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Why Western Africa is the next Gold mining frontier

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Western Africa is fast emerging as the continent’s top region for gold mining. The region is currently being seen as a more attractive prospect than Asia or South America to construct new mines due to the return on investment capital.

This has led to the expansion of mining projects that are transforming the West African gold industry.

Western Africa’s drive to become one of the world’s top gold providers is being led by the output of its current gold mines.

Notable success stories include Endeavour Mining Corporation’s Houndé mine in Burkina Faso (3 million tonnes per year), B2Gold’s Fekola mine in Mali (5.6 million tonnes), and Semafo’s Natougou gold project also in Burkina Faso (3 million tonnes). The success of these mines has led to more international investment in the construction of new large scale mines.

Currently under construction is Perseus Mining’s Yaouré gold mine, whose permit was granted by the Côte d’Ivoire last May. Yaouré is set to become fully operational in either December 2020 or January 2021. The mine will be the third mining operation from Perseus Mining and their second in West Africa (after the Edikan Mine in Ghana).

But what is driving these new mining projects?
Mining Review report that it is the untapped resources that has set Western Africa on the path to becoming one of the top five gold producers in the world.

Bulk Mining Explosives(BME) general manager for West Africa operations  Michael Klaasen told the magazine that most West African countries “have vast mineral reserves that remain untouched, making it a very lucrative area for foreign investment.” He credits governments in the region for easing their mining charters, therefore making it easier for mining companies to construct mines.

Yet it hasn’t all been easy for mining companies with the price of gold causing some issues for newly developed mines. Despite producing 7 tonnes of gold, Kinross’s Tasiast gold mine in Mauritius still lost money last year Brahim M’Bareck from Canadian mining giant told The Africa Report.

“Fluctuations in gold prices have not helped”. This was on top of an already costly investment due to its construction in the middle of the desert. With construction finished on the mine, it is set to start generating revenue. This will also be boosted by the price of gold rebounding in 2019.

The gold price chart featured on FXCM  shows how the value of the precious metal has been strong this year. It topped $1,400 (Ksh 143,8130) in June, and is currently hovering between $1300 and $1,400 (Ksh 133,541– Ksh 143,8130). If the price of gold holds up, large investments like the Tasiast gold mine will become profitable sooner rather than later, which in turn will help increase Western Africa’s gold industry.

Western Africa is also benefitting from South Africa surrendering its spot as the region’s top gold producer. Gold production in South Africa has been on a decline for over a decade now, with output down by as much as 54% since 2005.

Noah Capital Markets mining analyst René Hochreiter attributes this downward trend to the rising costs of mining gold in South Africa.

“If you add in total costs, including capex, most of South Africa’s gold production is loss-making,” Hochreiter points out. “The resources are very deep and the cost of getting those resources is so high that it is not worth it.”

Making matters worse were the five-month-long Sibanye-Stillwater strike and the power outages that hit the country in January. The high construction and workforce costs are why investors have been looking elsewhere in the continent.

All signs point to an extended gold rush in West Africa, with companies like Kinross, BME, and Perseus currently exploring the region for more gold. As more resources are found, so too will the number of mines increase.

Also Read:

Australian mining firms on the spot over tax issues in Africa
Landmark ruling for Southern African Gold Miners


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