COMMENTARY — West Africa versus South America

Why do we believe that investor enthusiasm, which swept South American countries like Venezuela in 1993, will spread to West African countries in 1994? (By West Africa, we are referring primarily to the countries of Ghana, Mali, Burkina Faso, Ivory Coast and Senegal.)

Much of our reasoning stems from the fact that the two regions share the same gold-prone geology. They were once part of the same land mass. Both areas have long histories of extensive gold production. Likewise, both areas offer vast, unexplored tracts of land. Governments of West Africa and South America are equally eager to attract investment. Logistics are a challenge, but the greatest hurdles (risks) are manmade, as is the case in all developing countries.

West Africa has something of an advantage over the northern countries of South America in that most of the countries share a stable, common currency. However, what really sets West Africa apart for the explorer and investor alike are the market capitalizations of companies operating in the two regions. The West African market capitalizations are a fraction of their South American peers, despite sharing the same geology (see below) . . . For all the excitement about Latin America’s gold exploration potential, Ghana alone produces more gold than the northeastern countries of Venezuela, Guyana and Suriname combined. Only if Brazil’s production is added to the balance does the scale tip in favor of South America. We draw this comparison because once, 120 million years ago, the two regions were one, before the continents split apart in a process called Continental Drift. The Guyana Shield, which hosts gold-prone greenstone rocks, stretches from northern Brazil, Suriname, Guyana and Venezuela. These greenstones offer some of Latin America’s most prospective gold terrain. In West Africa, the gold has typically been found in what has been broadly described as the Birimian greenstones. The Birimian greenstone belts are found primarily in the West African countries of Ghana, Ivory Coast, Burkina Faso, Guinea, Mali, Senegal and Niger . . . A worldwide scramble for new, prospective exploration ground has been under way for more than a year. West Africa is only now beginning to receive attention.

— From a recent edition of Wood Gundy’s “Investment Research.”