Risks rise in Mali as junta holds Resolute CEO

Shares in Resolute Mining (ASX: RSG; LSE: RSG) lost a third of their value on Monday after the Australian gold miner said Mali’s military government detained CEO Terence Holohan and two senior executives.

It’s the second time in the past two months the ruling junta has targeted mining personnel over a tax dispute. It briefly held several Barrick Gold (TSX: ABX; NYSE: GOLD) employees last month.

“The executives were in Bamako to hold discussions with the mining and tax authorities regarding general activities related to Resolute’s in-country business practices, and to progress open claims made against Resolute, which the company maintains are unsubstantiated,” Resolute said in a release on Monday. “Following the conclusion of these meetings on Friday, 8 Nov. 2024, the three employees were unexpectedly detained.”

Resolute operates the Syama mine in the country’s southwest, about 30 km from the border with Cote d’Ivoire and roughly 300 km southeast of the capital, Bamako. The company forecast Syama’s production at 205,000 oz. to 215,000 oz. gold this year out of total company guidance for 345,000 oz. to 365,000 oz. gold.

“We have seen a broader pattern of resource nationalism in West Africa,” Alex Vines, Africa director at the Chatham House think tank in London, said by email on Monday. “I do not expect pressure on mining companies to dimmish, especially if gold production is increasing and the global price remains high.”

The company’s stock closed Monday in Sydney at A45¢ (41¢) apiece, valuing the company at A$958.1 million. They’ve traded in a 52-week range of A32¢ to A89¢.

New mining code

Holohan and his colleagues are being treated well at a Bamako office complex and are in regular communication with Resolute, it said. The British and other embassies are lending support, it added.

“The junta will likely continue to use arbitrary detentions of mining sector operators to enforce compliance with the new mining code,” analyst Beverly Ochieng at London-based Control Risks said by email on Monday. “Negotiations between the government and mining companies will remain opaque.”

The government is prolonging these regulatory disputes by auditing the mining industry to claim tax arrears and scrutinize ownership and registration documents, Ochieng said.

“Political interference in the mining sector will become more prevalent in the coming years as the junta increases its economic stake,” she said. “The aim may not necessarily be to completely deter or drive out Western operators in order to hand over operations to more favourable partners such as Russia and China, but to demonstrate that the junta can enforce measures that align with its resource nationalism drive.”

Raising stakes

Mali’s junta, which came to power in coups in 2020 and 2021, has been pressing for higher compensation from Western gold producers after passing a new mining law last year that can raise government stakes to 35% when most were 20%. It arrested then released four Barrick employees last month in a dispute over US$500 million in taxes from its Loulo-Gounkoto mine complex. The military leaders have threatened to withhold Barrick’s licence, while the company has said a deal should be reached by year’s end. 

Allied Gold (TSX: AAUC) signed a 10-year deal on its Sadiola mine with Mali in September. B2Gold (TSX: BTO; NYSE-A: BTG) agreed with the government separately the same month on the Fekola mine. 

Mali’s neighbour, Burkina Faso, is a gold producer with companies such as Endeavour Mining (TSX: EDV; LSE: EDV; US-OTC: EDVMF), West African Resources (ASX: WAF) and Orezone Gold (TSX: ORE; US-OTC: ORZCF). The country had two coups in 2022, January and October. Leaders there said last month some mining licences might be revoked.

Niger, which also borders Mali, had a coup in July 2023. The military government revoked GoviEx Uranium‘s (TSXV: GXU; US-OTC: GVXXF) mining licence in July after it failed to meet a deadline to start the Madaouela mine, one of the world’s largest projects for the nuclear fuel.  

Security concerns

A combination of jihadist insurgency, economic challenges and anti-Western sentiment is destabilizing the region. Juntas who seized power said the coups were necessary because governments failed to provide security. West Africa, composed mostly of former French colonies, has seen rising anti-Frech sentiment and efforts to redirect economic ties to Russia and China, adding to Western concerns about losing resource-rich footholds​.

China is a leading lender for African resource projects, spending billions across the continent to secure a flow of minerals. Russia’s mercenary group Wagner, now controlled and amalgamated with other Russian forces in the country’s Africa Corps, is operating in Mali, Niger and Burkina Faso among other nations.

It’s angling for control of industrial or artisanal mines for payments in gold to fight Islamic extremists. But so far it doesn’t have any in Mali, according to The Economist. It cited Washington, D.C.-based investigative publication The Sentry, which was co-founded by George Clooney.