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EDITORIAL
Gold bulls

finally land on

African shores

by Dominic Piper

n the editorial for July GMJ, I discussed the dramatic change in market conditions
Ifor juniors in Western Australia. Three months on, the trend is spreading to other
parts of the globe.
In July, we noted an investor shift towards gold exploration stocks which had been
a long time coming. The WA gold exploration sector had been waiting four years for the “trickle down effect” to take
hold among investors and deliver them some of the massive returns the market had made on the high-performing gold
producers.
It has led to the best of times for gold explorers with De Grey Mining Ltd and Bellevue Gold Ltd at the front of the pack
but a multitude of others behind them.
Now, the momentum is gathering behind miners and explorers in West Africa.
There is an adage among African-focused miners that gold is gold, wherever it is extracted from, but the suspicion of
many Australian investors in recent years has been whether companies could actually extract it from Africa and still keep
hold of the profits.
While their domestic-focused peers enjoyed several years of success, the likes of Perseus Mining Ltd and Resolute
Mining Ltd struggled for market recognition. African-focused juniors had an even worse time of it, unable to raise money
for exploration in the face of political and security risks in their host countries.
The risk-off attitude towards African projects suggested Aussies had forgotten their previous love affair with gold stories
from the continent. The period 2005-2013 delivered numerous ASX-listed gold success stories in Africa. Some resulted
in happy endings (Adamus, Papillon, Orbis) while among the others were satisfactory outcomes (Gryphon, Ampella)
scattered with a few disappointments (we’ll leave them unnamed), a bit like any jurisdiction in the world.
The relationship was frosty in subsequent years but in 2020 established producers and ambitious explorers alike are
back in the limelight.
Perhaps the African scene is just following the same trend as we have witnessed in WA over the past few years –
investors being prepared to back companies who display consistent, profitable operational performance.
Now that the producers have established reliable cash flow from operations in Africa – and it has taken some difficult
times for Perseus and Resolute to get there – investors are showing willingness to back them.
There is often a perception that investors work on an “African discount” and will mark down the value of companies and
assets because they are located in jurisdictions which have either political or security issues. However, the recent rally
by Perseus, Resolute and now West African Resources Ltd (WAF) is proof the discount is a red herring.
WAF’s Sanbrado has always been a cracking project which never received fair value in the market but once gold was
poured and cash was generated earlier this year, the company’s share price took off, putting on 139% between April and
September.
This is despite Sanbrado being located in Burkina Faso, a country with severe and ongoing security problems.
With investors now comfortable Australian miners can find, build and keep their African assets, they are piling into
developers and explorers active on the continent. Cardinal Resources Ltd is leading the charge, thanks to a takeover
war between Shandong Mining and Nordgold Inc.
Earlier stage explorers such as Predictive Discovery Ltd, Oklo Resources Ltd, Chesser Resources Ltd, Mako Gold Ltd
and Tietto Minerals Ltd are also enjoying the spotlight, but the starkest example of the renewed support for West Africa
is Mali Lithium Ltd whose audacious bid for Barrick Gold Corp’s unwanted Morila mine in Mali has been fully backed by
investors via a $70 million capital raising.
The Morila deal is the clearest sign yet the gold boom we have seen in Australia may be headed to West Africa. After
all, Northern Star Resources Ltd, Evolution Mining Ltd and Saracen Mineral Holdings Ltd have all grown into multibillion
dollar, multimillion ounce producers on the back of Barrick and Newmont Mining Corp cast-offs.

dominic@paydirt.com.au @Paydirt_Media @paydirtmedia @PaydirtMediaAustralia

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