Ann: Quarterly Activities Report, page-87

 

 

I’m have reviewed the terrorist violence in BF again, because I have taken a big swing and it deserves to have all concerns and any bias tested.

 

Eshmun’s last post stated that the Liptako-Gourma region (rectangle) was “JNIM’s (terrorist) sphere of Influence”. That is false, the “sphere of influence” sits within the very broad-brush rectangle of traditional Liptako occupation. Multiple websites refer to a sphere of trouble within the ‘Liptako-Gourma region’, not at all the entire region.

Broad Ethnic map of BF below with red line separating troubled border regions

 

 

Liptako-Gourma is a reference to the Gourmantche people, which include Gourma obviously and the northern Fulani, reaching into the Sahel region of Mali and east into Niger. On the map of Burkina Faso below I have traced the the 19 provinces now under a state of emergency since Jan 4^th 2019. Not a coincidence that the ethnic regions bordering Mali and Niger coincide with the tribal ethnic regions.

 

 

 

The map below shows the location of violence in the Liptako-Gourma region.

 This map terrorism related violence below for Burkina Faso to 2017. 

The map below from 2018 shows attacks in the Africa. Other than the red dot on Ouagadougou all BF attacks are in the Sahel and down on the eastern side of BF in the Gourma region. The violence is almost entirely occurring contained within ethnic regions who have some support for Islamic jihadist movements. 

 

 

This map below shows what is regarded as the Sahel Region, the centre of recent a historic violence associated with Islamic jihadist. Only more recent violence in the Gourma region in east BF has spilled out of the Sahel (odd capital city attacks aside).

 

 

 

Nobody can say with certainty that the violence will not spread but over many years and according to much of what I have read the terrorists are very much inclined to operate where they have ethnic/tribal support. There has been no evidence of trying to force their ideology and goals upon other areas of different ethnic majorities to date. It would be quite probable that there is no appetite in the future to take their brand of trouble outside the natural borders within which they fell justified to operate. Certainly the other ethnic groups do not want the jihadist violence up-ending their way of life and will be quick to assist defence forces where possible.

 

 

The last thing I considered is exactly what impact having a mine inside ‘terrorist active’ areas would mean (just in case trouble did spill over into Sanbrado? There are a number of gold mines inside or on the edge of the troubled border areas as per the map above, and more in Mali obviously. Other than the exploration geologist who was killed in January I cannot find where there has been any impact on mining operations anywhere in West Africa?

 

That is to say, for all the risk and violence committed on locals in these areas, no gold mine has been raided, supply lines impeded, or operations stopped for even one day I can find over these many years of attacks. Security is an added cost but retired local soldiers under the supervision of western professionals come cheap and frankly have a very cruisy job. Certainly, a lot easier working security for a gold mine than getting killed with unfortunate regularity working for the police or army.

 

In summary, I cannot see that the violence will meaningfully engulf the Sanbrado project given it’s location and lack of local population to incite. Security should be cheap and relatively easy for the mine, personnel and supply lines from Ouagadougou. For a mine making some $120M free cash flow per year it shouldn’t sink the share price hundreds of millions of dollars that’s for sure. Nothing has materially changed from 3 years ago for mine and I cannot see a much larger risk discount is deserved. If anything, BF is now more beholden to western aid in fighting the scourge of jihadist terrorism and therefore less likely to make a grab for the gold assets (a bigger risk in Africa than violence imo).

 

I am comfortable with the risk and extremely happy with the value proposition of the shares at these prices. I understand that others with a higher average buy price would not be happy but that doesn’t impact on the investment analysis today.

 

Good luck