[Update]Burkina’s gold hunt on the rise

Burkina Faso has recently seen more gold mining due to its relatively stable government, favourable geology, modern mining code and attractive fiscal regime.   

The small landlocked West African country is slightly larger than Colorado, covering 274, 200 sq. km, but has more than three times the state’s population at 16.7 million.

The Fraser Institute ranked the country’s mineral potential as sixth best out of 79 countries it surveyed in 2010-2011. However, Burkina Faso remains one of the world’s poorest nations, and receives international aid for debt-relief.

To boost its economy, it has recently turned to gold exports. It reported a 7.9% economic growth (US$9.3 million) in 2010 partially helped by soaring gold prices, combined with more gold being exported, Norton Rose’s lawyer Jake Howard outlines in an article on the country’s current gold rush. In the past two years, gold exports have become the government’s major stream of revenue.    

The country is expected to have produced roughly 1 million ounces gold in 2011, reflecting an estimated 32% increase from its 2010 production, says the London-based banking lawyer, who specializes in mining and project financing, among other areas.  

The country boasts six gold mines and a handful of advanced-stage exploration gold projects.

Iamgold‘s (img-t, iag-n) Essakane operation is the country’s largest gold mine, producing 337,000 attributable oz. gold in 2011. Other producers include: Semafo‘s (smf-t) Mana mine, Avocet Mining‘s (avm-l) Inata, Endeavour Mining‘s (edv-t) Youga, High River Gold Mines‘ (hrg-t) Taparko-Bourom and Cluff Gold‘s (clf-l) Kalsaka.

If it continues on this production path, the country could become the fourth-largest gold producing country in Africa.

It’s telling to know there have been six gold mines built in the last five years, Kevin Bullock, president and chief executive of Western Africa-focused explorer Volta Resources (vtr-t), says when asked about the country’s attitude towards foreign investors.   

“The permitting process is smooth; the government is fully behind mining companies getting their projects going in a proper timeline because really the revenues from the net smelter returns from these gold mines have surpassed the income from cotton. It is the number one income for the government at the moment.”

Bullock reckons the country is one of the better West African countries to work and start a mine in. “They have a modern mining code, total expatriation of profits and a clear and well understood fiscal regime.”

This year Volta has budgeted $34 million to bring its flagship Kiaka gold project to feasibility and advance its other projects in the country. The debt-free company plans to make a development decision at Kiaka by early 2013, once it completes a feasibility study.

Situated 120 km southeast of the capital Ouagadougou, the 184-sq.-km project lies in the intersection of the significant Markoye fault corridor and the Tenkodogo greenstone belt, which hosts several of the country’s gold producers.

Since acquiring the property from Rangold Resources (gold-n, rrs-l) in October 2009 for 20 million shares and $4 million, it has drilled 100,000 metres at Kiaka, confirming a strike extent of up to 1.9 km and maximum depth of 440 metres. Bullock says the deposit is still open at depth.

The project hosts 3.01 million oz. gold from 90.2 million tonnes grading 1.04 grams in measured and indicated. It has another 1.3 million oz. from 38.5 million inferred tonnes grading 1 gram gold. Bullock notes the company will update the current resource by late February or early March. That update will be used in the ongoing prefeasibility study due in late March. It has raised more than $50 million for exploration, and is currently working through a 50,000-metre program at Kiaka.

The project is one of the largest undeveloped gold deposits in Burkina, says Bullock, adding “it’s a very well behaved deposit with really good metallurgy – not refractory ore – and it’s a simple conventional mill. So there’s no technical difficulty moving this forward, it’s just a process.”

Kiaka is envisioned to produce over 250,000 oz. gold a year, but Bullock reckons that in the first two years production will be near 400,000 oz., thanks to the deposit’s natural starter pit, situated at the south end of the project. The mineralization in this area grades up to 30% higher than the average grade of the deposit.  

The company is half way through an environmental and social impact assessment, and predicts the future permitting of the mine to go smoothly, given the government’s ongoing support.   

Burkina Faso ranked 150th out of 183 countries in the World Bank’s Doing Business 2012 report, up from its 164th ranking in 2008, says Howard of Norton Rose, explaining it reflects the country’s success in creating an environment open to business.

The country has a 20% income tax rate and a 20% corporate tax rate for mining companies.

“There is a three-year tax holiday that includes relief from valued-added tax and custom duties during construction and reduced customs duties of 7.5% during mining operations,” notes Avion Gold (avm-l), which is pressing ahead with its Houndé gold project, 60 km southwest of Semafo’s Mana mine, and about 250 km from Ouagadougou.

 It adds the government has a 10% free carried interest and a 3% royalty on gold production.

Avion snapped Houndé from Avocet for 10.3 million shares in 2010. Since then, it has completed 19,800 metres on the 1,670-sq.-km property and delineated a 1.6-million-oz. resource. The entire resource comes from the project’s Vindaloo zone.

For 2012, Avion has budgeted $11.8 million for an exploration program at Houndé, and aims to complete a preliminary economic assessment by mid-year.

While it may be awhile before Houndé can start contributing to Burkina Faso’s gold exports, Orezone Gold (ore-t) appears to be farther down the path with its Bomboré project, situated 85 km east of the capital, and adjacent to the national paved highway.

 The company currently has seven drills turning at the 168-sq.-km property as part of its 215,000-metre program, which should be done by March. It aims to update the project’s 3.5-million-oz. resource by June, and finish a full feasibility by year-end. Orezone anticipates bringing its flagship project online by 2015.

A few paces ahead is High River Gold with its 90%-owned Bissa gold project. The government of Burkina Faso owns the remainder. The company received a mining license for the pit last July and kicked off mine construction in late 2011. A September 2010 feasibility study estimates the cost to build the project at US$110 million.

Once up and running, it should produce an average of 95,000 oz. a year over its 7-year mine life, with mill churning through 4,000 to 5,000 tonnes per day.

The Bissa group permits cover roughly 1,000 sq. km, and are 80 km north of Ouagadougou. It hosts gold reserves of 29.1 million tonnes grading 1.76 grams for 51,417 kilograms (1.81 million oz.) as of November 2010.