Below BYR get a mention, RBS is a large and decent...

Below BYR get a mention, RBS is a large and decent broker.


Research Note


Burkina Faso update - opportunities in the West African gold sector Subject: Burkina Faso - politics settling down?
Analyst: James Wilson



There are numerous news reports circulating at present in regards to the mutiny of the army in the Ivory Coast, uprisings and other political issues such as the dissolution of the government and appointment of a new Prime Minister. We have spoken to the companies operating in Burkina Faso and we feel that the issue is settling down. This doesn't come without a level of risk as we have previously pointed out - the potential for flash-points in this part of the world is high.

We don't disagree that there are issues in the country that need to be resolved, but in our view the issues can be fixed and are unlikely to escalate to a similar point as that seen in the Ivory Coast - and for that reason we take the view that this may present a potential buying opportunity in West African gold stocks after their recent sell-off.

Facts and fiction:

* Recent news reports spoke of shopkeepers protesting over the cost of living - this was apparently a protest that escalated to a riot (due to one of their shops having it's roof damaged by one of the army whilst they themselves were protesting). Whilst the reports of the riot's were true, there were other reasons for the escalation of the issue as far as we know.

* As far as we are aware the army was publically saying sorry overnight, this could result in the situation calming down quite quickly in our view - of course risk still remains that other events could surface. Curfews are being maintained until order is restored. Soldiers rioted late last week demanding their March pay and housing/food allowances which authorities began to pay out late last week.

* The issue is more political risk than sovereign risk. Mining companies Cluff, Iamgold, Semafo and Gryphon have all reported that there's no issues in country with their personnel or operations - all have administrative offices in Ouagadougou.

* It's important to remember this issue is not linked in any way to the issues regarding the presidential elections in the Ivory Coast. Even throughout the Ivory Coast war zone (which we feel was much worse than this) there was no issues with NCM's Bonikro operations besides the evacuation of personnel during the conflict and a lack of production.

Opportunities?

Many of the West African stocks have been sold off on the back of this issue - even those without projects in Burkina Faso and in spite of a rising gold price so in our view the issues has sparked a sell-off of the West African gold sector. We see value in GRY, AMX, PRU and BYR at current levels and we continue to monitor the situation with hope that a peaceful resolution is near at hand.





Top picks in the West African space:

Gryphon Minerals (GRY) PT:$2.28 - GRY has fallen back ~16% in spite of a rising gold price and resource upgrades. We see the ability to pick up the stock at levels prior to them releasing their 2Moz resource upgrade.

Perseus (PRU) - PT: $3.17 - PRU has declined along with all the other West African's even in spite of actually having projects in Ghana (not in Burkina!). Operations on their Central Ashanti Gold project are currently under construction with first gold to be poured in September 2011.

Ampella Mining (AMX) Price $2.40 - Not Formally Covered

Ampella has come off quite strongly due to it's projects being in Burkina Faso. The stock has fallen 21% in the last 14 days and now at 5 month lows. Exploration upside and a 2.2Moz resource put the stock at appealing levels given the recent drop.

Burey Gold (BYR) Price 29c - Not formally covered

Another story which has been sold off but has projects in Guinea - not in Burkina Faso!. Samples from their most recent drilling at currently at the lab - but transport issues in country have resulted in delays of the samples getting to the lab. We still anticipate that results for the first 6 holes at Balatindi in Guinea will be released sometime in April.

Middle Island Resources (MDI) Price: 46c - Not formally covered

We continue to like the MDI story, further results from drilling at their Reo project in addition to further work in their Niger projects will add more spice to the story going forward. MDI currently trading at 3 month lows.