|Mali and its mining sector: A focus on gold, while minerals are unexplored|
|Written by Denine Walters (1) Sunday, 03 October 2010 07:04|
Mali, a poor, heavily indebted and land-locked country in Sub-Saharan Africa has great potential wealth in bauxite, iron ore, base metals and phosphate deposits; however, a lack of infrastructure has denied devolvement of these mineral resources. Furthermore, the Government of Mali’s reformed mineral code in the 1990s attracted numerous foreign investors, specifically in the gold industry.
Currently, Mali is Africa’s third largest gold producer, after South Africa and Ghana. Hence, gold production forms the cornerstone of Mali’s mining industry and represents 95% of the country’s mineral production.(2) As such, this article will discuss Mali’s mining industry with regards to international involvement in the sector, as well as the implications of mine production for the African country.
Overview of Mali’s mining industry
Mining has long formed an important aspect of the Malian economy. When modern commercial gold mining started in 1984, it accounted for only 1.5% of Mali’s Gross Domestic Product (GDP). In 1991, after a commercial mining code reflecting internationally accepted standards was implemented according to the International Development Association, commercial gold production proliferated from 4 metric tonnes that year to 48 metric tonnes in 2008.(3)
Simultaneously, Mali relaxed the enforcement of mining codes and this led to greater foreign investment in the mining industry. From 1994 until 2007, national and international mining companies were granted approximately 150 operating licences along with more than 25 certificates for mineral exploitation and an excess of 200 research permits. Government revenue originating from mining contracts totalled less than 1% of the state’s income in 1989, but increased to nearly 18% in 2007. Rising international gold prices have also increased exploration, investment, and production in the mining sector. The upsurge in gold prices, from an average US$ 445 per ounce in 2005 to US$ 900 per ounce in 2009, has nearly doubled Mali’s profit on gold production. This increase in the gold price has translated into higher royalties (a minimum of 3% and maximum of 65% depending on when the mine started production), profit taxes, and dividend payments.(4)
Mali’s mineral wealth
Mali has abundant mineral wealth. Gold has become Mali’s second-largest export after cotton and has emerged as a leading export for the African country since 1999. Mali is West Africa’s second largest gold producer with an estimated 2009 output of 1.6 million ounces, or 49 tonnes, and total gold wealth is estimated at 350 tonnes.(5)
Several companies in Mali are currently carrying out uranium exploration in the Falea and Gao regions, where the uranium potential is estimated to be 5,200 tonnes. Furthermore, Mali has the potential to develop diamond explorations. In the Kayes administrative region, also known as “Mining region 1”, 30 kimberlitic pipes have been discovered of which eight show traces of diamonds. Diamonds have also been picked up in the Sikasso administrative region, in southern Mali.(6)
More than 1.3 million tonnes of potential iron ore reserves has been detected in the areas of Djidian-Kenieba, Diamou, and Bale. Bauxite reserves are estimated to be 1.2 million tonnes and the potential for other mineral resources in Mali includes 42.2 million tonnes of calcareous rock deposits; nearly 46 million tonnes of copper reserves; 1.7 million tonnes of lead and zinc with traces in western and northern Mali; an estimated potential of 4 million lithium reserves; 53 million tonnes of rock salt; 65 million tonnes of diatomite potential; and an estimated 870 million of bitumen schist.(7)
International involvement in the mining industry
Various gold mines and one diamond mine, owned by several international companies, are situated around Mali.(8) The main gold mines include the AngloGold Ashanti part-owned Morila, Sadiola and Yatela, as well as Tabakoto/Segala (Avion), Loulo (Randgold) and Syama (Resolute).
