Burkina Faso's "Mining Boom": Second Gold Mine; Zinc,

UNCLAS SECTION 01 OF 03 OUAGADOUGOU 000602

SIPDIS

AF/W FOR EMILY PLUMB

E.O. 12958: N/A
TAGS: EMIN ECON EINV ETRD PREL UV
SUBJECT: Burkina Faso's "Mining Boom": Second Gold Mine; Zinc,
Manganese, and Uranium Development Underway

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REFTELS: A) Ouagadougou 859; B) Ouagadougou 919


1. Key Points:

-- Seven months after the October 2007 opening of a gold mine in
Taparko, Prime Minister Tertius Zongo presided over the May opening
in Youga of the nation's second commercial gold mine.

-- During his speech, Zongo opined that the opening of the Youga
mine was the beginning of a "mining boom" in Burkina Faso, which
granted 245 exploration permits in 2007 for gold, manganese, zinc,
and uranium.

-- In addition to the opening of Taparko and Youga, four other mines
are scheduled to go into production in 2008 including: Mana gold
mine (Canada's Semafo),Inata gold mine (Canada's Goldbelt
Resources),Perkoa zinc mine (Australia's Aim Resources),and Kiere
manganese mine (United States' Burkina Manganese).


2. Key Judgments:

-- Located in West Africa, the world's fastest growing gold
producing region, Burkina Faso is ideal for mineral exploitation.
The country's flat terrain makes it accessible to mining companies
and the arid climate oxidizes minerals near the surface. Oxidized
mineral deposits found close to the surface are easier to discover
and less expensive to produce.

-- With geological formations similar to its gold and mineral
producing neighbors, Burkina Faso is considered the country with the
greatest untested mining potential in West Africa.

End Key Points and Key Judgments.

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Gold
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3. High River Gold Mine, a Canadian company that is owned in
significant part by U.S. investors, brought its Taparko gold mine
into production in October 2007 (ref A). Located 200 km northeast
of Ouagadougou, Taparko is the first industrial mine to open since
the closure of the Poura gold mine in 1990. Its opening marked the
revival of modern industrial mining in Burkina. Gold production for
2008 at the Taparko gold mine is expected to total about 100,000 oz,
with production increasing to over 140,000 oz during 2009. High
River also owns rights to the Bouroum satellite deposit located
approximately 50 kilometers northwest of Taparko. High River is the
largest holder of exploration permits in Burkina Faso covering
approximately 15 percent of the country's greenstone belt. (Note: A
greenstone belt is a geologic stratum primarily formed of volcanic
rock and is often several thousand kilometers in length. The belts
often contain ore deposits of gold, silver, copper, zinc and lead.
End Note.) The company also has substantial holdings in Bissa,
which covers an area of approximately 1,000 square kilometers in the
province of Sanmatenga, approximately 80 kilometers north of
Ouagadougou. Several other mining companies have been granted mining
permits in this area.


4. In May 2008, Canada's Etruscan Resources opened Burkina Faso's
second commercial gold mine at Youga in Bolgou Province with its
first "gold pour", 180 km south-east of Ouagadougou. Youga has an
estimated gold reserve of 6.6 million tons at an average grade of
2.7 grams per ton containing 580,000 ounces of gold. The mine will
cost approximately $71 million to develop and will produce an
estimated 25 tons of gold in seven years. Etruscan, through its
wholly owned subsidiary Cayman Burkina Mines, holds a 90-percent
interest in Burkina Mining Company (BMC),which has been granted the
rights to exploit the Youga deposit. The remaining 10 percent of
BMC is held by the Government of Burkina Faso (GOBF). Etruscan
plans an extensive training program for the local workforce, which
will number approximately 350 people. In December 2003, Etruscan
acquired the Youga mining permit and three contiguous exploration
permits along the Youga gold belt from Ashanti Goldfields Company,
and Echo Bay Mines. In addition to the Youga belt, Etruscan holds
six exploration permits in the Banfora belt in southwest Burkina
Faso.


5. In 2007, the GOBF granted a mining permit to Canada's Goldbelt
Resources to operate the Inata gold mine in Soum province, in
northern Burkina Faso. Project commissioning is scheduled for
December 2008. Once opened, the mine is expected to produce 25 tons

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of gold in seven years and provide approximately $177.3 million to
the Burkinabe economy.


6. In 2007, the GOBF issued a mining permit for the Mana gold mine
to Canada's Semafo Burkina. Mining at Mana began on June 30 and the
company anticipates commercial gold production at the rate of
4,000t/d, producing 125,000oz per year for the first three years.


