Government Beating The Drum For Gold Investment

BMI View: Côte d'Ivoire will experience a surge in gold mining investment over the coming years as the government seeks to attract foreign investment into the country and reduces its reliance on the agricultural and cocoa sector for economic growth. Our expectation for gold prices to remain elevated in the medium term, coupled with the plethora of undeveloped gold reserves in Côte d'Ivoire further reinforces our belief that miners will continue to hunt for investment opportunities. Notwithstanding a sharp deterioration in political stability, we expect to see a significant increase in Côte d'Ivoire's gold mining production from 355koz in 2011 to an estimated 975koz by 2016.

We believe Côte d'Ivoire, the biggest economy in West Africa's monetary union, will witness a significant increase in gold investment over the coming years with its plethora of undeveloped gold reserves and as the government seek to harness the sector's potential earning power. The government of Côte d'Ivoire recently granted a gold exploitation permit to Occidental Gold Cl, a unit of Australia's Perseus Mining, for its US$165mn planned investment in the northern Tengrala region of the West African nation. Our expectation that gold prices will remain elevated over the medium term as central banks embark on quantitative easing to try and rejuvenate global growth further reinforces our view that miners will continue to hunt for investment opportunities in West Africa. Overall, we expect to see a surge in gold mining production from 355koz in 2011 to an estimated 975koz by 2016.

Surging Output In Côte d'Ivoire
Select African Countries - Gold Production (moz)

We believe Côte d'Ivoire will experience the strongest growth in mining output as compared to other traditional gold producing countries in Africa, notably Ghana, Tanzania and Mali. Our forecast for gold production to surge in the coming years is further supported by the increased accessibility of gold resources following Ouattara's election. BMI has long held that Côte d'Ivoire's gold resources offer a substantial opportunity now that the country has been reunified. We believe the country has the potential to become a significant gold producer in Africa over the coming years, as several projects are set to come online that will transform the country's mining sector.

Côte d'Ivoire - Largest Gold Projects
Company Mine Estimated Output Year
Source: BMI
Cluff Gold Angovia 100kozpa 2012
Newcrest Mining Bonikro 120kozpa 2008
Randgold Resources Tongon 280kozpa 2012
Endeavour Mining Agbaou Gold Project 280kozpa 2014
Perseus Tengrela 340kozpa 2013
Corvette Resources Koutouba, Mannian and Arrah Exploration Stage na

Furthermore, falling grades and higher wage costs in major mining centres such as South Africa and Australia have pushed companies to look elsewhere for deposits. Rising gold production, as well as the start of oil output, should reduce the country's dependence on the agricultural and cocoa sector for economic growth, which currently represents more than a third of the economy. Côte d'Ivoire President Alassane Ouattara has highlighted the government's plans to make the country a major pillar of stability and growth in West Africa and pledged to support continued growth in the country's mining sector. Though we hold an optimistic view of Côte d'Ivoire's economic revival following its long period of political instability, it is important to note that significant improvement in the country's business climate remains vulnerable to political risk, the main impediment to investment and growth of the country's mining sector.

Risks To Outlook

We believe that lingering political risks following the country's post-electorion crisis will prevent foreign direct investment from reaching its potential while an inadequate infrastructure support continue to hinder project development. The post election violence in 2011 left more than 3000 people dead after ex-president Laurent Gbagbo's refusal to cede power to Alassane Ouattara.

President Alassane Ouattara's recent visit to Europe triggered angry demonstrations by supporters of Laurant Gbagbo who claimed that the incumbent was completely non-Ivorian and was illegitimately elevated to power. With Laurant Gbagbo currently awaiting trial by the international Criminal Court on charges of crimes committed against humanity in 2011, we believe the start of the proceedings will provoke more unrest and violence in the country, which could hinder mining projects in future.

Table: Côte d'Ivoire - Gold Production
2009 2010 2011e 2012f 2013f 2014f 2015f 2016f
e/f = estimate/forecasts. Source: BMI, World Bureau of Metal Statistics (WBMS)
Gold, koz 222 170 355 445 695 809 890 975
- % change y-o-y 135 -23.2 108 25.4 56.2 16.4 10.0 9.6
This article is tagged to:
Sector: Mining
Geography: Cote d`Ivoire, Ghana, Mali

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