Improved legislative environment supports growing interest in Côte d’Ivoire's mining industry

With a favourable mining code, yet largely untapped potential, Côte d’Ivoire has become an exploration hotspot in West Africa. In recent years many international companies have rushed to install operations, helping the country more than double gold production since 2012. However, having missed the booming mining years of the early 2000s due to political instability, Côte d’Ivoire is lagging behind its neighbours Ghana, Burkina Faso and Mali. In Ghana gold output was more than four times that of Côte d’Ivoire’s in 2016, while Mali produced 45 tonnes in 2017 compared to Côte d’Ivoire’s 25.4 tonnes, according to government officials.

Still, with proven reserves of gold, bauxite, iron ore, nickel and diamond, Côte d’Ivoire’s growth potential is significant. There are signs that diamond production is regaining momentum, following the lifting of an international ban on exports in 2014 aimed at preventing illegal sales. The country exported 11,200 carats of diamonds in 2017 at a value of $2.1m. The largest minerals export is gold, but production grew only slightly in 2017, as most of the active mines reached maturity. In a context of low international prices for gold, miners argue that the government needs to encourage exploration to sustain the sector’s expansion.

Mining Policy

Since the period of political turbulence came to an end in 2011, the Ivorian state has made efforts to develop the mining sector, which was overlooked for decades in favour of agriculture. Now, in pursuit of economic diversification, officials aim to turn the country into one of Africa’s largest mineral producers. To achieve this, a new mining code streamlining the granting of exploration licences, simplifying procedures for investors and increasing transparency in licence management, was enacted in 2014. “Historically, the government’s priority has been to develop agriculture, which has come to occupy a strong percentage of GDP. Today, we are observing a push towards increasing influence of the mining industry by extending exploration licences and reducing taxation on such activities,” Jean-Jacques Koua, director-general of mining company EPC Ivory Coast, told OBG.

Reorganisation at the ministry level also highlights the increasing focus on minerals. In July 2018 the administration of Prime Minister Amadou Gon Coulibaly created a dedicated Ministry of Mines and Geology, with Jean-Claude Kouassi appointed minister. In the past, mining had been coupled with the industrial or energy portfolios. “The government sent a strong signal that it wants to accelerate Côte d’Ivoire’s mining development, and that is a very good thing,” Christine Logbo-Kossi, executive director at the Professional Miners Association of Côte d’Ivoire (Groupement Professionnel des Miniers de Côte d’Ivoire, GPMCI), told OBG.

The contribution of the mining sector to the national economy was estimated at 4.8% in 2017, down from 5.4% in 2016. The figure is forecast to remain at 4.8% in 2018 and rise to 5% in 2019, according to the Ministry of Economy and Finances. In 2017 the mining sector directly employed 10,520 people, up from 8290 in 2016.

Deposits

Côte d’Ivoire is located on the Birimian Greenstone Belt, a mineral-rich geological formation that connects a large swath of West Africa and has allowed Ghana, Mali and Burkina Faso to rank as Africa’s second-, third- and fourth-largest gold producers, respectively, after South Africa. Although Côte d’Ivoire has around 35% of the belt within its borders, its area remains one of the least explored in the region.

The country has estimated deposits of around 11.2m carats of diamond, 3bn tonnes of iron ore, 3bn tonnes of manganese, 1.2bn tonnes of bauxite and 390m tonnes of nickel, according to the Extractive Industries Transparency Initiative, a global organisation dedicated to good governance in oil, gas and mining. However, political instability prevented both local and foreign investment in the mineral industry at the turn of the century. “The country was in political turmoil during the latest mining boom,” Stanislas de Stabenrath, managing director of local mining company X&M Suppliers, told OBG. “That is when Burkina Faso began to develop its mining sector. There are huge reserves in Côte d’ Ivoire and only a few mines in operation, therefore the industry’s growth potential is significant.”

Sector Growth

In 2017 the sector’s turnover increased by 11.5%, rising from CFA483bn (€724.5m) to CFA539bn (€808.5m). This growth resulted in CFA56.4bn (€817.5m) in direct taxes for the government, up 39% over 2016. The increase in 2017 was mostly due to a rise in the production and export of manganese, gold and nickel, with manganese output increasing by 146% to 510,000 tonnes, gold rising by 2.2% to 25.4 tonnes and nickel production – which kicked off in 2017 – reaching 379,766 tonnes.

According to BMI Research, Côte d’Ivoire’s mining sector is expected to grow by about 16% between 2017 and 2021, as the sector benefits from business-friendly legislation and improving infrastructure.

