MINING IN AFRICA SPECIAL — Mutual positions itself in West

The chairman of Mutual Resources (VSE) says “Ghana was a sleeper.”

Tony Frizelle believes the West African nation, thanks to events triggered elsewhere in Africa and South America, is set this decade to become a rousing giant in gold production.

Frizelle is convinced that by the end of the 1990s, continental and off-shore investment in Ghana will reach $1 billion in new mine development and existing mine expansion and that Ghana will produce many millions of ounces of gold annually.

Frizelle, speaking from his London office, is also confident that Mutual and his own company, the Crescent Group (a commodity and resource developer), is “ahead of the herd” that is destined to arrive in West Africa in the near future.

Already, mining companies are finding South American land prices soaring, and since the geology of West Africa has similarities to the South American Guiana Shield in terms of lithology and age, an exploration shift is expected. The West African Precambrian Guinean Shield consists of Archean and Lower Proterozoic sedimentary and volcano-sedimentary formations, with the main rock areas including the metamorphosed and folded Birimian and Tarkwaian systems.

West African properties are still inexpensive, governments are receptive to foreign investment, skilled labor is available and labor rates are low. Ghana, known formerly as the Gold Coast, has a history of gold trading going back to the fifth century AD. Brokerage house Nesbitt Thomson, in a June, 1994, research document on Mutual’s West African ventures, writes that “it is estimated that more than 2,000 tonnes of gold have been produced here (West Africa) since the beginning of recorded history”.

However, political instability has been — and remains — the primary risk in West Africa, although governments in power in countries that Mutual is exploring have attempted to create a receptive environment to foreign investment.

Ghana, after ll3 years of British rule, gained independence in 1957 (and republic status in l960), but coups occurred in l966, l972, l978, 1979 and 1981, with the last two placing the country in control of the Armed Forces Revolutionary Council, led by Flight Lieutenant Jerry Rawlings. In l983, the government initiated an economic recovery program; in l992, a free election returned Rawlings’ National Democratic Congress with a 60% majority vote. Rawlings has since adhered to stringent recovery measures set out by the World Bank and the International Monetary Fund.

Nationalization of Ghana’s mines had stalled investment interest, but by the late l980s and early l990s, two significant events occured. First, the government, realizing a need to kick-start the economy, put several major gold properties on the auction block and, second, several new private mines came under development.

Frizelle’s Crescent Group became involved in Ghana when South African-based Gold Fields wanted to diversify outside its region. Crescent was charged with “finding opportunities as quickly as possible on a small budget.” Crescent found that the Tarkwa mine was for sale and that Ghana’s government was eager to deal with Gold Fields, since it was a major company with sufficient financial and technical expertise to operate and expand the mine. As well, the geology of the area is similar to the Witwatersrand conglomerates of South America. Gold Fields Ghana Ltd., a Gold Fields subsidiary, acquired Tarkwa in mid-l993.

(Tarkwa, near the major port of Takoradi, covers a concession area of 220 sq. km. Production from the property since l912 totals 4.5 million oz., from 19 million tons of ore with a head grade of 7 grams of gold per tonne. It is anticipated that the mine has extensive reserves remaining.) “In return for finding this mine, we were given an equity position (5% share) in the project,” Frizelle says.

Consequently, other opportunities were identified in the region, and Mutual was used as vehicle to explore them.

Crescent is now Mutual’s largest shareholder. Mutual has also sold (for $2 million) a 20% share interest to Teck (TSE), which will use the company as a junior exploration vehicle in West Africa.

Under a private placement agreement concluded in October, l994, Mutual will present any properties it acquires in Ghana, Burkina Faso and Ivory Coast to Teck, which can participate in exploration and prefeasibility stages and earn up to a 50% stake by performing feasibility studies and undertaking production financing.

Frizelle says exploration at Tarkwa looms as the company’s brightest prospect at this time. Gold Fields Ghana has reduced the manpower and costs at the minesite, returning it to an efficient operation.

Exploration is focused currently on the south side of the existing underground operation; the hope is to develop several surface mines. To the southwest of the concession are two existing surface mines, Teberebe and Iduapriem, which have a combined annual production of 250,000 oz. An exploration program has resulted in substantially higher gold resources — 5.5 million oz. compared with 2.1 million oz. at June 30, l994 — being defined in three priority areas at Tarkwa. The areas cited are Akontansi east and Mantraim and the upper zone above the A zone in the Pepe block. Gold Fields has commissioned engineers to prepare a prefeasibility study for a surface mining project on these three areas. The first phase would look at the potential for a heap-leach operation based on the geometry of the deposits and existing surface infrastructure on a section of the Mantraim area. (The 5.5-million-oz. estimate is not included in the mine’s underground reserves of 560,000 oz.)

Frizelle says Mutual is in the act of acquiring land holdings in Ghana (see accompanying chart); currently, 3,509 sq. km are held, with another 285 sq. km in Burkina Faso.

Mutual has acquired from Seto Mining an option to earn a 54% interest in the Sewum Tokosea concession after completing trenching, drilling and airborne geophysical work worth $l.75 million.

Work has also started on the Oda River and Kent concessions on the promising Manso-Nkwanta belt. The Oda River property is immediately adjacent to the Odal concession on which Kiwi Gold and Associated Gold Fields have announced the discovery of 3 million tonnes of oxide material grading 5 grams. Mutual has entered into an agreement to earn a 55% interest in the Bilpraw concession (near the Kiwi Gold concession) of EQ Resources (CDN) by paying $75,000 and spending $525,000 in exploration during a 3-year period. “A drill has been mobilized to the Sewum Tokosea property . . . to test geochem anomalies,” Frizelle says. “Upon completion of this first phase of drilling at Sewum Tokosea, the drill will be moved to the Oda River property to test the depth extent of the mineralized zone that has been identified at surface. The Oda River property is contiguous with the southeast boundary of the Bilpraw concession situated in the Manso-Nkwanta gold belt.” In Burkina Faso, a country that recently made changes to its mining legislation, the company is carrying out trenching at Comidok (Kiere Nord). Frizelle states in a l994 report to shareholders that “we will continue work on our two advanced projects, Sewum Tokosea and Kiere Nord, and hope to commence prefeasibility work by the first half of 1995 providing the drilling program in late fall justifies such a decision.”

As yet, Mutual has no acquisition in Ivory Coast.

Frizelle says that governments in the region, particularly the one in Ghana, have been “extremely pragmatic” in their dealings. The Ghanaian government, he says, “bent over backwards to attract mining companies, particularly the majors.” In cases, he says, the tax rate was reduced to 35% from 45%. While environmental impact studies are required, “they are nothing like those required in North America,” he says. However, for foreign-controlled projects, the Ghanaian government requires a l0% carried interest, with the ability to increase its share to 20%.

The mining permits are processed relatively quickly, Frizelle says, adding that initially a reconnaissance lic
ence is given out for a broad area; then, an exploration licence is issued as the company focuses upon a region; and, finally, a mining licence is granted when the exploration proves worthwhile. The time for obtaining each of these licences is 3-6 months. — The author is a freelance writer based in Vancouver, B.C.