MINING IN AFRICA SPECIAL — Burkina Faso’s gold potential

West Africa’s Burkina Faso had a record year in 1994. And with any luck, 1995 will be even better, with the continuation of a gold exploration boom which analysts say could soon lead to a significant mid-sized discovery.

The landlocked West African country has never been much of a player in any kind of mining, and so far has recorded only 1 million tons per year of artisanal gold production. But success in neighboring Ghana and Mali has sent several international companies looking at its greenstone gold deposits, which have always been considered to have favorable geology but have never been thoroughly explored.

Increasingly, the gold industry sees Burkina Faso as “one of the best potential areas in Africa,” says the World Bank’s Craig Andrews. He estimates that in 1994, 20 companies began operations there and spent a total of US$10 million on exploration — far more than ever before.

Andrews expects the firms may invest another US$15 million this year on exploration. Among them are majors such as BHP, Anglo-American, Placer Dome (TSE) and Newmont (NYSE). The activity makes him think chances are good that someone will soon announce a considerable find.

“This level of excitement equals the levels of excitement of Ghana back in the mid-1980s, and I’m optimistic somebody’s going to find something,” says Andrews, who will speak on West Africa’s gold mining potential at the annual Prospectors and Developers Association of Canada conference in Toronto in March.

“I’ve told my management here that within 10 years, Burkina Faso is going to have one — if not two — mid-sized gold mines, with each one producing 3 to 5 million tons a year,” he says.

Currently, Burkina Faso has only one small industrial gold mine, the dwindling Poura deposit operated by state-owned SOREMIB. But companies have been attracted by reports that artisans are finding gold as deep as 30 metres below surface, and have sent in staff to get more data than are available from the preliminary UNDP-BRGM geological surveys that have been around for many years.

Canadian mining companies with recent Burkina Faso connections include Channel Resources (TSE), Viceroy Resource (TSE), Loubel Exploration (ME), Messeguay Mines (ME), High River Gold Mines (TSE), International Gold Resources (TSE), InterStar Mining Group (CDN) and Mutual Resources (VSE). Andrews compares the situation to Mali, which recorded no production in 1985 but expects to be at the 15-ton-per-year level by 1997. The key early player there was BHP, which began producing at the Syama deposit in 1990. BHP is now expanding production to as much as 8 million from 4 million tons per year, with US$23.6 million in backing from the World Bank’s private sector arm, International Finance Corp.

BHP has staffed a 2-person office in Burkina Faso’s capital city of Ouagadougou since early 1994 and is actively exploring at the two sites where it has obtained permits. One of the sites, Bauda, could have as much as 80 tons of gold, but only after further drilling will geologist Michael Bennell know if it hits the threshold of about 0.1 oz. gold per ton (3-4 grams per tonne). Such a level would be required for a gold mine to be economically viable in an area with such undeveloped infrastructure. His goal is to be producing at least 5 million tons per year within two years. “The industry here only got started in the past year. Before that there was nothing,” Bennell says. “But we wouldn’t be here if we didn’t think we had a significant chance of finding a significant gold deposit.”

Bennell estimates the government of President Blaise Campaore has already granted permits on about 26 of the 80 concessions it has to offer. Without much experience in the sector, the ministry of mines and energy has been swamped by all the foreign companies that have arrived in the past year. It is now limiting permits to those that cover 500 sq. km and reportedly no longer awarding more than one to any one company. By all accounts, the government has been slow in responding to applications, which is leading the World Bank to come forward with an assistance package it hopes can help both the country and foreign investors.

After all, Andrews points out, at current world prices, 10 million tons per year of gold production would raise export revenues by 50%.

That output would likely also make Burkina Faso Africa’s fifth-largest producer after South Africa, Ghana, Zimbabwe and Mali, and help to diversify the economy away from its age-old agricultural base. But, he argues, it must reform its legal and regulatory code if it is going to the next level of investment capital.

“The government has a window of opportunity,” he says. “They’ve been very fortunate to attract this kind of investment and they need to work very hard to keep it.”

In December, the World Bank hopes to approve a roughly US$15-million project loan called Burkina Faso Mining II. One of its key objectives is hiring consultants for technical assistance in the following areas: * writing a new mining sector strategy;

* setting reform measures on fundamental mining code and model private investment agreement;

* speeding up the regulatory process for exploration permits; * funding new geological data acquisition, primarily from airborne geophysical surveys for the western third of the country that has so far never been covered; and

* restructuring and reforming CBMP, the government agency that has a monopoly on all gold exports.

— The author is a freelance writer based in Arlington, Va.