Burkina’s gold hunt heats up

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

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 it receives international aid for debt-relief and poverty reduction. 

To boost the country’s economy, the government has recently turned to promoting 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 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 1 million oz. gold in 2011, up around 32% from 2010, says the London-based banking lawyer, who specializes in mining and project financing. 

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

Iamgold‘s (IMG-T, IAG-N) Essakane 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, AWGF-Q) Inata, Endeavour Mining‘s (EDV-T) Youga, High River Gold Mines‘ (HRG-T) Taparko-Bourom and Cluff Gold‘s (CFG-T, CLF-L) Kalsaka.

If it continues on this path, the country could become Africa’s fourth-largest gold producer after South Africa, Ghana and Mali.

It’s telling that all six gold mines were built in the last five years, Kevin Bullock, president and CEO of 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.”

Bullock says 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.”

Volta has budgeted $34 million this year to bring its Kiaka gold project to feasibility and advance its other projects in the country. 

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 Randgold Resources (GOLD-N, RRS-L) in 2009 it has drilled 100,000 metres at Kiaka, confirming a strike extent of up to 1.9 km and maximum depth of 440 metres.  

The project hosts 3.01 million oz. gold from 90.2 million measured and indicated tonnes grading 1.04 grams gold. It has another 1.3 million oz. from 38.5 million inferred tonnes at 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 March. 

Kiaka is one of the largest undeveloped gold deposits in Burkina, says Bullock. “It’s a very well behaved deposit with really good metallurgy – not refractory ore – and it’s a simple conventional mill.”

Kiaka is envisioned to produce over 250,000 oz. gold a year, but Bullock hopes 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.

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.

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 devoloping its Houndé gold project, 60 km southwest of Semafo’s Mana mine.

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

Avion snapped up Houndé from Avocet for 10.3 million shares in 2010. Since then, it has completed 19,800 metres of drilling on the 1,670-sq.-km property and delineated a 1.6-million-oz. resource. 

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 a while before Houndé can start contributing to Burkina Faso’s gold exports, Orezone Gold (ORE-T) appears to be further down the path with its Bomboré project.

 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  owns the rest. The company received a mining license for the pit last July and kicked off mine construction in late 2011. A September 2010 feasibility study pegs the cost to build it at US$110 million. 

Once up and running, Bisa 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 project’s group permits cover roughly 1,000 sq. km,  80 km north of Ouagadougou. It hosts reserves of 29.1 million tonnes grading 1.76 grams gold for 1.81 million oz. gold as of November 2010.