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 OUAGADOUGO 00000602 001.2 OF 003 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. -------------- Gold -------------- ¶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 OUAGADOUGO 00000602 002.2 OF 003 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. -------------- 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. -------------- 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. OUAGADOUGO 00000602 003.2 OF 003 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. -------------- 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