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Attack on Canadian miner in Burkina Faso threatens gold’s final frontier

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Attack on Canadian miner in Burkina Faso threatens gold’s final frontier

NAIROBI / JOHANNESBURG / LONDON (Reuters) – While jihadists have done the most damage over the past two years, mining companies in Burkina Faso have implemented extra security measures, from barracks to government troops that protected them to safe rooms for workers behind wire. Barbed and heaps.

Relatives of victims of an ambush against workers near a Canadian-owned mine react during their meeting with officials in Ouagadougou, Burkina Faso, 7 November 2019. REUTERS / Anne Mimault

Expatriates usually fly in and out while local staff still drive, but on guarded convoys.

That added millions of dollars to the security costs of foreign companies, mainly from Canada and Australia, operating in the West African country, where industrial miners are expected to produce 60 tons of gold this year.

However, this week's attack on a convoy carrying hundreds of local employees and contractors from a Canadian Semafo mine (SMF.TO) exposed the vulnerability of companies.

At least 37 civilians died, with 60 others injured and dozens more missing.

"This is the deadliest incident affecting the mining industry or any private company in the Sahel since the 2013 hostage crisis in Amenas," said Vincent Rouget, an analyst at Control Risks Group, referring to an attack on a mining plant. gas in Algeria. desert that killed dozens of foreign hostages.

There were no claims for Wednesday's ambush, but the modus operandi – a bomb attack on military escorts followed by gunmen firing bullets – suggested the involvement of Islamic groups.

They are pushing southern fortresses in northern Mali to carry out attacks on much of Burkina Faso and parts of western Niger.

More than 1,000 people have been killed in Burkina Faso since 2016 and nearly 500,000 more have fled their homes, mostly this year. During this period, there were dozens of attacks on small scale industrial and mining operations.

Following Wednesday's attack, Semafo said the Boungou mine remained safe but suspended operations at the site.

It is a dilemma for the miners.

The region is seen as the final frontier of the gold industry, with large untapped reserves.

Attracted by low-cost mining, Semafo and others like Barrick, IAMGOLD, Endeavor Mining and Resolute Mining, have invested billions there in the last decade – but the expansion of al Qaeda and Islamic State-linked militants may force them to rethink.

IS IT WORTH THE RISK?

"Due to the escalating security situation in Burkina, there are companies looking to reduce their exposure to Burkina or leave," said Bill Witham, head of AAMEG, an agency representing Australian resource companies in Africa.

"But miners still see West Africa as a whole as a good investment."

Shares listed at Semafo in Toronto have fallen 17% since the attack. And large mines just beyond the borders in northern Ghana and Côte d'Ivoire are now an impressive distance from Islamic fortresses, experts warn.

Last year, AQIM, Al Qaeda's main affiliate in West Africa, told followers that Western companies, especially from France, were "legitimate targets."

Semafo, whose staff, contractors or escorts have been attacked three times in the last 18 months, declined to comment further, saying only that he had tightened security since these episodes.

Eight other companies contacted by Reuters on the Sahel would not provide details of their extra security costs.

West Africa has been considered a risky prospect, where political instability, volatile tax regimes and difficult relationships with small-scale miners weigh heavily in the boardrooms.

However, government incentives and the potential to produce gold relatively cheaply led to more than $ 7 billion invested in mining projects in the region between 2004 and 2018, according to a count by S&P Global, a mining intelligence company. market.

That reached $ 1.2 billion in 2012, when gold prices reached their all-time high.

That year, al Qaeda-related groups seized northern Mali, but gold operations were not set ablaze as most mines are in the south, hundreds of miles away from militant fortresses.

Since then, France has sent more than 4,000 troops to the region, there is a UN peacekeeping mission with 16,000 troops in Mali, and West African leaders have launched regional security initiatives. However, local armies are losing ground.

Since 2017, researchers have documented at least 28 violent mine or mining worker incidents in Burkina Faso, 17 of them this year, according to a Reuters analysis of data compiled by the Armed Conflict Events and Location Data Project.

At least 12 such events this year, including attacks on workers, kidnappings and use of improvised explosive devices, have been linked to jihadists. By Wednesday, at least 54 people were killed in mining-related violence this year, five times more than in 2018.

“MAKING AN ATTACK”

That forced the industry to accept that the threat spread far beyond the deserts of northern Niger, where people like Frances' Areva have uranium mining operations and expatriates were kidnapped, Rouget said.

In October 2018, France escalated two jets to attack militants attacking a gold mine in northern Burkina Faso.

Earlier this year, the Burkina Faso government asked mining companies to help fund a helicopter rapid reaction unit to respond to incidents like Wednesday, but the initiative failed, according to two people involved in the meetings. .

A company security official said his company spent millions of dollars on armored vehicles, bulletproof walls and security rooms. "We are preparing for an Amenas-style attack," he said.

However, some still think it's worth gambling.

Semafo's top investor said risk and gold mining went hand in hand, and the extra security costs would not be a watershed.

"Obviously, this will add perhaps a few dollars to the cost of producing an ounce of gold, but it will not change the overall economy," said Joe Foster, gold fund portfolio manager at VanEck Investment Management, which has a 10.1 percent stake. Semafo and a 9.8% stake in Endeavor (EDV.TO), another Canadian company with two mines in Burkina Faso.

An immediate impact may be the restriction of how far companies are prepared to send geologists.

In May, Oumarou Idani, Burkina Faso's mining minister, identified exploration companies as high risk. "They work in large areas, sometimes 250 square kilometers … it's hard to have a safe way to work on that size of area."

Attack on Canadian miner in Burkina Faso threatens gold’s final frontierSlideshow (3 images)

Months earlier, Kirk Woodman, a Canadian geologist with 20 years of experience in the region, was kidnapped and found dead.

That was a "big call," a former senior mining executive who is now an investor told Reuters.

"Miners risk exploring much further now," he said, asking not to be identified. "It will affect how many new gold deposits will be found."

David Lewis in Nairobi, Helen Reid in Johannesburg and Zandi Shabalala and Ryan McNeill in London; Editing by Andrew Cawthorne

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