course since independence) and is considered to be one of the most stable countries. At least there have been no civil wars or significant internal conflicts!
Benefiting from high metal prices and consequently, a thriving resources sector, Ghana’s economy has performed well. According to the World Bank, the GDP has increased progressively from 3.7% in 2000 to 6.4% in 2007 with a further 2.8% growth is expected for 2008. Poverty level has fallen from 52% in 1992 to 28.5% in 2005, and is on track to meet its target of halving poverty levels by 2015. High exports have been the mainstay that has fuelled Ghana’s economic growth.
Ghana – The mining regulatory environment
Ghana awards three types of licences for mining companies. A Reconnaissance Licence confers on the holder the right to search for a specific mineral within the licence area by geochemical and photo-geological surveys or other remote sensing techniques. Granted usually for one year (renewable) Reconnaissance Licence does not permit drilling, excavation or other sub-surface techniques.
In order to undertake drilling, a Prospecting Licence is required. Prospective licences are initially granted for three years and a maximum area of 150 km², renewable for a maximum of two terms or for further periods of up to two years each. At each renewal, half the licence area is required to be relinquished by the holder. If more than one prospecting licence is held, they may be treated as one area for purposes of shed-off.
The third type, Mining Leases, give the licensee the right to mine or extract specified minerals within the lease area. The lease may be granted to the holder of a prospecting licence or any company that satisfies the Ministry criteria. The lease is issued for up to thirty years subject to renewal for a further thirty-year term. The size of the area a lease may be granted is limited to 50 km² for a single grant or 150 km² for aggregate grants.
Not surprisingly, Foreign Direct Investments (FDI) to Ghana has been on the rise with the majority channelled towards the mining sector. International Council on Minerals and Metals estimate total FDI attracted by Ghana to the mining sector to be $7 billion over the last 10 years. Gold production has indeed been high during the same time period and Ghana now is Africa‘s second largest gold producer after South Africa.
Ghana remains a promising destination for gold exploration in general and attractive in particular for small to mid size companies. Indeed, there is a plethora of companies with assets in Ghana and are enjoying varying degrees of success. Together with its promising geology and political stability, Ghana is well on its way to establish itself as a mining heavy weight.
Sources & Acknowledgements:
Minerals Commission Ghana, World Bank, African Development Bank, African Gold Group, Keegan Resources
Sam Kiri
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Editor’s Note: Sam Kiri is a CFA Charter Holder and a qualified Management Accountant (ACMA) with over 10 years of capital markets and asset management experience in North America, England and the Pacific Rim, with primary focus on Resources and Oil & Gas sectors. Sam is a director of Proactive Investors North America Inc., a financial media forum focused on small to mid cap companies. He is also involved in listing North American companies on the London Alternative Investments Market (AIM). Sam can be reached at sam@proactiveinvestors.com. To learn more about companies exploring and mining in Ghana, Please visit our web site at www.proactiveinvestors.com
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