Digging for Gold

Although growth in gold output was modest in 2017, the figure has doubled from the 2011 level of 12 tonnes to 25.4 tonnes in 2017. “Production growth in the past two years has not been as good as it was from 2012 to 2016,” Logbo-Kossi told OBG. “Most of the mines in operation have already reached maturity.” That being said, the segment remains among the most attractive, with 80% of new applications for exploration licences aiming to tap into an estimated 200m tonnes of gold reserves, according to the GPMCI.

Côte d’Ivoire has five industrial gold mines in operation. In April 2018 Australia’s Perseus Mining began commercial production at its Sissingué mine in the north of the country. The mine is expected to produce 358,000 oz during its five-year lifetime, with further exploration of the area to begin once operations turn profitable. The UK’s Randgold Resources operates the country’s largest mine, Tongon, also in the north. The lifespan of the mine, initially expected to close in 2021, was extended by two years after a new deposit was discovered near the site in October 2018. Total output of the mine, established in 2010, stood at roughly 285,000 oz by the end of 2017, following investment of around $1bn. Toronto-based Endeavour Mining works in the mines of Agbaou in the south-east and Ity in the south-west. The latter is where the company is building a carbon-in-leach plant to extend the mine’s lifespan by 14 years, although the mine has already been in operation for over 20 years and has produced more than 1.2m oz of gold, according to Endeavour. In December 2017 Australia’s Newcrest sold its Bonikro mine in the south to Afrique Gold, a consortium of Canada’s Forbes & Manhattan Group and the Africa Finance Corporation, for $81m. The new owners plan to invest CFA60bn (€90m) to extend the life of the mine, which produced 128,000 oz in 2017.

Côte d’Ivoire is slated to have a sixth gold mine in 2020, located in Yaoure, in the centre of the country. The open-pit mine is being developed by Perseus Mining, and has an estimated life of 8.5 years and reserves of 1.52m oz. Production is expected to start in December 2020 and yield 215,000 oz annually for the first five years. In November 2018 Perseus announced that it completed a scoping study for an underground mine on the same site, thus Côte d’Ivoire may have a total seven mines by 2021 and a gold production of 40 tonnes.

Illegal Extraction

The country’s industrial mines account for only a part of total gold output, as it is estimated that nearly the same amount of gold is lost each year to illegal mining. According to the GPMCI, 22 tonnes of gold were illegally shipped out of Côte d’ Ivoire in 2016, prompting the government to establish a special brigade to tackle the issue in October 2018. The state closed over 140 illegal mines in 2015 and 2016.

Gold Prices

As evidenced by the Yaoure project, investment in gold exploration has continued even though international prices have declined in the years since 2012. As of mid-January 2019 gold was trading at around $1290 per oz, down from $1320 in January 2018 and $1900 in 2011. However, even as exploration is growing, low prices are indeed affecting the development of new mines, noted Logbo-Kossi. “Mining majors are interested in projects that have already started. They will not invest in initial exploration, instead they look for partnerships on advanced exploration projects,” she told OBG. “When prices are low, their capacity to raise funds on international markets becomes quite limited.” Weak prices also negatively affect the companies’ social and community projects at the existing mines, she added.

Manganese

While gold had a subdued year, output of manganese reached 510,000 tonnes in 2017, more than double 2016 production. The increase follows the recovery of manganese prices, which plunged in 2016, leading some miners to suspend activity. Output of the commodity fell from 362,000 tonnes in 2014 to 217,000 tonnes in 2016. With rising prices, operations of local firm Taurian Manganese resumed at the Odienné and Bondoukou mines. Meanwhile, Shiloh Manganese, a unit of India’s Shiloh Industries, began commercial production at its Korhogo mine in 2017.

Nickel & Bauxite

Nickel and bauxite output is new to the country, with Côte d’Ivoire recently joining the ranks of rare minerals exporters – production of nickel was 379,766 tonnes in 2017. Compagnie Minière du Bafing (CMB) is developing the Biankouma-Touba mine in the country’s west, taking over from Ivorian firm Nickel de l’Ouest Côte d’Ivoire, which carried out the exploration. CMB is planning to invest CFA220bn (€330m) over the next 20 years to develop the site, which could produce up to 2m tonnes of nickel per year. Canada’s Sama Resources is also working a nickel-copper mine in Samapleu, near the border with Liberia, which has up to 60m tonnes of reserves. In April 2018 the company finalised a private placement with HPX Ivory Coast Holdings to develop the mine, and in November 2018 announced it also started drilling at its Yepleu property near the Samapleu deposits. This is believed to have reserves of nickel, copper, cobalt and palladium.

