Barrick Gold (TSX: ABX) (NYSE: GOLD) is feeling the pressure in Mali as the country’s military junta attempts to take more control over its mining sector.
According to intelligence papers by the Africa Defense Forum released on Monday by the Africa Command of the United States military, and the United Kingdom-based Africa Report, Mali’s rules have performed an industry audit and produced a new mining code aimed at expanding state control over mining companies.
As a result, the regime may be seeking to nationalize Barrick’s Loulo-Gounkoto, which is one of the world’s largest gold mines.
The junta seized power in a coup in 2021 and formed a partnership with Russian troops led by the mercenary outfit, the Wagner Group, and now the Mali junta is focusing on the mining industry.
Russian troops have seized mining sites in Mali and neighbouring countries, prompting the U.S. government to accuse them of using African mining revenue to fund global military operations.
If Mali takes over the gold mine with Moscow’s backing, it will not mark the first instance of Russia gaining control over such an asset in Africa. In 2020, Russian mercenaries working for the Wagner Group seized a mined owned by Canadian gold junior, Axmin Inc (TSXV: AXM) in the Central African Republic. This then became a source of funding for Wagner.
In November, Mali announced a deal with Russia to build a gold refinery in the capital city with an annual capacity of 200 tonnes.
Weeks earlier, a senior official from Mali’s mines ministry declared that the country was on track to meet or possibly exceed its gold production forecast of 67.7 tonnes for the year 2023.
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Russian troops have seized mining sites in Mali and other countries
Russian soldiers also captured the Intahaka gold mine in January, the largest artisanal site in northern Mali, according to the report.
Barrick CEO Mark Bristow has made two visits to Mali since January to highlight the company’s significant contributions to the Malian economy. These contributions include nearly USD$10 billion in taxes, royalties, salaries, and payments to local suppliers, accounting for about 5 to 10 per cent of the country’s gross domestic product since the 1990s.
Additionally Loulo-Gounkoto has injected more than USD$1 billion into Mali’s economy over the past 12 months.
The Loulo-Gounkoto mine possesses proven and probable gold reserves of 6.7 million oz. and measured and indicated gold resources of 9.1 million ounces. Last year, it produced 683,000 oz. of gold and is on track to meet its production guidance for the current quarter and the year.
The Loulo-Gounkoto complex, comprising two distinct mining permits named Loulo and Gounkoto, is located in western Mali, bordering Senegal and adjacent to the Falémé River.
Société des Mines de Loulo SA owns the Loulo gold mine, and Société des Mines de Gounkoto owns the Gounkoto gold mine. Barrick holds an 80 per cent ownership in both Loulo and Gounkoto, while the State of Mali owns the remaining 20 per cent.
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The Wagner Group has ties to the Russian government
The Wagner Group is a Russian mercenary outfit with a murky past. Officially a private military company, it’s believed to be state-funded and closely linked to the Russian government.
Founded in 2014, Wagner fighters have participated in conflicts around the world, including in Ukraine and Syria.
The group has been accused of human rights abuses and operates with a high degree of secrecy. In 2023, its leader, Yevgeny Prigozhin, was presumed dead, and the group has since been referred to as Africa Corps.
This is one of the key problems with venturing into unstable regions in search of gold.
Venturing into unstable regions for gold holds tremendous risk compared to established, well-regulated areas like Canada and the United States. These risks range from personal safety threats like violence from armed groups, banditry, and kidnapping to what Barrick is facing down right now, which is nationalization for geopolitical reasons.
Political instability can also lead to sudden changes in regulations, seizure of property, or even expulsion from the country. While the potential for a major gold strike might be higher in these areas, the successful extraction and secure transport of the gold haul can be a gamble with potentially deadly consequences.
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