7. In September 2007, Canada's Orezone Resources entered into an
agreement with Gold Fields Ltd. to acquire its 60-percent interest
in the Essakane project. Essakane is the largest known gold deposit
in Burkina Faso. It will take 18 months to construct mining
facilities there at a cost of $346 million. Once operational, the
mine is expected to produce an average of 292,000 oz per year.
Orezone controls over 3,140 square kilometers of land in Burkina
Faso, in addition to Essakane. It also has interests in Bondi, Sega,
and Bombore.

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Zinc
--------------


8. Australia's Aim Resources has begun construction on Perkoa mine,
the first zinc mine in West Africa. Located in Sanguie province,
the Perkoa mine is located 35 km by road from the country's third
largest city, Koudougou. Although Koudougou is linked by rail to
Abidjan, Cote d'Ivoire, the concentrate will be trucked over 1,100
km to the port of Tema in Ghana. According to Abdoulaye Abdoulkader
Cisse, Minister of Mines, Quarries and Energy, Perkoa has zinc
reserves of 6.271 million tons of 53-percent zinc with an estimated
production of 160 tons per year over a 17 year period. Aim
Resources' Managing Director, Marc Flory, has described the deposit
as "one of the world's richest known zinc deposits." With a
projected annual cash flow of $40 million, the project will pay for
itself within the first two years of production. The GOBF has
supported development of the mine by assisting with the upgrade of
local roads and permitting water use from the recently constructed
and government-funded Seboun Dam. Once development is complete, the
mine will provide much needed revenue for the GOBF and 250 jobs for
local residents.

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Manganese
--------------


9. Burkina Faso has several high-quality manganese deposits that,
before the commodity boom sharply raised prices, had previously been
considered commercially unviable because of high transport costs.
Unlike gold, which is so valuable that it can be commercially
transported by air, manganese must be transported by truck or rail.
Burkina Faso's rail system is controlled by France's Bollore Group,
a multi-national conglomerate and the largest transportation and
logistics operator in Africa. Because Burkina Faso's railway
freight pricing is pegged to truck pricing, large-scale
transportation of bulk commodities is not currently cost effective.
Manganese is essential to iron and steel production and has no
satisfactory substitute. Increased demand, primarily from China, has
resulted in significant price increases during the past year, making
manganese mining more appealing despite high transport costs.


10. A U.S. company, Burkina Manganese, has announced its interest in
the development of Kiere mine in Tuy Province, the Baliata and
Tambao mines in Oudalan Province, and the Ansongo mine in southern
Mali. In early 2008, the company was granted a 10-year mining
permit for the operation of the Kiere mine. Preliminary
exploration, conducted by French mining interests in 1948,
identified manganese reserves of at least 600,000 tons at grades of
44-45 percent. The Kiere mine will begin production in June 2008;
Burkina Manganese envisages rapid development of the deposit. The
Baliata mine in Oudalan Province is estimated to have 500,000 tons
of 30-percent grade manganese, while the Tambao mine in Oudalan
Province is estimated to have more than 19 million tons at a grade
of 52-54 percent.


11. According to Burkina Manganese Chairman, Lou Slaughter, Tambao
may contain as much as 50 million tons and could become a
world-class manganese mine. With a potential of 50 million tons,
competition for the Tambao mine could become intense. Other Tambao
contenders include Dubai's Al Wadi, Australian's Territory Mines,
and the U.K.'s Weatherly PLC, all three of which are planning a
partnership to develop the mine. According to Slaughter, Indian and
Japanese concerns have also expressed an interest in the site.

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Burkina Manganese recently had discussions with the Ministry of
Mines regarding the Tambao mine, and plans to build a railway from
Kaya to Tambao if production is high enough to justify the
investment.

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Uranium
--------------


12. In a June 23 press release, Canada's Crosscontinental Uranium
announced the signing of a joint venture agreement with Southern
Cross Exploration and Longreach Oil. The group has been granted two
uranium exploration permits and plans to conduct detailed airborne
geophysical surveys in the Oursi Project in northeastern Burkina
Faso. The Oursi Project covers 500 square kilometers, and includes
a 50-kilometer area with prospective uranium deposits. There is
also a known uranium mineralization occurrence located 50 kilometers
along the west side of the Oursi formation. The survey is expected
to begin as soon as the necessary approvals are in place and weather
permits. More than 30 foreign companies have requested exploration
permits for possible uranium reserves along Burkina Faso's
northeastern border (ref B).

JACKSON