African Gold Group is engaged in identification, acquisition and exploration of properties for mining of precious and base metals. The Company’s principal assets are mining licenses located in Ghana and Mali, West Africa.
West African Mining industry – Yet to reach the heights it deserves!
Dominated by Ghana, Senegal, Guinea, Niger, Mali, Burkina Faso and Ivory Coast, the West African Mining industry is fast gaining recognition in the resources world. Home to well-known deposits and an impressive history of producing mines, the region now is a preferred mining destination. In a series of articles we will discuss the growing importance of the region, some salient statistics and important aspects of the regulatory environment in different countries in the region. We will also highlight few interesting companies with attractive assets that warrant investor attention.
Industry sources such as Natural Resources Canada (NRC) estimate mining investments in Africa to reach $14 billion by 2010 from $7 billion in 2006. Much of the investments are expected to be in West Africa, Southern Africa and Central Africa. Amongst West African nations, Ghana, Mali, Guinea and Burkina Faso are expected to be at the fore front. In addition to majors such as Newmont and AngloGoldAshanti, relatively new entrants such as Rangold Resources, Keagan Resources, Red Back Mining, Golden Star Resources, and African Gold Group are expected to help script the future of West African mining sector with their projects and investments. Successful discoveries or advanced stage projects by these companies may well become acquisition or joint venture targets by larger companies leading to capital gain opportunities.
Apart from geology, West Africa’s stable politics and the mining friendly regulatory environment has played an important role in attracting investments. From a governance perspective, some West African nations have made considerable progress and rank alongside South Africa, which has a developed mining environment. Mali, Ghana and Burkina Faso rank high on contract enforceability and property registration. The Fraser Institute ranks Ghana and Mali higher than South Africa and the mining friendly Peru on its policy potential index. The glut of investments to the region should therefore cause little surprise.
Policy Index graph
West African governments have shown considerable commitment to the development of their respective mining industries and have introduced several incentives. Investments however are more linked to the political stability and high ranked countries such Ghana, Mali and Benin have enjoyed the lion share.
Political stability graph
West Africa owes its gold riches to the Birimian greenstone belt, which hosts some of the largest gold deposits in the world, including Sadiola, Yatela, Morila and Syama in Mali, Siguiri in Guinea, and Obuasi, Bogosu, Prestea, Bibiani in Ghana. It is also the home for many prominent projects such as Newmont’s 18.0 million ounce discovery (Akyem and Ahafo) and AngloGoldAshanti’s 66 million oz discovery (Obuasi, Bibiani and Iduapriem-Teberebie). According to industry sources, there is ample potential for more deposits on the Sefwi belt where Newmont has the Ahafo mine and in the Asankrangwa belt. Ghana in other words remains under explored.
The Birimian belt is a massive geological formation spanning from the Central to West Africa. It is shared between Cote d’Ivoire (35%), Ghana (19%), Burkina Faso (21%) and Mali (10%). For the relatively less familiar reader, the famous Ashanti gold belt is on the Birimian. The area has been a major gold producing district and the home to several gold projects. In addition to majors such as AngloGoldAshanti and Newmont there are several junior exploration companies with operations in the area.
Ghana – Leader in the pack…..
Amongst West African countries Ghana is the largest gold producer with much of the mining observed around the Ashanti gold belt. Unlike many other African nations, Ghana has an established democracy (after some hiccups of course since independence) and is considered to be one of the most stable countries. At least there have been no civil wars or significant internal conflicts!
Benefiting from high metal prices and consequently, a thriving resources sector, Ghana’s economy has performed well. According to the World Bank, the GDP has increased progressively from 3.7% in 2000 to 6.4% in 2007 with a further 2.8% growth is expected for 2008. Poverty level has fallen from 52% in 1992 to 28.5% in 2005, and is on track to meet its target of halving poverty levels by 2015. High exports have been the mainstay that has fuelled Ghana’s economic growth.
