Investors in the mining space are always on the lookout for a
"perfect 10." Christopher Welch, a mining analyst with Ocean
Equities in London, ranks jurisdictions and companies in this
focusing on little known names in Africa.
The Gold Report:
Chris, the lifeblood of your business is financing. What's your
read on the appetite for junior financings compared to earlier this
The appetite for high-quality projects in the mining space is
basically the same as it was in early 2012. However, in the current
environment, where share prices are a bit depressed, it's getting
harder to match investors with companies at share prices that are
acceptable to both parties.
Aureus Mining Inc. is conducting a big fundraising for its New
Liberty mine in Liberia, which is positive news demonstrating there
are green shoots in the equity space for West African gold, which
is encouraging. We're optimistic that there will be more deals done
in the near term.
There's been some instability in Mali, which stemmed from
instability in Libya in part, and now there's growing religious
tension in Nigeria. Does West Africa remain as stable as you once
believed it was?
We need to separate political instability from operational risk.
Let's use Mali as a bit of a case study. Randgold Resources Ltd.'s
) operations were affected, but in a very minor sense. It's
important to draw that clear line. Yes, political instability will
affect investment appetite for projects in the region, but it's
still an area that has fantastic geological potential. It's
certainly is a place where business can get done, but investors
have to bear in mind political instability.
Perhaps we could create a scorecard for how you see things for a
number of countries in West Africa. Canada is just about as stable
as it gets in the world. If Canada scores a 9 out of 10 as a stable
jurisdiction, how would you score countries like Burkina Faso,
Ghana, Mali, Liberia, Cote d'Ivoire, Sierra Leone, Ethiopia and
Eritrea? Let's start with Burkina Faso.
Burkina Faso had similar strife to Mali's, but the Malian issue
sprawled and became a much bigger issue. Burkina Faso has an
interesting political future, but it's also got a great mining
future. Mining is going to be the backbone of economic development
for West Africa. Each country has to secure its investment from
outside of Africa. If Canada is a nine, I say Burkina Faso is a
four. There's perhaps a little bit of instability and political
insecurity on the horizon, but that should be sorted out.
Ghana, given its long gold mining history and its stability, has
got to be a five. Some recent tax regime changes might have dusted
it up a little bit, but it's a very solid country where companies
can get the services that support mining. That is very important
for operational risk.
Mali has a problem that it has to sort out. Randgold's share
prices initially after the coup showed the effect of instability in
the country. Yet Randgold's share price has recovered on its
continued success in the area. Papillon Resources Inc. has
definitely shown that if a company provides great exploration
success and resource growth, then the currently political
uncertainty doesn't really matter, the company will get an uplift
in share price.
I really like Liberia. It's one of the more exciting countries
in West Africa. President Ellen Johnson Sirleaf has done a good job
getting rid of corruption--she fired half of the executive group
because of fears of corruption. Liberia is exciting because it has
great geological potential with a pretty stable political outlook
in the near term. It's a 5 out of 10.
Looking at Cote d'Ivoire?
It's had a checkered history. Companies like Amara Mining Plc
(formerly Cluff Gold Plc) have some very interesting projects in
Cote d'Ivoire. It's got great exposure to the country and
understands it very well. Amara has reduced some of my fears about
the country, but it's got to put its past behind it and the wounds
will take time to heal. It's probably a 3.5 of 10.
Sierra Leone is next.
There's been a bit of saber-rattling from the two political parties
in Sierra Leone. The incumbent has done a bit of what we call
"Clintonian triangulation" where it's said, "Oh, my opponent got
some support by saying we need to toughen our tax regime on mining
projects and mining profits." That's genuine just saber-rattling.
The incumbent is probably going to get in again and he's probably
going to maintain a good outlook for mining in Sierra Leone.
We've got some good iron ore projects that have been developed
recently in Sierra Leone. There may be some uncertainty regarding
mining taxes in the country, but companies can develop big projects
with large infrastructure requirements. It is stable, but we've got
to get a near-term election out of the way to show that it's going
to remain stable. I'd give it a 3.5 out of 10.
The last two are Ethiopia and Eritrea.
We have covered Nyota Minerals Ltd. (NYOTF.PK) for a good while
now. The company has got the Tulu Kapi gold project in western
Ethiopia. It's the first public company applying for a mining
license in Ethiopia. It's not holding the hand of the government,
but has helped where possible while the government gets itself up
the information curve on the mining industry and mining law.
