Toronto, Canada — MININGREVIEW.COM — 13 August 2010 – Junior gold miners with assets in West Africa are becoming more alluring acquisition targets for their larger rivals as near-record high bullion prices fire up an intense race within the industry to expand.
West Africa is touted to be one of the world’s fastest growth regions for gold production over the next four years, with output seen rising 30%, Reuters reports from here quoting a study by GFMS metals consultancy.
Toronto-listed Semafo and Golden Star are mentioned prominently as potential takeover targets, given their growing production footprint in the region, which also tends to feature lower extraction costs than some other areas.
Head of BMO Capital Markets Metals & Mining group Egizio Bianchini sees a vast potential in West Africa.
The area “’ which includes countries like Burkina Faso, Mali and Cote d’Ivoire “’ has become more politically stable and it has proven to be a prolific region for gold production, says Reuters.
“West Africa is probably the darling part of all of Africa,” said Bianchini, adding that other parts of the continent are unlikely to attract the same level of investment as West Africa under current conditions.
The region, already an M&A hot spot, came into the limelight again last week with Kinross Gold Corporation’s US$7 billion (R51 billion) bid for West Africa-focused Red Back Mining.
Last year, Iamgold acquired Orezone Resources in a bid to gain control of its Essakane project in Burkina Faso. It also struck a deal for an option to acquire an interest in Avnel Gold’s Kalana project in Mali..
Jennings Capital analyst Stuart McDougall sees Semafo and Golden Star as the prime candidates. While Semafo expects to produce between 235 000 and 260 000 ounces in 2010, its rival Golden Star expects to produce about 400 000 ounces this year. Semafo operates mines in Burkina Faso, Niger and Guinea, while Golden Star has operations and interests spread across Ghana, Niger, Sierra Leone and Cote d’Ivoire.
The combined gold output of Ghana, Mali, Guinea, Burkina Faso, Mauritania and Cote d’Ivoire has risen more than 65% over the last five years to about 6.7Moz, annually. Regional production is expected to rise by a further 2Moz annually, by the end of 2013, according to GFMS.
The survey, which includes responses from 670 mining companies across the globe, found that Burkina Faso ranked among the top five mining destinations globally in terms of its mineral potential, given its current mining policies.