Nationalization of Boungou and Wahgnion Gold Mines in Burkina Faso

Abstract

This report provides a comprehensive analysis of the recent nationalization of the Boungou and Wahgnion gold mines in Burkina Faso, following a legal settlement between Endeavour Mining and Lilium Mining. The nationalization, valued at approximately $80 million, resolves a dispute involving allegations of missed payments and financial misrepresentation. This move is part of a broader trend of resource nationalism in Africa, particularly in countries under military control, aiming to increase state control over natural resources.

The report details the location, resources, investment history, and current values of the Boungou and Wahgnion mines. Boungou, located 323 km east-southeast of Ouagadougou, has significant gold reserves and a history of efficient production since its commercial start in 2018. Wahgnion, situated 510 km southwest of the capital, has also shown robust production since 2019. Both mines have been pivotal in Burkina Faso's gold mining sector.

Economic and political implications of the nationalization are discussed, highlighting the potential for increased state revenue, political stability, and impacts on investor confidence. The report concludes by situating this nationalization within the broader context of African resource nationalism, emphasizing the strategic importance of these moves for economic and political consolidation.

Introduction

Burkina Faso has recently nationalized two significant gold mines, Boungou and Wahgnion, following a legal settlement between Endeavour Mining and Lilium Mining. This nationalization, valued at approximately $80 million, resolves a protracted dispute where Endeavour accused Lilium of missing payments, while Lilium claimed Endeavour misrepresented the financial status of the mines.

Background

The legal conflict between Endeavour Mining and Lilium Mining has been a significant issue in the mining sector of Burkina Faso. Endeavour Mining, a major player in the gold mining industry, alleged that Lilium Mining failed to meet its payment obligations. Conversely, Lilium Mining contended that Endeavour had misrepresented the financial health and operational status of the Boungou and Wahgnion mines.

Nationalization Details

The nationalization of the Boungou and Wahgnion mines is part of a broader trend where African governments, particularly those under military control, are seeking to exert greater control over their natural resources. This move by Burkina Faso's government aims to stabilize the mining sector and ensure that the benefits of the country's natural resources are more directly realized by the state.

Legal Settlement

The settlement between Endeavour Mining and Lilium Mining includes both companies dropping their legal cases against each other. This agreement not only resolves the financial disputes but also paves the way for the government to take full control of the mines without further legal entanglements.

Boungou Gold Mine

- Location: The Boungou mine is located approximately 323 km east-southeast of Ouagadougou, the capital of Burkina Faso1.

- Resources: As of December 2022, the Boungou mine had Proven and Probable reserves totaling 8.9 million tons at 2.91 g/t, containing 0.83 million ounces of gold. Measured and Indicated resources (inclusive of reserves) totaled 8.6 million tons at 3.59 g/t, containing 0.99 million ounces of gold1.

- Investment History: Construction of the Boungou mine commenced in Q1 2017, with the first gold pour taking place in June 2018. Commercial production was achieved in September 2018. Endeavour Mining acquired the Boungou mine as part of its acquisition of SEMAFO in July 20201.

- Current Value: As of March 2023, the Boungou mine had a book value of $277.7 million, comprising $367.6 million in total assets and $89.9 million in total liabilities1.

Wahgnion Gold Mine

- Location: The Wahgnion mine is located approximately 510 km southwest of Ouagadougou2.

- Resources: As of December 2022, the Wahgnion mine had Proven and Probable reserves totalling 14.0 million tons at 1.59 g/t, containing 0.72 million ounces of gold. Measured and Indicated resources (inclusive of reserves) totaled 18.4 million tons at 1.70 g/t, containing 1.00 million ounces of gold2.

- Investment History: The Wahgnion mine was acquired by Endeavour Mining in February 2021 as part of its acquisition of Teranga Gold. The mine achieved commercial production in November 20192(https://www.endeavourmining.com/news-and-media/news/endeavour-announces-sale-its-non-core-boungou-and-wahgnion-mines/).

- Current Value: As of March 2023, the Wahgnion mine had a book value of $322.3 million, comprising $401.8 million in total assets and $79.5 million in total liabilities2

Economic and Political Implications

The nationalization of these mines is expected to have several economic and political implications:

1. Economic Control: By nationalizing the mines, Burkina Faso aims to increase its revenue from gold mining, which is a critical sector for the country's economy.

2. Political Stability: The move is also seen as an effort by the military-controlled government to consolidate power and demonstrate its ability to manage the country's resources effectively.

3. Investor Confidence: While nationalization can lead to concerns among foreign investors about the security of their investments, the resolution of the legal dispute might also be seen as a positive step towards stabilizing the investment climate.

Broader Trends in Africa

This nationalization is part of a broader trend across Africa, where governments are increasingly taking control of natural resources. This trend is particularly pronounced in countries with military or authoritarian regimes, which seek to leverage natural resources to bolster their economic and political standing.

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Conclusion

The nationalization of the Boungou and Wahgnion gold mines in Burkina Faso marks a significant development in the country's mining sector. By resolving the legal dispute between Endeavour Mining and Lilium Mining, the government has taken a decisive step towards greater control over its natural resources. This move, while potentially unsettling for some investors, underscores the broader trend of resource nationalism in Africa and highlights the ongoing efforts of governments to maximize the benefits of their natural resources.

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References:

1: Wood Mackenzie Report on Boungou Gold Mine: https://www.woodmac.com/reports/metals-boungou-gold-mine-37867296/

2: Endeavour Mining Announcement on Boungou and Wahgnion Mines: https://www.endeavourmining.com/news-and-media/news/endeavour-announces-sale-its-non-core-boungou-and-wahgnion-mines/