Mali coup could put gold miners at risk
By Peter Koven
For many gold miners, West Africa is proving to be a lot riskier than expected.
West Africa has been the single hottest gold mining region in the world over the past few years, receiving billions of dollars in investment. Miners like the area because it is under-explored compared to other gold-rich regions, and because governments have recently enacted investment-friendly policies.
However, political instability continues to create fresh problems. The latest example came this week, when the government of Mali was overthrown in a military coup. Last year, there was an outbreak of violence in Ivory Coast over a disputed election, and Burkina Faso experienced a partial army mutiny and related protests.
According to reports, the Malian coup began because the military is frustrated at the government’s inability to end a rebellion in the Northern part of the country. A group of soldiers looted the presidential palace, and the constitution and all state institutions were dissolved. The whereabouts of former President Amadou Toumani Touré, who has held power since 2002 and brought democracy to the country, are not known.
“We promise to hand power back to a democratically elected president as soon as the country is re-unified and its integrity is no longer threatened,” Lieutenant Amadou Konare said on Malian state television. An immediate curfew was then imposed.
The gold miners with direct exposure to Mali include Iamgold Corp., Avion Gold Corp., Randgold Resources Ltd. and Cluff Gold PLC. Avion is the most exposed of that group, as the company’s two flagship projects are both in Mali. The Toronto-based miner’s shares tumbled as much as 25% Thursday, before closing at $11.20, down 12% on the day.
For now, none of the companies said they were facing any interruptions.
“Obviously, we’re on standby watching what goes on and making sure we’re on top of the situation,” said Bob Tait, vice-president of investor relations at Iamgold, whose shares fell 1.2% to $13.17.
The gold miners could easily emerge from the Malian crisis with few or no setbacks, as they did after trouble broke out in Ivory Coast and Burkina Faso. But the incident highlights the fact that West African democracies can be extremely fragile. Gold miners have spent a great deal of time in recent years promoting the untapped potential of West Africa, but far less discussing the political risks.
Tom Whelan, Canadian mining leader at Ernst & Young, said that miners need to have well-developed contingency plans to protect their employees and their investment in case of a political crisis like this one.
“You hope you never have to use them, but you make contingency plans for those disaster scenarios,” he said.