Can Mali Maintain Its Gold Mining Status?
By Joao Peixe
October 10, 2017
Mali's gold exports are falling, and new discoveries aren't
enough to make up for the loss of its giant legacy mines, where
production is already dead or winding down, and the fate of one of the
biggest of them all—Sadiola—now hangs in the balance.
world-class Sadiola gold mine needs an investment of $380 million to
keep it open for
years, accessing 3.4 million ounces in reserves.
there are signals that
negotiations over the deal to extend the productive life of Sadiola
by at least another decade have stalled within the government, putting
the investment at risk.
The reason for the stalled negotiations
remain unclear, but what's at stake for Mali is as visible as ever:
Sadiola is crucial for Mali's reputation as one of Africa's top three
gold producers. Next to this, it is a crucial lifeline for new jobs and
much-needed state revenues.
How the stalled negotiations over
Sadiola are resolved could be a litmus test for a government
heading into elections next year—and a government that relies
heavily on foreign aid, while working hard to create an attractive
The investment climate in theory has
improved immensely in recent years, but putting this into practice has
proved to be challenging in this terrain.
So far, it's been
moving in the right direction. But many industry eyes will be on the
Sadiola deal ahead of the Invest in Mali Forum 2017, which will be
held in Bamako in early December and supported by the World Bank.
Sadiola—A Legacy with a Lot More Gold to Give
Sadiola mine is a joint venture between Canadian miner IAMGOLD
(NYSE:IAG) (TSX:IMG) with 41 percent, operator AngloGold Ashanti
(NYSE:AU) with 41 percent, and the Government of Mali with 18 percent.
Located in southwest Mali near the border with Senegal in a
remote part of the Kayes region, the giant Sadiola permit covers 302
The existing plant was built to process soft
rock, or oxides, and the soft rock is now running out. But Sadiola has
much more to give with the massive hard-rock, or sulphides, deposit that
lies beneath the depleted oxides. This is now a ‘hard rock' story, and
IAMGOLD and AngloGold Ashanti are keen to invest in a major plant
modification that would enable hard-rock processing.
mine has had a major, positive economic impact on Mali since it opened
in 1997, following liberalization of the sector. That same year, gold
had already become the primary source of Mali's foreign currency. By
1999, it had become its biggest export. By 2001, Mali had risen to
become the third top gold producer in Africa.
It wouldn't have
happened without Sadiola—one of three key mines behind Mali's
preeminence as an African gold giant. The other two mines are Morila and
The Morila mine, owned by Randgold Resources, AngloGold Ashanti
and the government, is scheduled to be
closed down in 2019, after producing over 200 tonnes of gold since
it opened in 2000.
Yatela—a joint venture between IAMGOLD with
40 percent, operator AngloGold Ashanti with 40 percent and the
Government of Mali with 20 percent—has already reached the end of its
productive life, and closure activities continue.
Yatela's planned mine life would have seen it closed in 2007. But the
exploration efforts of IAMGOLD and AngloGold Ashanti extended the life
of the mine by an exceptional seven years. The partners continually
opened up additional economically exploitable deposits at Yatela,
pushing the closure back repeatedly.
But Yatela is much
more expensive to exploit than Sadiola, which has been producing
gold at a lower total cash cost.
If negotiations fail over the
terms necessary to invest in Sadiola's ‘hard rock' gold, much could be
What's at Stake for Mali
Mali's industrial gold
production rose negligibly from 2015 to 2016, with 2015 coming in at
46.5 tonnes and 2016 just squeaking past at 46.9 tonnes,
according to Reuters. But total gold exports fared even worse,
falling from 70 tonnes to 67 tonnes during that same period.
With Morila winding down, Yatela closed, and Sadiola stuck in apparent
bureaucratic purgatory, the next couple of years will be an uphill
struggle to maintain production—even with new discoveries.
Mali's state revenues from mining companies rose only 1 percent last
year—but it wasn't due to an uptick in exports; rather, gold prices saw
a bit of a bump.
Indeed, industrial gold production will fall
this year to 45 tonnes, with no new mines slated to come online until
2018—if all goes well.
With gold representing about 25-30
percent of government revenues, getting more out of a giant legacy mine
like Sadiola is critical.
So, what's at stake? Nearly
56,000 tonnes of ore containing 3.4 million ounces of gold. And
these are proven and probable reserves, which already have a
demonstrated economic viability.
Though the ‘soft rock' is
nearing depletion, the ‘hard rock' is bursting at the seams, and Sadiola
is ready to fast-track its expansive development. But getting past the
politics in Mali is no easy task—even when you have a track record of
extending the life of another legacy mine—Yatela—for seven years.
Sadiola has been operating for 20 years. Because the soft rock is
being depleted, production has dropped from 600,000 ounces in 2000 to
less than 200,000 ounces today.
But it could go for
years if IAMGOLD and AngloGold Ashanti are given the green light to
invest some $380 million to process the hard rock.
government revenues would increase, the investment would create
additional jobs for Malians.
Sadiola, with soft-rock production
slowing, is now employing around 1,000 people, 93 percent of whom are
Malian nationals. If Sadiola's hard-rock expansion plans are
green-lighted, it would not just protect, but expand those jobs for a
country that is struggling to keep its growing numbers of young people
And for Mali, this means much more than
putting food on the table. For the government, it means security. With
over half of the Malian
population under the age of 35, and that figure expected to double
by 2030, there is a
direct link between unemployment and crime or terrorism. And when
criminal-terrorist groups offer money for new recruits, security is
Getting the Gold Out
Sadiola mine is surrounded by some 46 villages and a few hamlets, as
well as a mining village created specifically for Sadiola employees,
with housing, a medical clinic, recreation facilities, a supermarket, a
sewage treatment facility and recreation facilities, among other things.
Water comes from a 55-kilometer pipeline from the Senegal River,
providing the villages with drinking water and the mine with water for
operations. The site and its surrounding villages are powered using
Sadiola's expansion project will use
existing infrastructure, but also build new infrastructure. The plan is
to connect the mine to the Malian power grid, which may also facilitate
distribution of electricity to local villages.
But 2018 is an
election year, and in Mali, this means uncertainty, especially for the
fate of mining deals, but also for the investment climate as a whole.
IAMGOLD, for one, is closely watching the developments, and what
they might mean for the investment environment.
In an interview
with Oilprice.com, IAMGOLD CEO Stephen J.J. Letwin noted that the “Sadiola
mine has been a remarkable success for all stakeholders in Mali for two
The Canadian giant has
operating mines in Burkina Faso, Suriname, Mali and Canada, and
exploration projects in Senegal, Brazil, Mali, Canada and Nicaragua.
While Essakane, in Burkina Faso, is IAMGOLD's biggest mine and
its most prolific, Mali was “the birthplace of our company,” Letwin
said. “And we will always be committed to exploring opportunities in
Mali, and West Africa more generally.”
IAMGOLD did not comment
on rumors of a possible deadlock over the Sadiola deal.
Sadiola work for Mali and its people, the energy-intensive expansion to
access the deep sulphides requires a world-class miner and the right
economics. The gold is there, the economics are there from a mining
perspective, and the miner has been there successfully for 20 years and
is particularly known for an intense focus on mine optimization—but the
government, whose representatives are struggling for political capital
ahead of crucial elections, is hamstrung.
In the meantime, 3.4
million ounces of gold remain stuck in the hard-rock at Sadiola.
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