africa's as safe as houses: perseus mining md

Africa's as safe as houses: Perseus Mining MD Mark Calderwood

THE 620 mining-types who rolled up to listen to the rundown on goldmining in West Africa by Perseus Mining managing director Mark Calderwood at Melbourne Town Hall were not sure if of one the opening lines from the West African gold veteran was a joke or not.

Mr Calderwood, who has been knocking around West Africa for close to 20 years, and who built the Perth-based Perseus into a $1 billion-plus West African gold specialist, opened up his presentation with the statement that the region was a "politically stable part of Africa which welcomes explorers and producers from the rest of the world"

It all seemed at odds with the regular reports of a coup here, a coup there, and miners been hit with new demands for increased rent, somewhere in West Africa -- a region which by UN definition covers 16 countries across five million square kilometres.

They are Benin, Burkina Faso, Cape Verde, Ivory Coast, The Gambia, Ghana, Guinea, Guinea-Bissau, Liberia, Mali, Mauritania, Niger, Nigeria, Senegal, Sierra Leone and Togo.
But the straight-talking and travel-worn Mr Calderwood was talking about the region from a miner's perspective. And that perspective, for the foreigner looking to tap West Africa's gold riches, is that the region is more stable than most because security of tenure is as close to sacrosanct as can be had anywhere in the world.

Mr Calderwood said that the concern spawned by the region's regular coups, wars, acts of terrorism, abject poverty and mass human transits across borders was undoubted. But at the end of the day, the single biggest single risk miners face -- being stripped of their tenements -- was not an issue in the region.

"I don't know of a single case in West Africa where someone has lost a licence that didn't deserve to do so," Mr Calderwood said.

There are plenty of examples of foreign companies losing part or all of their tenure in West Africa. But Mr Calderwood stands firm, saying that he has yet to hear of a single case where tenure has been lost and the company involved was not at least technically in default.

There is a qualification: Guinea. "It is the odd country out and they do like changing the goal posts," he said.

"They way they dealt with Rio Tinto (it was stripped of half of its leases covering the now stalled Simandou iron ore deposit) was terrible. It was typical political risk. In the rest of West Africa -- Ghana, Cote d'Ivoire (the Ivory Coast) and all those other countries -- people don't lose licences. You couldn't lose a licence in Ghana if you tried."

But as recent share price weakness in the scores of ASX companies operating in West Africa's goldfields demonstrates, the region has followed the lead of Australia with its mining tax in seeking out increased rent from the mining industry. Mr Calderwood acknowledges that "tax creep" is a new risk in the region.
It has also become an issue for the company, forcing a delay in it making a commitment to a $US115 million-plus ($190m) development of its Sissingue gold project in the Ivory Coast until its government clarifies its proposed windfall tax.

The development would lift the group's annual production from West Africa to more than 400,000 ounces of gold, with the company already a 260,000oz-a-year producer from its Edikan mine in Ghana.

Perseus was meant to have given the go-ahead for the 170,000oz-a-year mine two months ago, but along with other Ivory Coast producers, including Melbourne-based Newcrest, it is now locked in talks with the government to ensure the tax does not kill off the country's gold industry.

Speaking after addressing the Melbourne Mining Club, Mr Calderwood said that the Ivory Coast's proposed tax was not all that unreasonable, given that its current tax rates on the industry were the lowest in West Africa.

"We don't have a problem with that. It's just that they have been ill-advised on its wording and its structure," Mr Calderwood said.

The key issue for the miners is that the trigger point for the proposed tax assumes cash costs of $US615 an ounce.

"No one actually produces gold at $US615 an ounce in Ivory Coast. Newcrest is well over $US1000 an ounce and Randgold is $US700 and $US800 an ounce. We don't know where the $615-an-ounce came from," he said.
Tax creep has been an issue elsewhere in West Africa. But no one expects it will cause an exodus of foreign miners. The region's geology, its reasonable operating cost base, and its comparatively fast approvals process means it remains one of the world's most attractive destinations for foreign goldminers.

"No region in the world comes close to it in terms of new mines," he said. Since 2005, 21 new goldmines have started and a further 17 are in the development pipeline. Production has risen from 6.7 million ounces in 2010 to 8.5 million ounces projected for 2013, putting the region on par with the Australian industry. Further growth to 11 million ounces in 2015 is forecast.

The big five producers are Ghana (47 per cent of 2011 production of 7.3 million ounces), Mali (16 per cent), Burkina Faso (15 per cent), Guinea (9 per cent) and Ivory Coast (5 per cent).

The massive growth of gold production from West Africa might be a modern-day phenomenon. But it really is just the restoration of the old order. The region has been known for its gold production by artisan miners for more than 3000 years.

And for a stretch of 1100 years, the region was the world's biggest source of gold -- a title only lost on the discovery of the mineral riches in the Americas.

http://www.theaustralian.com.au/business/mining-energy/africas-as-safe-as-houses-perseus-mining-md-mark-calderwood/story-e6frg9df-1226539981417

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