South African-based Randgold Resources owns 80% of the Loulo gold mine (open pit and underground) and the Government of Mali owns 20%. This mine produced 282,000 ounces of gold at a cash cost of US$ 522 per ounce in 2009. Sadiola gold mine, the second largest mine in Mali, is jointly owned by South African AngloGold Ashanti (41%) and Canadian IAMGOLD (41%), as well as the Government of Mali (18%). Sadiola produced 320,000 ounces of gold at a cash cost of US$ 488 per ounce in 2009. In the Yatela operation, which also uses conventional open-pit mining techniques and heap leach, AngloGold Ashanti and IAMGOLD each have a 40% stake and the Government owns 20% of the shares. This mine produced 233,000 ounces of gold at a cash cost of US$ 368 per ounce in 2009. Morila gold mine produced 343,000 ounces in 2009 at a cash cost of US$ 527 per ounce and is jointly owned by AngloGold Ashanti (40%), Randgold Resources (40%) and the Government of Mali (20%).
Furthermore, Australian Resolute Mining owns an 80% stake in Syama gold mine, while Mali’s Government has a 20% stake. Syama produced 60,000 ounces of gold in 2009. Avnel Gold, a 100% subsidiary of Canadian-based Avnel Gold Mining, owns Kalana gold mine in Mali. Avion Gold, also a Canadian-based gold producer, owns 80% of the Tabakoto and Segala gold mines, which are situated in a major gold mining district where Sadiola and Loulo are located, while the Government of Mali owns the remaining 20% of these mines. Only one diamond mine is located in Mali. Australian Ashton West Africa and Canadian Mink International Resources Corporation have formed a joint venture and collectively own 51% and 49% of Kenieba.
Implications of mining operations
While a substantial amount of income from gold mining is produced, there are a significant number of expatriates employed in the mining industry, especially in senior positions. Residents in the areas of intensive mining operations have allegedly complained that they receive little benefit from the industry’s wealth. Furthermore, villages have been relocated because of mine construction - 43 households, comprising one or two villages were displaced due to Sadiola being built, while 121 households were dislocated in Fourou, near Syama.
In return for the land, the villagers have the option of seeking compensation, either from the Government authorities or directly from the mining company. In 2002, however, Mali’s National Assembly adopted a new legislation. This new policy entitled those persons who had not registered their land to also be compensated for land expropriation. As such, residents whose unregistered land was expropriated during the construction of Sadiola and Morila were not compensated, as the legislation was introduced only after the two mines were established in 1996 and 2000 respectively.(9)
In Sadiola and Morila, only a minority of the people who had legal title to the land was eligible for state compensation of the expropriated land. The majority of agriculturalists and pastoralists who had not registered their land before the advent of the mines could only directly seek compensation from the mining companies. In the end, the mining companies gave compensation to land users for the fields, fruit trees, and houses that were given up. In some instances, compensation took the form of money or the construction of new settlements. After compensation was provided, the mining companies registered the land acquired and thus obtained property rights to it for future use.(10)
Furthermore, the establishment of the gold mines has had negative effects on the natural environment, and, consequently, the people who depend on it. One study done by CMI(11) noted that the construction of the gold mines, most notably Sadiola and Morila, caused deforestation, as the trees that were in the concession area were removed with the establishment of the mines, and because of over-exploitation of wood during the operations phase. However, another possibility is that the mines attracted new residents, who may have then exploited wood outside of the mining areas. Another problem posed by the construction of the mines included the possibility of contamination by cyanide and other liquids that would coalesce with surface water and thus pose a danger to both people and animals.
Since the Government of Mali reformed mining codes in the early 1990s, much foreign investment, in the form of international mining companies, has entered the African country. Several gold mines and one diamond mine are operational, while discovery of new projects, feasibility studies and other developments are in the pipeline for other international companies, such as North Atlantic Resources, African Gold Group, Axmin, Etruscan Resources, Golden Rim Resources, Merrex Gold, and Pelangio Exploration. While gold has generated wealth for Mali’s Government, the construction of the mines has caused land expropriation.
However, it seems that Mali is currently intent on developing those other mineral resources as is considering to introduce a new mining code (one option being to cut taxes, although most of the Government’s wealth comes from the taxes that international firms pay to operate in the country), which will be voted on by the members of Parliament in October 2010. As such, it remains to be seen whether those minerals will in fact be developed and whether the wealth of those mineral resources will assist Mali out of debt and poverty and lead to economic growth and development in the country.
(1) Contact Denine Walters through Consultancy Africa Intelligence's Eyes on Africa Unit (