Ghana – The mining regulatory environment
Ghana awards three types of licences for mining companies. A Reconnaissance Licence confers on the holder the right to search for a specific mineral within the licence area by geochemical and photo-geological surveys or other remote sensing techniques. Granted usually for one year (renewable) Reconnaissance Licence does not permit drilling, excavation or other sub-surface techniques.
In order to undertake drilling, a Prospecting Licence is required. Prospective licences are initially granted for three years and a maximum area of 150 km², renewable for a maximum of two terms or for further periods of up to two years each. At each renewal, half the licence area is required to be relinquished by the holder. If more than one prospecting licence is held, they may be treated as one area for purposes of shed-off.
The third type, Mining Leases, give the licensee the right to mine or extract specified minerals within the lease area. The lease may be granted to the holder of a prospecting licence or any company that satisfies the Ministry criteria. The lease is issued for up to thirty years subject to renewal for a further thirty-year term. The size of the area a lease may be granted is limited to 50 km² for a single grant or 150 km² for aggregate grants.
Not surprisingly, Foreign Direct Investments (FDI) to Ghana has been on the rise with the majority channelled towards the mining sector. International Council on Minerals and Metals estimate total FDI attracted by Ghana to the mining sector to be $7 billion over the last 10 years. Gold production has indeed been high during the same time period and Ghana now is Africa‘s second largest gold producer after South Africa.
Ghana remains a promising destination for gold exploration in general and attractive in particular for small to mid size companies. Indeed, there is a plethora of companies with assets in Ghana and are enjoying varying degrees of success. The focus of this article is on exploration plays with advanced stage projects. Companies we have been in contact with include Keegan Resources (TSX/AMEX: KGN), African Gold Group (TSX.V: AGG), PMI Corporation (TSX.V: PMV), Golden Star Resources (TSX: GSC, AMEX: GSS), Red Back Mining (TSX: RBI), Volta Resources (TSX: VTR) and Etruscan Resources (TSX: EET).
We have provided a thumbnail sketch of these companies and their operations in Ghana. We have not included Newmont and AngloGoldAshanti due to their diversity of operations spread over several countries. Our emphasis is largely on Ghana focused companies with assets predominantly in Ghana.
Keegan Resources has two very promising gold assets in its Esaase and Asumura projects in Ghana. The Esaase project is located on the Asankrangwa gold belt in SW Ghana, 13 km NE of Resolute's 3 M oz Obotan deposit. The property contains bulk mineable targets in highly deformed Birimian metasediments containing gold. Esasse is a significant gold deposit which is currently being delineated and rapidly moved towards production. Exploration efforts are underway to expand the current 1.7 million ounce (43-101) resource.
The Asumura is an exploration project also located along one of Ghana's three major deposit gold belts. The project is a disseminated open pit target on western boundary of the Sefwi-Bibiani belt, one of the two large Birimian age greenstone belts in southwest Ghana. The deposit is 65 km south from Newmont's Ahafo deposits (reserves 12.2 million ounces at 2.21 g/t Au; resource 17 M oz) on the same belt boundary.
Keegan is highly committed to Ghana and is on the look out for expansion and acquisition opportunities. The corporate strategy prefers acquisitions rather than joint ventures. The company is well-financed and is fast becoming a force to reckon with in the Ghana mining space.
Toronto listed African Gold Group (TSX: AGG) provides exposure to both Ghana and Mali. The company has nine gold concessions that are consolidated into five separate exploration projects – three in Ghana and two in Mali. AGG’s Asankrangwa project is in the northern segment of the Asankrangwa gold belt, which is located midway between the Ashanti and Sefwi gold belts in Ghana.
Immediately to the south of AGG's Manso Nkwanta concession in the Asankrangwa project, Resolute Resources mined approximately 30 million tonnes of ore grading 2.0 g/t Au from a number of pits. Immediately to the west and draining from the contiguous Assuowunu concession, Bonte Gold Mines produced approximately 500,000 ounces of alluvial gold from 1992 to 2002. Keegan Resources now control Bonte Gold Mines. AGG’s surface exploration program at its Assuowunu concession has identified three main gold-in-soil anomalies that trend into Keegan’s contiguous Esaase concession.