In April 2018 production began at the country’s first bauxite mine in the eastern area of Bongouanou. Lagune Exploitation de Bongouanou (LEB) developed the facility at a cost of CFA218bn (€327m), where reserves of 32.5m tonnes of bauxite are estimated. The mine is expected to produce an annual 315,000 tonnes of calcinated bauxite with an alumina content of 80%. Production was halted in October 2018, however, on the request of Japanese firm Sumitomo, with which LEB is in negotiations. Sumitomo is calling for further exploration to better determine the size of the deposit before signing a partnership agreement with LEB.

Foreign Investment

Côte d’Ivoire has become very attractive for foreign investment over the past few years, despite low minerals prices. In December 2017 Canadian miner Teranga Gold signed a memorandum of understanding with Bahamas-headquartered Sodim for a three-year exploration programme of the Afema gold deposits in the south-east. Meanwhile, Canadian-based Volcanic Gold Mines announced in March 2018 that it will acquire Jofema Mineral Resources, a private company registered in Côte d’Ivoire. Jofema has a 100% interest in exploration permits at nearly adjacent properties known as Le Debo and Soubré, covering a 600-sq-km area in the south-west.

Also in March, Aeos Gold, a wholly owned subsidiary of the UK’s Altus Strategies, acquired a 369.5-sq-km exploration licence in the Prikro and Koun-Fao areas of eastern Côte d’Ivoire. The four-year licence has options for two additional three-year renewal terms, and a further two years under an exceptional renewal, with each renewal subject to a 50% reduction in the licence area. Australia’s Tietto Minerals is also carrying out exploration works at its Abujar project in the central-west of the country. Lastly, in October 2018 Endeavour announced a maiden resource at its Fetekro project in the north, with high indicated reserves of gold.

Exploration Licenses

In 2017 the government granted 29 exploration licences, bringing the total of research and operation permits to 164, of which 138 are for gold. Although the number of licences increased, some industry observers say it is still too low for Côte d’Ivoire to significantly boost its production, and that conditions to qualify for an exploration permit as established in the 2014 code are still discouraging. The regulation states that a company must have at least seven years of experience or partner with another experienced company to qualify for a licence. “This is a restrictive clause. The government would benefit by softening these rules and giving an opportunity to the greatest number of firms. The more permits you give, the more chances you have to find deposits,” Logbo-Kossi told OBG. X&M Suppliers’ de Stabenrath agreed, saying one of Côte d’Ivoire’s main issues is the lack of mining data. “The real challenge for Côte d’ Ivoire is letting the mining companies work and create on-the-ground data,” he said. “There are vast parts of the country where no one has ever gone.”

Other key aspects of the 2014 mining code included extending the duration of exploration licences from seven to 10 years, and reducing the maximum size of exploration areas from 1000 sq km to 400 sq km. The law also made it more difficult for government officials to be involved in the operations of mining companies.

In February 2018 the government eliminated an exemption from a 35% tax on industrial and commercial profits. The exemption remained for mining licences granted before the new rule and is to be phased out progressively. The authorities said the move is in line with international standards, but the decision prompted fierce opposition from the industry, with the GPMCI saying the measure would affect companies’ finances and impact the growth of the sector.

Disruptions

One factor hindering growth is the number of strikes that have disrupted operations at several mines in recent years, representing a growing challenge for companies and the government. Employees at the Tongon mine, for example, carried out 53 days of industrial action in 2018. The 729 workers asked for bonuses and guarantees for the future, given that the mine is expected to shut down in 2023. As a result, the mine’s production for 2018 is forecast to come in 23% lower than the initial estimate. To prevent further strikes, the GPMCI is working on a draft of what would be an inter-profession collective convention.

To increase the involvement of local human resources and suppliers, the 2014 mining code mandates permit holders give preference to Ivorian suppliers and staff when hiring. Mine operators are also required to establish a local mining fund to contribute to regional development. These and other recent rules are welcomed by Ivorian players. “The new provisions to the mining code adopted at the end of 2017 will allow stronger participation of local companies in the development of the mining sector,” Yao Kossonou, director-general of local business partner Biotitiale, told OBG.

Outlook

Côte d’Ivoire’s mining industry is set to continue its expansion in the next few years. While gold will remain the primary export, accelerated exploration is necessary to sustain growth in production. In the meantime, recovering manganese prices are boosting output and the country’s new focus on rare minerals is diversifying the sector’s revenues. Effective implementation and keeping pace with necessary revisions of the mining code will be key for growth over the medium term and the continuance of investor confidence.