Rewards outweigh risks in Ivory Coast, bordering nations

Two recent developments in Africa — the election of Nelson Mandela as the new leader of South Africa and the decision by the government of Ghana to sell a considerable chunk of the Ashanti mine — are expected to give a profound boost to mineral exploration in the western half of this continent.

Indications are that as economic restrictions on South Africa are eliminated in the aftermath of apartheid, investment dollars from companies active in that country — the economic centre of the continent — will flow beyond its borders to areas where the rewards are potentially greatest. Already, South African mining houses such as Anglo American are acquiring indirect interests in companies operating in neighboring countries, including Mali, Burkina Faso and Ghana.

Ghana, the richest gold-producing country in West Africa, indicated its willingness to do business with foreigners when it decided to sell a 23.7% interest in the Ashanti mine through two public offerings. Ashanti, the country’s biggest gold producer, is 45% owned by London-based conglomerate Lonrho and 55% owned by the Ghanaian government.

The lessening of trade restrictions and the increased interest in foreign investment have fostered the impression that exploration and development are not only welcomed, but encouraged. Not known for passing up opportunities, Canadian explorers are also showing interest in West Africa. On a recent trip to the region, The Northern Miner observed that, despite the inevitable obstacles stemming from doing business in distant lands, countries such as Ivory Coast offer significant potential for the discovery and development of mineral deposits.

A former French colony, Ivory Coast gained independence in 1960 and quickly garnered a reputation as “the jewel of West Africa.” It has since experienced relative stability, largely as a result of a strong market for crops, which constitute 75% of exports.

For a time, the country produced 30% of the world’s cacao supply and was a leading producer of coffee, palm oil, bananas and pineapples. However, as with most commodities, these markets are cyclical; and when prices of these key crops dropped, a period of social unrest ensued.

In 1992, the government responded by instituting various programs which were intended to broaden the country’s economic horizons. One of the key initiatives was aimed at encouraging and developing mineral exploration. Today, Ivory Coast has two producing gold mines — Aniuri and Ity — which yield a total of 60,000 oz. per year.

Yet despite the improved business climate, numerous challenges and risks remain for companies exploring in West African countries. Most of these are related to infrastructure, land tenure and government bureaucracies. While the road network is quite extensive (consisting of several paved highways and secondary roads), communicating and travelling between countries can be frustrating. It is not uncommon to have to make 10-20 attempts before getting through on the telephone. Nor is it uncommon for flights to be delayed, cancelled or disrupted for no apparent reason.

Land tenure within the Ivory Coast requires that companies secure either exploration or exploitation leases. With the former, permits are valid for four years and may be renewed four times. With the latter, mining rights are granted for the life of the mine.

Currently, the government receives a 10% equity share in any new mining venture — at no cost. However, this cannot be increased without the consent of the partners.

Historically, local villagers (as well as the federal government) have owned mineral rights, and it is still necessary for companies to reach agreements with local tribal councils before they can begin developing orebodies. West African governments have long been known for their burdensome bureaucracies; yet by adjusting schedules to fit longer time frames, companies generally manage to find the system workable.

The most common bureaucratic obstacle is the delay in shipping equipment from North America to West Africa. Oftentimes, containers are held by customs inspectors for as long as two months. Creating inventories and ordering enough material for extended periods can enable companies to withstand such delays, but they remain a nuisance.

Graft is another problem in some countries. According to one consultant: “A thick wallet always helps grease the wheels.”

But on a positive note, the Ivorian government is drafting a new mining act, which is expected to reduce some of the obstacles to exploring for minerals in the country.