- West African Resources points out that the mining companies were involved in the review process
- An increase in costs of around 6 to 8 USD per ounce at current gold prices
- But its production costs remain below 1175 USD per ounce
- This change will have no impact on Kiaka’s financing.
West African Resources announced on 30 October 2023 that “after consultation with the country’s gold mining industry, the government of Burkina Faso has increased the royalty rates for gold producers”. West African Resources operates the SOMISA mine, some one hundred kilometres from Ouagadougou on the Ouaga-Fada N’Gourma road. It is currently finalising construction of the Kiaka mine, located in Gogo near Manga. This announcement follows the signing on Friday 27 October 2023 of the decree amending decree no. 2017-0023/PRES/PM/MEMC/MINEFID of 23 January 2017 setting mining taxes and royalties.
The new decree introduces major innovations in the setting of mining royalties by increasing the level of proportional royalties. While the previous decree, issued in 2017, capped the royalty collection rate at 5% when the price of gold exceeds 1,300 dollars per ounce, the new decree sets other rates progressively in line with the price of gold. Proportional royalties will be levied at a rate of 7% if the price exceeds 2,000 dollars per ounce.
In its press release, West African Resources explains the consultative nature that preceded this decision: “The change to the royalty regime follows a period of constructive engagement between the government, gold mining companies and stakeholders in Burkina Faso’s gold mining industry, including local suppliers, contractors and banks,” the release states. “The changes align Burkina Faso’s royalty rates with those of other jurisdictions in the West African region and reflect the higher gold prices currently received by unhedged gold producers. Royalties are capped at 7% for gold prices above 2,000 USD per ounce”, according to West African Resources.
The new royalty rates come into effect in November 2023 and are expected to increase the Company’s production costs in 2023 by approximately 6 to 8 USD per ounce at current gold prices. However, the Company is maintaining its production and cost guidance for 2023 of 210,000 to 230,000 ounces of gold at a production cost of less than 1,175 USD per ounce.
As a reminder, the company announced production costs of 1,164 USD/oz in the third trimester of 2023. These costs were 1,166 USD/oz in the second trimester of 2023, compared with an average selling price of 1,969 USD /oz.
West African Resources does not expect the royalty changes to have an impact on the financing of the construction of the 7.7 Moz Kiaka mine, as the bank financing model uses conservative gold price assumptions of around 1,700 USD/oz over the loan period. Construction of Kiaka is proceeding on schedule and on budget, with first gold production scheduled for the second half of 2025.
Elie KABORE
#Mines_Actu_Burkina
