Get set for more West African action
By Michael Quinn, 24 March 2008
FURTHER corporate action in West Africa could be triggered by Lihir Gold’s announced takeout of Equigold, with Gold Fields one of the majors that’s been actively canvassing opportunities in the region over the past six months. Juniors such as Perseus Mining and Gryphon Minerals could be the sorts to figure in the thoughts of those with M&A on their mind.Insiders say the South African-based major has been on the lookout for both companies and properties in Ghana, and, speaking from Russia, Gold Fields’ exploration and business development VP Tommy McKeith confirmed to HighGrade the company had been “tooling” up its Accra office in light of a “renewed effort in West Africa”.
McKeith said Gold Fields, which last year divested the advanced Essakane project in Burkina Faso and which had a major operating presence in the region with its Ghanaian Tarkwa and Damang operations, particularly liked the potential of Ghana and Mali. (In the latter it has a joint venture with Dublin-based Glencar Mining).
While McKeith unsurprisingly wouldn’t be drawn further, Australian Securities Exchange-listed Perseus would be one junior that would likely hold attraction to M&A predators. Its Ayanfuri project in Ghana is targeted to have more than four million ounces by the end of the year, with a new resource calculation due next month, a pre-feasibility out in June and a full feasibility completed by October.
Perseus managing director Mark Calderwood said while there were plenty of “tyre kickers” around, the company wasn’t interested in transactions at current price levels.
Perseus was this week capitalised at about $A150 million, about half its value according to Cormack Securities, with the Canadian broker writing a site visit note on the stock this week ahead of a possible Toronto listing aimed for in the first half of the year – though Calderwood said the company might only raise half the $C40-50 million it previously mooted, not because of lack of appetite he assured, but rather, recent trading price levels.
Significantly, Calderwood said Lihir Gold “wasn’t the only big Australian” taking a look in the region, though he declined to comment further. (Merrill Lynch this week cited Newcrest Mining as a possible counter-bidder for the $A1.1 billion-valued Equigold in reference to the Lihir transaction).
Other international heavyweights active in Ghana and elsewhere in West Africa include AngloGold Ashanti and Newmont Mining Corp, with Newmont’s initial scepticism of the region when it took over Normandy Mining earlier this decade now well and truly a bygone sentiment.
Aside from its major Ghana operations, Newmont is also a big shareholder in Gryphon Minerals, whose Banfora project in Burkina Faso continues to show big promise – as shown by hits like the 12m grading 8.66gpt from surface released this week.
Though it is early days, Banfora is seen as having potential to hold +5Moz (see HighGrade Jan 28-Feb 3 edition), with Gryphon this week capitalised at $A40 million.
A big shareholder in both Gryphon and Perseus is Macquarie Bank.
Canadian companies active in West Africa include Red Back Mining Inc (capitalised at $C1.5 billion), Golden Star Resources ($C920 million), Orezone Resources ($C550 million), Etruscan Resources ($C300 million), and High River Gold Mines ($C900 million).
London-listed Randgold Resources ($US3.8 billion) is another West African miner that insiders claim is taking a close look at its radar, with operational and development projects in Mali and Cote d’Ivoire, and an emerging prospect in Senegal. (Also working in Senegal is Melbourne-based Mineral Deposits, a $A400 million company currently in the throes of constructing an initial 200,000oz per annum gold mine as well as being the owner of an undeveloped Senegalese zircon project).
Meanwhile, Resolute Mining ($A600 million) is in the home straight redeveloping its Syama project in Ghana, a former Randgold asset that’s being comprehensively re-jigged and which is targeted to be in full production by year’s end at a rate of 250,000oz per annum. Resolute is also in joint venture with Etruscan on promising ground south of Syama.
Those that are active in West Africa don’t rule out changes to fiscal regimes and the like as a result of the activities of governments elsewhere in Africa and the world – particularly those gaining headlines at the moment in Central Africa.
However, the overriding point of the Lihir-Equigold transaction is that West Africa has re-emerged as the least risky region in the world for companies seeking the most significant growth opportunities in the gold sector. Credit Suisse summed the situation with its take on the Lihir deal.
“County risk aside, the Bonikro operation (owned by Equigold) and ground position shows significant potential for resource growth, reserve growth and production growth. This time around [compared to Lihir’s acquisition of Ballarat Goldfields] Lihir has acquired production and cash flow certainty and a significant exploration option. Given the very large and prospective ground position in the Ivory Coast controlled by Equigold, with 700km of strike exposure to the right rocks which host numerous world class deposits, we would not be surprised to see a competing offer.”
Similar sentiments on the potential for both the exploration and competing bids were expressed by other analysts.
“A key point that was emphasised when we met Equigold management earlier this week is the extensive and highly prospective tenements extending over 700km of strike in the Birrimian Greenstone Belt in Ivory Coast,” Merrill Lynch said. “This belt is highly productive, extending through West Africa, including the famous Ashanti mine in Ghana.
Arthur Hood, Lihir CEO, stated he would like to double or triple the $US8 million pa exploration budget for Ivory Coast. Equigold management beieves they already have an indicated 1Moz resource outside Bonikro’s 1.36Moz.”