We're at a turning point for Ethiopia. It's going to have stable
mining law for the first time. When it comes out, depending on tax
and royalty rates, we're going to get a new mining jurisdiction on
the block. But until that happens, I'd give it a 3 out of 10. Once
that happens, which is imminent, that score will go up.
Who is Ethiopia working with to develop its mining law?
Ethiopia is a very independent country. I've spent a bit of time
out there and the Ethiopians are a great people. The country has
never been colonized. It is starting from scratch, but has looked
at other mining laws. The basis of its law is a Western-type of
mining law. It's not specifically Australian, but it's been
influenced by Australia. It's trying to take in the recent
evolutions of mining law, but Ethiopia is basically starting with a
blank piece of paper.
On to Eritrea.
The Eritrean government is pro-mining investment. It has great
mineral potential. Bring the two together, and it's definitely an
interesting mining investment jurisdiction. However, because of the
political football nature of Eritrea regarding the UN sanctions,
etc., it's a 3.5 out of 10. Most people would probably give it a
two, but that's unfair to Eritrea.
Of the companies operating in these countries, are there examples
of management teams that have mitigated risk?
There are good examples of companies that have reduced operational
risks. SEMAFO Inc. (SEMFF.PK) in Burkina Faso has done a great job.
It's made sure its agricultural developments have gone hand in hand
with its mining developments. It has practical, sustainable
development, where it uses very small amounts of operating profits
to develop sustainable businesses, like paprika and sesame seed
growing alongside the mining projects. It's been able to secure
non-unionized mining teams, which is very rare in Burkina Faso.
Another company that has spread its wings in the region is
Amara. It's done quite well and has picked a few good projects in
certain countries. It has shown that having a broad spread and
management based in the region gives it unparalleled information to
reduce the operational risk.
Amara was once Cluff Gold Plc. Why did it change the name?
It had a big change in the management team. Algy Cluff stepped
aside to let more development- and operation-focused management
come in. Chairman John McGloin joined the team and he's definitely
had a positive effect already.
Is it fair to say that those are very positive changes?
They're very positive changes. John McGloin was an analyst before,
so I know him reasonably well.
He was a very well-respected mining analyst, who won the
Association of Mining Analyst's analyst of the year award in London
last year. He made a pretty quick hop over to Amara. He's got a
strong technical background and he's been able to shepherd the
resource calculation for its Baomahun project in Sierra Leone very
What are some other tangible things that great management teams do
that earn points in your book?
Companies need something that differentiates them-be that grade,
scale or some technical aspect. It should pick the thing that makes
it special and stick to it and not spread itself too thin. What's
going to sell the company is that tag line, "the highest grade
mining company" or "the biggest mining company in the region."
Companies are akin to professional sports teams in that one manager
can get more out of the same people or resources than another
manager can. What are some West African juniors that have
management teams that you would consider a cut above?
I'm going to go with Amara Mining again. It's really a good
company. Chief Executive Officer Peter Spivey is based in the
region and has unparalleled information about what's going on in
every country where it operates. The new management in London is
very strong and is quite happy to jump on a plane and spend a long
time on the projects. It has the depth and the dynamism to carry
out its long-term objectives.
Amara has the Baomahun gold project in Sierra Leone, which is
expected to reach production in 2014 at 135,000 ounces [oz]
annually. Financing was supposed to be in place by now and
construction started. Is that the case?
John McGloin has taken a very prudent step and said, "Let's not
rush the feasibility. Let's get it right." It's quite a bold call
because a lot of investors will be looking for delivery sooner
rather than later. It's a brave call, but the right call to ensure
that the project's going to be economic and profitable.
It's had good exploration success in some of the projects that
were written off by many investors. At its Yaoure project in Cote
d'Ivoire, it's gone into some of the deeper mineralization. It
might be sub-economic if it had to run it on diesel oil, but with a
nearby power source, it could be quite profitable. We're waiting on
a resource update, which should come out soon based on the recent
It also recently announced a deal with Samsung Electronics Co. Ltd.
Is that meaningful to shareholders?
It's very meaningful for shareholders. It's one of two strings to
the bow that haven't gotten due recognition. Samsung coming on
board shows that it's a company that can get approval by one of the
biggest players in the world. It's doing a small loan to help Amara
bring on-line the nearby Sega project, which is next to the Kalsaka
mine that is already in production. Having a big brother in Samsung
means that it can keep its other near-term development projects,
like Yaoure, in its portfolio rather than be forced to spin them
out to pay for development of Baomahun.
