The ruling junta in Mali is flexing its muscles over another foreign gold company.
The junta detained three executives from the Australian gold company, Resolute Mining Ltd (ASX: RSG) on Friday. Terry Holohan, the company’s CEO, and other executives were pulled in for for questioning, according to the American Foreign Press.
A Resolute executive, speaking anonymously, stated that investigators are questioning the company over suspicions of presenting false evidence and misappropriating public assets. He denied these allegations, acknowledging that efforts to persuade investigators have so far been unsuccessful.
Resolute owns 80 percent of a subsidiary that controls the Syama mine in northwest Mali, with the Malian state holding the remaining 20 percent, according to the company’s website. In addition, Resolute operates a gold production site in Mako, Senegal, and conducts exploration activities in Mali, Senegal, and Guinea.
Since coming to power, Mali’s leaders have committed to ensuring a fairer distribution of mining revenues. Although one of Africa’s top gold producers, the Sahel nation remains among the poorest globally.
Mali faces a political, security, and economic crisis, battling Al-Qaeda and Islamic State armed groups and a separatist insurgency in the north since 2012. Gold contributes a quarter of Mali’s national budget and accounts for three-quarters of its export earnings.
These actions come as gold prices soar, with the precious metal rising about 30 per cent this year and reaching an all-time high of USD$2,790.10 an ounce amid increasing geopolitical uncertainty leading up to Donald Trump’s U.S. election victory.
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The squeeze on gold companies an economic response to sanctions
Mali’s military junta, weakened by sanctions and isolated from Western aid, leads the push by aggressively targeting both Resolute and Canadian giant Barrick Gold Corp (TSE: ABX) (NYSE: GOLD), which has also faced employee detentions and threats to a key license in recent months.
“We’re seeing it across Africa, especially in West Africa,” Chris Eger, Resolute’s chief finance officer.
“It’s unfortunately the environment that we’re living in. As we’re generating a lot more cash because of the gold price environment, one of the, I think, unfortunate byproducts of it is that people are looking for possibly a bigger piece of the pie.”
Mali’s detention of Resolute’s CEO Terry Holohan follows its audit of the mining industry and the adoption of new legislation that increases the state’s stake in mining projects.
The new code enables the government to acquire 10 per cent of mining projects and grants the option to take an additional 20 per cent stake within the first two years of commercial production. Companies must also transfer an extra 5 per cent stake to the government, which can then choose to sell it to private Malian investors at an unspecified future date.
Barrick Gold has faced challenging negotiations with the Malian government over these new terms. In September, authorities detained four Barrick executives for four days. Last month, Barrick Gold paid USD$85 million to the government “in the context of the ongoing negotiations.”
Several other miners operating in Mali, including Toronto-listed Robex Resources Inc (OTCMRKTS: RSRBF) (CVE: RBX) and Allied Gold Corp (TSE: AAUC) (OTCMKTS: AAUCF), recently signed agreements with the government involving one-time payments and higher royalty rates, according to Peter Mallin-Jones, a mining analyst at Peel Hunt.
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