Recent assay results from AGG’s recently acquired Manso Atwere concession has returned 84 Meters Of 3.0 G Au/T, Including 36 Meters Of 6.28 G Au/T & 16 Meters Of 13.6 G Au/T. Diamond drilling is currently underway at Manso Atwere concession and will shift to AGG's Assuowunu concession.
Toronto listed Red Back Mining has a producing gold project in Ghana (Chirano Gold Mine), which comprises 11 deposits. Chirano has an open pit resource estimate of (at 1.0 g/t gold cut-off) 2.05 million tonnes measured and indicated resource and 6.2 million tonnes of inferred resource. The underground estimate is (at 2.5 g/t gold cut-off) 5.86 million tonnes indicated resource and 0.68 million inferred resource.
Golden Star Resources has two operating mines on the Ashanti Gold Belt in Ghana. Production in 2008 is expected to reach between 370,000 and 425,000 ounces of gold from 246,000 oz in 2007. GSC has two projects namely Bogoso/Prestea and Wassa. Both projects have their own processing facilities. In addition, GSC has an 81% interest in the currently inactive Prestea Underground mine in Ghana, as well as gold exploration interests elsewhere in Ghana.
Total mineral Reserves of GSC as December 31, 2007 is 62.3 million tonnes grading 2.46 g/t for contained gold of 4.93 million ounces. Proven and probable reserves Bogoso/Prestea at Wassa as of December 31, 2007 are estimated to be 44.8 million tonnes and 17.6 million tonnes respectively. This amounts to 3.91 million oz of contained gold at 2.72 g/t at Bogoso/Prestea and to 1.01 million oz of contained gold at 1.79 g/t at Wassa (43-101 compliant).
Etruscan Resources (TSX: EET) is developing a project in Ghana under an option agreement with Redback Mining Inc. Etruscan could earn a 100% interest in 580 km2 of ground in northern Ghana, including the Bole-Bolgatanga Gold Belt. These permits cover the south-western extension of the Youga Gold Belt into Ghana. Etruscan also has an exploration project in joint venture with Haber Ghana Inc. in the Sefwi Belt and the Kumasi Basin. The area hosts significant gold deposits including the 13 million ounce Ahafo deposit, the nine million ounce Bogoso-Prestea deposit, the five million ounce Bibiani deposit, the two million ounce Obotan deposit, and the two million ounce Chirano deposit.
Volta Resources (TSX: VTR) was formed following the merger of Birim Goldfields Inc and Goldcrest Resources resulting in a total of 26 properties in Ghana and Burkina Faso. In Ghana, VTR has Ghana, six advanced drill defined prospects, nine drill-ready targets and over 40 first class anomalies with the potential to be advanced to a drill-ready stage in Sefwi, Ashanti, Bui and Maluwe belts. Its flagship Tinga project has a NI 43-101 compliant resource of 232,000 ounces gold.
PMI Corporation (TSX: PMV) acquired its first interests in Ghana in 2003 from Goknet Mining Company Limited of Accra, whereby PMI Gold could earn up to 85% of Goknet's interests. Following few subsequent acquisitions, PMI now has five projects in Asankrangwa Gold Belt (Obotan and Edubia) and Ashanti Gold Belt (Kubi, Ofoase and Bankame). At Kubi PMI has a 43-101 compliant 5.15 million tonnes of indicated resources grading 3.66 g/t and 5.38 million tonnes of inferred resources grading 1.88 g/t. Brisk development activity is currently underway in all PMI’s prospects.
It should be noted that there are several other companies with operations in Ghana. We have plans to discuss those companies as a follow up to this note or when we discuss other countries such as Mali and Burkina Faso.
Sources & Acknowledgements:
Minerals Commission Ghana, World Bank, African Development Bank, African Gold Group, Keegan Resources