The other aspect of Amara that has not had due recognition is
its revenue. If you're looking at a group of, say, six players that
are going to bring bigger mines on-line in the near term, Amara
differentiates itself because the Kalsaka mine generates good
revenue that can help fund near-term development and exploration,
which importantly reduces dilution.
That's one exceptional management team. How about another one?
Volta Resources Inc. (VLTAF.PK) has an A-Team with good company
experience. Kevin Bullock and Vic King are doing a great job
bringing on-line a huge project in Burkina Faso, Kiaka, which has 5
million ounces [Moz]. It is not getting due credit for the scale of
its projects. Some people are saying they don't think a small
company can deliver such a big project. That's unfair. I believe
Volta is going to do it given its skills; Volta is one company
where the skills of the management differentiate it.
Volta recently released 111 drill holes from the Phase 4 drilling
program in the Kiaka Central area. What should investors make of
The big takeaway is that the company successfully turned blocks of
material that were classed as waste into ore that can be mined.
It's also shown that there are definitely areas of high-grade
mineralization to Kiaka, which are going to improve the economics
of the projects.
What upgrade do you expect to the 1 Moz Inferred resource?
We're probably going to get 60-70% of that kicked into indicated
and hopefully lifted into a probable reserve.
Are there some juniors in Africa that are developing projects
proximal to existing mines that could generate takeover
Definitely, in areas like Ghana where there's the infrastructure
advantage and the proximal mineralization.
What are some projects that you've visited recently that our
readers might want to take a closer look at?
One company that's very attractive is Mawson Resources Ltd.
(MWSNF.PK), which has the Rompas project in central Finland. Its
exploration results so far are eye-popping. Grab samples include
several kilos of gold per tonne in grade with uranium, which I know
is a bit of a love-it-or-hate-it commodity, but the potential ore
in the region would be classed as a concentrate already. It's
something that has to be on your watch list, if not in your
I visited the Agnico-Eagle Mines Ltd. (
) Kittila mine in Lapland, Finland. That mine has reserves of more
than 5 Moz and the grades are around 4.7 grams per tonne [g/t].
Could Rompas be even larger?
It has beat it on grade already. Rompas produced the best drill
intersection ever seen in Finland of 6 meters [m] at over 600 g/t
gold at a depth of 7m. We're looking at a very high-grade project
if it can delineate a resource at depth. We're expecting some more
drill results in early 2013.
In your research, you suggested that Mawson's land package could
host a new gold mining camp in central Finland. That's high praise
indeed. Is that putting the cart before the horse?
We've got to take an optimistic view on this. It's got a large
mineralization footprint in the range of 10 square kilometers. It's
got Rompas. It's definitely the most advanced project with drilling
on it so far. I'm quite confident that the near-term drilling
results are going to demonstrate that we're right on our early
analysis of the project and the company.
What are some other companies under coverage that you find
Condor Gold Plc's La India project in Nicaragua is very
interesting. Mark Child, who is at the helm of Condor, has
definitely delivered on a great resource increase of more than 2
Moz. He's also delineated a potentially open-pit project. The
company is just scratching the surface of that. It has a large land
package, which is essentially riddled with gold with lots of
epithermal veining across the whole area. It could host a mining
district for sure.
Condor recently acquired the La Mojarra concession in Nicaragua.
How is that material to shareholders?
It's very early stage for La Mojarra. The company has done some
grab samples. It will run a geophysical survey over its land
package, which should add a lot of value. It could show a lot of
larger targets. In order to have an area that's got such
disseminated gold mineralization over the whole land package,
there's got to be a deeper source there. Hopefully, geophysics will
give us more information about where a potential source of larger
scale could lie.
What's the earliest we could expect some drill results on La
Condor just did a financing to carry out more drilling, but it is
early stage at the moment. It could be the middle of next year.
What else is on your plate?
Rambler Metals & Mining Plc (RBMTF.PK) has done very well and
just completed a commercial commissioning of its Ming mine in
Again, you've got to look at the management team. George Ogilvie
has delivered. He's done what he said he's going to do and the high
grade of the Ming mine is its differentiator. It also has near-term
potential to develop a larger zone of mineralization at Ming, which
would transform Rambler into a much larger player. Newfoundland
offers a lot of exploration potential for some of the last
low-hanging fruit in the volcanogenic massive sulfide high-grade
The Ming mine was supposed to start commercial production Nov. 1.
