Burkina Faso’s second military coup of 2022 raises risks for miners

Burkina Faso-focused miners say operations have not been affected following a second coup d’état on Sept. 30 that saw the country’s president Lt.-Col. Paul Henri Sandaogo Damiba overthrown after only nine months in power.

While local mining operators face growing security, logistical and financing issues, they appear to remain bullish on the jurisdiction, with no announcements emerging of reduced exploration and mine development budgets to date.

Burkina Faso is Africa’s fourth-largest gold producer, and gold makes up a significant part of its GDP and national exports.

The change of leadership appears to have its roots in a disagreement within the Burkina Faso military on security issues in the north and east of the country, areas which have been hard-hit by Islamic-associated terrorist insurgencies in recent years.

The nation’s new military leader, Captain Ibrahim Traoré, said on Oct. 2 that the country was facing an emergency in every sector, “from security to defence, to health, to social action, to infrastructure,” and it was time for the government to “abandon the unnecessary red tape.”

An analyst with global risk consultancy Control Risks says that, at first glance, the development is unlikely to directly impact the mining sector from a regulatory perspective. The current leadership has gone so far as to say no additional constraints will be placed on the mining sector, given its economic importance.

“The succession of coups in Burkina Faso, and more broadly persistent discontent in the armed forces, is driven by worsening militancy and repeated failure of successive governments to improve security,” said analyst Tristan Gueret in response to emailed questions.

Since 2015 Islamist militants have made significant gains across the country, expanding their influence in rural areas and carrying out frequent and deadly attacks against civilians and security forces.

According to Gueret, the Burkinabe security apparatus has long suffered from capacity issues, including manpower, air support, intelligence, and personal equipment. Such challenges were also made worse by divisions and rivalry between different branches of the security forces.

“Deteriorating militancy, high casualty rates among troops, capacity issues, and grievances in the rank-and-file, both against the political class and senior officers who are seen as out of touch and disconnected from the day-to-day realities of the counterinsurgency, have been the main drivers of discontent,” Gueret said.

Before the coup against President Roch Marc Christian Kabore in January 2022, there had been several incidents of mutinies by disgruntled troops. The January 2022 coup came after more than 50 gendarmes were killed in Inata in November 2021, and reports later emerged that the authorities had abandoned them.

Similarly, the intervention on Sept. 30 occurred after at least 27 soldiers were killed during an ambush on a convoy on Sept. 26.

“Successive coups, alongside deteriorating security, are likely to continue dampening investor confidence in Burkina Faso. This is particularly pertinent for the mining sector, which has been under considerable pressure over the past 18 months, with mining operators facing growing security, logistical and financing issues,” Gueret said.

Even so, the analyst does not expect authorities to place additional constraints on the mining sector, given its economic importance.

“There are also no signs that ECOWAS would be willing to impose sanctions on the country that would cause further financial or logistical challenges for mining operators. That said, security remains the main challenge for the sector, and unless there are significant measures taken to enhance security around mining assets, it is unclear how long some mining sites will be able to continue operating, particularly in the north and east of the country,” Gueret said.

Meanwhile, he adds that uncertainty and insecurity will continue to depress investment in exploration, weakening the pipeline of future projects in the longer term.

Russian interference?

The latest Burkina Faso coup saw many younger people waving Russian flags in the capital’s streets, Ouagadougou.

Although relatively small in number, it has prompted speculation that there may have been some Russian involvement in the events that saw Traoré seize power in a nation beset by growing jihadist violence.

Yevgeny Prigozhin, an oligarch close to Russian President Vladimir Putin and the founder of the Wagner Group, a shadowy mercenary organization active in several African countries, congratulated the young junta leader, describing him as “a truly worthy and courageous son of his motherland.”

“The people of Burkina Faso were under the yoke of the colonialists, who robbed the people and played their vile games, trained, supported gangs of bandits and caused much grief to the local population.”

According to local media reports, he was referring to former colonial power France, and those welcoming the coup not only waved Russian flags but attacked French institutions, including the embassy.

The violence sent shockwaves across the region, demonstrating the strength of anti-French resentment in many of France’s former African colonies.

Burkina Faso has been destabilized by a decade-long Islamist insurgency that leaders have failed to suppress.

More than 40% of the country, a former French colony, is currently outside government control. Thousands have been killed, and about 2 million people have been displaced by fighting since 2015, when an insurgency that began in Mali in 2012 spread to Burkina Faso and other countries in the Sahel region, south of the Sahara Desert.

Operations unaffected

Soon after the turbulent events of the first weekend of October, miners and explorers were quick to publish statements saying business was more or less continuing unhindered.

West African Resources (ASX: WAF), an Australian gold miner that gets all its revenue from Burkina Faso, saw its shares dive 10% on the news to A95¢ per share in the immediate aftermath. That’s the lowest the stock has closed at this year.

The company said the new military leadership had released a statement urging the people of Burkina Faso to “go about their business in peace.” It added it remained on track to meet 2022 production guidance of 220,000-240,000 oz. gold.

Endeavour Mining (TSX: EDV; LSE: EDV) also said its mines were unaffected. The company is Burkina Faso’s top miner with four operations – Houndé, Mana, Boungou and Wahgnion – and two exploration projects.

Canada’s Iamgold (TSX: IMG; NYSE: IAG), which owns the Essakane mine, said that all employees and contractors were safe. Essakane, located about 330 km northeast of the country’s capital, Ouagadougou, is Iamgold’s biggest operating mine.