Resolute Mining Ltd has become one of the biggest gold mining firms at the hub of sweeping changes in regulation across West Africa after its chief executive was detained recently in Mali. This has come at a time when cash-strapped governments in this region are trying to lay their hands on maximum revenues from their natural resources.
Increasing Regulatory Pressure in Mali
The military-led government of Mali has been wrangling with international sanctions and withdrawal of budgetary support from the West in its efforts to strengthen state revenues. The junta has turned the system against foreign mining firms, with Resolute Mining not alone, but rather seeing other embattled companies like the Canadian giant Barrick Gold Corp. have their employees also face detentions, with the company’s critical licences under threat in recent months.
But Mali’s neighbours, Niger, Burkina Faso, Senegal, and the Ivory Coast, are not far behind with changes. They are rewriting their mining laws, withdrawing permits, and slapping full-sector audits on them.
“A New Environment” for Mining Firms
Chris Eger, CFO of Resolute, said on the earnings call last month: “We’re seeing this trend across Africa, particularly West Africa. It’s just the way it is, unfortunately. The higher the gold price, the more revenue we make, it seems the governments want a bigger slice of that.”
Indeed, this trend in regulatory moves coincides quite nicely with the upward spiral of gold prices, which have climbed this year by about 30%, reaching an all-time high of $2,790.10 per ounce. Such a surge in value has been propelled by global geopolitical uncertainties. Particularly in the lead-up to Donald Trump’s recent electoral victory in the United States.
Mali’s New Legislature and Its Impact
Jailing Resolute’s chief executive, Terry Holohan, followed Mali’s broad audit of its mining industry and new legislation increasing the state’s interest in mining companies. However, firms like Resolute and Barrick had secured deals with past governments. Additionally, the junta has progressively turned the screw on foreign operators through the application of changes to the current mining code.
The military government in Niger recently banned uranium exports by a French company. Notably, Orano SA, sending prices of the commodity surging. Neighbouring Burkina Faso revised its mining code to raise state royalties last year. The Ivory Coast is reviewing the tax regime for the industry while Senegal’s new government initiated a wide-ranging audit of mining starting in 2017.
Market Consequences for Mining Companies
The heightened scrutiny in Mali already comes with a high financial cost. On Monday, shares in Resolute Mining sank as much as a third of their value. Other companies in Mali have also suffered, including the lithium project developer Kodal Minerals Plc, whose share value declined as much as 13%.
These changes mark the new face of mining companies in West Africa. A region where governments have begun to exert control over natural resources to reap increased economic rewards. It is a trend that, if it continues, may make it tougher for mining firms to meet the increasingly complicated regulatory requirements within the region.