Is everything going as planned?
Nov. 1 is the official date of commercial commissioning. It's been
operating. It's got its first shipment of concentrate coming up.
It's informed its offtake partner, Transamine Trading, that it's
got enough concentrate in the Goodyear's Cove port facility to
During the pilot plant, gold recovery rates averaged 65%. Is there
a plan to boost those numbers?
It has a great option to use a hydrometallurgical process on the
tailings of the main copper concentrate circuit, which could boost
gold recoveries to over 80% or higher based on laboratory testing
so far. It's a cheap option, and we know it has high-grade gold, so
it's a very good thing for the company to do.
As an investor, would you follow this management team to another
I hope the team doesn't leave this one, to be honest. Once you have
built a team, and George built his team to bring Ming into
production, you can apply the skill set onto other areas. It could
grow within Newfoundland or it could go to another part of the
world and do exactly the same thing.
It's fun to talk about these companies. Is there another company
that interests you?
Nyota Minerals, which is at a critical stage. Its area has got
great exploration potential. Nyota's flagship deposit, the Tulu
Kapi mine, is basically the first step. Once it's got Tulu Kapi
into production, it'll be able to demonstrate that the initial mine
life for the plant at 10 years is just a start.
There was a delay in Nyota receiving its mining license for Tulu
Kapi. Do you think the Ethiopian government is looking for a larger
Investors shouldn't be too concerned. It was a combination of
factors that led to the delay, including the death of the prime
minister and the departure of two key members of the Ministry of
Mines. One of them actually joined a mining company. The Ethiopian
government is also on a near vertical learning curve to understand
mining and mining investment. There's a bottleneck at the Ministry
of Mines in processing all the technical data.
As we saw at Nevsun Resources Ltd. (
) when it went into Eritrea, there are going to be problems along
the way. Once Nyota has delivered, it'll get due credit. It has
good support and good shareholders. Some of them are strategic
players in the region. These are investors who have done due
diligence and know when a deposit is good.
What are the odds of the company making another significant
discovery beyond Tulu Kapi?
The chance of success in exploration is great. Nyota carried out
some wildcat drilling earlier this year on its Northern Block
tenements. The results were interesting, but Nyota didn't quite hit
the mineralization that was expected. However, what it has learned
from the drilling is going to be tremendously important. It can
apply that to the wider area. It's doing more grassroots-stage
exploration across the area, which could yield some very good
results. I'm very optimistic that it's going to find something of
decent scale on the Northern Block.
Where do you believe the sweet spot is for investors looking to put
money in gold equities?
We're at a very interesting stage at the moment. Producers are
getting the recognition back for having revenue. That value
recognition is going to trickle down to the midtiers, juniors and
the very junior juniors. Investors have to do their homework to
find the right companies that will soon get recognition for success
in either exploration or development. Papillon is a great example
of backing the project geology and the team that bucks the trend.
For me, at the moment, the sweet spot is producers, but I've got to
go for the juniors that have that exploration experience and strong
This interview was conducted by Brian Sylvester of
The Gold Report
and can be read in its entirety at
or on our
is a mining analyst with Ocean Equities in London. Before joining
Ocean Equities, Welch spent four years with Bloomsbury Minerals
Economics as a copper analyst, prior to which he worked as a
geologist in Lesotho. He holds a master's degree in international
business management and a Bachelor of Science (Honors) in geology
from University College London and an Advanced Certificate in
Economics from Birkbeck University.
1) Brian Sylvester of
The Gold Report
conducted this interview. He personally and/or his family own
shares of the following companies mentioned in this interview:
2) The following companies mentioned in the interview are sponsors
The Gold Report:
None. Streetwise Reports does not accept stock in exchange for
services. Interviews are edited for clarity.
3) Chris Welch: I personally and/or my family own shares of the
following companies mentioned in this interview: Condor Gold Plc,
Amara Mining Plc, Aureus Mining Inc., and Nyota Minerals Inc. I
personally and/or my family am paid by the following companies
mentioned in this interview: None. I was not paid by Streetwise
Reports for participating in this interview.
I have no positions in any stocks mentioned, and no plans to
initiate any positions within the next 72 hours. I wrote this
article myself, and it expresses my own opinions. I am not
receiving compensation for it. I have no business relationship with
any company whose stock is mentioned in this article.
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