Three trends in the West African mining sector
– A shift towards mergers and acquisitions – Mining IPOs down in Sydney and London – Growing use of private equity, positioning of billionaires
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▪ Three trends in the West African mining sector
▪ – A shift towards mergers and acquisitions – Mining IPOs down in Sydney and London – Growing use of private equity, positioning of billionaires
10/07/2020 at 13h19, by Jeune Afrique Business+
Consolidation has become a byword in the African gold exploration and production sector, particularly when it comes to the Birimian rocks of West Africa, a geological structure straddling Burkina Faso, Ivory Coast, Mali, Ghana and Guinea, where many exploration companies on the continent tend to cluster.
The $18bn merger concluded in early 2019 between Randgold Resources, founded by emblematic South African entrepreneur Mark Bristow, and Canada’s Barrick Gold, then headed by Barrick’s current Executive Chairman John Thornton, has accelerated this trend. The merger took place against a backdrop of a general decline in the number of new yellow metal discoveries around the world, and a slowdown in mining stock markets in London (LSE) and Sydney (ASX). Toronto (TSX), the world’s leading mining exchange, did, however, perform well in 2019 with a higher number of mining IPOs than in 2018, but still fewer than in 2017.
Mining companies increasingly turn to private equity for funding
Globally, investors are less likely to approach stock markets, instead turning increasingly to private equity, where such financing is flourishing. Long its goal, an IPO on the London AIM was finally abandoned by Toro Gold, the Senegal gold producer, which was financed by Resource Capital Funds, Tembo Capital and Quantum Global, before being bought out in the summer of 2019 by Australian company Resolute Mining. Led by ASX-listed John Welborn, Resolute carried out a dual-listing on the LSE just beforehand to increase its visibility, but without raising new funds.
In January 2020, Avesoro Resources, Turkish billionaire Mehmet Nazif Günal’s gold-producing Burkina Faso and Liberia-based company, pulled out of the London and Toronto stock exchanges where its share price was steadily eroding.
At the end of last year, leading West African gold producer Endeavour Mining, active in Mali, Ivory Coast and Burkina Faso, led by Sebastien de Montessus, tried and failed again to merge with Egypt’s Centamin (where Toro founder Martin Horgan has recently taken the reins). But Endeavour, whose main shareholder is Egyptian billionaire Naguib Sawiris’ La Mancha Holding, set its sights on Canada’s SEMAFO with a merger announced in March 2020. Benoit Desormeaux, President and CEO of SEMAFO, became President of Endeavour following the transaction.
More and more billionaires invest in gold in Africa
A former telecoms magnate, from 2018 Sawiris also positioned himself in gold in Ghana – the former “Gold Coast” where major league players Newmont, Kinross, AngloGold Ashanti and Gold Fields have long operated – by purchasing Golden Star Resources, managed by Andrew Wray, in cash for $125m. This was after Endeavour withdrew from the country by selling its Nzema gold mine to Paul List’s BCM Group for $65m in 2017. The following year, BCM Group again featured when Endeavour continued to streamline its asset portfolio and sold the Tabakoto gold mine to BCM Group for $60m. In early 2020, Naguib Sawiris confided in Jeune Afrique Business+ his intention to create a mining investment fund.
He is not the only outsider to bet on gold in West Africa, like David Mimran, the film producer and heir to the Mimran Group (which made a fortune in the continent’s sugar industry), who became the reference shareholder of the Canadian Teranga Gold in 2016. The company, the first operator of an industrial gold mine in Senegal, bought the Massawa yellow metal deposit from Barrick for $400m at the end of 2019. This transaction was carried out to strengthen its asset portfolio and renew its reserves, an approach seen this month with the takeover by West African Resources, founded and directed by Richard Hyde, of the Toega deposit in Burkina Faso from B2Gold (Clive Johnson President and CEO) for $45m.
Alongside SEMAFO and Endeavour, the Burkinabe gold industry counts Russian billionaire Alexey Mordashov’s Nordgold among its major players, with the Taparko, Bissa and Bouly mines. Nordgold, with Nikolai Zelenski as CEO, is also involved in the Lefa mine in Guinea, a jurisdiction where Managem, the Moroccan mining giant led by its CEO Imad Toumi, set up operations a few years ago.
To keep up to date with these various players on the West African mining scene, subscribe to Jeune Afrique Business+, the Jeune Afrique Media Group’s premium daily business briefing for decision-makers on the continent.
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